The Japanese policy was called forbearance. It meant that banks did not call in loans on defaulters even though the money would never be repaid. Alan Ahern in NUI Galway has argued (for a long time now) that it delayed the recovery of the economy.
In Tokyo this morning, we were given a dazzling briefing by Dr Robert Feldman of Morgan Stanley this morning. He said that one of the events that helped the return to growth was the decision that 140 top executives of a major Japanese bank needed to be fired in return for a major capital injection by the State.
The bottom line is that tough medicine needs to be applied. And everything that happened in Japan in the 1990s and 2000s should be noted as a forewarning by Brian Cowen and his Cabinet.
That was then. This is now. Now is sadly very much like then. The Japanese economy has bombed since September with all the tentive growth of the past three years being wiped out almost overnight. Feldmans’ concise summary a tht end of the brifing was that the economy here is terrible and is going to stay terrible.
He drew a very interesting graph showing the policy spectra of the two major parties. Within each party, there are individuals and group who alternatively believe in small government or in large government.
In other words, they are all drinking out of the same trough.
As Irish political parties are. What’s has been successfully imported annd exported between governments and financiers all over the developed world is the same sense of hubris. that they had finally beaten the cycle. During the good times political parties jostled into the same patch of ground in the centre. You wonder is the opposition here, or indeed the opposition in Ireland, in a position to come up with any radical, novel or different ideas about to get out of the mess we all find ourselves in.
Japan is a country that has a strange hold on a surprisingly large Irish cohort, many of whom came on FAS courses or to teach Englisha decade or two decades ago and stayed on. You can see the immense appeal it has. It is very different but there are so many aspects of Japanese society and living that are appealing.
And for all the posturing at home about us hanging around wit the ‘big boys’, direct trade between indigenous Irish companies and Japan is surprisingly low. It is currently worth €95 million. Even with a looming recession, that’s dismal. The property boom and the comfort zone supplied by foreign direct investment into Ireland has masked some fairly ordinary performances by Irish industry and serives over the past decade.
Back to forbearance. There are many lessons to be learned from the previous Japanese experience. In a way you can understand how it happened because of the system of honour and culture. But what could ever justify its existence in Ireland other than the succumbing to soft sentimentality: ‘ah sure, behind it all, he’s not a bad fella”.
We can’t afford to have such attitudes any more.