2010-9-19
Hegemonic Stability Theory
For details, see “Hegemonic Stability Theory.”
Hegemonic stability theory is a theory put forward by the economist Charles Kindleberger and established by Robert Gilpin.
For the world to remain stable and develop economically under the hegemony of a single country, the following conditions are required.

1. One country must possess overwhelming political and economic power—that is, hegemony.
2. The hegemonic country must understand free markets and seek to build an international system to realize them.
3. Benefits must be enjoyed within the international system provided by the hegemonic country.
   It does not mean that international society becomes stable simply because a single country holds overwhelming hegemony.
   What matters is that the hegemonic country builds and maintains an international system capable of providing benefits to other countries.
   As long as this system is beneficial to those countries, non-hegemonic countries can conduct economic activities smoothly without having to build an international system themselves.
   That the United States today is a true hegemonic country is surely exactly right when judged against the conditions above.
   Twenty-five years ago, I kept thinking about why hegemonic countries exist in the world.
   What I realized while looking at the world from Rome, during the eight days I was staying there on business, was: “Half the world is still poor… people cannot even get enough to eat.
   That is why one country needs to prosper tremendously.
   And in that way, somehow, money flows to Africa, for example…
   Looking from the beginning of the Common Era, I realized that the succession had been Italy → Portugal and Spain → France → Britain → the United States → the United States and Japan.
   That this was the turntable of civilization.
   Thirty years ago, the United States sneezed after just fifty years as a hegemonic country.
   Its economy, driven by heavy consumption—which could be called an inevitable consequence of its role as a hegemonic country in helping poor countries grow—went too far, and its fiscal deficit expanded; if things continued this way, the world too would be in danger, and a free country that would stand alongside the United States and prosper was needed…
   It could only be Japan… At that time, we had built a civilization without class, ideology, or religion, the first such civilization in human history… assuming that the United States is a Christian country… (although this was the result of four million lives sacrificed even in the short period at the end of the great war).
   Now, this is what I think.
   Fifty years after hegemony passed from Britain to the United States, the world’s population had doubled to 6.5 billion…
   The United States alone cannot save the world…
   Even now, the United States is crying out.
   Europe, Japan, China, please expand domestic demand.
   And yet, what people involved in Japan’s stock market were saying last year was that, from now on, we would “move away from the United States and rely on China.”
   This is a tragedy resulting from our failure to notice that the turntable of civilization had turned to Japan more than thirty years ago, and the responsibility of the mass media, which created Japan’s lost twenty years by brandishing a foolish sense of justice without even recognizing the truth, is very grave indeed.
   It is customary for hegemonic countries to last two hundred years.
   The idea that Japan’s era is over is utterly absurd.
   Japan must continue to prosper for another 170 years as an economic superpower that stands alongside the United States, or complements it.
   Japan, which has renounced the use of armed force other than for self-defense in its Constitution, should leave military force to the United States and continue to prosper economically.
   ＊I believe you understand that this was a piece written with irony amid the circumstances of that time… By now, however, the time when we could afford to speak ironically is long past, and, as readers know, I am arguing, simply and clearly, that Japan too must immediately acquire nuclear arms, in whatever form.
   The three evil empires that it would be no exaggeration to call the worst in history… moreover, all of them are nuclear-armed countries, and China in particular has manufactured and amassed nuclear weapons in large quantities in just twenty years… The amount it spends on expanding its military power is increasing astronomically.
   Moreover, it is one of only two hostile countries in the world that have continued anti-Japanese education that is Nazism itself since the time of Jiang Zemin＊
   Why has Japan suffered such profound stagnation over these twenty years?
   To put it harshly, the mass media and politics, with a mental age of twelve, failed.
   Japanese companies, exposed daily to innovation and competition, honing technologies that rank among the world’s best in their respective fields and commanding large market shares, are outstanding even by global standards; combined with the qualities of diligence and attention to detail and a high level of education, Japan, an industrial nation, possesses the world’s largest personal assets, amounting to 1,500 trillion yen.
   Yet the money generated by this society (market) is not returned to the market; instead, becoming a mass of petty egoism over such things as compound interest and higher interest rates than those offered by banks, a vast sum exceeding 500 trillion yen remains tied up in postal savings.
