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THE SINKING SUN OF JAPAN'S ECONOMY AND COMMODORE PERRY'S OLD FIGHT WITH JAPAN.
by Linda Minor © 2001

On March 15, 2001, William Safire, wrote:

Stock markets are slumping because the world's second-largest economy has admitted that it is near collapse and shows no sign of knowing what to do.

Your assets and mine have been dwindling for other reasons as well. High-tech tulip bulbs were fated to wither. The soaring U.S. economy had to land sometime, softly or otherwise: the vaunted "new economy" did not repeal the business cycle.

Yet what most concerns many institutional investors and other heavy hitters is the effect on world markets of the trauma of Japan. While our stock indexes dip toward 1998 levels, its has just gone through 1985.  Click to read the entire story. http://www.nytimes.com/2001/03/15/opinion/15SAFI.html

Is the economic near collapse of Japan and its affect on the United States a repeat of the old fight with Japan spearheaded by Commodore Matthew Calbraith Perry?

I deduce this from papers now being studied in the Bush White House and at Treasury, State and Defense. These include the National Defense University's November 2000 report by Richard Armitage and Paul Wolfowitz; the McKinsey Global Institute paper by Masahiko Aoki and Paul Romer on "Why the Japanese
Economy is Not Growing," and the article by Michael Porter and Hirotaka Takeuchi in the May-June 1999 Foreign Affairs, "Fixing What Really Ails Japan."

The economic heart of these documents is in a line from McKinsey: "In a misguided effort to protect jobs and maintain stability, the government subsidizes the inefficient players and blocks the entry of competitors."

The Bush people will not be so crude as to say: "Look, Prime Minister, the way to avoid dragging the world down the drain is to close 20 of your weakest banks and make those remaining write off bad loans. Let hundreds of inefficient companies go bankrupt and save face by giving them long-term no-interest bonds. Join the deregulation revolution, stop depending only on exports for growth and open your markets to global competition. Then resign and be remembered in history as a hero."

That would be impolite and impolitic. Instead, we can hope that Treasury Secretary Paul O'Neill will fondly reminisce about how the U.S. taxpayers combined with private industry to spend $160 billion in 1980's dollars to bail out the crazily lending S.& L.'s, thereby returning our financial system to a firm footing. O'Neill can also expound on the wisdom of tax cutting, spending restraint and buying dollars with yen.

How the American expansionist, Commodore Matthew Calbraith Perry "opened" Japan.

An avowed American expansionist, Perry believed that "our people must naturally be drawn into the contest for empire." In 1852, he accepted command of the East India squadron in order to lead an expedition to Japan. The U.S. State Department directed him to negotiate a treaty of amity and commerce that would open Japan to relations in as full a range as possible.

Perry prepared diligently for the formidable task of inducing Japan to negotiate a document advantageous to the United States. In 1846, Japan had humiliated and expelled an American emissary, leading Perry to conclude that a resolute show of force would prove essential to the "opening" of Japan. He, therefore, shaped a small but powerful armada of four ships, including the steam-driven paddle wheelers Susquehanna and Mississippi. On July 8, 1853, Perry stormed boldly into Edo (Tokyo) Bay, the steamers belching black smoke and appearing as "floating volcanoes" to the alarmed Japanese. Six days later, with great pomp and ceremony, Perry went ashore to the accompaniment of a naval band playing Hail Columbia! The Japanese resisted
Perry's proposals, and he temporarily withdrew from the country, promising to return to receive a reply to President Millard Fillmore's request for a treaty.

...
Matthew C. Perry was born in Newport, Rhode Island on April 10, 1794, the younger brother of another United States naval officer, Oliver Hazard Perry.
Source: http://www.umi.com/hp/Support/K12/GreatEvents/Perry.html

The lineage of the Perry family traces to the Belmont family.

