Barry Eichengreen has an excellent column on the difficulties China will likely face transitioning into a more service-oriented economy. He notes that the precedent from other rapidly developing Asian nations like Korea and Japan is not inspiring in this regard:

In both Korea and Japan, to cite two key examples, the problem is not simply that productivity in services has grown barely a quarter as fast as it has in manufacturing for a decade. It is that service-sector productivity growth has run at barely half the rate of the United States. [...]

In both Korea and Japan, large firms’ entry into the service sector is impeded by restrictive regulation, for which small producers are an influential lobby. Regulation prevents wholesalers from branching downstream into retailing, and vice versa. Foreign firms that are carriers of innovative organizational knowledge and technology are barred from coming in. Accountants, architects, attorneys, and engineers all then jump on the bandwagon, using restrictive licensing requirements to limit supply, competition, and foreign entry.

Of course the mere fact that China is “Asian” doesn’t mean China has to follow this path. Indeed, one can only hope that they won’t. This is also a reminder that the world’s long-term economic fortunes would be drastically improved if Korean and (especially) Japan would rethink their positions in this regard. In the short term, these restrictions look to be cushioning Japanese employment. But if foreign firm with better techniques came in and delivered the same quantity of services with fewer personnel, then in the long-run Japan could switch people out of its low-productivity service sector and add many more people to its high-productivity manufacturing sector. That way lies more overall production and more overall income. And the foreign firms doing more business in Japan would mean that foreigners can afford more Japanese exports.

Mark Thoma offers this:

From a forecasting point of view, I think it’s not totally clear how you want to interpret this. I think it’s noteworthy that capacity utilization at our last peak was actually pretty low—similar to the early-nineties recession level. I take that as evidence that global policy leaders haven’t learned how to fully take advantage of developed world economic progress. In the aggregate, the planet earth is getting much, much, much better at making stuff and we’re distributing it effectively.

Edmund Andrews surveys the fiscal policy debate and says “If I were king, the plan would allow for another round of stimulus spending but call for real belt-tightening around 2015.” Sure, me too. But one thing that I really think needs to be emphasizes is that the need for medium-term belt-tightening has nothing to do with the argument over short-term stimulus.

By which I mean, whether we make the short-term deficit smaller or larger we still need to tackle a serious longer term problem. And we would still need to tackle that problem even if the recession hadn’t happened. It’s a real problem. And a big one. But the shape of the problem is very simple and it looks like this:

1. The public sector has assumed responsibility for financing the health care of old people.

2. The cost of health care relative to the rest of the economy is rising.

3. The proportion of old people relative to the rest of the population is rising.

This trend bodes ill for our fiscal future. And thinking about solving it is enough to make one’s head hurt. As we saw during the debate over the Affordable Care Act, it’s very difficult to pass measures that reduce the incomes of doctors, the profits of medical device makers, the profits of pharmaceutical firms, or the incomes of hospitals. And yet it’s difficult to see how you could reduce health care without reducing the revenue flows that go to medical professionals and the firms that employ them. It’s a big problem.

But the problem doesn’t get any smaller if we refuse to extend stimulative tax breaks. And the problem doesn’t get any bigger if we think up a public works employment scheme for the long-term jobless.

To try to show that I’m not an unreasonable person, let’s note that while I think austerity budgeting for the United States is nuts, the harsh cuts being planned for the United Kingdom are grounded in a plausible theory: “Clegg and colleagues such as Danny Alexander, Treasury chief secretary, share the Tory view that fiscal consolidation will allow the Bank of England to hold interest rates – currently 0.5 per cent – down for longer and that the private sector will pick up the slack.”

That is a real and specific reason to think that austerity is needed. If not austerity, rate hikes. The theory makes sense logically. How does it look empirically? Here’s recent inflation history in the UK:

This chart seems open to multiple readings. On the one hand, the inflation rate is falling so the case for rate hikes is weak. On the other hand, the inflation rate is above the target level, so the case for rate hikes isn’t all that weak. The Clegg/Tory view that high deficits will prompt rate hikes is far from an open-and-shut case, but the belief has some basis. If I were prime minister, I would move more judiciously with the short-term cuts than Cameron seems to be—and of course I’d be more attentive to the interests of the poor and less attentive to the interests of the rich in designing the package—but the British seem to be in the “meaningful tradeoff between policy options” zone.

The United States, by contrast, is not. Inflation is low and falling and has been low and falling for some time. Rising inflation is both unlikely and desirable. There’s no reason to raise rates and no reason to worry that it will be necessary to raise rates in the near term.

Last year, a pretty good movie called The Cove came out, a documentary about cruel treatment of dolphins in Japan. It’s not the kind of thing you expect to get wide release anywhere, but if anyone should be interested it’s Japanese people. But apparently so far no theaters will agree to show it:

And if Shuhei Nishimura and his compatriots on Japan’s nationalist fringe have their way, none ever will.

In a country that shudders at disharmony and remains wary of the far right’s violent history, the activists’ noisy rallies, online slanders, intimidating phone calls and veiled threats of violence are frightening theaters into canceling showings of “The Cove,” which not only depicts dolphin hunting in an unflattering light but also warns of high levels of mercury in fish, a disturbing disclosure in this seafood-loving nation.

Bad times. Ultimately digital distribution and the trend toward everyone having bigger TVs should reduce the gatekeeper role of movie theaters, which will be good news for this kind of controversial film.