The economy of a nation is a major indication of its success. One aspect of a nation's economic success or failure is the system of government. Whether a nation is socialistic, communistic, ruled by absolute sovereignty, or based on capitalistic principles can be a key factor in a country's economic success or failure. Government is the foundation of an economy but it is not what determines its success. Issues that determine a nation's economic success include growth strategies, improved or increased resources, investment and savings, government policies, trade, foreign direct investment, income distribution, labor allocation, innovations in technology, and several other economic issues. I feel that economic growth is the main indicator of economic success. Additionally, innovations in technology, improving human capital, and improving foreign direct investment (FDI) are three issues that can lead to economic growth. In the following essay I will try to compare two highly developed economies, Japan and The United Kingdom. I will emphasize the success of their economies and how human capital, advancing technology (innovation), and FDI have contributed to their current success or failure. I will briefly discuss the contemporary history of each country, thoroughly cover their current conditions, and end with expectations for their future.
Introduction: Comparison of Japan and the United Kingdom
The U.K. and Japan seem natural subjects for comparison. British and Japanese observers alike have long been fascinated by the many parallels (and the even more numerous divergences) in the histories of these two island nations. Particularly interesting about these two was the "economic role reversal" which occurred between Japan and Britain over the course of the twentieth century. In 1900, the United Kingdom was the world's dominant colonial, financial and naval power, as well as a center of industrial production and technological innovation. Japan was a mere up-start, a precocious and aspiring, but still unthreatening, economic competitor in East Asia. The beginning of the twentieth century, and more accurately the 1950s, saw Japan and Great Britain's economic "role" reverse. Although Britain has enjoyed healthy growth rates and rising standards of living over the past 100 years, it has been progressively eclipsed by Japan as an economic superpower and an international model. Indeed, Britain's accomplishments have paled in comparison to Japan's meteoric rise: while Japan has emerged as the outstanding economic "success story" of the twentieth century, Great Britain's relatively modest performance has been both discouraging and confounding.
Brief Contemporary History:
Over the past 40 years, Japan's strong work ethic, mastery of high technology, emphasis on education and a comparatively small defense allocation (1% of GDP) have helped them advance with extraordinary speed to become one of the largest economic powers in the world along with the US and the European Union. For three decades, overall real economic growth had been spectacular: a 10% average in the 1960's, a 5% average in the 1970's, and a 4% average in the 1980's. Growth slowed considerably in the 1990's largely because of the after effects of overinvestment during the late 1980's. Since 1973, the U.K. has been a member of the European Union, and various British governments have signed on to measures which have been aimed at improving economic conditions, such as the Single European Act (SEA), signed by Margaret Thatcher. This act allowed for the free movement of goods among members of the European Union. The British pound was tied to EU exchange rates, using the Deutsche Mark as a basis, as part of the Exchange Rate Mechanism(ERM); however, this resulted in disaster for Britain. "Black Wednesday" in 1992 ended British membership of the ERM but also brought about a deep recession, affecting many who had benefitted from the economic boom of the late 1980's. Since...
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