by Charles Hugh Smith

This article ran for our enrolled users last week and is one in a series from respected guest commentators while Chris is at work on his new book. Please welcome them to the PeakProsperity.com community and enjoy the fresh perspective.

At some point, economic recessions trigger social recessions. Individual expectations and behaviors slowly gather the momentum to change cultural values, social relations, and the way entire generations think about key issues such as opportunity, security, prosperity, government, family, and the relative importance of money in life.

Those of us who know people who experienced the Great Depression have some glimmerings of how social recessions change people’s attitudes and values. Two examples come to mind: My grandmother had small savings accounts in multiple banks; clearly, she didn’t trust the idea of having one’s nest egg in one bank. And my uncle said that just having a job with a steady paycheck after World War II seemed like heaven. (He’d served in the 8th Air Force in Europe, surviving a 50% casualty rate for B-17 crews.)

But we don’t need to turn back the clock 65 years to view a social recession; there is a real-time one playing out in the world’s second largest economy: Japan.

The more you know about a culture other than your own, the warier you are about drawing parallels between two radically different societies. I studied Japanese language, geography, literature, and society in university, and have traveled widely in Japan with my wife, who is 3rd generation Japanese-American (sansei). As a consequence of living in a West Coast university town, we have been fortunate to have befriended many young Japanese in their 20s and 30s—friends whom we have visited in Japan.

I am not an academic expert on Japan, but I have deep ties to the culture and many of its people. Thus while I am cautious about claiming any special insight, I can comment on media reports with the confidence of personal knowledge.

Social Recessions: Causes & Consequences

Social recessions appear to be triggered by declines in upward mobility and opportunity and increases in income disparity. In response, the young generations lose faith in the secure financial future that they were once implicitly promised, and they start opting out of careers, marriage, and having children.

For many citizens, these seemingly normal options are no longer financially viable. As the path to security narrows, young people realize that “following the rules”—studying hard and trying to fit into corporate/government niches—no longer offers the promised payoff. Cynicism replaces hope, and society stagnates and turns inward.

America is already getting a taste of the social costs of economic decline. Young Americans graduating from college find a world of greatly diminished opportunities for full-time employment and the type of financial security that their parents took for granted.

In Japan, these trends began after the unprecedented bubbles in Japan’s real estate and stock markets popped in 1990. Now, a third of jobs that are available are free-lance/contract or other temp jobs, or part-time positions that pay one-third of typical corporate salaries.

Lacking sufficient income to be independent, young people are moving back home or staying at home because that is the only financial option open to them. In bonding themselves to the security of their parents, they enter a state of permanent adolescence in which marriage, having children, and making long-term plans have no place.

It is no secret that Japan’s birth rate has been falling for years, but less well-known is the decline in marriage and even relationships.

In these ways, the social conventions of Japan are fraying or even unraveling under the relentless pressure of an economy in structural decline.

While each culture responds to social recessions in unique ways, the economics causes seem remarkably consistent across cultures.

Rising Income Disparity

Beneath the bright lights of Tokyo and the evident wealth generated by decades of hard work and the massive global export machine of “Japan, Inc.” lies a different reality: increasing poverty and decreasing opportunity for the nation’s youth.

The gap between extremes of income at the top and bottom of society—measured by the Gini coefficient — has been growing in Japan for years; to the surprise of many outsiders, once-egalitarian Japan is becoming a nation of haves and have-nots.

The media in Japan has popularized the phrase kakusa shakai, literally meaning “gap society.” As the elite slice of society prospers and younger workers are increasingly marginalized, the media has focused on the shrinking middle class. A bestselling book offers tips on how to get by on an annual income of less than three million yen ($34,800). Two million yen ($23,000) has become the de facto poverty line for millions of Japanese, especially outside high-cost Tokyo.

On the surface, Japan appears resilient and prosperous. Journalist James Fallows recently returned to the suburban neighborhood he lived in 20 years ago and found plentiful signs of wealth, but also a subtle turn away from embracing change.

Declining Career Opportunities

Beneath the surface of continued prosperity, one-third of the workforce is now part-time, as companies, enabled by government legislation which abolished restrictions on flexible hiring a few years ago, shed the famed Japanese lifetime employment system. Temp agencies have expanded to fill the need for contract jobs, as permanent job opportunities have dwindled.

Many fear that the country’s economic slide might accelerate as the generation of salaried Baby Boomers dies out. Japan’s share of the global economy has fallen below 10 percent from a peak of 18 percent in 1994. Were this decline to continue, income disparities would widen and threaten to pull this once-stable society apart.

Young Japanese, their expectations permanently downsized, are increasingly opting out of the rigid social systems on which Japan, Inc. was built.

Freeters, No-Good People, “Herbivores” and Hikikomori

The term “Freeter” is a hybrid word that originated in the late 1980s, just as the Japanese property and stock market bubbles reached their zenith. It combines the English “free” and the German “arbeiter,” or worker, and describes a lifestyle which is radically different from the buttoned-down rigidity of Japan’s permanent-employment economy—freedom to move between jobs.

This absence of loyalty to a company is totally alien to previous generations of driven Japanese “salarymen,” who were expected to uncomplainingly turn in 60-hour work weeks at the same company for decades, all in exchange for lifetime employment.

Many young people have come to mistrust big corporations, having seen their fathers or uncles eased out of “lifetime” jobs in the relentless downsizing of the past twenty years. From the point of view of the younger generations, the loyalty their parents unthinkingly offered to companies was wasted.

