2025-11-04 20:23:10
I’m traveling to Ireland today for the Kilkenomics festival. This is a very strange but very fun festival in a picturesque little town called Kilkenny, in which Irish comedians and international economists and econ writers go on stage together. The econ people talk seriously about econ, and the comedians crack jokes. It’s a lot of fun, and it’s basically the kind of thing that only Irish people could think up. When I went two years ago, I wrote a fun post about how Ireland got rich:
Other than its startling economic success, another interesting thing about Ireland is the emotions it inspires in Americans. Even though most Americans don’t have an actual ancestral connection to the Emerald Isle, we all grow up steeped in stories about Irish immigration in the 1800s. So lots of Americans, consciously, think of Ireland as “the old country”, and have an almost inexplicable emotional connection to it. Bill Clinton famously claimed to be part Irish, despite no record of any familial connection; I feel it too, despite the fact that my ancestors are all from East Europe.1
Anyway, this strange emotional connection reminds me a little bit of weeb culture, which is a bit of an obsession of mine. So when the pseudonymous blogger Cartoons Hate Her offered to write me a guest post about how she’s a “weeb for Ireland”, I thought this would be a perfect time to publish it.
Perhaps you’ve heard of a “weeb” or weeaboo, basically a Japanophile (usually a white person)2 who has an outsized interest in Japanese culture. Weebs have been documented as existing as far back as the 1800s:
Modern-day weebs are typically white men obsessed with anime and other components of Japanese pop culture. Weebs have been stereotyped as neckbeardy, creepy, and cringey, but there may be benevolent weebs who truly just love Japanese pop culture.
Noah Smith, himself a big fan of anime and Japan, wrote a great article about weebs and provided a nuanced portrayal of the weeb mindset, arguing that most of them are simply cultural enthusiasts with no creepy motivations, and that the “anime pfp” Nazis you’ve probably seen on Twitter aren’t emblematic of your average weebs. #NotAllWeebs.
But anyway, I came to the devastating conclusion that I am a weeb. Not about Japan, but about Ireland and Irish culture. My obsession has gone back at least thirty years. And like a weeb, I’m confident that no matter how obsessed I am with Ireland, I’m getting the obsession all wrong and don’t really know what I’m talking about.
I don’t even know where my Ireland obsession began, but it was far enough back into my childhood that I don’t really remember. A while ago I wrote about my obsession with Victorian orphans and associated literature when I was in elementary school. I’m guessing that I discovered a vague sense of “Irish culture” around that time.
On the bright side, my need to be obsessed with a culture that wasn’t my own was better channeled into Ireland than whatever I was doing in 1996:
Anyway, a big part of my Ireland obsession awakened with the concept of Irish dancing. My school was heavily Jewish and Italian, but we did have a few Irish-American kids, and many of them got to leave class early for Irish dancing lessons, where they’d curl their hair into flawless copper ringlets and wear regal green velvet dresses and grown-up makeup. I was jealous of them, but even more jealous when one of them brought in a VHS tape of the iconic Riverdance Irish dancing program. Something about the music and dancing just hooked me. I had a similar reaction when I watched the Irish dancing scenes in Titanic when Rose slums it in steerage (Why does it never feel that way when I fly economy on Delta?)
I asked my parents to enroll me in Irish dancing classes. They laughed and refused because we weren’t Irish and I was a terrible dancer who couldn’t even be bothered to figure out the Macarena for our school spring concert. So I would practice my own version of “Irish dancing” in my room. One St. Patrick’s Day, my family attended some kind of cultural festival in our hometown where, much to my seething envy, a bunch of kids got to perform Irish dancing. I bided my time until my big moment: later that year, when I attended a Santa Meet and Greet at the mall, I took it upon myself to use “meeting Santa onstage” as an excuse to begin an impromptu Irish dancing performance to the unnervingly off-beat, “Simply Having a Wonderful Christmastime” playing on the speakers.
I can only remember this moment as I saw it from the eyes of an eight-year-old: I had absolutely killed it.
I could have sworn I heard a parent ask if I was professional and if I was hired to perform. Like, I know for a fact that I looked like an idiot and there’s no chance anyone believed I was a hired dancer, especially given that I was wearing a pink GAP puffer coat with a groovy smiley face flower on it, and not an Irish dancing costume, but I genuinely remember someone saying this. Maybe they wanted to help me maintain my delusion. Maybe they just couldn’t think of any other reason why a child would start performing bad Irish dancing at the mall. But I swore they said it.
The obsession continued. I begged my parents to let me dye my hair ginger red (they also said no to this one.) Sometimes, when our backyard looked especially green and misty, I would pretend I was “in Ireland.” I eagerly looked forward to St. Patrick’s Day every year and ignored the naysayers who insisted it was a corny American thing. When I was twelve, I developed a crush on one of the geekiest boys in our class just because his last name was Gallagher. We never dated, but I dated other Irish boys. It’s not that I only dated Irish guys or even that they were my main type, just that being visibly Irish probably helped them level up by 2 points on the 1-10 scale. This phenomenon possibly explains why Sabrina Carpenter dated Barry Keoghan. On the bright side, my husband should feel very good about himself that I consider him a solid 10 without any Irish heritage, although he could pass in a Collin Ferrell way.
Speaking of heritage: unlike your typical white weeb, I am at least part Irish, but not Irish enough to justify my weebishness. I’m half Ashkenazi Jewish (to all of you on right-wing antisemite Twitter, congratulations on your keen “noticing,” and I haven’t even posted nose). My other half is loosely “WASP” but it’s more of a collection of random Northwestern European ethnicities—English, Scottish, French, German, Swedish, and, well, Irish.
I actually didn’t know I was Irish until adulthood, when my mom began exploring her ancestry on Ancestry.com and later 23 and Me. For many years in my teens, I wanted to be Irish, but didn’t think I was. Can you imagine how I felt when I discovered that I was actually part Irish after all this, with an entire lineage of family members with the last name Kennedy? It must have been like Rachel Dolezal discovering she’s actually 1/16th Nigerian. Suddenly, my excitement about St. Patrick’s Day felt slightly less embarrassing because at least I could claim some Irish heritage to back up my shamrock-induced soyface.
