Should you send aid to Japan?

by on March 15, 2011 at 11:51 am in Uncategorized | Permalink

Felix Salmon offers the case against donating money to Japan.  Read the whole thing, I don’t wish to quote it out of context.

For reasons which you can find outlined in my Discover Your Inner Economist, I am generally in sympathy with arguments like Felix’s, but not in this case.  I see a three special factors operating here:

1. The chance that your aid will be usefully deployed, and not lost to corruption, is much higher than average.

2. I believe this crisis will bring fundamental regime change to Japan (currently an underreported issue), rather than just altering the outcome of the next election.  America needs to signal its partnership with one of its most important allies.  You can help us do that.

3. Maybe you should give to a poorer country instead, but you probably won’t.  Odds are this will be an extra donation at the relevant margin.  Sorry to say, this disaster has no “close substitute.”

It may be out of date, but the starting point for any study of Japan is still Karel von Wolferen’s The Enigma of Japanese Power.   Definitely recommended.

Anton Tykhyy March 15, 2011 at 12:10 pm

Could you expand a bit on 2., specifically on the “this crisis will bring fundamental regime change to Japan” part, please?

Justin March 15, 2011 at 12:30 pm

We can finally get rid of the samurai ruling class.

Silas Barta March 15, 2011 at 1:40 pm

Yeah, I’m sick and tired of the Samurai beheading anyone who criticizes th

Thierry Roy March 15, 2011 at 12:36 pm

Mr. Salmon is seeing this all wrong, imho.

I’ve discussed the subject with my wife this weekend and we came to the same conclusion as yours. Except for number 2, which I’d also be happy to have explanation on.

Thanks for being smarter.

Sorry for my english, french is my main language.

Anon March 15, 2011 at 12:58 pm

Tyler, you have always loved Japan: the food, the innovation, the markets-in-everything and other blog material. You are just signaling your loyalty.

Anton Tykhyy March 15, 2011 at 1:03 pm

I agree with Mr. Salmon’s conclusion, but for different reasons:
1) Japan does not need money, it was lending hundreds of billions to all the world until Friday.
2) It will be very difficult for foreign organizations to operate in Japan effectively, in fact to operate at all without being a net loss: as one Japan-based commenter put it, arrivals would be “a) illiterate b) unable to understand instructions and c) a productivity drag on people who are quite capable of dealing with this but will instead have to play Babysit The Foreigner.”
As for “socks for Japan”, it is indeed ridiculous. If some wants to, they should give the socks to their local homeless shelter.

Lou March 15, 2011 at 1:04 pm

Printing money simply passes the cost to the Japanese people in the form of inflation. And aside from the cost, the organizational challenges a disaster relief effort such as tihs creates may be too daunting for one organization (i.e. the Japanese government) to handle on its own- recall FEMA’s performance after Hurricane Katrina.

Furthermore, I, like Tyler, reject the argument that donating to Japan displaces planned donations to other parts of the world. I also reject the argument that earmarking donations will create an inefficient glut of capital. The Red Cross, for example, accepts donations for Japan but notes that in the unlikely event they receive more money than they need, they will apply funds toward other areas of need.

Anton Tykhyy March 15, 2011 at 1:36 pm

JCB would be happy to have a bit of inflation in the country, you know. And I am positive that your doubts as to GOJ’s ability are unwarranted — just wait and see.
Besides the cost will be borne by Japanese people anyway. We can’t donate yen, so donations will have to be spent on imports — principally oil and other raw materials. The price-demand balance should be a wash, so your added money will just go into Saudi etc. coffers. Oh, and did I mention Japan had a trade surplus until the other day? Dollar donations will buy Treasuries, so anyone willing might just go buy them directly.

Lou March 15, 2011 at 3:45 pm

The BOJ would like consistent, expected ~2% annual inflation. There’s no reason to think they would like an unanticipated upward price adjustment, which would be the likely impact of a large, one-time money printing spree.

And the further comments are especially odd. Of course the donations will not sit permanently in Japan in the form of money. it will “end up” circulating virtually in perpetuity. The obvious relevant point is that the Japanese victims will receive needed goods and services in exchange for that money (not Treasury bonds).

