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Cavity in your soul hollows out your wealth - and vice versa

Production is thus at the same time waste or destruction of material, financial and human resources, and consumption is at the same time negative production.
- Words from Critique of Political Economy by Karl Marx (1857) paraphrased by this blogger.

I am a humble blogger who has lived for almost 77 years and is now dying in dire poverty. I am well aware most of you think I am Aesop's fox because I seem to have walked away from the bunch of grapes with my nose in the air, saying the grapes must be sour.

But nothing is farther from the truth. I've never said grapes are unripe here. Instead I'm always saying I can tell from my experience that they are worm-eaten all over.

Besides, earlier in my life, I've had fine moments when I had a lot of sweet grapes before worms ate into them. There's no reason I have to look around for a fairyland where quality of life hasn't eroded yet.

Given this perception gap between us which seems almost unbridgeable, it's all the more annoying to hear empty-headed ideologues in the U.S. talking about the future of Northeast Asia under the guise of political analysts.

Sometime last year, Gordon G. Chang had to revise his 10-year-old forecast that China would collapse by 2011, saying, "I was wrong, but only by one year." Now as the end of 2012 draws near without seeing imminent signs of his prophecy coming true, Chang must be sweating a lot over how to ask his patrons and followers to give him another reprieve. Learning no lessons from his repeated failure to predict what's happening in this region, he wrote on in September 9, 2011 that Japan would once again overtake China as the world's second largest economy by 2013. Chang's disciples are too nice with their guru to ask him this simple question: "What yardstick are you going to use to figure out GDP of the nation which will have disappeared one year earlier?"

These unprincipled guys arbitrarily single out GDP, or sometimes sovereign debt, when talking about the wealth and health of nations as if they are talking about the Olympic games. Worse, the only thing these makeshift economists can tell about GDP is that the abbreviation stands for Gross Domestic Product. It's about time you should stop being distracted by their amateurish arguments about how soon China catches up with the U.S. GDP-wise, whether or not Japan overtakes China in the foreseeable future, etc.

From 1955 through 1959 I majored in economics and industrial relations at Keio University. Before we went on to study macro- and micro-economics, we had to get familiarized with the tricky rules of debits and credits. I was a dull-witted freshman. So I failed to grasp the principle behind the modern accounting method invented in 1494 by the Venetian genius named Luca Pacioli. It was only after I became a corporate financial manager 10 years later that I understood why income has to be posted on the credit side along with debt, and expenses have to be recorded on the debit side as if they were assets.

Since Pacioli's principle isn't just about debits and credits, it really adds up only when you take a look at it from a much broader perspective. It all comes down to this: Everything has two or more different aspects in the real world. To put it differently: Goodbye to ideological delusions and delusive ideologies.

Karl Marx observed that a producer produces a new product by consuming existing one and a consumer, in turn, consumes the product to produce a newer one. In that sense, he echoed Pacioli's principle while trying to adapt it to the post-Industrial Revolution era.

And this is exactly where the flyblown brains of these self-styled economists like Chang stop to work. And that is why they keep talking about nations' wealth and health so lightly. I even suspect those of you who are well-educated but have little experience engaging in an actual process of production of wealth think the accounting equation is something for number crunching nerds and has nothing to do with your own life. As a result you always end up scratching the surface of things even when you address your own problem. You self-righteously think problems are always for someone else to solve.

In the last five centuries since Pacioli, valuation of assets and liabilities have been an everlasting challenge for professional accountants in and outside FASB (Financial Accounting Standards Board) or IASB (International Accounting Standards Board). Especially in recent years, the hottest topic among them has been how to deal with intangibles such as intellectual property. I have no interest, whatsoever, in how these vultures flocking around paper money are measuring their imaginary wealth. But I am still deeply concerned about how these accounting experts bring up to date the way to value and revalue man's tangible and intangible wealth.

So I became a sophomore and then a junior without really understanding the basic principle of economy. In subsequent years, I skipped almost all classes primarily because not a single professor lectured on his own theory tested against the reality of the Japanese economy. As anywhere else in this country, these incompetent teachers kept talking about foreign ideas borrowed from the likes of François Quesnay, Adam Smith, David Ricardo, Karl Marx, and John Maynard Keynes.