This continued into my thirties. I recently binge watched Say Nothing and listened to the associated audiobook. I am obsessed with House of Guinness. If it’s Irish, I’ll watch it. There was a month where I listened to two songs by the Cranberries on a loop basically all day. Whenever we pass by an Irish pub I tell my husband we have to go there “at some point” despite barely drinking alcohol. When it was time to name our daughter, I had a bunch of names picked out: Nora, Bridget, Fiona, and I even flirted with Siobhan for a while, my excuse being that I “liked Succession.” I have since channeled all of those names into Sims characters and I can’t deny creating ten-generation Sims legacies of Irish people. I love chunky cable knit fisherman sweaters, although I prefer cotton over the traditional wool. I have a favorite Spotify playlist called “Celtic folk music,” and I play it nearly every day when I’m making breakfast. Sometimes, when I wear a particularly woodsy-looking midi dress with a pair of lace-up boots I take a walk with my baby while listening to “Rocky Road to Dublin” on my AirPods. My husband, despite initially finding this obsession a bit weird, has come around to it, often playing “Galway Girl” by Ed Sheeran whenever I walk into the room.
I completely understand that this is not “really” Irish culture. I understand that I don’t really get it. I know that if I actually showed all of this to an Irish person, they’d probably laugh at me, or maybe even be offended (can you culturally appropriate the Irish if you’re part of a slightly less white subgroup? More at 11.) This is why I’m so embarrassed. Not embarrassed enough not to write a whole article about it, but still a little bit embarrassed. I feel like those people who say they love Chinese food because they love their local Chinese restaurant in their suburb of Cleveland and exclusively order wonton soup. I don’t need anyone to remind me that I’ve gotten the Irish all wrong. I know I have. But I want to enjoy my version of Irish culture—not sell it to others, profit off it, or claim it as my own—no matter how silly it is.
My warmth toward my imagined concept of Irish culture has extended to things that aren’t actually Irish, but feel Irish-coded. Ireland, at least in my demented mind, has come to represent a particular vibe: cozy, friendly, warm, moody, misty, mysterious…I can’t fully explain it, but it just makes sense in my head. It’s like those people who see the number 4 and immediately know it’s orange.
Much to my surprise, despite looking zero percent Irish, and marrying a man who looks zero percent Irish, my second child came out looking like she belongs on a billboard below big green letters that say “Travel to Dublin.” My mom recently went to Ireland on a trip, and knowing how I feel, brought me back a tiny green wool cable knit cape for her.
At this point you may be wondering if I’ve ever been to Ireland. The answer is no. I may still go one day, but I have concerns that it might ruin the whole thing for me. I’m painfully aware that my idea of “Irish culture,” is similar to a weeb’s idea of “Japanese culture” in that it’s mostly based on movies and music. I know a little bit about Irish history, and I’ve read and watched content on The Troubles, but I don’t know enough to be confident in my overall understanding of Ireland or Irish culture. If I went to Ireland for real, I imagine there would be a rude awakening, plus a lot of irritated Irish people who found me unfathomably annoying. In an effort to save the good people of Ireland from any further plight and injustice, I will be suspending any visits to Ireland until further notice.
In fact, an Asian American friend of mine even confessed that she feels it too!
Note: I disagree with CHH here. Weebs are actually disproportionately Black or Asian in America! See my original post on this.
2025-11-03 18:59:44
My father’s father was a bombardier in Europe in World War 2. Around Christmas in 2002, I asked him to tell me everything he remembered about the war. I had always had great reverence for my grandparents’ generation, and growing up I pestered them for as many of their stories as they could tell me. But the war, and especially combat itself, had been the one thing I avoided asking about directly; instead, it simply loomed silently in the background, defining and giving meaning to everything.
But my other grandfather, who had been an infantryman in the Pacific, had died a few years prior, and had taken most of his dark secrets with him to the grave — why he couldn’t see certain objects without throwing up, or the nature of the secret wound that had earned him his “extra” purple heart. I told my remaining grandfather I didn’t want to let his own stories perish completely. So he sat down with me in his living room and told me every story he could remember. We talked all night and into the morning.
The picture I got of the war from those stories was far from the glossy cartoon version of World War 2 that we learn from popular culture. It was full of foolish mistakes and gross incompetence, casual brutality, petty vice. Most of all what I realized was how confused everyone was. The one line my grandfather repeated, over and over, was “For all we knew, we were going to die the next day!” When we hear the story of World War 2 now, we know how everything turned out — what the ultimate conclusion was, what the important battles were, and so on. We’ve had time to turn it into a coherent narrative. But at the time, the people fighting that tremendous conflict had very little idea what was actually going on, or how it would all turn out.
By convention, we call my grandparents’ generation the Greatest Generation, and though it’s a bit cheesy, it was precisely that utter confusion that made them deserve the moniker. In 1932, there had never been an economic downturn like the Great Depression1; nobody knew whether capitalism was permanently collapsing, but they kept on going to work every day. In 1942 nobody knew whether the Nazi and Japanese empires would conquer Eurasia, enslave its people, and use its vast resources to cow the United States into submission — but they didn’t flinch from the task of beating those enemies back.
With smug hindsight, we now know that capitalism is largely self-correcting, and that the Allies could easily outproduce the Axis. Imagine getting up every day to fight, or work in a factory, not knowing any of that, and yet knowing that as long as it took, and as hard as it got, you would keep fighting. There was a saying in the early days of the war: “Golden Gate in ‘48, bread line in ‘49.” That’s how long Americans expected the war to last, and what they expected the cost to be.
That generation left us an inheritance so priceless that we will never really appreciate its value. For decades, our world was free of great-power conflict, and that long period of relative stability brought unprecedented economic growth. The war brought the end of the age of European empires, self-determination for Asia and Africa, and the long fall of global inequality and extreme poverty. It brought us the United Nations and the Universal Declaration of Human Rights. It brought us an age of wonders — the computer revolution, the atomic age and the space age, modern health care, the age of Big Science.
