Reviewing Earlier Calamity
to Understand the Present

Bill Totten

[Part 2 of 4 of Our World, 11 March 1999]

One of my deepest impressions from reading about the atomic bombing of Hiroshima is that the victims had no idea what was happening to them, and continued to be unaware for several days after the bombing. Because it was the world's first atomic bombing, the victims were hit by a weapon of which nobody else had endured or been forewarned. Suffering from war, fire, earthquakes or other natural disasters has to be entirely different from being hit by something new that nobody else has ever experienced, anticipated or discussed. Attempting to understand the nature of what the people of Hiroshima suffered in 1945 might help us comprehend what is happening to us now in 1999.

I think Japan's current economic maladies have been caused by two calamities completely new to mankind. Neither of these calamities has ever afflicted any other nation; at least, neither has been recognized as such. Neither has been anticipated, analyzed or discussed by economic pundits our leaders trust and follow. As a result, our leaders and their pundits, failing to recognize that our economy is afflicted by completely new calamities, are trying to cure our afflictions with remedies that are obsolete, ineffective and, in fact, deleterious.

In this essay I'll address one of these new calamities: economic warfare. I'll address the second calamity in the next Our World installment.

New Type of Economic Warfare --

Many Japanese these days remind me of Monica Lewinski. They think and talk of the United States as their nation's partner, just as Monica thought and talked of Bill Clinton as her partner. Just as Bill only exploited Monica for sexual favors, the United States exploits Japan for military, political and economic favors. Why can't Japanese see that their nation's only partnership with the United States is that of a subordinate partner, just as Monica's only partnership with Bill was that of sex partner? When has the United States ever treated Japan as an equal, rather than as junior partner?

What has the United States ever done that benefited Japan as much as the United States itself benefited? What has the United States done for the benefit of Japan rather than for itself?

Most of us now in Japan don't seem to comprehend that the United States is, at this very moment, once again waging war against Japan. We don't comprehend this situation because it is an entirely new kind of war, a war that no one else has ever experienced: an economic war. This is a war fought with financial instead of military weapons, with dollars instead of bullets, with mind control instead of physical coercion.

Perhaps a good way to convince readers who doubt this is to present the facts just as a lawyer would present facts in court to prove a case. A lawyer would have to prove that a crime had been committed, that there was a motive, and that there was convincing evidence to show the accused had committed the crime. If we juxtapose the relationship between the United States and Japan onto this scenario, we should consider that Japan is suffering now from the economic war being waged on it by the United States, and we should consider why and how that war is being waged.

Devastation from the United States'
Economic War on Japan --

First, let's look at the evidence that proves Japan is suffering from an economic war being waged on it by the United States. Japan is suffering the worst rash of bankruptcies, both in the number of companies going bankrupt and in the amount of debts those companies leave behind, since such records began being kept after World War II. The primary cause of these bankruptcies is starvation of funds: while Japanese citizens continue to save more of their incomes than citizens of any other nation, Japanese banks are loaning and gambling those savings overseas, primarily in the United States, instead of loaning them to companies in Japan. Bankruptcy -- and fear of bankruptcy -- have prompted companies to cut back on employment, causing the worst unemployment on record. Unemployment continues to climb. Since only 80% of this year's graduating university students have found jobs, the unemployment rate can be expected to jump dramatically this spring. Unsurprisingly, the number of suicides attributed to economic failure is the highest on record.

This economic devastation is widely attributed to the bursting of Japan's so-called "bubble" of the late 1980s. To the extent that this is true, I believe the real cause of the current crisis is the servile capitulation of Japanese leaders to pressure from the United States. Until Japan's government caved into US pressure to relax capital controls in the early 1980s, Japanese companies were able to borrow most of the funds they needed from Japanese banks. In other words, Japan's own financial system financed the greatest "economic miracle" in the history of mankind, and did so efficiently and equitably. Citizens saved frugally, largely because banks paid them attractively high rates of interest for depositing their savings. The banks were able to pay those high interest rates by charging even higher rates to corporate borrowers. Borrowers could afford to pay the higher interest rates because frugal savers supplied a safe and steady supply of funds to support their rapid growth. But as soon as the government capitulated to US pressure in the early 1980s and relaxed regulations that had prevented corporations from obtaining funds outside Japan, short-sighted businessmen rushed overseas in search of cheaper funds. That process left domestic banks without sufficient interest income from having made loans to trustworthy borrowers. As a result those banks could not pay favorable interest to depositors.