They have also come to see diminishing value in the grueling study and tortuous examinations required to compete for elite jobs in academia, industry, and government; with opportunities fading, long years of study are perceived as pointless.

In contrast, the freeter lifestyle is one of hopping between short-term jobs and devoting energy and time to foreign travel, hobbies, or other interests.

As long ago as 2001, the Japanese Ministry of Health, Labor, and Welfare estimated that 50 percent of high school graduates and 30 percent of college graduates now quit their jobs within three years of leaving school.

The downside is permanently downsized income and prospects. Many of the four million freeters survive on part-time work, and either live at home, or in a tiny flat with no bath. A typical freeter wage is 1,000 yen ($8.60) an hour.

An ironic moniker for the Freeter lifestyle expresses much about the new realities: Dame-Ren (No-Good People). The Dame-Ren get by on odd jobs, low-cost living, and drastically diminished expectations.

The decline of permanent employment has led to the unraveling of social mores and conventions. Many young men now reject the macho work ethic and related values of their fathers, as well as the traditional Samurai ideal of masculinity.

Derisively called “herbivores” or “grass-eaters,” these young men are uncompetitive and uncommitted to work, evidence of their deep disillusionment with Japan’s troubled economy.

A bestselling book titled The Herbivorous Ladylike Men Who Are Changing Japan, by Megumi Ushikubo, president of Tokyo marketing firm Infinity, claims that about two-thirds of all Japanese men aged 20-34 are now partial or total “grass-eaters.” “People who grew up in the bubble era really feel like they were let down. They worked so hard and it all came to nothing,” says Ms Ushikubo. “So the men who came after them have changed.”

This has spawned a disconnect between genders so pervasive that Japan is experiencing declines in marriage, births, and even sex.

Surveys indicate that roughly two-thirds of freeters live at home. Freeters “who have no children, no dreams, hope or job skills could become a major burden on society, as they contribute to the decline in the birthrate and in social insurance contributions,” Masahiro Yamada, a sociology professor wrote in a magazine essay titled, “Parasite Singles Feed on Family System.”

This trend of never leaving home has sparked an almost tragicomical countertrend of Japanese parents who actively seek mates to marry off their “parasite single” offspring as the only way to get them out of the house.

An even more extreme social disorder is Hikikomori, or “acute social withdrawal,” a condition in which the young live-at-home person will virtually wall themselves off from the world by never leaving their room.

Though acute social withdrawal in Japan affects both genders, impossibly high expectations of males from middle- and upper-middle-class families has led many sons, typically the eldest, to refuse to leave the home. The trigger for this complete withdrawal from social interaction is often one or more traumatic episodes of social or academic failure; that is, the inability to meet standards of conduct and success that can no longer be met in diminished-opportunity Japan.

There is even a darker side to this disintegration of the social fabric and convention: Child abuse is on the rise as well. Sadly, people under long-term stress often take out their multiple frustrations on the weakest, most marginalized people, including children.

Old Social Models No Longer Working

In effect, postwar Japan grafted a mercantilist export economy based onto a traditional patriarchal society in which women were expected to sacrifice their autonomy and ambitions for the good of their children, husband, and the husband’s parents.

The male “salaryman” was expected to sacrifice his life up to retirement to his employer via 60-70 hour work-weeks and killing commutes. Children were expected to sacrifice their childhood and teen years to study, in order to pass hellishly demanding exams on which their future livelihood, career, and income depended.

These extremes of sacrifice might have seemed necessary to rebuild the nation after World War II. But now, 65 years and three generations after the war, these sacrifices make no sense and are destroying the social fabric of Japan.

Men who work long, soul-crushing work weeks have no real role in their children’s lives, nor are they able to be husbands and fathers in any meaningful day-to-day sense. Understandably, many young Japanese men are opting out of that life of absurd, fundamentally meaningless sacrifice to corporations or the government.

For their part, young women are opting out of the burdens of being, in effect, a single parent who carries the immense responsibility of guaranteeing the academic success of her son(s) and the marriageability of her daughter(s). Further, as in standard traditional societies, she essentially leaves her own family and throws in her lot with her husband’s family, as she is expected to care for his aging parents as a daughter-in-law.

Given these burdens, it’s no wonder a third of Japanese young women have not married and have no plans to marry. According to one female author, Japanese men sometimes propose to women with lines like: “I want you to cook miso soup for me the rest of my life.” Japan’s increasingly educated and well-traveled young women are not impressed with this offer of lifetime menial servitude.

Japan’s youth are opting out of its stagnating economy and traditionalist society for good reason: The sacrifices demanded are inhuman and no longer necessary. What Japan needs is 35-hour work weeks and shared jobs, not 70-hour work weeks for some and dead-end jobs for half its youth.

If Japan wants to encourage families and women to have children, then it needs to recognize that the sacrifices demanded of young men and women no longer make sense in today’s world.

Both Japan and the U.S. alike need a peaceful revolution in their cultural and economic models and in their social definitions of wealth, security, community, “growth” as a measure of well-being and prosperity, and ultimately, what constitutes meaningful “work.”

Charles Hugh Smith has been an independent journalist for 22 years. His weblog, www.oftwominds.com, draws two million visits a year with unique analyses of global finance, stocks and political economy. He has written six novels as well as the non-fiction publications Weblogs & New Media: Marketing in Crisis and Survival+: Structuring Prosperity for Yourself and the Nation.