Like my grandparents’ lives, World War 2 silently loomed in the background of the entire American Century. Talking all night with my grandfather, what I came to understand was that he and his generation — their pain, their sacrifice, their confusion, and their stubborn perseverance — were still watching over us, still protecting us and guiding us. Our happy, carefree modern lives — the paid vacation, the startup exits, the casual sex, the dance music festivals, the stock market, the psychedelic drugs, all of it — was an inheritance they fought to bequeath to us.
And now they are gone. The Greatest Generation has largely passed, and at the same time, we are discovering that some of those precious inheritances have been spent down. The moral anchor of the victory over the Axis has been largely lost. The Arsenal of Democracy, which endured throughout the Cold War, has been strangled by institutional sclerosis and ceded to China.
We’ve lived all our lives in the Great World 2 Afterparty, and now that party is over.
General George Patton’s nickname was “Old Blood and Guts”. He was no stranger to violence. And yet when he walked into the Nazi death camp at Ohrdruf, Patton reportedly vomited in horror, describing the camp as “one of the most appalling I have ever seen.” Eisenhower agreed, writing:
The other day I visited a German internment camp. I never dreamed that such cruelty, bestiality, and savagery could really exist in this world! It was horrible.
When he liberated Buchenwald later, Patton forced over a thousand local German civilians to come look at the sight, to behold and reckon with the evil they had supported.
Eisenhower famously ordered U.S. troops to tour Ohrdruf, saying “We are told that the American soldier does not know what he is fighting for; now, at least, he will know what he is fighting against.” He understood that those atrocities would serve as a moral anchor that would give meaning to Americans’ struggle. And so it did; when they went home, Americans remembered what they had seen.
That moral anchor long outlasted the fighting. The whole modern notion of human rights, enshrined in the UN Charter and various international declarations, was in large part a reaction to the horrors perpetrated by the Axis. This necessarily involved some degree of whitewashing of the Allies’ own war crimes.2 But the moral tally is unambiguous. The kind of systematic mass slaughter perpetrated by the Nazis and the Japanese Army was something unseen since the days of premodern conquerors like Tamerlane or Genghis Khan.
Adolf Hitler, in particular, was the all-time champion of genocide — the Holocaust is only the best-publicized part of his rampage, with Jews being perhaps only a quarter of his victims. And had they not been defeated by the Allies, the Axis would have just kept on killing and killing — Hitler’s explicit plan was to murder over 60 million more Slavs in order to make room for German expansion, and it’s unlikely he would have stopped with the Slavs.
2025-11-01 09:32:15
I used to talk a lot about developing countries — how the successful ones accelerated their growth, and what lessons the others could learn from those successes. Here’s a whole series I wrote about the more promising development stories:
And when I was at Bloomberg, I wrote a lot about the prospects for African industrialization (which has been disappointing in the years since), and about the need for humanitarian aid to help some of the very worst-off countries.
These days, I’ve been writing a lot less about developing countries, for several reasons. First of all, developed countries aren’t doing so well themselves these days — most have slow growth, stagnating or shrinking populations, and internal political turmoil. Second, with the rise of economic nationalism, there is much less appetite among rich countries for altruistic crusades to help the developing world. China did have a big idea — the Belt and Road program — but it didn’t help very much, and created a lot of problems, meaning China will also probably retreat from development promotion. Meanwhile, protectionism in the U.S., China, and elsewhere will make it harder for developing countries to pursue traditional export-led growth.
But the window when developed countries (including China) can afford to treat poor countries like an afterthought is rapidly drawing to a close. The reason is simple demographics. The whole developed world is about to start shrinking. If not for immigration, it already would be:
Meanwhile, the world’s poorest countries are going to experience strong population growth through the end of this century:
The result of this disparity is visible in the chart at the top of this post. By 2100, six out of the fifteen most populous countries in the world — and three of the top five — will be places that as of 2025 have under $7,000 in per capita GDP (PPP). The biggest ones will be Pakistan, Nigeria, and the Democratic Republic of the Congo, with Ethiopia and Tanzania not far behind. Altogether, over 2 billion people — a fifth or more of humanity’s peak population — is projected to live in those five countries.
And that percentage will only grow after that, at least unless some sort of radical unexpected change happens to demographic patterns. Fertility is falling everywhere, but in the Big 5 poor countries, it’s not falling much faster than in the world as a whole:
Why are these countries’ fertility rates falling so slowly? Because they’re poor. The idea that some countries are culturally resistant to the fertility transition is falling out of favor, as African nations and predominantly Muslim nations show the same pattern of fertility decline as everywhere else (or faster). But the Big 5 are unusually poor, and poor countries tend to have much higher fertility:
Of course we can expect to see the fertility transition accelerate as these countries cross the $7,000 threshold; as you can see on the chart, very few countries maintain high fertility past that level. But while Pakistan might manage that soon, the others probably won’t. Nigeria’s GDP per capita has actually gone down in recent years, Tanzania and Ethiopia are still decades away at current rates of growth, and the DRC is still seemingly inextricably mired in extreme poverty:
To see just how weak of a performance this is, consider the fact that Pakistan — arguably the country that’s in the best shape of the Big 5 — has fallen relentlessly behind India in economic terms:
What happens to big countries is incredibly important; in recent decades, it’s India and China that have made the big strides against global poverty. These supergiant countries used to be desperately poor, but they got their act together and produced decades of solid growth — and as India and China went, so went the whole planet:
But as you can see on that chart, there’s a composition effect at work here — as big countries get rich, their fertility goes down, and their percentage of the human race falls as well. The countries with rapidly growing populations are those that failed to provide for their people. Now that Africa comprises a majority of the world’s extremely poor population, the drop in extreme poverty has stalled, and may soon start to rise again.
This tradeoff between income and fertility is a problem that the whole human race is going to have to solve, and soon, if it wants to have a prosperous long-term future. But in the meantime, poverty is still worse than aging, and the billions of people in the Big 5 poor countries deserve to have decent living standards.