As Michael Hudson explained thoroughly in Our World essays 244, 245 and 246, the Japanese government then caved into the so-called "Plaza Accord" demands of the United States and agreed to hold its interest rates below those of the United States. (The Republican Party then in power wanted to cut US interest rates to stimulate the US economy in hopes of winning the next election. They worried that without an agreement with Japan, there would be a massive outflow of funds from the US to Japan, whose economy was much more vibrant than that of the United States.)

The sudden ability of Japanese borrowers to attract cheap funds overseas, plus the cheapening of Japanese funds caused by these two capitulations by Japan's government to US demands, flooded Japan with a glut of cheap funds far in excess of what Japanese businesses could absorb to increase production and distribution capability. With no socially or economically appropriate place to loan those funds, Japanese banks turned to gambling on land, stocks, bonds, currencies, and other assets (and loaning to other such gamblers) to cover the cost of holding those funds. This gambling naturally inflated the bubble that eventually burst, leaving Japan in its current state of devastation.

Motives of the United States to Wage
Economic War on Japan --

Let's look at what the United States gains by waging economic war on Japan. By keeping Japan weak militarily since World War II, the United States has made Japan dependent on the assumption of US protection from foreign attack or invasion. Yet the US has never unambiguously committed itself to providing such protection. (The US-Japan Security Treaty is one of the most brazen frauds of the 20th century; it sanctions continued US military occupation of Japan in exchange for the US commitment merely to do whatever the United States unilaterally elects to do if Japan is attacked or invaded.) The United States has gained enormously by keeping Japan weak militarily, unable to defend itself, and clutching at the mere hope its servitude will motivate the United States to defend it in case of military invasion or attack. For example:

1. The United States can occupy Japan militarily as a base for US objectives that have nothing to do with the defense of Japan;

2. Japan pays the costs of US forces that occupy it militarily;

3. Japan funds the United Nations, which the United States manipulates as an instrument of US foreign policy via its veto (as well as by bribes and intimidation), while the United States doesn't even pay its UN dues;

4. Japan provides similar funding to the IMF, World Bank and WTO, which the US controls to serve its own national interests;

5. Japan funds US wars, which the US wages unilaterally without consulting Japan, even when those wars harm Japan's national interests (e.g., the Gulf War);

6. Japan funds US projects (like KEDO) where the United States makes all decisions unilaterally without consulting Japan, then invoices Japan for the costs, paying little or nothing itself;

7. Japan has run up the highest ratio of government deficits and public debt to national product of any advanced industrial nation, but still lends 50 trillion yen of its citizens' money to finance the US public debt;

8. Japan has brought its food subsistence level down to 30%, by far the lowest among advanced industrial nations. This leaves Japan as susceptible as North Korea to economic blockade - merely to please the United States by serving as the largest receptacle of US agricultural exports;

With the US benefiting so much from its relationship with Japan, what does the US gain from waging economic war on such a compliant ally? I believe it gains the following:

1. The United States has spent most of the 20th century fighting communism, for two reasons. The first is that US leaders seem to feel they cannot afford to allow any type of government or economy other than their own brand of unregulated free competition to succeed. They seem to feel that to gain and maintain hegemony over the world, they cannot tolerate the success of any other form of government or economy that would prove an attractive alternative to the US model. The second reason, I believe, is that World War II taught US leaders that war held the most profitable future for their kind of capitalism. They needed a plausible enemy to justify keeping the US economy on continued wartime footing. The communist countries were the most plausible candidates to become enemies until they opted out of the game in the late 1980s.

2. The United States needed to keep Japan as an ally during that Cold War, a relationship which required Japan to be economically and militarily dependent on the US. The US accomplished this by encouraging Japan to build an economic prosperity dependent on exports to the United States.

3. But the Cold War crippled the US economy nearly as badly as it crippled the communist economies, reducing it from the world's richest creditor to the poorest debtor during the Reagan era. By the end of the Cold War, Japan had the world's most prosperous economy, its citizens had the world's highest standard of living, and other Asian nations were gaining rapidly by emulating the Japanese rather than the American model. Japan and its Asian emulators had become the new model that US leaders couldn't tolerate as a successful and attractive alternative to the US model. Thus, Japan and its Asian emulators became the new "enemy" of US leaders.

