Economy

Where Abenomics Went Wrong

Japan has slipped into recession, the ultimate mark of failure of Prime Minister Shinzo Abe's ambitious but misguided efforts to turn around the nation's economy.

After dissolving Parliament last week
After dissolving Parliament last week
Eric Le Boucher

-Analysis-

The difficulties Japanese Prime Minister Shinzo Abe is currently facing are a call to humility for the world's political leaders: all those who offer easy, preconceived solutions, but also for those who are more realistic but believe that economic policies will nicely and quickly work out the way they do on paper. The crisis is more unruly than that.

Abe decided last week to dissolve the lower house of parliament and to call snap elections for next month. Not that his political position had become untenable. On the contrary, it's as solid as ever, and his Liberal Democratic Party (LDP) will undoubtedly win a new majority. Abe will thus have a free hand for the next four years, which is actually why he opted for the dissolution. But in reality, his economic policy, branded by some as "magical," has floated about as well as a lead balloon.

Abe is a right-wing hawk when it comes to foreign policy and a left-wing one for economic policy. He took office two years ago promising to "bring Japan back." To do so, the daring samurai armed himself with "three arrows." The first one was monetary, aimed at bringing the too-independent Bank of Japan into line and starting up the money machine at full throttle. The desired effect was to flood the economy with liquidity to kickstart inflation and bring the yen's value down to boost exports.

The second was budgetary. The central bank was to buy treasury bonds en masse so the state could finance a massive infrastructure plan.

Finally, the third arrow consisted of structural reforms to ease regulations on trade and work.

But practice hasn't been as easy as theory. It's still too early to say that Abenomics has failed, but coming out of the crisis in Japan as well as anywhere else appears to be less like the stunning image of wild geese flying towards the red sunset and more like that of the prime minister ingloriously floundering in the mud of the real economy.

Over the last six quarters, average growth has stood at a mere 1.4%, not much better than the 1% of Abe's predecessors. Worse, Japan recently fell back into recession. And inflation, far from reaching the expected 2%, remains stuck below 1%. Why?

Strategic misfires

The drop in the yen didn't translate into export growth. That's because the Japanese sell high-quality products that depend very little on prices. Instead, the price of energy, which is entirely imported since the shutdown of nuclear power plants, has risen, burdening family budgets and penalizing consumption.

Another disappointment was that the abundant monetary liquidity didn't deliver on the promise of boosting the stock market and prompting a "wealth effect" that would have stimulated consumption like in the United States. The Japanese population being older, it saved the money earned on the markets.

The April decision to raise sales taxes from 5% to 8% only affirmed consumer hesitation to buy. With a debt worth 240% of its GDP, Japan's financial situation is disastrous. Like in France, all that's holding the country's economy together is the markets' belief that the country can levy taxes easily. With the sales tax increase, Abe was showing that indeed he could.

But that is blamed for having broken the recovery. Nobel Prize-winning columnist Paul Krugman sees the mark of "failure" of Abenomics in that decision. The prime minister wanted to have more than one iron in the fire. To gain market trust, he lost the people's. Forced into a corner, the government has postponed the second planned increase until 2017.

Bank of Japan headquarters in Tokyo. Photo: Fg2

This debate between supply policy and budgetary rigor, which is also happening in Europe over the question of austerity, demonstrates that it's difficult to find a balance between the two contradictory imperatives.

Another measure illustrates this too. Since the adopted monetary policy was going to bring down interest rates, the country's many pensioners were going to suffer poor savings gains. The government asked savings funds to sell part of the treasury bonds they were holding in order to buy Japanese stocks. The expected boost on the stock market was supposed to compensate that loss. At the same time, to prevent Japanese debt from falling into the hands of uncontrollable foreign investors, the Bank of Japan bought the whole package thanks to a second wave of equities buying.

But all these carefully planned maneuvers fell flat. Savers didn't consume more, and foreign investors now question the Bank of Japan's reliability. A loss of both fronts.

