2min chapter

Economics Explained cover image

Japan's Rise and Fall... And Rise Again?

Economics Explained

CHAPTER

Japan's Technological Decline and its Impact on the Economy

This chapter discusses Japan's decline in technology since the 1970s and its impact on the economy, including losing out on the mobile phone market and productivity.

00:00
Speaker 1
Japan is a country that has stuck living in the year 2000, but they've been living there since the 1970s. What that means is that during their boom, they were decades ahead of their time. Japan was technologically well ahead of all of their advanced rivals, and they were producing cutting-edge gadgets and building world-class infrastructure, they adopted computers faster than the west, and they were using all of this to be some of the most productive people on the planet. Unfortunately, Japan is still living in the year 2000, only now that means that they are 23 years behind. This is clearly visible in a lot of their most important industries. Japan used to be the defining example of high tech, but now it's struggling with adopting new technologies. Its companies are falling well behind rivals in the USA. Just Microsoft and Apple are together worth more than every single public company in Japan combined. That's inclusive of all of their other companies, not just their once-dominant tech companies, which apart from Sony just really don't have nearly the global influence they once did. Mobile phones are one of the largest and most value-adding markets in the world. Japan used to produce a massive share of the world's mobile phones, and having a phone from Japan was considered a big deal because they were normally more advanced and more valuable than regular mobile phones. Now this lucrative market is dominated by companies from the US, South Korea and China. The decline of technological dominance has hurt the economy in more ways than just missing out on selling mobile phones as well. Within an economy, technology can also be used to make existing workers more productive. A single worker digging with an excavator will be able to do the same work as a hundred laborers digging with shovels. And the utilization of technology carries this idea forward to almost any industry in an economy. The more than an individual worker can make in a given amount of time, the more productive they are. And since economies are usually measured using gross domestic product, the collective productivity of all workers in that economy is very important because there are really only three ways to improve GDP or total economic outputs. The first is by getting workers to work for longer. If 1 million workers in an economy can produce $30 worth of output in an hour and they work a thousand hours per year, then that economy will have a GDP of $30 billion. If that economy instead got all of its workers to work for 2,000 hours a year, then it will have double its GDP to $60 billion. Another way to do the same thing is to get more people in an economy to work.

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