I admire your respect for the Japanese government, but at the end of the day I think the rebuilding of entire cities is too large of a task for any single organization. The optimal policy for the Japanese government will be to work in concert with other governments and private charities such as the Red Cross.

Anton Tykhyy March 15, 2011 at 4:52 pm

If BOJ finances reconstruction and substitution imports by printing money, it won’t be a one-time money printing spree, leastways the money won’t enter circulation all at once.
And your further comments about rebuilding entire cities (it’s not cities by the way, but small fishing towns and villages) are especially odd. Did Japan ‘work in concert with other governments and private charities’ to build them in the first place? Why do you want the Japanese to go for massive outside help?

Ice April 9, 2011 at 1:00 pm

PBMWoJ Kudos! What a neat way of thinking about it.

Ryan Vann March 15, 2011 at 1:09 pm

I concur with Anton, and disagree with Tyler. Then again, Tyler is entirely cryptic, while Anton is specific.

Right Wing-nut March 15, 2011 at 1:12 pm

As much as I like dumping on FEMA, and the feds generally, please note that most of the short-term issues (including the undermining of the surge wall in the first place) were directly related to the rampant corruption of Louisiana poli-tic-ians.

Japanese culture is different (witness the lack of looting), and it will be interesting to see the results. If they respond to this like they did to Commodore Perry, look out!

mulp March 15, 2011 at 1:41 pm

I assume that the regime change will be to one that calls for massive government spending funded by cashing in foreign holdings, borrowing even more from the Japanese, and hiking taxes.

A nation with no natural resources sufficient to support its economy and that depends on its productive capital assets, has no option other than borrowing to rebuilt the destroyed productive capital, or else the economy will collapse, if nothing else from the lacks of food and energy to not only support individuals, but industry.

After only a few days we are also seeing the down side of the Japanese innovation of just-in-time – without the supply chain operating daily to produce and deliver goods, Japan has started running out of just the basics.

And globalization means the global supply chain is going to be disrupted – in a few months, US east coast ports are probably going to see a 10% or more fall in trade. Unless Japan starts buying on credit from the US and the east coast ports are shipping a lot more to Japan.

Fortunately, Japan is very un-American. A few days ago, the government announced they would be implementing rolling blackouts to deal with the power shortages, but that hasn’t been necessary because the Japanese people voluntarily embraced shared sacrifice and cut their power use so much that their is no power shortage even with a lot of the power generation out of operation. I’m sure the Japanese people will support higher taxes as a necessary shared sacrifice to promote the general welfare need to aid those who lost so much.

Is there any other way for Japan to recover other than shared sacrifice and collective action and massive investment in productive capital?

Ken Rhodes March 15, 2011 at 4:44 pm

Mulp — I love that last line, as well as the prior paragraph pointing out that the Japanese are just the folks to do it.

Do I detect a less-than-subtle suggestion to the doofuses inside our DC Beltway?

Tobias March 15, 2011 at 1:49 pm

I find no. 2 cryptic and puzzling as well. A slow-motion regime change has already been underway for some time now, to the point that Von Wolferen’s book isn’t really all that helpful today. The question is how this disaster will affect the changes already in motion, not how it will spark some “fundamental” and undefined change. The interesting question is whether the crisis will break the obstacles standing in the way of change before the quake: an upper house that is far too powerful, opposition parties unwilling to cooperate, an incoherent party system, and a prolonged economic crisis for which the government has no easy answers (and no real mechanism for generating new policy ideas).

Stewart March 15, 2011 at 1:50 pm

Rush Limbaugh just tore into Salmon. He didn’t give it a charitable read and really missed the point.

msgkings March 15, 2011 at 4:47 pm

Hmmm…Rush tore into someone, didn’t give charitable credence to something written in good faith, and missed the point.

In other news, water is wet and the sky is blue.

Back to you, Stewart.

