Rebuilding will stimulate domestic growth and global demand while helping integrate East Asia
No one -- least of all someone like myself who has experienced the existential terror of California's regular tremors and knows the big one is coming here next -- would minimize the grief, suffering and disruption caused by Japan's massive earthquake and tsunami.
But if one can look past the devastation, there is a silver lining. The need to rebuild a large swath of Japan will create huge opportunities for domestic economic growth, particularly in energy-efficient technologies, while also stimulating global demand and hastening the integration of East Asia.
Japan has been wallowing in stagnation for years despite massive government stimulus programs and zero-interest rates because, simply put, in such an advanced, mature economy there was too little demand to generate sufficient returns to attract private investment. Thus the famous "bridges to nowhere" and other projects that amounted to pushing a string.
By taking Japan's mature economy down a notch, Mother Nature has accomplished what fiscal policy and the central bank could not. Now there are more bridges to somewhere to be built than one can count. Entire cities and regions need to be reconstructed in toto, from housing and commercial buildings to roads, rail lines, information networks, the energy grid and even the tsunami warning system that must be digitally revamped. Twitter- and Facebook-like platforms will need to be integrated into a system reliant on old technologies like warning sirens and radio or TV broadcasts. (It was reported that at one point on the day of the quake, 20 tweets a second were coming out of Tokyo.)
The result of all the new wealth creation will be money in the pockets of Japanese to buy global goods and services.
This newly created demand will surely attract the piles of cash out there looking for investment opportunities, from global private equity pools to American banks and China's sovereign funds. At a dinner in Hong Kong a couple of weeks ago, one of Asia's largest investors complained to me about the dearth of good deals in Asia outside of China. China itself has more surplus funds than it knows what to do with. Direct foreign investment in overly indebted Japan's reconstruction by China would more closely integrate the second- and third-largest economies in the world in a way that political reconciliation has failed to do under normal circumstances.
The greatest opportunities lie in building the world's most advanced, smart, energy-efficient cities and infrastructure out of the rubble. Japan is not Haiti or even the United States. Despite its long stagnation, Japan has retained an engineering prowess second to none.
Indeed, Japan is uniquely positioned for a green recovery. While the world has been focused on Islamist terrorism or the miracle of Chinese growth, the island nation has been engaging in a quiet revolution as the incubator of the energy-efficient technologies of the future.
Japan is responsible for 50 percent of the world's solar-power energy production. It uses 20 percent less energy to produce a ton of steel than the U.S., 50 percent less than China.
Innovations abound, from capturing "ice energy," to more energy-efficient plasma screens, to capturing the kinetic energy of bridges that sway when traffic crosses them. The facility that housed the media at the Lake Toya G-8 summit in 2008 was cooled by snow stored in thermal insulation instead of by air conditioning.
As everyone knows, Japan is the leading manufacturer and exporter of hybrid cars, most famously the Toyota Prius. Honda has developed a hydrogen fuel cell car that is being prepared for mass production. Komatsu has just produced the world's first-ever hybrid heavy machinery, a 20-ton excavator used in construction sites all across Asia.
Beneath the surface of Japan's faddish consumer society, the frugal culture of an island nation that must wisely husband limited resources still lives.
This cultural disposition that has been the fertile soil for the development of green technology will only be bolstered by the earthquake and tsunami damage to Japan's nuclear reactors, as well as the economic jolt of rising oil prices resulting from the combined effects of the sudden drop in refining capacity because of Japan's damaged facilities and the Libyan civil war prompted by the Arab revolt. (Talk about the "butterfly effect" of chaos theory. What scenario planner could have imagined that the political shock waves emanating from the self-immolation of a Tunisian shopkeeper would meet the geophysical shock waves generated by a moving subduction fault along the Pacific plate to cause yet another energy crunch?)
No one can anticipate or control the wrath of Mother Nature or political turmoil on the other side of the planet. But it is no less true for being a cliché that crises do present opportunities. When the carnage is cleared away, Japan, as it has proven in the past, is more capable than most nations of building an even better future.
Nathan Gardels is editor-in-chief of NPQ and the Global Viewpoint Network of Tribune Media Services International.
© 2011 Global Viewpoint Network; Dist. by Tribune Media SERVICES.
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I hope you were being as sarcastic as I am.
Toyota closed its plants in Japan after the quake. Fortunately, the company reports none of its employees were killed.
The standard by which we should judge how well an economy is doing is how well it serves the needs of individual members of society. Are they better fed? Clothed, sheltered? Are they more able to pursue their wants and needs? Do they have more free time? Magic numbers like GDP don't tell us that, but if GDP increases, Keynesians think thats great!
What about the millions left homeless, or without power or water? It may take Japan years, if not decades, to get back to the point it was before the quake. There is no silver lining.
I agree!
Nonetheless, blame the feminine principle when she doesn't act the way MAN predicts she will, becasue MAN doesn't know as much as he thinks he does...not is willing to live with any degree of humility within the bounds of LIFE.
Go take a look in your mirror, MAN when you castigate natural forces which do not behave according to your wishes
You are talking about opportunities for capitalists. This is not the time to salivate over economic opportunities.
http://bastiat.org/en/twisatwins.html#broken_window
Taken to the extreme; If destruction were so great, destroying everything would certainly stimulate the economy. Worked well for us in WWII
http://en.wikipedia.org/wiki/Parable_of_the_broken_window
Finding economic benefit in disaster is nonsense.
Your detachment here to the real grief and misery of thousands, not to mention radioactivity leaking at alarming rates is in bad taste to say the least.