Peter Popham: Japan shows us the limits of growth

It's finally happened: China's economy has overtaken Japan's. Less than 20 years after Deng Xiaoping told his people that "to get rich is glorious", and three decades after the Chinese Communist Party began its first timid opening to the outside world, the Central Kingdom has surpassed its rival across the Sea of Japan. China is now officially the world's number two and, unless something inconceivable happens, it will hold that place until it becomes number one, maybe as soon as 2030.

So today marks the beginning of a new era, but it's hardly a surprise. Just as China's economy has been galloping ahead for three decades now, Japan's has been crawling ever since I left the place for good in 1988. I don't mean to imply any connection there: as somebody once remarked, the only people who failed to make money in Tokyo during the 1980s were the mentally retarded and the foreigners, and I was one of the latter.

But I remember when the world looked so different, seen from Tokyo. Global domination was at hand. There was Sony with its Walkman and its Betamax VCRs, Honda launching its revolutionary City car with the help of Madness. Robots were promising to take over bed-making and washing-up, workers would disappear from factories because even a Japanese worker could not compete with a robot. Toyota and its rivals were producing cars that never broke down, and the rest of the world's car makers were sprawling in the dust. Brother launched its first laptop word processor with a memory of perhaps 300 words – and across the Pacific the Americans were quaking in their boots at the Yellow Peril. Japan as Number One: Lessons for America, by Ezra F Vogel, was a best-seller.

The most fashionable Western architects streamed through Narita airport to design restaurants and shops to adorn the most expensive land in the world. People worked out that a one-room flat in Shinjuku was worth more than the state of Virginia, or some such preposterous calculation. But with hindsight, those architects were a symptom of the problem: Japan's real estate was madly overvalued, and when the bubble burst the economy went down the tubes. Years of stagnation followed.

And no bad thing, one might say.

Doomsday-watchers like to scare us by saying: imagine what the world would be like – how shattered the environment would be – if the Chinese and the Indians were all as rich as us. Well, we don't need our imaginations. Just look at Japan.

As any first-time visitor to Tokyo quickly appreciates, the most striking way Japan differs from the West is that it is so much more crowded. This is nothing uniquely Japanese: nearly all of Asia is like this, from Korea to the Khyber Pass. Rice is a far more intensive crop than wheat. You can fill far more stomachs with it, and you always could.

In the mid-19th century, Japan worked out that the only way to avoid going the way of India and China and disappearing down the imperialists' maw was to industrialise in a hurry. Modernisation was thus motivated by fear: the only hope of remaining independent was to beat us at our own game. Thanks to national cohesion, a tradition of subservience to power and a generation of far-seeing reformers, within half a century of first seeing America's steam-powered "kurofune" ("black ships") puffing over the horizon, Japan was on the brink of defeating Russia in war, using modern, home-produced weapons.

And Japan's next great burst of energy was also powered by fear. I once said to Tokyo's most successful developer: "You live in a traditional wooden house, you eat on the floor, you sleep on tatami mats: why, if this is the way you prefer to live, do you cover your city in concrete?" He pointed out that nearly all Japan's cities were destroyed by aerial bombing in the Second World War: built of wood, they burned like bonfires. "We must make sure that never happens again," he said.

Forty years of furious post-war growth brought Japan close to economic parity with its wartime enemy – but they wreaked havoc of a new sort on the Japanese environment; havoc of a sort we are becoming horribly familiar with in cities across Asia today. Japan's megalopolises go on for ever. The population density means that the countryside has always been crowded, and with industrialisation those villages and paddy fields morphed overnight into city blocks with factories and apartment buildings and fast-food outlets. You could travel by Shinkansen from Tokyo to Osaka and wait in vain for a proper patch of countryside.

There are several reasons why Japan stopped growing after the crash. An ageing population, a shrinking birth rate and a national disinclination to admit millions of immigrants are among the obvious ones. But one reason economists tend to overlook is the following: with the Cold War coming to an end, Japan saw that, for the first time since the 1850s, there really was nothing to fear any more.

The Japanese have never been very impressed by consumption for its own sake. They were grateful to be able to haul themselves out of their wartime misery after 1945, but the pursuit of happiness, American style, has never made much sense to them. Their homes remain as cramped and humble as ever: look at the super-realistic films of the new star of Japanese cinema, Hirokazu Koreeda, and the homes of his older characters are not significantly different from those in Yasujiro Ozu's films, made 50 years earlier. The Japanese know that the more their cities grow, the longer will be their train rides to work, the worse the smog will get, the greater the problems with water quality, acid rain, rubbish disposal: the law of diminishing returns which confronts all of Asia's crowded, fast-modernising societies has been staring them in the face for decades. And because Japan continues to be a remarkably egalitarian society, everyone shares the misery.

Let us suppose, then, that Japan's 20 years of stagnation is not in fact the dismal failure the business writers describe, but a semi-deliberate national choice – a recognition of the limits of growth. And let us hope that, just as industrialising Japan was an inspiration to the rest of Asia 100 years ago, deindustrialising Japan might be the same today. Because it's one of the few hopes we have.

p.popham@independent.co.uk

For further reading:'Limits to Growth: the 30-Year Update', by Dennis Meadows and others (Earthscan, 2004)