And it’s not like rich countries can sit back and just ignore the suffering in poor countries, either. Emigration pressure usually peaks around $8,000 to $12,000 in per capita GDP1, meaning that rich countries in Europe, the Anglosphere, and Asia are likely to see giant waves of Pakistani, Nigerian, Congolese, Ethiopian, and Tanzanian migrants clamoring to get in. The current anti-immigration backlash gives us an unpleasant hint of what might happen as a result. Also, the shrinking of rich-country markets (due to shrinking populations) will hurt Western corporations, unless it can be matched by economic growth in developing countries.
So the world has a stake in helping the Big 5 poor countries grow. They’re highly unlikely to be the next China or India, but getting them to middle income level is probably doable.
But how? The most important thing rich countries — including China — can do is to fully open their markets to these countries’ products. The economic literature is pretty conclusive that this raises economic growth in poor countries, at least somewhat. There are many instances in which rich countries have actually done this, and there are a lot of ways we can evaluate the results of those experiments. For example, Romalis (2007) found that when America reduced its tariffs under the Most Favored Nation program, poor countries sold more products to the U.S. and grew faster as a result:
This paper examined whether improved access to developed countries’ markets raises developing country growth. The paper concludes that it does. Decreased developed country trade barriers increase developing world trade. This induced trade expansion causes an acceleration in the growth rate of developing countries. Developing countries that expanded their trade the most in response to improved access to developed country markets saw their growth rates increase relative to other developing countries…This suggests that developing country growth rates will accelerate if the developed world lowers its remaining trade barriers.
Frazer and Van Biesebroeck (2007) found that the African Growth and Opportunity Act, which opened American markets to some African products, raised African exports:
[W]e find that AGOA has a large and robust impact on apparel imports into the U.S., as well as on the agricultural and manufactured products covered by AGOA. These import responses grew over time and were the largest in product categories where the tariffs removed were large. AGOA did not result in a decrease in exports to Europe in these product categories, suggesting that the U.S.-AGOA imports were not merely diverted from elsewhere.
Opening rich-country markets to textile exports also helped get Bangladesh’s garment manufacturing sector off the ground, which has enabled that country to climb out of absolute poverty.
Importantly, though, these positive effects happen even when poor countries don’t see a manufacturing boom at all. Kassa and Coulibaly (2019) found that AGOA usually didn’t stimulate manufacturing in the long term, and usually just allowed African countries to sell more commodities to the U.S. But this ended up having a positive effect on growth in those countries anyway.
Right now, American policy is going in exactly the wrong direction. AGOA was allowed to expire this year, which will definitely hurt poor countries in Africa — including four of the Big 5. Meanwhile, Donald Trump is slapping tariffs on Africa, and has threatened tariffs on Pakistan as well. This might satisfy MAGA machismo in the short term, but in the long term it’s going to lead to a lot more African migrants trying to get into the U.S. — not exactly the kind of outcome Trump would probably like. Meanwhile, opening American markets to Pakistani goods might prompt that country’s government to try to emulate its South Asian neighbors, building industries like garments, textiles, and so on, and investing more of its GDP for the future.
So opening American markets to products from the Big 5 is a win for everyone involved.
Another pretty obvious idea is foreign aid. There’s a huge debate on whether aid actually raises growth — whether it actually “teaches a man to fish”, as the saying goes. The best literature review here that I know of is Dreher, Lang, and Reinsberg (2024). They find that aid does increase growth a bit, especially in very poor countries (like the Big 5). But the bigger effect is on poverty, which aid seems to reduce by a decently significant amount. That decrease in poverty comes with big improvements in health and welfare — things that tend to drive fertility down faster. That can reduce overpopulation in resource-dependent poor countries like the DRC, which means more natural resource rents to go around.
MAGA types might balk, however, at Dreher et al.’s finding that aid increases emigration pressure. When you give poor people money, or simply relieve their economic stress, one of the things they use that money for is to move out of their country to somewhere with better opportunities — like Europe or the U.S. MAGA is fundamentally an anti-immigration movement, so it might be a bridge too far to ask American conservatives to support aid, despite the long-term effect on population reduction. China, however, might still be persuaded to dish out more aid, especially given the geopolitical benefits it might reap from doing so.
One policy that’s probably not a good idea is to give money to the governments of the Big 5. Back in 2021, I wrote about how Pakistan has basically learned how to get repeated giveaways from the IMF (and now China), in the form of “loans” that get predictably and repeatedly “forgiven”:
This infinite lifeline of free money acts a bit like oil does for a petrostate, allowing Pakistan to exist at a subsistence level without investing its savings or building up its industry much. While India and Bangladesh invest to grow their economies for the future, Pakistan fritters its money away on hanging on to an impoverished status quo:
Therefore, aid to the Big 5 should go directly to the people of those countries — to building schools and hospitals, training teachers and doctors, and even just giving poor people cash. The governments of these dysfunctional giant nations should not be given sources of free cash.
But one thing the world can do for the Big 5 is to try to provide them with military stability. While Pakistan and Tanzania are largely stable (despite Pakistan’s frequent coups), the DRC, Nigeria, and Ethiopia are plagued by near-continuous warfare between fragmented ethnic groups, with the occasional religious movement thrown in. Increasing UN peacekeepers, other international peacekeepers, and diplomatic mediation efforts for those three countries would probably yield big dividends, allowing their fragile governments to focus a little more on economic and social development and a little less on war. Research generally shows that peacekeeping operations reduce conflict in poor countries, though they’re not a panacea.
The harsh reality is that nothing rich countries do is likely to turn countries like the DRC and Nigeria into countries like China and India. But there’s a lot we can do — for very low cost to ourselves — in order to push these countries toward a more livable, sustainable future. And in doing so, we can hopefully avert a world where most people live in a failed state.
At 2025 purchasing power parities. I converted from the numbers in that paper.
2025-10-29 15:00:38
Japanese prime ministers tend to be gray, unimpressive placeholders who don’t last very long in office. But every once in a while, an important leader shows up who gets big things done and stays in office for a while — Koizumi Junichiro in the 2000s and Abe Shinzo in the 2010s were the two most recent examples. It’s not always easy to tell who is going to be one of these when they come into office — Abe himself even had a short, unimpressive first term in the 2000s before he came back in 2012 and changed Japan utterly.