Belmont, August (1816-1890) of New York, N.Y. Father of Perry Belmont and Oliver Hazard Perry Belmont. U.S. Charge d'Affaires to the Netherlands, 1853; U.S. Minister to the Netherlands, 1854; Delegate to Democratic National Convention from New York, 1864, 1876. Interment at Island Cemetery, Newport, R.I.

Belmont, Oliver Hazard Perry (1858-1908) Son of August Belmont; brother of Perry Belmont. Born in New York City, N.Y., November 12, 1858. U.S. Representative from New York 13th District, 1901-03. Died June 10, 1908. Interment at Woodlawn Cemetery, Bronx, N.Y. (See also his congressional biography.)

Belmont, Perry (1851-1947) of New York, N.Y. Son of August Belmont; brother of Oliver Hazard Perry Belmont. Born in New York, N.Y., December 28, 1851. U.S. Representative from New York 1st District, 1881-88; U.S. Minister to Spain, 1888-89; Delegate to Democratic National Convention from New York, 1896, 1900, 1904, 1912; major in the U.S. Army during the Spanish-American War. Died in Newport, R.I., May 25, 1947. Interment at Island Cemetery, Newport, R.I. (See also his congressional biography.) Source: http://politicalgraveyard.com/bio/bella-benne.html

Belmont, Oliver Hazard Perry, 1858-1908 BELMONT, Oliver Hazard Perry, (brother of Perry Belmont), a Representative from New York; born in New York City November 12, 1858; attended St. Paul's School, Concord, N.H., and was graduated from the United States Naval Academy, Annapolis, Md., June 10, 1880; was commissioned as a midshipman and served until June 1, 1881, when he resigned; at one time a member of the banking firm of August Belmont & Co., New York City; became publisher of the
Verdict, a weekly paper; delegate to the Democratic National Convention in 1900; elected as a Democrat to the Fifty-seventh Congress (March 4, 1901-March 3, 1903); was not a candidate for re-nomination in 1902; died in Hempstead, N.Y., on June 10, 1908; interment in Woodlawn Cemetery, New York City. Source: http://bioguide.congress.gov/scripts/biodisplay.pl?index=B000352

Belmont, Perry, 1851-1947 BELMONT, Perry, (brother of Oliver Hazard Perry Belmont), a Representative from New York; born in New York City December 28, 1851; attended Everest Military Academy, Hamden, Conn., and was graduated from Harvard University in 1872; studied civil law at the University of Berlin; was graduated from the Columbia Law School, New York City, in 1876; was admitted to the bar the
same year and commenced practice in New York City; elected as a Democrat to the Forty-seventh and to the three succeeding Congresses and served from March 4, 1881, to December 1, 1888, when he resigned to accept a diplomatic position; chairman, Committee on Expenditures on Public Buildings (Forty-eighth Congress), Committee on Foreign Affairs (Forty-ninth and Fiftieth Congresses); declined to be a candidate for re-nomination to Congress in 1888; United States Minister to Spain in 1888 and 1889; delegate to the Democratic National Conventions in 1892, 1896, 1904, and 1912; during the Spanish-American War served as major and inspector general of the First Division, Second Army Corps, United States Volunteers; in 1905 successfully initiated and organized the movement for the Federal and State campaign-publicity legislation, which was enacted into law in 1911, and was elected president of the National Association for Campaign Publicity Law; during the First World War was commissioned a captain in the remount service; resumed the practice of law in New York City in 1920; author of a number of books pertaining to national and political affairs; went abroad in 1932 for three years, residing mostly at Paris, France; returned, and made Newport, R.I., his permanent residence; died at Newport, R.I., May 25, 1947; interment in Island Cemetery.
Source: http://bioguide.congress.gov/scripts/biodisplay.pl?index=B000353

The biography of Commodore Matthew Calbraith Perry whose daughter married August Belmont, Sr.

Matthew Calbraith Perry  b. Newport or South Kingstown, RI, April 10, 1794. d. New York City, NY, March 4, 1858. Birthplace in question, boyhood home still stands at #31 Walnut Street.

