The Unpredictable Dance of Economic Empires

Not far from the famous Avenida Paulista, in the Liberdade district in São Paulo, a building on a quiet street houses the Museum of Japanese Immigration. I was fortunate enough to visit it earlier this year. Little did I know, but Brazil is home to the largest Japanese diaspora in the world. This stems from a treaty agreement the Brazilian and Japanese governments signed early in the 20th century, permitting migration from Japan. People took the long, arduous and brave trip to Brazil in search of a better life.

Sitting here, in 2023, the direction of migration between the two countries may seem odd. Japan is a prosperous, well-developed nation with the world's third highest nominal GDP. What’s not to like? Only 23,000 Japanese people emigrated to other OECD countries in 2019.

That’s not to say Brazil isn’t great, because Brazil is great, and I’m not only talking about the Seleção. By the same measures, Brazil has the twelfth highest nominal GDP and a healthy average life expectancy of 73. Then there’s the scenery: I spent two of the best days of my life in Rio, where I was the quintessential British tourist: exploring Christ The Redeemer, Sugarloaf Mountain, the Maracanã Stadium and walking the entire length of Copacabana Beach, whilst muttering to myself “it’s too bloody hot.”

But even so, economic migration from Japan to Brazil is something we, perhaps, wouldn’t expect. But that’s with the benefit of hindsight.

Out of the ruinous ashes of World War Two, The Land of the Rising Sun became The Land of the Growing Economy, as Japan embarked upon an economic miracle, lifting millions out of poverty, undergoing mass industrialisation, and delivering sustained economic growth. Without that, we don’t get Sony, we don’t get the Walkman, we don’t get the Playstation, and we don’t get one of the finest Playstation games ever, Gran Turismo … it doesn’t bear thinking about.

Grab yourself a time machine, and transport yourself back to 1946. You’d struggle to find someone to stake a bet that the Japanese economy would be so much stronger than that of Brazil.

Speaking of 1946 …

In the late 1940s, Germany and the USSR had nearly identical GDP per capita, even when we adjust for inflation and differences in the cost of living. Compare our favourite example of economic mismanagement, the USSR (record tractor production!), to Germany. Predicting what would come in the second half of the 20th century, from the Cold War to technological and scientific advancements like the internet and the space race, would have been simply impossible. I intend on living until 2100. God knows what will happen between now and then.

I’ve spent a while in tech, and I can assure you that it’s very very hard to predict the “next big thing”, let alone the future. Except one thing: any economic empire is transitory. Nothing lasts forever. The music always stops.

It’s quite timely I mention this, as there’s a sign, albeit small, that some countries are moving ahead with “de-dollarisation”. As a share of global central bank reserves, the USD has fallen to a record low of 58%. Our American friends should not assume that the world’s current economic superpower stays the superpower forever. The US dollar is the world’s reserve currency and has been since 1944 and Bretton Woods. But it wasn’t always the case. Before that, it was the British pound.

It’s like when a good party reaches 4 am. No matter how good the party was, at some point, it ends. Economic dominance never lasts forever, from the Andes to the Alps and the Mekong Delta to the Mississippi. A cautionary tale for the tech dominant empires of Silicon Valley, Tel Aviv, and Hangzhou. But an optimistic tale for the BRICS and others, like Egypt.

Unless, of course, a Finance Minister completely balls it up, and for that, look no further than the contrasting fortunes on the Korean Peninsula.

Thanks for reading, I’ll see you next time!