Sometimes I think if the economic faculty of Keio University had had a class on Wassily Leontief's input-output analysis in which macroeconomics converges with microeconomics、I mightn't have skipped it. The Russian-born economist had already defected from the Soviet Union, but it was only 14 years after my graduation that the Royal Swedish Academy of Sciences awarded the Nobel Prize to Leontief. That is the only reason I missed the opportunity to learn his economic model which, in essence, was derived from Marx's analysis of production-consumption chain.

Outside these boring classes, I read many books written by the likes of Max Weber and Karl Marx. But it was only after I got into the business world that I learned first-hand that the economic system actually in place here is neither capitalism nor socialism.

This is not to say, however, the bachelor's degree is the only thing I obtained at my alma mater. I acquired one thing which was much more important than the diploma. What I learned there and have never forgotten is the fact that the greatness of these great economists such as Adam Smith and Karl Marx lies with their principled way of theorizing on what man's economic activity is all about. They invariably based their theories on the premise that monetary, religious and secular values can be, or at least should be, defined univocally. To them value is value.

It was only after the Great Depression that Keynes, his followers collectively called demand-siders, and their opponent supply-siders derailed economics into a mere tool for financial institutions and governmental organizations to make a fast buck or manipulate markets.

As this blogger has repeatedly pointed out, people in America, and some other countries to a lesser degree, have lost the ability to conceptualize things which Thomas Jefferson and other founding fathers of the country used to have. These birds don't think they have to define words such as "value" and "change" when they tweet about them. In my definition of these words, you can't have a value without changing something.

Perhaps revolution, in the original meaning of the word, is the most effective way to change things. But it's useless to talk about revolutionizing status quo with these effete people. That's basically why I always focus on more "peaceful" way to create values in my blog. My message is that you don't have to be a revolutionary in order to be a change agent. Just create values, i.e. genuine wealth.

Another conceptual thing I want to stress here is that the creation of a value, or its destruction for that matter, is not a natural process. Values never generate themselves. The single most important driving forth in the value-creating chain is always people.

With all this in mind, let me talk about Gross Domestic Product for a moment. As you may already know GDP consists of the following four elements:
● Private Consumption
● Gross Investment
● Government Spending
● Trade Balance.
It's important to note human beings play the central role throughout all these elements.

Private Consumption normally accounts for the largest portion of GDP, typically at around 60%. But you can also see personnel costs, i.e. corporate investment in human resources, in other GDP components. For one thing, a good part of your salaries, bonuses, other "fringe" benefits, and "overhead" expenses are included in corporate investment in "inventories" of the goods. And Government Spending is always funded by taxes withheld or voluntarily paid from your paychecks.

There's no denying that GDP is one of the important indications of the quantitative values being created in a year. But since values, or potential values to be more precise, are all created by man, GDP tells us only part of the story about our pursuit of wealth. Let us be reminded of Marx's succinct words from his contribution to Critique of Political Economy. He wrote: "Consumption gives the product the finishing touch." This requires us to take a close look into the qualitative aspects of the production of wealth.

Once again let me take up the condoms for umbrellas and the fancy devices to auto-load them. A trivial matter though it may seem, I think the case helps you understand the distinctive feature of the production and consumption particular to Japan.

I have nothing against the idea that things have to be kept clean as much as practicably possible. And generally speaking, there's nothing wrong with producing these amenities and selling them with a modest amount of frills called Saabisu here, although I can't afford to have such nice-to-haves myself. But even if you don't have first-hand knowledge in economy through working experience, you can tell only with your commonsense that overdoing things like this is not only useless but also harmful. It always entails a prohibitively large amount of waste of material, financial and human resources. That's why I think these people with pathological obsession with perfect cleanliness are destroying values much more than they create them by developing, manufacturing and selling the special condoms.

Equally important, you can never expect a sound spending habit from these sick people.

Their salaries are always subjected to theft by the tax authorities. Needless to say, they pour the loot down the drain called "government spending" for bridges to nowhere, soldiers who never fight, weapons they never use in actual warfare, and public servants who only serve themselves.