There’s a lot of hope that Takaichi Sanae, who just became prime minister, will be one of the transformative ones. She’s modern Japan’s first female leader, which may have contributed to her very high popularity, especially among young people. She’s also a tough-minded conservative, famous for her hawkish views on defense and on China.1 And in a party known for gray leaders who blend into the background, she stands out as a colorful individual, with her history as a biker and a heavy metal drummer (in fact, she still drums for fun).
Most coverage of Takaichi so far has focused on her personality, on boundary-breaking, or on her relationship with Donald Trump. Indeed, Takaichi seems to have charmed Trump on his first trip there:
President Donald Trump hailed the US’s alliance with Japan, reaffirming ties with a longstanding partner and praising new Prime Minister Sanae Takaichi on her plans to ratchet up defense spending as the pair met in Tokyo.
“I want to just let you know anytime you have any question, any doubt, anything you want, any favors you need, anything I can do to help Japan, we will be there,” Trump said. “We are an ally at the strongest level.”
But while maintaining good relations with the U.S. is certainly a very important task, there are also lots of other economic problems that urgently confront the new Takaichi administration. The country’s living standards are stagnant, having fallen behind those of South Korea some time ago:
And in fact this is doubly important for Japan right now, because it’s being menaced by its much larger neighbor, even as American power in the region slowly fades. Even if Japan continues to rearm to defend itself against a potential Chinese threat, it will need an economy that’s capable of supporting that rearmament.
Fortunately, Japan is in an OK macroeconomic situation right now. Government debt, the country’s thorniest problem, is actually falling as a percent of GDP, thanks in part to higher inflation and in part to rising corporate profits and tax revenues:
The deflation problem that bedeviled Japan for decades has finally been defeated. And at the same time, unemployment in Japan remains very low:
This means that Takaichi and her cabinet don’t need to focus as much energy and attention on macroeconomics, as Abe did. There is no need for further stimulus, monetary or fiscal. Instead, Takaichi is free to concentrate on improving Japan’s underlying economic model, in order to promote productivity and growth.
So here are a few things I think the Takaichi Cabinet should try to tackle while they’re in power.
Japan’s economy actually has fairly robust investment levels as rich countries go. But compared to its East Asian rivals, Japan actually puts far less of its GDP into capital formation:
China is probably overdoing it on the investment, but there’s no reason to think Korea is; again and again, Korean companies like Samsung have managed to outcompete their Japanese rivals by plowing more money into the next generation of factory technologies. When you’re a manufacturing-intensive economy, as Japan still is, you’ve got to keep investment levels high in order to compete.
How does a country increase investment? You can basically try to increase capital demand and capital supply. Capital demand is how much companies want to invest; capital supply is how much banks want to lend.
Japan’s major problem with capital demand is the shrinking population. If the consumer market is going to be smaller every year, that’s a disincentive for companies to invest in the country, because it’ll mean fewer customers in the future. Immigration can only do a little bit to help, in the quantitative sense, so the real thing Japan needs to do in order to increase capital demand is to become a more export-oriented economy. If Japan is a production base from which to produce things that foreigners buy, that’s a reason for companies to invest there.
Compared to other developed medium-sized economies, Japan exports very little, despite a recent surge connected to the weak yen:
Japan’s government needs to build on its recent progress and encourage its companies to export more — not just to a reluctant America, but to Europe, India, Southeast Asia, Latin America, and the Middle East. I’ll write more about Japanese export promotion later, but I’m sure the people at METI and the Ministry of Finance can think of some good ideas here.
As for capital supply, this really just means the financing system. Currently, big Japanese companies tend to sit on huge piles of cash, and use this for their investment needs, so prodding banks to lend more to these companies won’t accomplish much. Instead, banks need to lend more to smaller, growing companies looking to scale up their operations.
Japan’s early-stage startup ecosystem, including venture capital financing, is pretty robust. But the minute a Japanese company gets past the early stage, it finds itself in trouble, because it’s very hard to get the cash to grow from a medium-sized company to a big one. For hardware startups — which are crucial in a manufacturing-intensive economy like Japan’s — this is a “valley of death”.
In order to scale up, hardware companies (and AI companies) need bank loans. Equity financing is just too expensive, and bond markets are fickle; bank loans provide patient long-term financing. The government can also put its thumb on the scale, using “policy banks” like the Development Bank of Japan, the Japan Finance Corporation, the Japan Bank for International Cooperation, and so on.
It’s understandable that Japanese banks have become cautious and conservative after the go-go years of the 1980s ended in a giant crash, and a decade of zombie lending kept weak companies afloat. And letting more zombies fail is certainly important for freeing up financial and human resources for more productive uses. But helping small companies scale up quickly is very different from the bad old practice of allowing weak old companies to stumble onward. If Japan accelerates growth, much of it is going to have to be bank-financed, and that’s going to require banks to have a greater appetite for risk.
The final way to increase investment in Japan is to boost greenfield FDI. This is what my book, Weeb Economy, is about. Japanese people have become used to thinking of “FDI” as “foreigners buying Japanese companies in order to sell into the Japanese market”. This kind of transaction can be useful, but in general is of dubious value, so Japan has long resisted it.
But there’s a second kind of FDI — foreigners building factories, research centers, and offices in Japan in order to use Japan as a production base — that’s unambiguously positive. This is called “greenfield FDI”, because it’s basically like building something new in a green field.
Greenfield FDI is pretty magical. First of all, it increases demand for local workers, raising wages. It often results in more exports (“platform FDI”), because multinational companies tend to do multinational sales. Greenfield investment will also help Japan attract the high-skilled immigrants it has had difficulty attracting, because foreign companies will hire some engineers and managers from overseas to help and teach the locals. And perhaps most importantly, greenfield FDI encourages technology transfer from abroad, rounding out a country’s technological capabilities.