Aaron March 15, 2011 at 2:35 pm

People tend to give to charity opportunistically. (We tend to not seek out altruistic opportunities, but simply evaluate those that appear.) The heart of Felix’s argument is that we should be more strategic in our giving. If you think about it, opportunistic giving is necessarily suboptimal. If you’re going to give to Japan relief efforts, do it strategically.

GiveWell, a group of very smart people, agrees with Felix.
http://blog.givewell.org/2011/03/11/japan-earthquaketsunami-disaster-relief-donations/

Bman March 15, 2011 at 2:35 pm

If you’ve seen the collage of hateful pig-ignorant Facebook statuses comparing this to Pearl Harbor, you might also want to donate to offset the impression that all Americans are jackasses.

jake April 5, 2011 at 10:32 am

hey now we r so not jack butts thats just uncalled for dude…..

bryan April 5, 2011 at 10:34 am

yea stupid.

Floccina March 15, 2011 at 3:03 pm

3. Maybe you should give to a poorer country instead, but you probably won’t. Odds are this will be an extra donation at the relevant margin. Sorry to say, this disaster has no “close substitute.”

But I will, I always give a tenth of my gross income away so I just need to decide what organization I will send it to.

dirk March 15, 2011 at 3:07 pm

Salmon’s argument makes perfect sense for anyone who reads MR. His point should be taken in context, which is that he is only one voice out there arguing against the conventional wisdom. As he pointed out regarding the Thailand tsunami, much more money went to the Red Cross earmarked for “Thailand Tsunami Relief” than was eventually needed for that relief effort. The Red Cross was then in the awkward position of having millions of $s they weren’t able to use for other relief causes. It is much more likely Japan will end up with more money than needed for this disaster than Thailand was, since it is a vastly richer country. Tyler says this disaster has “no close substitute”, but Salmon’s point about donating money to say, MSF with “unrestricted access” would allow them to apply as much of those funds as they feel are warranted toward Japan and no more. I would call that donation a close substitute — and a more efficient one. So you can donate money to help Japan, but do it in a manner which allows that money to be used elsewhere, if needed.

As for point 2: I’m guessing Lady Gaga has more fans than Felix.

Anton Tykhyy March 15, 2011 at 3:39 pm

Re: point 2: you are being even more cryptic than Dr. Cowen.

dirk March 15, 2011 at 4:55 pm

Well I don’t pretend to understand Tyler’s theory about this event bringing regime change, but as far as “America needs to signal its partnership with one of its most important allies”, I imagine that all the Lada Gaga bracelets to help Japan will bring more financial support to Japan specifically than Felix will detract. Which only makes Felix’s position all the more salient for his readers.

Penis Advantage Review March 15, 2011 at 3:44 pm

Yes, of course. They need this most this time.

AnotherPhil March 15, 2011 at 4:55 pm

Salmon’s argument makes perfect sense for anyone who reads MR.

How?

Its a confused collage of inchoate indictments against: opportunistic charities, charities without distribution channels, etc.

Worse, even if I accept the premise that charity is limited and there is an opportunity cost in all donor decisions-I’m not accepting it. Japan has a history of productivity, industriousness and results. The situation is a a sudden crisis, a force majeur, with no moral hazard.

Therefore, should I donate to where the help might actually “work”, or flush my limited greenbacks into some persistently poor third world blackhole (many of the same charities with the same issues operate globally) that will probably just prop up some corrupt government that is the source of the perpetual penury?

dirk March 15, 2011 at 5:31 pm

“Salmon’s argument makes perfect sense for anyone who reads MR.”

What I meant by that was the whole Lady Gaga-is-infinitely-more-popular-than-Felix Salmon argument. Only a tiny % of people are going to accept Felix’s argument. By a factor of at least a thousand larger people will buy Lady Gaga “Help Japan” bracelets.

I’m accepting at face value his story about ear-marked donations having trouble getting re-directed elsewhere when needed. If he is wrong about that, then of course he has no argument.

Irina I March 15, 2011 at 5:28 pm

Or we should just send money because we’re humans and other humans are in trouble. It wasn’t their fault, they had no control over it and now they’re suffering greatly. Even if $0.50 of the $20 I donated get to help a person who is suffering, then it was worth it.