And how are these people working in the condom companies spending their take-home income?

Aside from daily necessities for them to stay alive aimlessly, they buy LCD TV sets, for instance. What for? To watch kiddies' anime, news programs filled with lies, and Waido-sho (variety shows). Also they allocate an average 34% of their disposable income for the education of their children. They make believe they don't notice these mentally neotenized parents and teachers can never help their kids grow into mature adults. Actually they are just reproducing the same stupidity from a generation to the next.

They also buy a personal computer. What for? To use it for Internet games, Buroguing (blogging) on their empty lives, or chatting on Mixi (Japan's largest social networking site). In other words, they are "using" the technologies of the 21st century for the same things their immediate and distant ancestors were doing without a computer.

An IBM consultant named Grant Norris once said: "Adaptive technologies move earlier technologies forward incrementally [while] disruptive technologies change the way people live their lives or the way businesses operate." He meant to say it's ridiculous to use a disruptive technology as if it were adaptive. That's the surest way to make a change-disabler out of the potential enabler of change.

Besides, practically every PC user installs in his computer an Internet security software such as the one from McAfee. These super credulous guys don't know, or don't want to know that all anti-malware software vendors, on the one hand, play the role of firefighters, and on the other, act as arsonists. Their business model is a typical example of what I call "negative production."

One of their typical behaviors when they get paid the biannual bonuses is to visit a local car dealer to purchase a Toyota or a Nissan. What for? Primarily to drive to their condom factories and adjacent offices. Another thing they often do is to take an overseas trip. Most of the time their destination is an outlet of these Duty-Free Shoppers. At a DFS, most of them purchase one of these luxury goods such as Louis Vuitton handbags.

According to a 2004 survey conducted by Merrill Lynch, Japan sale for highend marketers peaked at US$16 billion in 1996. After that, the sales somewhat slowed down, but in 2003, 3 years after the burst of the bubble economy, the Japanese people were still buying luxuary products worth US$10.8 billion, accounting for 40% of their worldwide sales. Chinese people may have temporarily caught up with Japanese in this respect, but it's astounding that the figure for 1996 was 7 times larger than Mongolia's GDP for 2005. This is an unmistakable sign that their unusually big appetite for values remains unsatisfied with industrial rubbish they can produce themselves.

Since the value-creating chain is open-ended, the same story can be told of employees of manufacturers of consumer electronics and automobiles. These are the "finishing touches" Japanese consumers can give to the industrial output. In short, the entire production-consumption chain of Japan has totally fallen apart.

According to IMF, Japan's GDP stood at $5,867 billion as of the end of 2011. But because of the broken chain, the world's third largest number means practically nothing. Japan's GDP is half-empty now, to say the least. This is a deliberate statement.

Some experts cite the huge accumulation of wealth, i.e. "household financial assets" which stood at 1,513 trillion yen as of 2009, as a proof that this economy is still sound. But values without substance will remain empty no matter how long they go through the process of fermentation.

Admittedly my economics remains an empirical theory because quality of life is an intangible thing. But sometimes intangibles can be measured quantitatively as some accounting experts have shown us. If I were an econometrician, I would certainly try to come up with the formula for something to be called a "cavity deflator" with which to gauge how far Japan's wealth has been eroded.

Actually I don't care too much about the emptiness of your life. At any rate it's none of my business. Throughout my first and second career, I did the best I could to make a difference to the shitty Japan Inc. There's nothing I could do anymore.

Maybe I will be a little better off if I know who I'm talking to on this website. It seems to me the American people have yet to recover from the election hangover. Mainstream Americans are still acting like fruitworms eating further into rotten grapes. Another group of people are saying grapes are too sour to eat with their signature cynicism as if they aren't dying for juicy fruit. A third group of people on the fringe are a little savvier. But they remain hesitant to leave the dead grapevines right away in search of a new vineyard. Instead they are untiringly warning grapes are pest-laden there. All these folks deserve the predicament facing them because none of them think about fixing, or better yet, revolutionizing the entire value chain with an unwavering resolve and down-to-earth, no-nonsense approach. · read more (39 words)
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Jobs are not an issue; your unprincipled attitude toward them is

Japan's unemployment rate is shown in black
against other G8 nations.

