Political leadership in the context of global political economy can yield different results, depending on the lens of analysis. In the context of economic policy crafting, effective political leadership can lead to equitable government regulation among public-private market interaction. In the context of social or more human-centric policy crafting, effective political leadership can alter a government’s ability to create rules that ensure reasonable reach across all persons involved. For instance, if political leader A were to set into law “financial institutions must place a higher threshold on the amount of money it holds in reserve;” it could send shockwaves through consumer markets domestically or even world-wide, even if in principle the move falls within equitable, economically-sound governing. The same is true across all perspectives involved in the discipline of Political Economy.
If a political leader of a social democratic system leads contradictory to its basic principle of balanced public/private partnerships, he or she could inadvertently collapse the system. Or for instance, if a political leader were to enforce harsher mercantilist views on an economic system that carries the health and well-being of other economies (i.e. the United States financial firms working in tandem with other similar systems), the system could spiral out of control, similar to events leading up to the Great Recession of 2008. Proper political leadership is the band that binds a country’s government and its corresponding economic future together. If left up to the wrong hands, developing or developed nations could face a surreal reality of over-regulation and underperformance.
Japan’s Real Estate Bubble or the Lost Decade a1989-1999
What are the effects of Japan’s leadership inconsistency on its political/economic influence among the G8 states? To start, Japan served as an unbelievable example of under-regulation and underperformance between the 1990’s and 2000’s. Foreign markets were just reeling from the dot-com bubble burst of 1990-2000, which sent technology stocks tumbling around the world. Technology firms that relied heavily on active derivative trading and risky investment strategies to shore up profits soon found their revenue bases diminished. Japan experienced a similar fiscal disaster following incremental increases in their real estate and stock prices between 1986 and 1991. These incremental increases followed led to rapid acceleration of asset prices, above-average economic activity, and uncontrolled money supply and credit expansion. The aforementioned negative markers led to this increasingly sizeable economic bubble that formed between 1986 and 1991. Contributions to the size of the economic bubble came not only from relaxed monetary controls prompted by the Bank of Japan, but sizeable growth in lending to commercial entities and individual Japanese with relaxed scrutiny on collateral, income etc. In effect, the low interest rates...