Vision of Zero Growth and Performance After the Oil Crisis

Abstract

We selected five papers by Dr. Shimomura and analyzed important issues such as his vision of zero-growth, policies to stabilize low-growth economy, discipline and equilibrium, Reaganomics, and bubble economy. When the oil crisis broke out in 1973, Dr. Shimomura suddenly changed his vision of high growth (10% a year) to zero-growth (1–2% a year). This change in forecast surprised the business community of Japan. Dr. Shimomura urged them to prepare for a zero growth. Dr. Shimomura warned that the fiscal and monetary policies cannot completely resolve the economic problems. He emphasized that consumers, labor unions, businesses, banks, and the government should exercise discipline to stabilize zero growth. In this case, discipline implies that stakeholders of an economy should take into consideration the whole scenario and exercise self-control. Dr. Shimomura emphasized maintaining a balanced budget. He criticized the US Reaganomics in the 1980s and Japan’s bubble economy in the second half of 1980s. As the data analysis shows, the zero growth vision was right. If some special and unsustainable reasons are excluded, then it can be seen that Japan witnessed an annual growth rate of almost 1–2% for 40 years since the oil crisis. The keywords that Dr. Shimomura thought important in a zero growth economy are innovation, equilibrium, and discipline.