Confusion concerning final burial location.  Some place body in the Slidell family vault (married Jane Slidell) in churchyard of St. Mark' s-in-the-Bowerie (NYC), others in the Belmont Circle at Island Cemetery.  On south wall of Trinity Church is a memorial to Matthew.  Baptized there in 1795.

His daughter Caroline married August Belmont, the senior.  A statue to Perry 's memory was erected in 1868 in Touro Park by Mr. and Mrs. Belmont.

In commemoration of Perry's accomplishment with relations between Japan and United States, the Black Ships Festival is held every summer in Newport.

Younger brother of Oliver Hazard Perry, he began naval career in his mid-teens, before it was over, he had been on an incredible number of missions spanning the globe for our government.

One of the most important missions of his career was the "opening up" of Japan.  Japan, at the time, was under self-imposed isolation from the rest of the world.  Our Navy, citing a need in that part of the world for a safe haven for whaling vessels and the need for coal for use in steamships, made a valid case to "open up" Japan.

In March of 1852, received command for Japanese expedition.  After preparing at Okinawa, the Perry squadron arrived at what is now known as Tokyo Bay on July 8, 1853.  The Japanese were quite taken back as this was the first time they had ever seen these so called "Black Ships."  The American ships had no sails and were dispersing thick black smoke into the air.

Perry promised sufficient time for the Japanese to consider the proposal and would return the next spring for their answer.  In November, Perry learned the Russians and French were planning their own treaties with Japan. Feeling this might jeopardize the Americans' chances he planned to sail for Japan early.

In February of 1854, Perry returned to Tokyo Bay and anchored of Yokohama. On March 8, the commissioners from the Emperor arrived to meet with Perry. After 23 days of intense negotiations, a treaty was signed.  It contained provisions for the harbors of Shimoda and Hakodate to be opened for supplies and coal; shipwrecked sailors to be assisted and returned; and the free movement of American citizens within treaty ports.

The treaty of Kanagawa was ratified by the Senate on July 15, and signed by President Franklin Pierce on August 7, 1854.  This was the first treaty of peace, amity, and commerce between the United States and Japan.

During his career, Perry successfully advocated for steam warships in the Navy, developed a naval apprentice system, organized the first Naval Engineer Corps , and established the first course of instruction at the Naval Academy.
Source:
http://www.redwood1747.org/notables/c_perry.htm

The Perry family connections to the Rothschilds through the marriage of Commodore Perry's daughter to August Belmont, Sr. who was backed financially by the House of Rothschild.  The creation of the Seligman-Belmont-Morgan-Rothschild alliance which was so successful that by the end of the decade there were complaints on Wall Street that "London-and-Germany-based bankers" had a monopoly on the ale of the United States bonds in Europe.

The Bibliography.  See http://www.redwood1747.org/notables/perry_bros_bib.htm

Oliver Hazard Perry  b. South Kingstown, RI, August 20 or 23, 1785     d. Orinoco River, Venezuela, August 23, 1819 
Source: http://www.redwood1747.org/notables/oh_perry.htm

Note: Originally owned by Caroline Slidell Belmont, daughter of Commodore Matthew
C. Perry and niece of Oliver Hazard Perry, who married August Belmont, the banker, in 1849.

August Belmont's (Schonberg) arrived in New York City in 1837, with the influence and backing of the House of Rothschild behind him. He was a Jewish banker of German decent, he had three sons Perry, Oliver H.P., and August Jr.. August Schonberg (Belmont) went to Frankfurt at the age of thirteen to work as an unpaid apprentice for the Rothschilds, the leading Jewish banking house in Europe. It is said among the European Rothschilds that August Schonberg was the illegitimate son of Baron Von Rothschild. The reason I believe this to be true is because the Jews are very clannish, they would not put a non-family member in such a important position, nor would a
non-family member have direct access to Baron Von Rothschild. http://www.biblebelievers.org.au/acountry.htm

Belmont married into the Perry family for their social influence. The Perrys were not very rich, but they had all the social contacts that Belmont wanted and needed, more than he needed money. Caroline was the daughter of Commodore Matthew Calbraith Perry, hero of the Mexican War and the officer later credited with having "opened Japan to the West," and her uncle was another naval commander, Oliver Hazard Perry, hero of the War of 1812 and the Battle of Lake Erie.

