Chapter 4: The Big Cycle of the United States and the Dollar, Part 1
This is the most recent instalment of Ray Dalio’s book on big cycles. Here is a section:
Eoin Treacy's view -
Like Germany, Japan was also hit exceptionally hard by the depression and became more autocratic in response to it. Japan was especially vulnerable to the depression because, as an island nation without adequate natural resources, it relied on exports for income to import necessities. When its exports fell by around 50% between 1929 and 1931, it was economically devastated. In 1931, the depression in Japan was so severe that the country went broke—i.e., it was forced to draw down its gold reserves, abandon the gold standard, and float its currency, which depreciated it so greatly that Japan ran out of buying power. These terrible conditions and large wealth gaps led to fighting between the left and the right. In 1932 that led to a massive upsurge in right-wing nationalism and militarism to forcefully restore order and bring back economic stability. To that end, Japan’s military took control and pursued military options to get Japan the resources it needed by taking them away from other countries. Japan invaded Manchuria in 1931 and later expanded through China and Asia to obtain natural resources (e.g., oil, iron, coal, and rubber) and human resources (i.e., slave labor). As in the German case, it could be argued that this path of military aggression to get needed resources was the best path for the Japanese because relying on classic trading and economic practices wouldn’t have gotten them what they needed.
Shifting to more autocratic, populist, and nationalist leaders and policies during times of extreme economic stress is typical, as people want strong leadership to bring order to the chaos and to deal strongly with the outside enemy. In 1934, there was severe famine in parts of Japan, causing even more political turbulence and reinforcing the right-wing, militaristic, nationalistic, and expansionistic movement.
In the years that followed, this movement in Japan, like that in Germany, became increasingly strong with its top-down fascist command economy, building a military-industrial complex with the military mobilized to protect its existing bases in East Asia and northern China and its expansion into other territories. As was also the case in Germany, during this time, while most Japanese companies remained outside government ownership, their production was controlled by the government.
It makes sense that no one would enter a war under the assumption they are going to lose more than they gain. Therefore, it is reasonable to conclude the increasing competition between China and the USA will not result in a war until one side clearly believes they can win. Nuclear weapons obviously complicate the calculus.
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