Japan has traditionally had very little greenfield FDI. Its economy caught up back when supply chains were far less globalized, and capital was far less internationally mobile, so it never developed the institutional instincts for luring greenfield investment. But in recent decades, countries like Poland and Malaysia have attained developed-country status almost purely by courting FDI. The contrast here is stark:
I’m not saying Japan should become an FDI-first economy like Poland or Malaysia. Japan already has many strong, good domestic brands. But courting greenfield FDI would result in a “missing piece” being added to the Japanese economy — another source of investment, labor demand, technology, and exports on top of the existing substrate of domestic brands.
Now is the perfect time for Japan to make a big push for more greenfield FDI. Japan’s relatively efficient land use permitting, good infrastructure, and cheap base of semiconductor engineers provide a powerful combination of incentives to invest. The weak yen won’t last forever, but it’s a tailwind right now. Japan’s attractive culture and cities mean that foreigners from all over the world — and especially from Taiwan, South Korea, and the United States — would like to live and work there if good jobs are available for them. And the geopolitical tensions and risks surrounding China mean that lots of companies are looking to diversify their operations out of that country; Japan can provide a natural alternative.
In fact, there are encouraging signs here. TSMC, the world’s dominant chip fabrication company, has built fabs in Japan’s Kumamoto Prefecture, and is building more. Samsung is following suit. So Takaichi’s cabinet needs to make a big push to promote Japan as a destination for greenfield FDI, in order to capitalize on this moment.
Japan’s corporate culture is widely recognized as a reason for its slow productivity growth since the 1990s. Traditional Japanese corporations had lifetime employment systems that promoted elderly managers who were unable to keep pace with changes in technology, globalization, and business models, while also keeping technology bottled up within companies and preventing it from circulating. Japanese white-collar management focused on encouraging longer work hours rather than rapid task completion or individual initiative, leading to unproductive time use and keeping women out of management. And domination of corporate boards by managers instead of shareholders weakened the profit motive.
Under Abe and his successors, Japan’s government has worked to transform this system, with much success. Profitability at Japanese companies has improved greatly, leading to increased corporate tax revenue:
Meanwhile, the Japanese labor market is becoming more flexible, thanks to a boom in mid-career hiring:
The share of Japanese companies that either hired or were in the process of hiring midcareer employees from October 2023 through March 2024 was 79.5%, according to a survey conducted by the Recruit Works Institute. This is an increase of nearly 20 percentage points from the same period 10 years ago, when the figure stood at 59.9%, suggesting that midcareer recruitment has become significantly more common over the past decade.
This is partly due to intentional government policy, and partly to a dearth of new graduates.
Meanwhile, more Japanese companies are embracing flextime working arrangements. This will naturally encourage a more results-oriented office culture, since the incentive will be to produce verifiable results instead of simply being seen to put in long hours at a desk.
These changes — along with government policy — are helping to promote more women in management at Japanese companies. Women in management are at a low level in global terms, but the percent has been rising steadily in recent years:
Progress is being made, but there is still much to do. The government needs to continue pushing companies to do more mid-career hiring, to promote more women, and to allow employees to take some of their work home with them.
In addition, the government should push companies to reduce seniority-based promotion. In an aged country like Japan, there is a natural tendency for the ranks of upper management to get clogged with old people, simply because there are more of them — and fewer young people — fighting for promotions. But companies often need young managers and executives in order to capitalize on new technologies, business models, and markets. The government should fight against the tide of aging by encouraging companies to promote more managers and executives based on initiative, performance, and potential, rather than seniority.
Finally, although profitability is important, the government should take care that it doesn’t push Japanese companies into a paralyzing short-termism. The focus should be on multi-year profitability, not on quarterly earnings.
Takaichi is a well-known hawk on defense issues. Her extremely high popularity thus indicates that the Japanese people understand the necessity to rearm in the face of the overwhelming Chinese threat, and are prepared to put aside their long-standing distrust of the military.
Rearming Japan will require big economic shifts. Currently, too much defense production is done by a handful of big companies like Mitsubishi Heavy Industries. This is similar to America, where concentration of defense procurement in the hands of a few “prime” contractors has raised alarms. Lots of people in America have been thinking about how to fix defense procurement, and Japan’s leaders should learn from these ideas.
But rearmament also gives Japan a golden opportunity to boost the country’s R&D capabilities and overall level of technology. Traditionally, the U.S. has done a very large percent of its research spending through the Department of Defense:
Research by Moretti, Steinwender, and Van Reenen (2019) shows that this defense research doesn’t crowd out private-sector research; it actually crowds it in.
[W]e uncover evidence of “crowding in” rather than “crowding out,” as increases in government-funded R&D for an industry or a firm result in significant increases in private sector R&D in that industry or firm. On average, a 10% increase in government-financed R&D generates a 5% to 6% additional increase in privately funded R&D…Finally, we find that increases in private R&D induced by increases in defense R&D result in productivity gains.
Many key inventions and innovations — the internet, GPS, and so on — famously came out of U.S. defense research, giving America a head start on commercializing those technologies. A host of smaller, incremental innovations is less heralded, but also important.
As a small nation that can’t match China’s total productive capacity, Japan will need to rely on cutting-edge technology to maintain an effective deterrent against its much larger neighbor. It will need better drones, better AI, better hypersonic missiles, and so on. Defense research is crucial for all of that. But at the same time, defense research will spill over and boost the civilian economy.
Japan’s industrial electricity prices are lower than Europe’s, but higher than those in most of the world. In particular, they’re higher than South Korea or China:
Japan has very few fossil fuel supplies, and will always be at the whim of a capricious global market when it comes to imports. Imports of LNG, coal, and oil will also always be vulnerable to cutoff by China’s navy in the event of a war. Japan should therefore focus as much as possible on energy sources it can produce at home — solar and nuclear. Currently, Japan doesn’t use much of these, so there’s plenty of room to grow them:
Japan has been slow to restart its nuclear reactors after the Fukushima disaster fourteen years ago. Only around half of the existing 33 reactors have come back online or will soon, thanks to cumbersome approval processes:
Accelerating the restart of all of the reactors should be a priority. Nuclear power can be a sensitive cultural issue in Japan, but the fact that the public hasn’t punished the ruling Liberal Democratic Party for restarting 17 out of 33 reactors suggests that the backlash to Fukushima is fading, and it’s politically safe to restart the rest.
