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p 53 despite very steep increases in the 1990s the

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Unformatted text preview: nt from the longer-term structural problem implied by the ‘wrong model’ argument. And there is interesting information in level terms which is obscured by growth-rate data. The OECD (1999) provides an illustration. While arguing that there is a serious problem of ‘excess capital’ for Japan, its evidence shows that capital–output ratios have only just reached the levels of most European countries (ibid., p. 53), despite very steep increases in the 1990s. The UK’s capital–output ratio, showing a steady ‘improvement’ since the early 1980s, was still above the Japanese level in 1998. This evidence is much more consistent with both aggregate and sectoral data showing that Japan’s capital–labour ratio was only around 70–80 per cent of the US level in the 1990s (van Ark and Pilat, 1993; Pilat, 1994; Wolff, 2000). Thus, despite the alarming size of bad loans at the depth of the banking crisis,16 it is hard to find unambiguous evidence that the system itself was predisposed to encouraging excessive capital-stock build-up in aggregate. It may still be the case, however, that the Wolff (2000) notes the pro-cyclical movement of produc...
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