Then, in the autumn of 1874, Baron Rothschild summoned Isaac Seligman to his office to give him a piece of news. Some fifty five million worth of United States bonds were to be offered for sale, and the Baron suggested, the issue might be backed by a combination of three houses-the House of Rothschild, the House of Morgan, and the House of Seligman. For the first time, August Belmont would act as agent for both the Rothschilds and J. & W. Seligman & Company. Needless to say, Isaac accepted. The Seligmans were now able to consider themselves the Rothschilds' peers. The Seligman-Belmont-Morgan-Rothschild alliance, furthermore, was so successful that by the end of the decade there were complaints on Wall Street that "London-and Germany-based bankers" had a monopoly on the sale of United States bonds in Europe-which they did. Joseph Seligman wrote to Richard C. McCormick, U.S.Commissioner General, to inform him:

"In filling the offices for Commissioners in Paris, please do not omit to
appoint Mr. William Seligman, of course as Honorary Commissioner, without pay, as brother William is at the head of a large American banking house in Paris and entertains all nice Americans."27

Footnotes: 26. OUR CROWD, p. 154, 27. OUR CROWD, p. 156

And so for a while the Seligman brothers were personally meeting the payroll of the United States Navy. The Seligmans continued their influence over the United States government with President Roosevelt:

"I (James Seligman) called on President Roosevelt and asked him point-blank if, when the revolt broke out, an American war ship would be sent to Panama to protect American lives and interests (including Seligman interests). The President just looked at me; he said nothing. Of course, a President of the United States could not give such a commitment, especially to a foreigner and private citizen like me. But his look was enough for me."29

At one of the Seligmans' weekend retreats, it was never a surprise to find a former U.S. President, a Supreme Court Justice, several Senators and a Congressman or two. The Seligmans' old friend Grant had, at their suggestion, bought a summer home at Long Branch and was a frequent, if somewhat unreliable, guest. President Garfield was another Seligman friend. Once more the Seligmans were displaying their uncanny way of getting to know the right people. Their friend Lyman Gage later became Secretary of the Treasury under President McKinley. He had, at one point, invited President Theodore Roosevelt to speak at a banquet for one of his philanthropies, and
Roosevelt spoke of this 1906 appointment of Oscar Straus a Jew and heir to the Macy & Co. fortune, to his Cabinet, saying:

"When this country conferred upon me the honor of making me President of the United States, I of course at once called my good friend Oscar Straus to my side, and asked him to serve as Secretary of Commerce."30

Footnotes:28. OUR CROWD, p. 257, 258, 29. OUR CROWD, p. 260
30. OUR CROWD, P. 342

Rothschild's supposed illegitimate son, August Belmont, financed Perry's expedition to Japan.

In 1837 Rothschild sent August Belmont his supposed illegitimate son as his representative to New York City with the specific task of taking Cuba away from Spain. Belmont was soon provided with investments in tobacco farms in Cuba .The first conspiracies in Cuba from 1823 to 1868 were organized by tobacco traders. ***

Belmont did not complete his Cuban plan because he entertained himself financing his relative Commodore Perry in the expedition to Japan. The American Civil War could have been avoided and the emancipation of the black conscripts accomplished by peaceful means if it was not for the braking of the Democrat Convention in Charleston in 1860. Belmont (married to Caroline Slidel) in his short stay in the country got to be the President of the Democrat Party and he and his relative in- law Slidel of Louisiana were the ones who disturbed the Convention so the war could follow its course.
Source: http://www.angelfire.com/fl/cubabrains/s.1898.html

Viscount Ishii of Japan headed a Japanese Mission which  visited Newport Rhode Island in 1917 to place a memorial wreath on the grave of Commodore Matthew Calbraith Perry, who, with an American :fleet, opened Japan to the world in 1853.