4. Moreover, ever since Senator Albert J Beveridge's celebrated 1900 speech in which he said: "The power that rules the Pacific ... is the power that rules the World", the United States has refused to tolerate leadership in the Pacific by Japan or any other power not servile to the United States. Making Japan as dependent on the United States economically as it already is militarily, and preventing Japan and other Asian nations from forming close bilateral relations in place of trilateral relations dominated by the United States is key to this US strategy of ruling the world by ruling the Pacific.

5. Finally, on a more immediate and mundane level, Japan is the world's most attractive target for US economic predators. Japan has the world's highest per capita income and consumption; gaining special privileges for US vendors is a high priority for US politicians who owe their offices to companies that bought them with campaign contributions. Japan has the world's highest per capita savings; getting hold of this wealth is vital to keeping the US financial bubble inflated, or to keeping it from bursting. Japanese companies have the world's most advanced technology and highest productivity; crippling them financially to allow US predators to buy these companies cheaply is the surest way to make and keep Japan economically dependent on the US.

How the United States Wages
Economic War on Japan --

Finally, let's look at how the United States wages economic war on Japan. When the United States conquered Japan in 1945, it immediately set out to colonize the country by destroying the education system that had taught Japanese to respect and appreciate their nation and themselves as inheritors of extraordinary traditions, culture and history. The American colonizers suppressed the teaching of Confucian, Shinto and Buddhist values as well as the teachings of classical Japanese and Asian literature. But they didn't replace this with the teaching of Christian, Judaic or any other values or classical literature. Japan was reduced to enduring as a society that teaches no particular values. The result was that people became obedient followers of authority, unable to think for themselves. Both through overt channels, such as the altered education system, and covert channels, such as American movies and popular culture, US occupiers taught the Japanese to despise themselves and their culture and to envy, copy - even worship -- American and Western culture, and to obey the United States.

This, of course, had little impact on Japanese who were educated before 1945, enabling Japan to remain a proud and remarkably independent nation while the prewar generation held most positions of leadership in Japan. Japan didn't begin kowtowing and toadying to the United States until the late 1980s, when Japanese educated before 1945 had died or retired and were replaced by colonials educated since 1945. From the late 1980s, one sees little independent thinking in Japan - just masses of unthinking people who look like Japanese on the outside but who meekly ape Americans and obey the commands of the United States.

The only foreign language now taught widely in Japan is English and it is as requisite for getting into and out of universities as the Japanese language is. English occupies the same place in colonized Japan as the Japanese language did in colonized Korea and Taiwan, and as English did in colonized India. Nearly all Japanese who study abroad go to the United States to learn to better ape and obey their masters. Most imports come from the United States and from low-wage offshore factories of US corporations, just as any colony imports mostly from its imperial master.

As a result, the current sheep-like generation of colonials run their own nation for the benefit of the United States instead of for the benefit of their own people; or, more accurately, they allow the United States to run Japan for the benefit of the US. Japan now lets the United States dictate its domestic policies and regulations, capitulates to US demands to open its markets, agrees to buy US- dictated quotas of American products, allows the US to dictate limits on its exports, negotiates its own domestic regulations with the United States, and follows orders to force weak Japanese corporations into insolvency to enable US corporations to buy them cheaply. Meanwhile, every new prime minister obediently travels to Washington to get his marching orders from his masters there while repeating the mantra that Japan's only foreign policy is servile obedience to the United States.

If any prime minister should dare contemplate an act of national independence, such as Tanaka Kakuei's attempt to circumvent the Rockefeller monopoly by buying oil from China, undoubtedly he will meet the same disastrous end that befell Tanaka.

Conclusion of Section:
US Economic Warfare on Japan --

Japan will never overcome its current economic problems until it recognizes that the United States is the cause of many of those problems and that the United States is waging economic war on Japan.

Japanese leaders must recognize that because the United States is waging economic war on them, Japan must stop capitulating to US pressure, stop following US advice, and stop sending its brightest prospects for future leaders to the United States to get brainwashed merely to serve imperial masters instead of their own nation.

In the next Our World essay (No. 259) I will discuss the other related calamity: the end of the Industrial Revolution.

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