A receptionist automatically bows at a constant
interval where there are no customers in sight.

One of the regulars at my website brought up a somewhat off-the-topic subject in response to my previous post. He wanted to say the Democrats are undermining the American values.

Currently I'm fully tied up with my constitutional battle against the municipality of Yokohama. But I thought I had to write another piece to further clarify my points from a different angle because what I want to tell my audience and the cause of the war I am waging come down to one and the same principle.

I said in my reply that I think the Democrats and the Republicans are the two wings of the same bird as is evident from the way they talk about "issues" such as jobs. Then he came back to say, "I can’t tell the difference between a girl mosquito and a boy mosquito and yet the girl and boy mosquitoes get it figured out."

His mosquito analogy is essentially different from my bird metaphor. And, of course, none of us are mosquitoes, e.g. ones caught trapped in the web. This is exactly what I wanted to make sure when I asked you who you really are in the above-linked piece. Actually I had suspected some of you could be eels, if not mosquitoes.

He is my longtime friend, and personally I have absolutely nothing against this respectable gentleman. And I think I am a flexible person. But I can't give in an inch when it comes to a matter of principle.

It's important to note you can't artificially create jobs out of thin air and it's none of the President's business in the first place. The only exception is murderous ones a President might create in the military and the military-industrial complex.

Let me first define the word "job" because talking this and that about a poorly defined subject will get us nowhere.

What is the thing called a job?

U.S. Bureau of Labor Statistics, by and large, has it right when defining who are employed and who are unemployed. But actually the classification by BLS doesn't make a bit of sense except when it says volunteering is not an occupation. It doesn't say a word about exactly what a job is.

Realistically speaking, robbery, for one, is a legitimate job if these tax-collectors in the city hall are performing their contractual obligations when they forcefully collect taxes from their employers. Prostitutes and their pimps are also doing decent jobs if the "presstitute" I referred to as "AK" in my previous posts claims to be a journalist. Likewise swindlers should be considered to hold respectable jobs if Gordon G. Chang is classified in the category of self-employed in the labor statistics.

Japan's Statistics Bureau of Ministry of Internal Affairs and Communications handles jobs data essentially in the same way. But unemployment rate still stays extraordinarily low in Japan (see the graph embedded above) as compared to the U.S. even amid the deepening economic doldrums here. It is true that the Statistics Bureau here is habitually fabricating jobs data as its U.S. counterpart does. But if you want to know the real reason behind the huge gap, it's far from enough to question the trustworthiness of the labor statistics. I think we need to look into other factors particular to this country.

Population angle

Gordon G. Chang is a breathtakingly unprincipled person who has no sense of responsibility for what he says. Just for instance, one of his favorite topics was the demographic "issue" supposedly facing "America's most important partner." He kept parroting the Japanese media until the fall of 2008 when they realized the red herring had too dried up to distract people's attention from the real issues. Until then Chang was making a big fuss over the Japanese population which was allegedly shrinking in size while the process of biological aging was further accelerating.

I told him, over and over again, it was simply wrong to assume Japan's economic vigor was declining as a result of the dwindling population because it's turning the causal relationship upside down. Every time I pointed out shrinking population can't be an issue in a nation like Japan where there are too many people relative to its anemic pursuit of value-creating activity, he shrugged me off. Presumably he thought there was no reason to believe in an obscure blogger, that I was, when the entire fourth estate of the country observed the situation in a diagonally different way. The last thing he would understand was the very basic principle that the overall quality of people by far outweighs the number of people. As the imaginary issue fell into oblivion here, Chang started playing dumb as if he'd never said population was at issue.

And it makes little sense to talk about the population of a country without knowing the square-mileage of the land it covers. The population density of this country is already way too high. In the U.S., for instance, the number of residents per sq.mi is a little below 83 while in Japan 868 people are living in a range of 1 sq.mi.

To Chang, the Japanese were basically faceless people. Needless too say, he didn't give a damn about their inner selves when he talked about Japan's bright future under the wing of the United States. In 2004, I presented him a copy of John Nathan's Japan Unbound in the hope that he would stop scratching the surface of this nation. But again he ignored everything that didn't fit into his cheap ideology.