At the reception Viscount Ishii said:

Mr. Mayor and gentlemen of Newport: The opportunity you have afforded us thus to visit and to know you will constitute one of the most pleasant memories of our visit to America. Newport is pictured for us as the summer home of all the world of intellect and fashion from two continents. Now we have seen it, we are satisfied that Newport is a summer home, a winter home---the home of American hospitality. But above all else, Newport is stored in the mind of every school child in Japan as the resting place of
Commodore Matthew Perry.

Not so long ago but that living men can well remember and tell it to their grandchildren, Japan lived in isolation, well contented. One day there came a knocking at our door, and looking forth, we saw strange sights indeed. Fantastic folk, in awesome ships with gruesome guns, held out the hand of friendship and thus came America and Commodore Perry to our shores.

Reluctantly we let you in, and in time, with more reluctance still, we ventured forth ourselves on voyages of exploration to this land of golden dreams. All this was but sixty years ago. All the world and more particularly America and Japan in these sixty years have seen vast upheavals .and vast changes.

These sixty years just passed, must constitute one full chapter in the history of Japan. During all that time the Pacific Ocean, so illimitable then to us, has been growing more narrow daily. The East and the West which stood aloof without a thing in common except their common humanity, have by that wonderful thread been drawn closer and ever closer together, until today we stand shoulder to shoulder as friends and allies, defying the power or the force of evil to destroy that splendid heritage, which we are agreed to share as common heirs.

It is a far cry from Newport to Tokyo, but because of these sixty years of learning we have come to recognize each others' voices. We know the way whichever route we take, and in either home a hearty welcome waits the coming guest.

Mayor Burdick responded to these remarks, and introduced as the next speaker Mr. Henry Clews as one whose name is as well known among the officials and leading citizens of Japan as it is in the financial circles of America. When the applause had subsided, Mr. Clews said in part:

This is certainly an eventful period in history, made so by the represen- tatives of Japan decorating the grave of him who played so large a part in bringing Japan into the group of nations, which she had for reasons of her own so long excluded from her domain. Commodore Perry opened the door which still stands open to friends, and I am glad to say America and Japan are the best of friends. . . .

It is a grand deed that helps to bring a nation out of comparative obscurity into the front rank of nations, and although the Japanese can trace events back thousands of years, I believe that today they realize that the half century that has elapsed since Commodore Perry knocked at their gates has been the most important half century in their history. I have always been deeply interested in Japan, and one of the greatest honors of my life was paid me by the late lamented Prince Ito, who told me on his last visit to New York on his way to London as special ambassador at Queen Victoria's jubilee, that he considered me his "financial teacher," as it was my privilege to be of service to the first financial delegation from Japan to this country forty-six years ago, of which committee Prince Ito was the chairman. I have met since that time almost every diplomat and man of prominence in Japan who has visited our shores, and with every year my esteem and admiration for the Japanese have increased.

After the address of Mr. Clews, the Mayor and the Mission stood in front of the stage and the audience filed past and were introduced by name to the members of the Mission. The entertainment closed by a large dinner given in honor of the Mission by His Excellency Governor R. Livingston Beeckman at his residence, and the Mission left for Boston on the 8 o'clock train the following morning.
Source: http://www.ukans.edu/~libsite/wwi-www/japanvisit/JapanC06.htm

Viscount Ishii's Japanese Mission arrived in Boston on Tuesday, the 18th of September, and was welcomed by a great crowd in spite of a northeast rainstorm. Troops, lined up in the South Station, stood at "present arms" while a band hailed the guests with the Japanese national anthem as they stepped from the train.   The Viscount made a tribute to Henry Willard Denison.

The party was greeted by Governor McCall. After a brief reception the visitors went into the hall where the Legislature was sitting to revise the State Constitution.

