Japan as No. 3 can still hold its head high

China’s economic output as measured in purchasing power parity (PPP) terms passed Japan’s in 2001, going by International Monetary Fund data. Measured in current exchange rate terms, China’s gross domestic product has just dislodged Japan’s from the No. 2 spot that Japan has held for 42 years ― China’s 2010 GDP of $5.88 trillion, against Japan’s $5.47 trillion. As GDP in PPP terms is regarded in many quarters as a more meaningful gauge of relative wealth, China should be in the lights. But Chinese people outside of the second-tier interior cities, let alone the coast, inhabit a very different China. The Chinese are notionally only one-tenth as rich as the Japanese, although China’s per capita figure is skewed by a population 11 times larger than Japan’s.

One has to think of China as the archetypal rich-poor contradiction to grasp what its accession to being second only to America after just 30 years of frenetic growth really means. It is in the same league of emerging nations ― including Brazil, India, Mexico and South Africa ― that are characterized by wide disparities of wealth and development. Advanced nations are nothing like that.

No, the Japanese can still hold their heads high. No amount of moaning at being overtaken by China would negate the fact that theirs remains a model rich nation others want to emulate, and that it is probably among the most civilized of societies. The latter category counts in evaluating human progress. The societal coarsening that has blighted China with the onset of sudden riches is a serious deficiency that can only get worse. And the Japanese economy remains innovative in spotting trends. Its brands are so strong Toyota has not lost the confidence of overseas car buyers despite a spate of production flaws. Japan has lots more to offer and its people need not think of the country as being in rapid decline.

A re-reading of Ezra Vogel’s 1979 book, Japan As No. 1, would not be an exercise in quaintness just because its proposition of Japan being a superior economic model proved premature. Chinese planners and Communist Party leaders can draw lessons from it to prevent backsliding. Besides good governance and improving productivity, education and controlling crime and environmental degradation, China has to attempt something drastic to control the awful corruption and the disdain for rules, proprietary rights and the sanctity of contracts. China’s edge over Japan as an economy is that it has peaks yet to scale and it believes in itself and its destiny. It has untapped strengths in commercial applications of military technologies and the biggest consumer boom in history when urbanization is complete. And the No. 1 slot beckons.

(The Straits Times, Feb. 16)