COVERLEADCan Economics Save the World from Rising
Geopolitical Incertitude?
By Naoyuki Haraoka

There has been growing public distrust in the politicalelites’ ability to deal with economic policy issues, suchas continuous deflation, fiscal debt, expanding income
inequality, and increasing job insecurity from structuraladjustments due to globalization. The general public
have a reason to distrust them, because most of theseelites are intellectuals, graduates of prestigious
universities or graduate schools, who are having to facean unprecedented landscape which they have neverlearned about. We are undergoing a significant paradigm
shift in our epoch, symbolized by the United States
adopting a lower profile in the domain of the economy
as well as security, the US-China conflict over sensitivetechnologies, and a malfunctioning capitalism creating
unacceptable levels of income inequality. The Fourth
Industrial Revolution, driven by digital technology, hasadded further uncertainty by raising the possibility of
low-skilled or medium-skilled labor being replaced by AIor IoT. The political elites are not yet well equipped withknowledge to deal with this possible rise in
unemployment. But neither the general public nor theelites should be blamed for the political instability
caused by their conflicting views and values. Theparadigm shift goes beyond their experience andlearning. In a globalized world, these conflicting views
could lead to geopolitical crises, and so both ordinary
people and intellectuals should strive to educate
themselves to find suitable responses to them. No text
book can provide these answers. Symposiums andforums are the best way to explore solutions, with2 Japan SPOTLIGHT • November / December 2019leading thinkers as speakers who may not be preparedwith answers but who could provoke new ideas among
the audience and participants. The elites and the generalpublic must begin collaborating to find solutions to thegeopolitical and economic uncertainties we face today,
and the key to this collaboration must be respect forknowledge.
Knowledge must not be monopolized by political elites
but needs to be widely shared among the public.
Prestigious universities are not the only places where
one can acquire knowledge and become an intellectual.
People who are not fortunate enough to have theopportunity to learn at high-level academic institutes
could educate themselves, at least about current policy
issues, by paying attention to the work of think tanks.
Distrust of elites should not lead to distrust ofknowledge or intelligence. A truly intelligent person
loves knowledge and learning regardless of his or her
academic record.
This issue’s subject is how economics can work toallay rising geopolitical uncertainty. Economics is often
referred to as a dismal science and is not popularamong the public, so it is a good subject to examine thepublic’s anti-elitism. Anti-elitism could in a sense beanti-economics. But economics is not a monopoly of theelites, since it can provide vital knowledge for solving awide range of critical issues, such as how to mitigate
income inequality – one of the factors behind risinggeopolitical risks.
The issue’s cover story attempts to provide readers
https://www.jef.or.jp/journal/

COVERLEAD

with ideas to provoke positive thinking about the future.
It will be seen that education is a crucial means forreducing the income gap between rich and poor.
Capacity building by self-education through reading athink tank’s publications or attending a policy seminarorganized by a think tank may help to mitigate theexcessive gap, and we hope our cover story helps tostimulate curiosity to learn about economics, inparticular. It is also important to reiterate the crucial roleof education in tackling the possible increase in
unemployment due to the Fourth Industrial Revolution.
Only those people with high skills or expertise gained
through self-education, even if they are graduates, will
be able to survive the serious competition in themachine age.
The first article of the cover story is my own shortessay on “Economic Policy in an Age of Rising
Geopolitical Risks”. You may recall French economist
Thomas Piketty’s excellent book on income inequality,
Capital in the Twenty-First Century (2013). Dr. J. Bradford
DeLong, a distinguished economics professor at U.C.
Berkeley, and his colleagues surveyed new issues on
income inequality being developed by economists
stimulated by Piketty’s book and published After Piketty:
The Agenda for Economics and Inequality in 2017. He
kindly contributed a leading article on the political
economy agenda after Piketty.
This is followed by interviews with three othereconomists. Dr. Heather Boushey, president & CEO of
the Washington Center for Equitable Growth, who is also

one of the editors and contributors of After Piketty: The
Agenda for Economics and Inequality, talks about theconcern that income inequality today could be socially
fixed by inheritance and thus result in reduced equalityof opportunity. In particular, limited access to goodeducation would seriously hamper social mobility andfurther increase income inequality.
Another contributor to After Piketty: The Agenda for
Economics and Inequality, Dr. Mark Zandi, chief
economist of Moody’s Analytics, warns about the risk ofincome inequality destabilizing the economy and thus
lowering growth potential through poor households’
increased access to mortgage debt and credit card debt,
as well as rich households’ increasing dependence uponasset prices. This is an important observation,suggesting income inequality would be a problem not
only in the social or political context but also in themacroeconomic context.
Finally, Dr. Linda Yueh, a distinguished economic
journalist and author of The Great Economists: How
Their Ideas Can Help Us Today (2018), responded to awide range of questions on the role of economics today,
not only about income inequality but also about theglobal economy in the face of the US-China technology
war, post-Keynesian policies with little room for fiscal
and monetary policy being implemented effectively, andeven about the future of the capitalist economy.

Japan SPOTLIGHT • November / December 20193COVERLEAD(Brief Introductions)
COVER STORY 1
Economic Policy in an Age of Rising Geopolitical Risks
By Naoyuki Haraoka

Economists should unite in studying the wide range ofreasons for income inequality and how to mitigate or
eliminate them, returning to the original question set byclassical economics in the 19th century that market
mechanisms cannot achieve income equality but only
optimal allocation of resources.

COVER STORY 4Interview with Dr. Mark Zandi, Chief Economist, Moody’s Analytics

Income Inequality Destabilizes Business Cycle &Lowers Growth
By Japan SPOTLIGHTA distinguished economic forecaster mentions thatmacroeconomic models need to catch up to the growing
chasm between the rich and the poor in many parts ofthe world.

COVER STORY 2Suggestion on a Political-Economy Agenda after Piketty
By J. Bradford DeLong

COVER STORY 5

This discusses not only the economic research agenda
suggested by Piketty’s first book, Capital in theTwenty-First Century in 2013 but also that suggested byhis second book, Capital and Ideology, in 2019. It points
out that the central political-economic problem is thatthe center-right has become the “merchant right”, aparty working exclusively for the interests of those whohave property.

Learning from the Author of The Great Economists –Linda Yueh
By Japan SPOTLIGHT
The current breakdown in consensus around theeconomic system poses an opportunity for anotherbattle of ideas to ensure that the system is reformed andmade suitable for the needs of the 21st century.

Interview with Dr. Linda Yueh, an economist at Oxford
University and the London Business School, and author of The
Great Economists: How Their Ideas Can Help Us Today

COVER STORY 3
Interview with Dr. Heather Boushey, President & CEO of theWashington Center for Equitable GrowthInstitutionalized Income Inequality Hampers SocialMobility
By Japan SPOTLIGHT
In dealing with institutional drivers of inequality such as
inheritance or gender inequality, we need to give people
access to information to understand the problem.
4 Japan SPOTLIGHT • November / December 2019

Naoyuki Haraoka is editor-in-chief of Japan SPOTLIGHT & executive
managing director of the Japan Economic Foundation (JEF).