The Agenda

Unpleasant Thoughts on Japan

(1) I agree with Felix Salmon on donating funds earmarked for disaster relief in Japan:

 

Earmarking funds is a really good way of hobbling relief organizations and ensuring that they have to leave large piles of money unspent in one place while facing urgent needs in other places. And as Matthew Bishop and Michael Green said last year, we are all better at responding to human suffering caused by dramatic, telegenic emergencies than to the much greater loss of life from ongoing hunger, disease and conflict. That often results in a mess of uncoordinated NGOs parachuting in to emergency areas with lots of good intentions, where a strategic official sector response would be much more effective. Meanwhile, the smaller and less visible emergencies where NGOs can do the most good are left unfunded.

In the specific case of Japan, there’s all the more reason not to donate money. Japan is a wealthy country which is responding to the disaster, among other things, by printing hundreds of billions of dollars’ worth of new money. Money is not the bottleneck here: if money is needed, Japan can raise it. On top of that, it’s still extremely unclear how or where organizations like globalgiving intend on spending the money that they’re currently raising for Japan — so far we’re just told that the money “will help survivors and victims get necessary services,” which is basically code for “we have no idea what we’re going to do with the money, but we’ll probably think of something.”

(2) Megan McArdle wonders how Japan will finance its reconstruction efforts, after noting that the country will have to borrow roughly a third of its GDP this year:

That borrowing is going to come atop an already colossal debt burden–Japan’s debt-to-GDP ratio is currently well over 200%.  This can’t go on forever . . . is this when it stops?In the short term, no, for two reasons.  As Nomura points out in the BBC link, the Bank of Japan is . . . er . . . [insert some metaphor for supergoosing the money-supply that does not involve floods.]  

In the short term the BOJ’s actions may actually increase the price of Japanese bonds–and according to Nomura, the ratings agencies are probably going to cut Japan some “humanitarian” slack.

There’s also the fact that most of Japan’s borrowing is done not only in its own currency, but from its own people.  This means you’re not going to see the sort of capital flight that has brought down other heavily indebted countries.  And in the immediate aftermath of a crisis, I expect that Japan is going to experience the sort of patriotic surge that temporarily unified America after 9/11.  I doubt their willingness to lend will flag in the near term; it will, indeed, probably increase.

On the other hand, it’s very much in question whether Japan can really finance all of this on its own resources.  1/3 of GDP is a lot of borrowing.  It’s not impossible–we borrowed 30% of GDP in 1943.  But we started with a pretty low debt burden. [Emphasis added]

At the risk of making a polemical point, this is one reason to keep an eye on public debt levels. We want to keep our powder dry in case of unanticipated emergencies. 

(3) I have an extremely unpleasant thought. Japan is notorious for heavily subsidizing rural areas and small and mid-sized cities. I have no doubt that some of the devastated regions can and should be rebuilt, because they are economically viable regions that people will choose to rebuild by drawing on their own resources. Rather than have the central government lead an expensive reconstruction effort, it might be best to make large lump sum payments to individuals in the affected regions, as Edward Glaeser proposed for post-Katrina New Orleans.

Reihan Salam is executive editor of National Review and a National Review Institute policy fellow.

Most Popular

Elections

Kamala Harris Runs for Queen

I’m going to let you in on a secret about the 2020 presidential contest: Unless unforeseen circumstances lead to a true wave election, the legislative stakes will be extremely low. The odds are heavily stacked against Democrats’ retaking the Senate, and that means that even if a Democrat wins the White House, ... Read More
Culture

What We’ve Learned about Jussie Smollett

It’s been a few weeks since March 26, when all charges against Jussie Smollett were dropped and the actor declared that his version of events had been proven correct. How’s that going? Smollett’s celebrity defenders have gone quiet. His publicists and lawyers are dodging reporters. The @StandwithJussie ... Read More
Energy & Environment

The Climate Trap for Democrats

The more the climate debate changes, the more it stays the same. Polls show that the public is worried about climate change, but that doesn’t mean that it is any more ready to bear any burden or pay any price to combat it. If President Donald Trump claws his way to victory again in Pennsylvania and the ... Read More
White House

Sarah Sanders to Resign at End of June

Sarah Huckabee Sanders will resign from her position as White House press secretary at the end of the month, President Trump announced on Twitter Thursday afternoon. https://twitter.com/realDonaldTrump/status/1139263782142787585 Sanders, the daughter of former Arkansas governor Mike Huckabee, succeeded Sean ... Read More
Politics & Policy

But Why Is Guatemala Hungry?

I really, really don’t want to be on the “Nicolas Kristof Wrote Something Dumb” beat, but, Jiminy Cricket! Kristof has taken a trip to Guatemala, with a young woman from Arizona State University in tow. “My annual win-a-trip journey,” he writes. Reporting from Guatemala, he discovers that many ... Read More
Politics & Policy

On Painting Air Force One

And so it has come to this. Two oil tankers were just attacked in the Gulf of Oman, presumably by Iran. The United States and China are facing off in a confrontation that is about far more than trade. The southern border remains anarchic and uncontrolled. And Congress is asking: “Can I get the icon in ... Read More