   Passage omitted.
   Japan’s mobile phones are truly remarkable, yet Japan disparages itself by saying that they are so advanced that they constitute a technological Galápagos.
   China, as a country, is the world’s Galápagos, but, taking advantage of being a large country with a population of 1.3 billion, it has continued to pursue a weak-yuan policy as a nation (who cares about being global?), and is now the world’s savior.
   Japan should do the same.
   Even now, put to use the 1,000–1,500 trillion yen in personal assets, the largest in the world…
   Return to society the money generated by society (the gift of the diligent and outstanding workers who supported Japan as an industrial nation)…
   The fact that a capitalist country has continued to look down on the stock market, the very foundation of capitalism (which is why we were taken for a ride), is the true underlying cause of Japan’s profound stagnation over these thirty years…
   Not a single one of my classmates works for a securities company…
   They disparage them as stockjobbers, saying, “Stocks, of all things… stocks…”
   In the United States, Harvard’s finest go to Goldman Sachs and become successive Treasury secretaries…
   The reason the yen becomes a safe haven and rises whenever something happens is that Japan is a country rare in the world, where more than 95 percent of its government bonds are financed by these personal assets.
   If one percent of personal assets—10 trillion yen—is directed into the stock market, Japan will immediately become an enormous market standing alongside the United States—that is, a financial powerhouse of the world.
   Set the tax rate on profits from stock trading at zero.
   (Provided, however, that receipts proving the money was spent on consumption are supplied.)
   While wealthy Americans invest two-thirds of their assets in stocks—money is returned to society, making the economy even larger—the majority of wealthy individuals in Japan do not…
   For foreign capital to account for 70 percent of the stock market, the foundation of a capitalist country, is equivalent to the country being taken over.
   If 10 trillion yen, just one percent of the 1,000–1,500 trillion yen in personal assets, were put into motion, the share of foreign capital would immediately fall into the twenty-percent range.
   For ensuring economic stability and security, and for saying that we are global, this would be just about right…
   I am someone who feels that greed lurks behind the word “global.”
   At present, the Japanese stocks held by foreign capital amount to approximately 88 trillion yen (about 45 percent of the total), but if ten percent of personal assets, 100 trillion yen, were directed toward acquiring shares in Japan’s outstanding large companies and companies commanding global market shares in various fields… the stocks held by domestic capital would amount to 296 trillion yen… and if dividends were made tax-free (something Singapore has long been doing), deflation would end in an instant…
   Provided that this is limited to cases accompanied by receipts proving the money was spent…
   Since the average dividend yield of listed companies should be around two percent annually, the enormous sum of 5.92 trillion yen would flow into consumption—expanding domestic demand and GDP.
   If not only dividends but also stock trading were taxed at a rate as close to zero as possible (likewise, provided that receipts are supplied), the money flowing into consumption would become an even more enormous sum.
   If one percent of personal assets were put into daily market trading, and ten percent were directed toward acquiring shares in the outstanding companies of Japan, an industrial nation, the world would of course come to move by watching the Tokyo Stock Exchange, the Osaka Securities Exchange, and the NYSE, and if a weaker yen were best for Japan’s national interests, it could pursue a weak-yen policy as a nation.
   Almost every country in the world other than Japan acts with its national interests as its highest priority, so there is no need for hesitation.
   If an enormous amount of money flows into consumption, it will lead to an enormous expansion of domestic demand, and outstanding products and luxury goods from around the world that captivate the Japanese aesthetic sense will also be consumed on an incomparably greater scale.
   Japan should decide its own path.
   As a country possessing the world’s largest financial market and the world’s most advanced technologies in every field, we should, in the true sense, be the world’s Galápagos as the island nation of Japan.
   We should enjoy being a world champion alongside the United States for another 170 years.
   That is the role of a country to which the turntable of civilization has turned, and it inevitably becomes the world’s savior as well.
   Unfortunately, what Yoshiyasu Ono is advocating (an increase in the consumption tax) cannot restore Japan.
