Bill Mitchell — What is the problem with rising dependency ratios in Japan – Part 2?

This is Part 2 of my blog posts on population shifts in Japan. In – What is the problem with rising dependency ratios in Japan – Part 1? (October 28, 2019) – we considered the evolution of dependency ratios in Japan as a precursor to considering the nature of problems that accompany a rising dependency ratio. The purpose is to disabuse the public debate of the idea that rising dependency ratios constitute a fiscal crisis and point to the increasing prospect of fiscal insolvency. That erroneous assertion has been used as one of the justifications for pursuing austerity policies, which damage growth, cause rising unemployment and generally miss the point. The problem with this construction is that the solution adopted by the ‘sound finance’ lobby (austerity) to their ‘non problem’ only serves to exacerbate the real problem. Today, we will consider the productivity challenge that lies at the heart of the issues a nation with a rising dependency ratio will face.

Bill Mitchell – billy blog

What is the problem with rising dependency ratios in Japan – Part 2?
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill Mitchell — What is the problem with rising dependency ratios in Japan – Part 1?

Later this week I will be in Japan for a series of presentations and meetings with a broad spectrum of Japanese politics. The various hosts of the events which I will confirm in Wednesday’s blog post are all committed to advancing an MMT understanding in Japan and ending the hold that ‘sound finance’ has on the public policy debates and regularly lead to poorly contrived policy shifts (such as the recent sales tax hike) in pursuit of lower fiscal deficits. As part of my preparation for my presentations I have been studying various aspects of the Japanese situation so that I can address the issues with a solid evidence base. One of the recurring themes put forward by the ‘sound finance’ lobby (which includes much of the economics profession both inside and outside of Japan) is that its ‘challenging’ demography demands that the Government move to surplus to ‘save up’ to avoid the impending fiscal disaster associated with a rising dependency ratio. This issue is not confined to Japan, of course. It is just that Japan’s demography is a little further down the ageing road than other nations. But while rising dependency ratios matter and need attention, the construction of the problem by the ‘sound finance’ lobby misses the point completely and their ‘solution’ to their ‘non problem’ only serves to exacerbate the real problem. That is what today’s blog post is about. In Part 2, I will elaborate more on the nature of the productivity challenge and some of the options that have been suggested to deal with it.

Bill Mitchell – billy blog
What is the problem with rising dependency ratios in Japan – Part 1?
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Zero Hedge — The Global Demographic Dependency Debacle

Read it at Zero Hedge (very short, chart self-explanatory)
The Global Demographic Dependency Debacle
Submitted by Tyler Durden