Building solar is hard in Japan because of lack of land — the whole country is about the same size as California, and has more than three times as many people. The government is trying to accelerate solar deployment, including innovative workarounds like panels over agricultural fields and on top of buildings. Those are good efforts, and should continue.
Solar needs batteries in order not to be intermittent. Japan used to be the world leader in lithium-ion battery production, but China has taken over the market. Continuing efforts to free Japan from China’s rare-earth supply chain, as well as industrial policies to promote the use and manufacture of batteries, should be made a priority.
Japan’s software industry is incredibly weak. This forces it to rely on expensive software imports, creating a huge “digital deficit”:
Japan is mired in a digital services trade deficit, with the red ink reaching 3.48 trillion yen ($23.6 billion) in the first half of 2025, reflecting the country’s reliance on overseas tech giants…The digital balance consists of three categories within the services account: telecommunication, computer and information services, like cloud services; specialized and management consulting services, which includes online advertising; and royalties and license fees for content like videos and music streaming…The January-to-June digital deficit…was the second highest on record. It was 2.6 times larger than in 2015.
Japan’s weakness in software is also hurting its manufacturing, as production processes become more digitized and AI promises to revolutionize the factory floor.
Why is Japan so bad at software? The most likely reason is that it simply lacks the one key input into creating good software: trained software engineers. In Japan, software traditionally isn’t a very prestigious career path; smart young people tend to go into hardware engineering, leaving software starved of talent. Various regulations are also problematic, and need to be fixed, but these are probably secondary to the deficiency of raw talent.
Fortunately, thanks to AI, this may be a more surmountable problem. AI boosts the capabilities of weaker software engineers, allowing even mediocre performers to create functional code. This may make the training gap easier to bridge. AI will also help with translation, solving the problem of a lot of foreign code being documented in English. Japanese educational institutions should take the lead in teaching software engineers how to code natively with AI.
But even with AI, Japan is going to have to work to make coding a more prestigious profession. One solution might be to have government ministries hire more people trained in software. Another idea is to leverage the defense buildup, and have the Japanese military establish elite AI and cryptography units. Creating those plum jobs will lure talented Japanese youngsters into studying software in order to get in; the ones who don’t quite make the cut, or who do those jobs and then quit, will fuel the rise of a better software industry.
Anyway, those are the sketches of six basic ideas for the Takaichi cabinet to restore Japan’s economic growth and technological might. These won’t solve all of Japan’s problems — low fertility, trade tensions, and resource shortages will all still be huge issues. But they’re a start.
The role of the military in Japanese society is the country’s most important political cleavage, by far — think of it as all of America’s culture wars rolled into one. This is a legacy of the 1930s, when the military took over Japan’s society, destroyed democracy and pluralism, implemented a nightmarish repressive state, and plunged the country into a foolish war that devastated it. But of course the military is also a pragmatic issue.
2025-10-28 17:47:57
The Trump administration is not doing a good job. Tariffs are punishing the U.S. economy. Masked federal agents are rampaging through the streets of American cities, grabbing people off the street. Corruption is rampant. The people Trump put in charge of the country’s public health services don’t even believe in the germ theory of disease. And as a result, Trump’s approval rating keeps slipping:
And yet as unpopular as Trump is, the Democrats seem to be in even worse shape. The two parties are neck and neck in terms of approval, with the GOP slightly ahead, even though a thermostatic reaction to Trump’s overreaches and blunders ought to be making the Dems more popular right now. And despite the fact that Trump is talking about a third term and ending birthright citizenship and cracking down on the press etc. etc., people perceive the GOP as no more extreme than the Dems:
Even worse, polls find that the American public prefers Republican ideas over Democratic ones on almost all issues:
This is a tragedy, because the Democrats are the only force in America with a real chance of resisting Trump and the MAGA movement.
What’s going on? Why do people dislike the Dems so much?
2025-10-26 18:03:31
Here’s a fun little historical analogy: Vladimir Putin as Louis XIV.
Louis XIV, known as the Sun King, was the King of France from 1643 to 1715, making him the longest-ruling monarch in European history. He was the archetypal “absolute monarch” of the 17th century — his famous line was “I am the state.” When you think of a European king, chances are you’re thinking of this guy:
So other than being European rulers with a taste for the grandiose, how is Louis XIV like Putin?
First of all, they both consolidated power after a period of chaos. Putin, of course, arose out of the chaotic 1990s, when Russia’s post-Soviet descent into poverty, civil war, and gangsterism was threatening to collapse the state entirely. Early in his reign, when he was still a child, Louis XIV confronted the Fronde, an uprising of the French nobility against the monarchy. France’s monarchy crushed the Fronde, just as Putin crushed the rebellion in Chechnya.
After putting down their internal rebellions, Putin and Louis XIV established absolutist systems designed to centralize power and prevent future chaos. King Louis sent royal officials called “intendants” to oversee matters in the provinces and report directly to him, reducing the power of the local nobility. Putin dramatically weakened the power of Russia’s local governors and also curtailed the independence of various institutions, creating what he calls a “power vertical” that reports directly to him. The idea of the state as an organization gave way to the idea of the state as a man.
Both leaders also took their countries in a more socially repressive direction — Putin cracked down on gays, activists, and independent media in Russia, while Louis XIV issued an edict banning Protestantism in France. In both cases, this led to an outflow of talent from the country — many Huguenots fled France, while many intellectuals have left Putin’s Russia.
But the most important similarity is the series of wars that the two leaders started. Both Louis and Putin believed that their country’s borders were insecure, and that security required territorial expansion and foreign power projection. In order to accomplish that, both rulers engaged in a series of limited border wars. Louis XIV fought the War of Devolution and the Franco-Dutch War, gaining territory along France’s periphery. Putin fought short, generally successful wars in Georgia, Syria, and Ukraine in 2014.
In the end, however, both Louis XIV and Putin bit off more than they could chew, by scaring their neighbors into checking their advances. Eventually, Louis XIV’s power and military success prompted other European countries to ally against him. Louis ended up facing a powerful European coalition that stalemated him in the Nine Years’ War and again in the War of the Spanish Succession, effectively ending his expansionist dreams.