Ed March 15, 2011 at 5:41 pm

Argument # 2 makes the most sense. The Japanese have been friends since 1945, and it makes sense to keep them as friends. Maybe people with time on their hands (the unemployed, the retired, students) can go to a Japanese consulate and offer to volunteer.

Otherwise, the country is probably as well equipped as any to handle a disaster on its own, and given the language barrier at least intervention by well meaning outsiders would probably complicate things. Plus if the most serious ramification of the disaster is a nuclear plant meltdown, I’m not sure how people in other countries could “help”. Cheyrnoble wasn’t a situation that could be helped with the usual aid efforts.

Ed March 15, 2011 at 5:43 pm

Uh oh.

“But Boing Boing points out that fraudsters have beaten all records in setting up fake Japan relief pages, fielding more than 1.7 million malware pages, 419 scams trading on the Japanese disasters, 50+ fake domains with “Japan tsunami” or “Japan earthquake” in their URLs. ”

From http://gothamist.com/2011/03/15/explosion_at_japan_nuclear_plant_pu.php#photo-1.

These guys will eventually kill off all volunteer giving by middle class individuals to help with disasters.

Colin March 15, 2011 at 5:53 pm

Re: “The Enigma of Japanese Power” – it is still the best description of the political culture that is Japan. Things have changed a bit, granted; the LDP did lose the recent election. But overall, the book is remains a valid picture of Japan and its government. Point two: I think Japan could use more tourism. Would the economists recommend “sympathy tourism”?

Bill March 15, 2011 at 6:09 pm

We should send them items for which they have errected trade barriers, such as US automobiles and beef. Maybe even US rice.

See if they decline the offer of these fine US products.

dirk March 15, 2011 at 6:24 pm

I have my theory on what Tyler is thinking on point 2 now: this could be the last straw for Japanese bond markets. Only Zimbabwe has a higher debt to gdp ratio. Are we going to see a default?

dirk March 15, 2011 at 7:23 pm

The more I think about it the more I am convinced that Japanese bonds are the Godzilla in the room to which Tyler cryptically referred. I believe he intentionally buried the lede, as he doesn’t want any blame for making “self-fulfilling remarks”. It would also explain his “Quick Quiz” post about U.S. bond markets earlier today…

dirk March 15, 2011 at 8:19 pm

Nah, I’ve changed my mind. I don’t see how this disaster is going to cost Japan too much relative to its GDP. Tyler merely knows more about Japanese politics than most of us. Back to: no idea what he was talking about.

George March 15, 2011 at 6:40 pm

It may be out of date, but the starting point for any study of Japan is still Karel von Wolferen’s The Enigma of Japanese Power. Definitely recommended.

Tyler, Wolferen’s book is “the starting point” for a certain sort of dilettante orientalist who gets a little thrill out of reading claims about the “inscrutable Japanese,” and likes to talk about “those wacky Japanese” more than they’re interested in learning about how politics/economics/law actually function in Japan. If that’s your personal taste, fine, but on behalf of your readers who study Japan full-time, please don’t tell people that it offers much information about how Japanese government/law/economics/business actually works, especially in the twenty-first century.

I too am mystified by Tyler’s point #2. Perhaps he could explain, with reference to the 1995 Kobe Quake that did NOT cause fundamental regime change, why he thinks it will happen this time, and what sort of regime change he expects will happen.

Nip March 15, 2011 at 7:51 pm

Send Bibles. They’re heathens.

mbt footwear March 15, 2011 at 11:04 pm

The BOJ would like consistent, expected ~2% annual inflation. There’s no reason to think they would like an unanticipated upward price adjustment

D March 16, 2011 at 12:47 am

The important point here is that Japan doesn’t need the cash. It seems giving money to Japan is merely a feel-good way to make the contributor feel like they’re actually doing something besides gawking at newspapers and the TV.

dirk March 16, 2011 at 1:52 am

The irony is that Japan does need the cash. They are the greatest debtor nation in the world. Not that that means they are so bad off, but in a literal since they need a whole, whole lotta cash.