The last arrow, the reforms, also got lost, though nobody knows where. Abe did manage to open a few thousand positions for women and to allow a few shops to open longer, but the positive effects are weak and will take years to be realized.

The prime minister will no doubt be reelected next month and will then have four years ahead of him to fix his reforms. He needs at least that long. Growth forecasts for 2015 are no more than 1%.

Abe deluded himself, putting too much faith in magical monetary easing. His two other arrows were less valuable, poorly sharpened and misfired. There's no magic in economics. The real weapons are not currency, but hard work and patience.

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Society

The Food Truck, A Sign That The White And Wealthy Are Moving In

In San Diego, California, a researcher tracked how in the city's low-income neighborhoods that have traditionally lacked dining options, when interesting eateries arrive the gentrification of white, affluent and college-educated people has begun.

Balboa Park Spring Fling Food Truck festival

San Diego Food Trucks via Facebook
Pascale Joassart-Marcelli

SAN DIEGO — Everybody, it seems, welcomes the arrival of new restaurants, cafés, food trucks and farmers markets.

What could be the downside of fresh veggies, homemade empanadas and a pop-up restaurant specializing in banh mis?

But when they appear in unexpected places – think inner-city areas populated by immigrants – they're often the first salvo in a broader effort to rebrand and remake the community. As a result, these neighborhoods can quickly become unaffordable and unrecognizable to longtime residents.

An appetite for gentrification

I live in San Diego, where I teach courses on urban and food geographies and conduct research on the relationship between food and ethnicity in urban contexts.

In recent years, I started to notice a pattern playing out in the city's low-income neighborhoods that have traditionally lacked food options. More ethnic restaurants, street vendors, community gardens and farmers markets were cropping up. These, in turn, spurred growing numbers of white, affluent and college-educated people to venture into areas they had long avoided.

This observation inspired me to write a book, titled The $16 Taco, about how food – including what's seen as "ethnic," "authentic" or "alternative" – often serves as a spearhead for gentrification.

Take City Heights, a large multi-ethnic San Diego neighborhood where successive waves of refugees from places as far away as Vietnam and Somalia have resettled. In 2016, a dusty vacant lot on the busiest boulevard was converted into an outdoor international marketplace called Fair@44. There, food vendors gather in semi-permanent stalls to sell pupusas, lechon (roasted pig), single-sourced cold-brewed coffee, cupcakes and tamarind raspado (crushed ice) to neighborhood residents, along with tourists and visitors from other parts of the city.

Informal street vendors are casualties.

A public-private partnership called the City Heights Community Development Corporation, together with several nonprofits, launched the initiative to increase "access to healthy and culturally appropriate food" and serve as "a business incubator for local micro-entrepreneurs," including immigrants and refugees who live in the neighborhood.

On paper, this all sounds great.

But just a few blocks outside the gates, informal street vendors – who have long sold goods such as fruit, tamales and ice cream to residents who can't easily access supermarkets – now face heightened harassment. They've become causalities in a citywide crackdown on sidewalk vending spurred by complaints from business owners and residents in more affluent areas.

This isn't just happening in San Diego. The same tensions have been playing out in rapidly gentrifying areas like Los Angeles' Boyle Heights neighborhood, Chicago's Pilsen neighborhood, New York's Queens borough and East Austin, Texas.

In all of these places, because "ethnic," "authentic" and "exotic" foods are seen as cultural assets, they've become magnets for development.

Food vendor at outdoor international marketplace called Fair@44.

Fairat44 via Instagram

A call for food justice

Cities and neighborhoods have long sought to attract educated and affluent residents – people whom sociologist Richard Florida dubbed "the creative class." The thinking goes that these newcomers will spend their dollars and presumably contribute to economic growth and job creation.

Food, it seems, has become the perfect lure.