The Governor, in welcoming the Mission on behalf of the state, referred to the visit of Commodore Perry to Japan, which opened the doors of the Empire to the rest of the world. But it was not all gain when the Japanese exchanged their "serene isolation for a restless and an almost haggard civilization," he said. "The western nations have apparently unleashed forces which they can not control. Those portents of energy called into being by the inventive genius of man have come to threaten us with mastery,
and we are in danger of becoming their victims and their slaves. Japan will far more than repay any debt she may owe our western civilization if she shall impart to it something of her old repose, and help subordinate its mighty engines to the use, and not to the destruction, of man."

Viscount Ishii arose amid great applause to reply to the introduction given
with such oratorical effect. He said:

Mr. President and gentlemen of the convention: I am highly complimented by an invitation to address you in this house, which throughout your history
has rung with eloquence unsurpassed in any tongue; with the loftiest appeals to the noblest sentiments of mankind from the lips of patriots whose names are written large on the walls of the corridors of fame. But it would not become me to occupy your time or interrupt momentous discussions which are of vital importance not only to your country but to all the world. Let me say, however, that Massachusetts and New England are very close to Japan. Many of our leading men owe to these surroundings the impressions and the education which has enabled them to take their place in the varying walks of life in their home land. Next to the land of their birth, dear to them above all. else on earth, they recall college friends and the happy days spent in study and at play at Cambridge. These always pay a tribute of affection to their alma mater and take increasing pride in the splendid record she is making in the up building of men and a nation.

Massachusetts and New England have wielded a vast influence upon the
civilization of our time. In literature, art, science, and industry that
influence has been felt and is being exercised throughout the world. In all
of these there has been no narrow prejudice, for you have gathered from and sent to the furthest comers of the earth the most representative and best.

Japan owes much to Massachusetts and to Boston. We have learned from you at home and your men and women have labored in our midst unselfishly and well to our great advantage.

In this connection you will permit me to pay a tribute to the memory of a great New England gentleman, whose name is well known to you, and who will by all others from New England or elsewhere be ungrudgingly conceded a premier place among those who have worked unselfishly and effectively for the betterment of mankind. I refer to the late Henry Willard Denison, for over thirty years the guide, the counselor and the friend of Japan. He was my friend, and I can not let this opportunity go by without saying that I am honored by the memory of that friendship. Not only this, but he was the friend of Japan; and all Japan, from His Imperial Majesty, the Emperor, to the least among us, unite in paying tribute at his resting place on the hills above the capital in Tokyo.

He was a great American who typified America in all his life and who has
done more than all the rest of us to weld the bonds that he knew and I know
must bind us. Rugged, strong, brave and independent, Denison lived and died an American, and lived and died his faith unfaltering in the future of our
relationship.

Source: http://www.ukans.edu/~libsite/wwi-www/japanvisit/JapanC07.htm

Who is Henry Willard Denison,  the "friend" of Japan?

Henry Willard Denison was born at Guildhall (VT) but grew up at Lancaster (NH). Following school Denison worked for the Coos Republican newspaper, then became a clerk in the Customs Department at Washington, D.C. While at Customs, Denison studied law at George Washington University, and upon receiving his degree he was sent as a vice consul to the American consulate at Yokohama, Japan (c. 1870). Some time later the Japanese government appointed Denison legal advisor to the Japanese Ministry of Foreign Affairs. Denison served in this position for thirty-three years (1880 - 1913). He drafted the Japanese government's positions following the First Chino- Japanese War (1894/5), fought over the Korean peninsula, and he helped conclude a treaty of friendship and alliance with Great Britain several years later. This latter treaty of alliance was useful in the development of treaty positions following the Russo- Japanese War (1903/05); and Denison accompanied Japanese Ambassador Baron Komura to Portsmouth, New Hampshire for the signing of the treaty in Summer 1905. At Portsmouth the treaty went through revisions; Denison was responsible for the Japanese positions during these negotiations. He also represented Japan at The International Court of Arbitration, at The Hague. For his services to the Japanese government, Henry Willard Denison was awarded the Grand Cordon of the Rising Sun, the first time this Japanese decoration had been given to a foreigner.
Source: http://www.state.nh.us/nhdhr/legport1/denison.html


THE SINKING SUN by William Safire © 2001, New York Times.