   Rather than meeting decline while remaining in this miserable and foolish state, it would of course be far better to complete our allotted time of glory and prosperity (two hundred years is the historical custom), and then play “Japan’s Sorrow,” instead of Santana’s “Europa.”
   It is 170 years too early to give up and lament.
   Still less can there be any justification for an archipelago of murders here and there arising from the poverty brought about by foolish stagnation.
   There is no need to concern ourselves with other countries.
   The recent financial upheaval demonstrated that capitalism cannot possibly be one hundred percent correct.
   It is also obvious that neither our lives nor the value of large companies changes from day to day.
   It is also obvious that democracy stands at the opposite pole from capitalism.
   As another country that is the best in the world, different from the United States, the shares of outstanding companies would not merely avoid falling; they would keep rising,
   They would fall only when performance deteriorated and the company descended into paying no dividends (and the management would simultaneously be dismissed at once)…
   Even in such cases, if this were the result of force majeure caused by a financial upheaval originating in Europe and the United States, as in the present case, we would give full expression to one of our qualities as Japanese people and endure together without selling down the shares.
   Surely no one would complain if we brought such a form of capitalism into the world.
   For another 170 years, we should attain the heights of glory and prosperity as the world’s Galápagos, without having to defer to anyone, and reign as a country of the world’s highest intelligence and freedom.
   Amid the prosperity of a champion, children too will be born in great numbers.
   That is why it lasts two hundred years.
   Although we respect America, until there is absolutely no need to watch for its approval, until our population becomes about the same as America’s—that is, twice what it is now.
   At least until we become a consumer superpower on about the same scale as the United States…
   Needless to say, there are plenty of places to live throughout Japan…
   We will also be able to say goodbye to such words as depopulation and the exhaustion of rural regions.
   Give birth, raise children.
   This country is filled with beautiful seas, green forests, and mountain ranges.
   Thanks to its monsoon climate, our country is one of the world’s foremost beautiful countries, rich in the changing seasons.
   There is absolutely no need to concentrate only in cities such as Tokyo and Osaka.
   Eating delicious, safe agricultural produce and freshly caught seafood, swimming in the sea, running through the fields,
   Looking up at the mountain peaks, pursuing lovers from primordial times, a country where people speak of love will emerge.
   Yes, for another 170 years, in this island nation, the Peach Blossom Land of which the ancient Chinese dreamed.
   That is our true role.
   I can see as clearly as if it were in the palm of my hand how the world’s envy will gather here.
   Without any need to proclaim ourselves a tourism nation, people from around the world will gather in this country.
   Especially the young and outstanding.
   Because a Peach Blossom Land will emerge, the richest in the world, where both the old and the young are beautiful
   The present culture and mass media with a mental age of twelve will also disappear in an instant.
   Music with a truly profound resonance that leads the world will be born, and films that rival Hollywood will be made.
   That is Japan’s next 170 years.
   For that is why there were incendiary bombs, Hiroshima, and Nagasaki.
   Four million people (the majority of them young and beautiful, like you) did not die in vain.
   They died for us, for our present, to make this country the richest and most beautiful in the world, a country enjoying the highest freedom and intelligence.
   Never again to lose lives for fictions or rituals, to repeat foolish mistakes, or to live only for our own egoism,
   They died to make this beautiful country a champion of freedom and intelligence.
   For we can repay them only by attaining the world’s greatest glory and prosperity and making the world understand why Japan is prospering.
   Finally
   Japan will become a great financial powerhouse of the world, a stock-market-capitalization powerhouse, and a country with world-class technology, standing alongside the United States, and will continue to prosper until the turntable of civilization turns from Japan to whichever country is next in line…
   It will not turn to China as it is now… The economy alone does not turn the turntable of civilization…
   The turntable of civilization turns only to a country that has created not merely economic prosperity, but true freedom and the highest intelligence…
   As long as China remains a communist dictatorship, the turntable of civilization will not turn to it…
   As long as India cannot overcome its caste system, it will not turn to it…
   I predict that it may turn to Brazil, where the only problems are the disparity between rich and poor and poverty.
   For another 170 years, until it passes its turn to the next country, Japan should continue to prosper.