It's uncontroversial and has broad appeal. It taps into the American Dream and appeals to the multicultural values of many educated, wealthy foodies. Small food businesses, with their relatively low cost of entry, have been a cornerstone of ethnic entrepreneurship in American cities. And initiatives like farmers markets and street fairs don't require much in the way of public investment; instead, they rely on entrepreneurs and community-based organizations to do the heavy lifting.

In City Heights, the Community Development Corporation hosted its first annual City Heights Street Food Festival in 2019 to "get people together around table and food stalls to celebrate another year of community building." Other recent events have included African Restaurant Week, Dia de Los Muertos, New Year Lunar Festival, Soul Food Fest and Brazilian Carnival, all of which rely on food and drink to attract visitors and support local businesses.

Meanwhile, initiatives such as the New Roots Community Farm and the City Heights Farmers' Market have been launched by nonprofits with philanthropic support in the name of "food justice," with the goal of reducing racial disparities in access to healthy food and empowering residents – projects that are particularly appealing to highly educated people who value diversity and democracy.

Upending an existing foodscape

In media coverage of changing foodscapes in low-income neighborhoods like City Heights, you'll rarely find any complaints.

San Diego Magazine's neighborhood guide for City Heights, for example, emphasizes its "claim to authentic international eats, along with live music venues, craft beer, coffee, and outdoor fun." It recommends several ethnic restaurants and warns readers not to be fooled by appearances.

Longtime residents find themselves forced to compete against the "urban food machine"

But that doesn't mean objections don't exist.

Many longtime residents and small-business owners – mostly people of color and immigrants – have, for decades, lived, worked and struggled to feed their families in these neighborhoods. To do so, they've run convenience stores, opened ethnic restaurants, sold food in parks and alleys and created spaces to grow their own food.

All represent strategies to meet community needs in a place mostly ignored by mainstream retailers.

So what happens when new competitors come to town?

Food vendor at outdoor international marketplace called Fair@44.

Fairat44 via Instagram

Starting at a disadvantage

As I document in my book, these ethnic food businesses, because of a lack of financial and technical support, often struggle to compete with new enterprises that feature fresh façades, celebrity chefs, flashy marketing, bogus claims of authenticity and disproportionate media attention. Furthermore, following the arrival of more-affluent residents, existing ones find it increasingly difficult to stay.

My analysis of real estate ads for properties listed in City Heights and other gentrifying San Diego neighborhoods found that access to restaurants, cafés, farmers markets and outdoor dining is a common selling point. The listings I studied from 2019 often enticed potential buyers with lines like "shop at the local farmers' market," "join food truck festivals" and "participate in community food drives!"

San Diego Magazine's home buyer guide for the same year identified City Heights as an "up-and-coming neighborhood," attributing its appeal to its diverse population and eclectic "culinary landscape," including several restaurants and Fair@44.

When I see that City Heights' home prices rose 58% over the past three years, I'm not surprised.

Going up against the urban food machine

Longtime residents find themselves forced to compete against what I call the "urban food machine," a play on sociologist Harvey Molotch's "urban growth machine" – a term he coined more than 50 years ago to explain how cities were being shaped by a loose coalition of powerful elites who sought to profit off urban growth.

I argue that investors and developers use food as a tool for achieving the same ends.

When their work is done, what's left is a rather insipid and tasteless neighborhood, where foodscapes become more of a marketable mishmash of cultures than an ethnic enclave that's evolved organically to meet the needs of residents. The distinctions of time and place start to blur: An "ethnic food district" in San Diego looks no different than one in Chicago or Austin.

Meanwhile, the routines and rhythms of everyday life have changed so much that longtime residents no longer feel like they belong. Their stories and culture reduced to a selling point, they're forced to either recede to the shadows or leave altogether.

It's hard to see how that's a form of inclusion or empowerment.The Conversation

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Pascale Joassart-Marcelli is a Professor of Geography and Director, Urban Studies and Food Studies Programs at San Diego State University

This article is republished from The Conversation under a Creative Commons license. Read the original article.


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