For one thing, he made believe he didn't notice that in the book Nathan quoted a director of the Mental Health Center of Yokohama as telling him, "Some 5 million Japanese are contemplating suicide at any given moment." It would be all the more out of the question for this guy to pay attention to the results of a survey recently conducted by the government, which said 23.4% of the respondents had answered in the affirmative to this question: "Have you seriously considered suicide recently?" When it came to the pollees in their 20s, an astounding 28.4% answered they had thought about killing themselves lately. This unmistakably indicates that the Japanese are well aware a good part of them are redundant.

With these facts and perceptions all taken into account, it looks all the more mysterious that Japan's unemployment rate has stayed at the lowest levels among industrialized countries for many decades. Among other things, it's especially unfathomable that we don't see a competitive labor market which would have inevitably arisen where there are too many people in a small strip of land. The fact of the matter remains that people here needn't compete against one another seeking scarce employment opportunities. As a result they don't have a motivation to improve themselves. This should be interpreted as an indication that what a job means to the Japanese is completely different from what it means to other peoples.

Pathological obsession with perfection

When I was in business, I already knew something was fundamentally wrong with this country. The only reason I could think of for the abnormally low jobless rate here was because this country is abnormal.

As I told you when I talked about the false obituary on the personal computer, one of my people in the accounting department was often spotted verifying an MIS output with her abacus. I said to her, "What the hell are you doing here?" The veteran accountant blushed and fidgeted for a second, but somehow found nerve to say, "I do this - just in case, Mr. Yamamoto." A couple of months later she decided to upgrade her verification system from the abacus to a calculator.

Then came the Plaza Accord of 1985 which ushered in the days of uncertainty. Now the woman belatedly realized that no matter how many times she double-checked a yen value, it would have to be restated at a new exchange rate against the US$ or the Swiss Franc by the time I sent the financial report to the headquarters.

I couldn't give her a pink slip for two reasons. Firstly, she wasn't alone, far from it, in being so fussy about accuracy. If I had fired her for her compulsive idea that everything had to be perfect, I would have had to dismiss everyone in the organization. Secondly, in this country where the world-renowned practice called "lifetime employment system" was, and still remains, the norm, joblessness isn't just the state of being out of work. It means much more than loss of income source, and perhaps loss of house to live in and family to live with. When you deal with such people who are driven too much by the obsessive ideas about maintaining a harmonious society to be really values-driven, you have to use quite different elimination criteria from those used in a little less abnormal country.

By the time I called it a career, I concluded that Japan would become a normal country only if and when its jobless rate soared to somewhere around 20%, or even higher. That would mean the number of the jobless should grow at least by 400% in the not-too-distant future. This is almost an unattainable goal as long as we take it for granted that Japan is a going concern.

In 1955, a Briton by the name of Cyril Northcote Parkinson observed that "the demand upon a resource tends to expand to match the supply of the resource." In a sense, his theory is the supply-sider's view applied to the labor market. But it is important to always keep in mind that Parkinson's Law is not a law of physics. You can change it if you and your colleagues are principled people. Otherwise the consequence is disastrous as we have already seen here in this country.

Corporate redundancies

The condoms for umbrellas and the state-of-the-art devices to autoload them are just the tip of the tip of the ice berg. Time and again I have discussed the issue of corporate redundancies on this website. In the first such post, I focused primarily on Saabisu lavishly given by large to small players in the service industry. Saabisu is the Japanese transliteration of "service" but it means a very different thing from service in that it is basically free of charge and it's something you can live without or sometimes you are better off without. It typically includes Oshibori (I don't want to bother to explain what it is), Pointo Kaado (ditto), Bakku-guraundo Myuujikku nobody appreciates, and automatic bowing (see the second photo). The list of Saabisu goes on and on.

At any rate, I have great difficulty figuring out why Japanese travelers don't think a smile from a cabin attendant suffices. It is true that with the late arrival of low-cost carriers, local airlines have started to seek the way to keep Saabisu to the minimum. But just trimming a small part of these frills is far from enough. As long as these sick people remain obsessed with the compulsive idea to pursue the unrealistic goal of "full-employment," it's for sure the same absurdity will come back the moment they see the slightest sign of turnaround and will soon start getting bloated until it "matches the supply of the resource."