WASHINGTON — Stock markets are slumping because the world's second-largest economy has admitted that it is near collapse and shows no sign of knowing what to do.

Your assets and mine have been dwindling for other reasons as well. High-tech tulip bulbs were fated to wither. The soaring U.S. economy had to land sometime, softly or otherwise: the vaunted "new economy" did not repeal the business cycle.

Yet what most concerns many institutional investors and other heavy hitters is the effect on world markets of the trauma of Japan. While our stock indexes dip toward 1998 levels, its has just gone through 1985.

Why? Because Japanese executives and the government they control never understood their need for competition. While the Sonys and Toyotas set world standards for innovation and marketing, the rest of Japan's companies — producing 90 percent of that nation's goods — refused to let outsiders compete.

Mom-and-pop stores were protected from domestic chains; those chains were protected from overseas competition; bankers, industrialists and politicians protected one another. The consequence: productivity plunged to less than two-thirds of that in the U.S. That false protection has been ruining Japan.

Liberal economists around the world confidently gave the Japanese the answer a decade ago: cut interest rates to stimulate the economy and have the government spend, spend, spend. Tokyo officials dutifully slashed rates to zero, subsidized failing companies to prevent unemployment and went on a Keynesian spending spree. That led to the current disaster. And the same gurus are advising another decade of similarly misguided medicine.

Small wonder that the Japanese resist gaiatsu, "outside pressure." When the lame duck prime minister, Yoshiro Mori, arrives in Washington next week, he will become a conduit for a wholly different approach.

I deduce this from papers now being studied in the Bush White House and at Treasury, State and Defense. These include the National Defense University's November 2000 report by Richard Armitage and Paul Wolfowitz; the McKinsey Global Institute paper by Masahiko Aoki and Paul Romer on "Why the Japanese Economy is Not Growing," and the article by Michael Porter and Hirotaka Takeuchi in the May-June 1999 Foreign Affairs, "Fixing What Really Ails Japan."

The economic heart of these documents is in a line from McKinsey: "In a misguided effort to protect jobs and maintain stability, the government subsidizes the inefficient players and blocks the entry of competitors."

The Bush people will not be so crude as to say: "Look, Prime Minister, the way to avoid dragging the world down the drain is to close 20 of your weakest banks and make those remaining write off bad loans. Let hundreds of inefficient companies go bankrupt and save face by giving them long-term no-interest bonds. Join the deregulation revolution, stop depending only on exports for growth and open your markets to global competition. Then resign and be remembered in history as a hero."

That would be impolite and impolitic. Instead, we can hope that Treasury Secretary Paul O'Neill will fondly reminisce about how the U.S. taxpayers combined with private industry to spend $160 billion in 1980's dollars to bail out the crazily lending S.& L.'s, thereby returning our financial system to a firm footing. O'Neill can also expound on the wisdom of tax cutting, spending restraint and buying dollars with yen.

At the same time, Secretaries Colin Powell and Don Rumsfeld (with deputies Armitage and Wolfowitz prepared to give other aides a pop quiz on their N.D.U. report), will bolster Japanese morale with assurances that Japan, not China, will be the "bedrock" of our Asian strategic defense policy. (Powell's rhetoric rests heavily on bedrocks.)

Bush's new take on Japan offers no quick fix for the stock market shakeout. But the current turmoil focuses minds on the need for talk with Japanese reformists about ways competition can help turn their economy around. The sinking sun can rise again; needed most to restore confidence is to know that the big, slow fix is under way.

The paradox: Japan got into trouble by protecting its businesses from overseas competition. America can get into trouble by failing to enable its medium-size businesses to compete with giants. We should both put our trust in antitrust. 


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