Of course, at some point it feels in bad taste to talk about Japan in sheer economic terms in the aftermath of all of this. I think the spirit of Tyler’s post is more about praying for souls than counting silver.

We should all pray for Japan now (even us heathens).

At some point, however, we will wonder what this means for the Japanese bond markets. And the more cold-hearted among us (me) are already thinking about it.

Humanitarian crises are impossible for humans to digest on a human level. Everyone made a huge deal about the BP oil spill in which 14 humans died. People made almost half as big a deal when an earthquake hit Haiti and several hundred thousand people died. Perhaps tens of thousands have died in Japan. The human cost is difficult to grapple with so we turn to economics as a way to escape.

Anton Tykhyy March 16, 2011 at 4:25 am

Their debt is internal, they don’t need our cash. Isn’t Japan the second biggest holder of US debt after China?
And yes, pray for Japan by all means.

Rahul March 16, 2011 at 3:05 am

It might make more sense in Japan to have a direct money transfer. Are there any charities that will walk around the disaster hit areas, do some vetting, and then pay yen amounts to disaster-affected Japanese families?

Japan has great infrastructure. Whatever is damaged, their government can repair better than do-gooder NGO’s. Japanese people are well educated and disciplined. I can trust they will take the right decisions how to use the money directly given to them. Not so much need for paternalism as in a third world country. No looting. No loansharking.

It’d eliminate a lot of waste to give Japanese families direct yen rather than socks, sweaters, baby formula and assorted random junk they do not need. A direct money donation probably sends a stronger signal of American goodwill than any in-kind donation.

Ricardo March 16, 2011 at 9:37 am

Wow, just compare the comment thread here to the one at Felix’s blog. The commenters there are falling over themselves to call him an idiot, a hack, a know-nothing and far worse.

Anton Tykhyy March 16, 2011 at 10:53 am

Yes, it is quite instructive to take a look at ‘arrogant Western overindulgent douche-bags’ over there having a field day calling Felix an ‘arrogant Western overindulgent douche-bag’.

RJ March 16, 2011 at 10:42 am

Excellent perspective on the comparative nature between donations to “rich” vs. “poor” nations. I, too, am impressed with
the thoughtful discourse on this blog.

Kelvin March 16, 2011 at 1:34 pm

xkcd made the #3 argument already (a few hours BEFORE the earthquake)

http://xkcd.com/871/

A former GMU econ student March 16, 2011 at 5:09 pm

As someone who is familiar with economics tought at GMU (and Chicago) and has lived in Japan for 12 years, I can tell you that KvW’s book is the worst about Japan. I have met the man and he is part of the disgruntled foreign community who see nothing but conspiracy in Japan. He has little – or almost no – understanding of economics and all his predictions about Japanese economy (take over the world!) were written at the moment when the long 20-year malaise in Japan started. Like most Western political scientists who neither speak Japanese nor can understand comparative advantage, KvW was from the school of thought that MITI and industrial planning made Japan an economic powerhouse.

Instead I recommend, “The Sun Also Sets” … it is written by a former editor of The Economist and was published around the same time as KvW’s book. It was much more prescient about Japan because the author understood economics.

mbt March 18, 2011 at 5:28 am

which you can find outlined in my Discover Your Inner Economist, I am generally in sympathy with arguments like Felix’s, but not in this case. I see a three special factors operating here:

mbt March 18, 2011 at 5:37 am

will bring fundamental regime change to Japan (currently an underreported issue), rather than just altering the outcome of the next election. America needs to signal its partnership with one of its most

Donald March 24, 2011 at 9:13 pm

Well lets put this in perspective. We (USA) Owes Japan a national debt of 877 Billion dollars of last year. Lets see how much of this debt they ‘forgive’ due to the incoming aid we are sending (My bet is on 0%). Furthermore How much aid did these foreign countrys send to the US in response to Katrina and our natural disasters? How about NONE! Take care of HOME first, We have people who cant afford thier medications, food, housing HERE!

jacob April 5, 2011 at 10:43 am

i think america is da shitttttttttt

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