Putin’s attack on Ukraine in 2022, meanwhile, has united almost all of Europe behind the NATO banner; as the U.S. withdraws from its regional influence, Europe is taking over the defense of its own borders. We don’t yet know the outcome of the Ukraine War, or whether or not Putin’s ambitions will push him to attack other European countries. But right now, the war looks like a quagmire for Russia, especially if the European NATO members keep ramping up defense spending.
Louis XIV is not generally remembered as a brutal tyrant or a rapacious conqueror — in fact, some French people still look back at his rule as a golden age. But his rule had a lot of negative consequences. His intolerance provoked an exodus of human capital. His warmongering exhausted the French treasury and got millions of French people killed, for meager gains of territory and influence. And his absolutism was probably a long-term factor ultimately contributing to the French Revolution, which threw off the entire old regime of which Louis had been the paragon.
Putin probably won’t fare better in the judgement of history, regardless of the outcome of the Ukraine War. Some people will always hearken back to him as the guardian of Russia’s strength and pride, who pulled the country out of the ashes of post-communist dysfunction and won back international respect. But at the same time, a whole lot of Russians are dying, for very little gain of territory, smart people are leaving the country, NATO is stronger than ever, and the Russian economy has been stagnant for years.
So even the paragons of absolute rule in the 17th and 21st centuries weren’t very good rulers. Yet in their day, both Louis XIV and Vladimir Putin spawned plenty of imitators. The style of absolute monarchy pioneered by the Sun King was adopted by leaders like Peter the Great of Russia, Frederick I of Prussia, and Philip V of Spain.
Meanwhile, in the early decades of the 21st century, a lot of leaders are looking eerily like Putin — Recep Tayyip Erdogan in Turkey, Viktor Orban in Hungary, and Benjamin Netanyahu in Israel being classic examples. Xi Jinping’s removal of term limits and personalization of power in China might have been at least partly Putin-inspired, and Donald Trump’s weakening of independent institutions probably drew some inspiration from Putin as well.
In other words, just as 17th century Europe decided it needed absolute monarchs, many of the countries of the 21st century are deciding that they need dictators and quasi-dictators. Why? It’s impossible to say, of course — we don’t really understand the social and political processes that lead certain systems to become popular at certain times. But one prime culprit is the instability created by new media technologies.
Absolute monarchs like Louis XIV arose after more than a century of nearly continuous social and political upheaval in Europe — the Reformation, the Wars of Religion, and the incredibly bloody and ruinous Thirty Years’ War. Those conflicts had many causes, but one of the main ones was the spread of new ideas — mostly religious ideas — enabled by the creation of the printing press. Suddenly, control of information was yanked out of the hands of the Church’s gatekeepers and thrust into the hands of all kinds of intellectuals, activists, and dissidents.
The efflorescence of ideas and communication unleashed by the printing press ultimately helped lead humanity into the age of science and enlightenment. But in the short term — and “short” here meant a hundred years — it caused blood and destruction and chaos and instability. Absolute monarchs were probably one reaction against that instability — elites in countries like France hoped that vesting all power in one capable ruler would enable that ruler to tamp down on the roiling chaos that information technology had unleashed.
The dictators and quasi-dictators of the early 21st century are arguably a similar phenomenon. For the last three or four decades, a series of new media technologies has swept the world, allowing new thinkers and political dissidents to challenge essentially every part of the social order that prevailed before. The spread of Western television was only the beginning. It was quickly followed by the internet, social media, and smartphones.
This explosion of new information technologies, like the printing press half a millennium earlier, blew away all the old gatekeepers. Some people still celebrate this as a victory for marginalized voices, but an increasing number of people realize that it’s a major factor behind the rise of extremism and illiberalism. Social media broadcasts extreme viewpoints at the expense of the moderates whom the old gatekeepers used to elevate:
Thomas B. Edsall even goes so far as to say that the smartphone — which enables social media to become a constant, enveloping presence — is the death knell for Western democracy.
Vladimir Putin’s rise was not a reaction to social media (which didn’t really exist yet), and the internet probably played only a minor part. But some of the leaders that are now following in Putin’s footsteps are reacting to a wave of unrest that swept the world in 2019 and 2020:
I continue to think, for example, that Trump’s return to power in 2024 was a delayed reaction to the George Floyd protests of 2020, and to the ideology that grew up around the Black Lives Matter protests since 2014. Xi Jinping’s increasing authoritarianism may have been motivated in part by the Hong Kong protests of 2019. These protest waves, like most of the others around the world, were both inspired by ideas spread over social media, and organized directly via social media as well.1
Our new printing press led to new Wars of Religion. And just as before, some countries are responding by imbuing national leaders with dictatorial or quasi-dictatorial powers, hoping they’ll tamp down the fire of popular unrest.2
This is, to put it mildly, not ideal. First of all, Putin-type leaders tend not to be very effective. Even discounting their tendency to start (and lose) wars, the economic impact of populist leaders is typically very negative. Here’s a chart of what happens to GDP when populists get elected:
But in the long run, the cost of absolute monarchy may be even greater political instability and violence. The UK and the Netherlands, which evolved into constitutional monarchies even as their neighbors were embracing absolute monarchs, ended up becoming stable democracies. France and Russia, on the other hand, fared much worse, with revolutions that were incredibly violent and bloody and led to further wars.
Trump, Xi, and Putin are all old men in their 70s. After they’re gone, the dictatorial and quasi-dictatorial systems they put in place will remain, but without the charisma and finesse that allowed the populists to finesse the contradictions of their regimes. People will get mad and strain against the new shackles that the absolute rulers put around their wrists. I predict that the new age of kings won’t last.
For a good book on this, read Martin Gurri’s Revolt of the Public.
There are, of course, some big differences I’m glossing over. In the 17th century it was mostly nobles and other elites who thought installing an absolute monarch would quash unrest; in the 21st century, the Putin-like rulers almost all rose to power as populists, winning elections and only later crushing democratic institutions.
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