Here's another case in point. Law says you are prohibited from smoking if you are 19 years, 364 days, 23 hours and 59 minutes of age, or younger. In recent years, those who are stupid enough to believe such a law is practicably enforceable have been stepping up measures for a stricter observance of the law. A couple of months ago, municipalities across the nation ordered convenience stores and other retailers dealing in tobacco products to tell anyone who wants to buy a pack of cigarettes to swear he is not a minor by pressing his finger to the touch panel of the point-of-sale system which just reads "OK" or "Confirm." I sometimes ask the salesclerk: "By any chance, do I look like a 19-year-old kid?" The clerk always says apologetically: "No, not at all. We are doing this just because we are told to."

I know if you have never taken part in an actual production process yourself, you will say, "It's not a big deal. Why don't you just follow his instruction without saying a word?" But actually it must have taken a tremendous amount of man-hours for them to make a minor change to their POS system. Someone defined the "user requirement" in writing. A second person translated it into a "program specification." A third one coded it into a computer program, which certainly needed a lot of testing and debugging. Only then they could go live with the new "system."

This is the way material, financial and human resources are chronically wasted in this country. Manufacturing sector is no exception. Earlier this week consumer electronics giants such as Panasonic, Sony and Sharp announced they are expecting huge losses for this fiscal year. As usual they put all the blame on the economic slowdown in China and the continued appreciation of the yen. They will never admit, until it is too late, that the only way to rectify the shaky situation is a drastic downsizing which would force them to dump tens of thousands of people being wasted there.

Now the world's third-largest GDP, either nominal or in "real" terms, is actually hollowed out as the immense waste of resources has fatally eaten into Japan's industrial base. In this context let us be reminded of the exquisite words by Karl Marx. To apply his observation about the value-creating chain to Japan Inc., we have to paraphrase it this way:

"In Japan, production is at the same time the destruction or waste of resources, and consumption is at the same time a negative production."

Marx observed: "Consumption gives the product the finishing touch." But the Japanese are now transforming potentially change-enabling products into change-disabling ones by habitually misusing them. This leads to a vicious circle because now the "misusability" has become the key to success for marketers.

Perpetual bubble

As I pointed out when I talked about the fecal truth behind the burst of the bubble, the Japanese economy has been inflated artificially to the extent that it's now half-empty, to say the least. I know very few of you readily accept my heretical view because most of you, like Chang, think there's no reason to believe in an obscure blogger who constantly brings subjective values into economics. Fortunately for me, though, I'm not alone. Peter F. Drucker, for one, repeatedly said to this effect:

"There is nothing so useless as doing efficiently what needs not be done at all."

Actually Drucker wanted to say it's not only useless but also harmful.

Even in Japan, there are a handful of people who realize problems deep-rooted in Japan Inc. Kazuo Yuasa, then chief consultant at Nittsu Research Institute and Consulting, Inc., wrote in 2002 about his first-hand experience with a Japanese steelmaker where people were working very hard on a big project for "what needn't have been done at all."

These are basically how the Japanese can miraculously keep nation's unemployment rate well below 5%. In this country it's a piece of cake not only for private sectors but also for the government to churn out as many jobs as they like, because these people are pathologically obsessed with perfection - perfect cleanliness, perfect accuracy, perfect certainty, perfect punctuality, perfect conformity, and most importantly perfect harmony among the community members - so anyone won't displease, upset or offend anyone else in any way.

And these are why I've been out of work since 2006 when these bastards at the rotten subsidiary of SAP AG, who were all suffering juvenile dementia, subtly suggested it was about time to have terminated our contract because I had already turned 70. If you are interested in knowing more about the ageist bias widespread in this country, you may want to look at the letter I sent to the editor of The Japan Times 16 years ago.

These are also what have since been driving me to an all-out war against the city hall. Unwinnable though it may seem, I won't stop fighting until the last day of my life. Not only my survival but also my principle are at stake there. · read more (22 words)