Why the west should heed Japan's economic lead

So Japan's a regimented country, with a cowed people fearful of breaking rules? Hardly. I've never seen so many people laughing, smiling and relaxed. Japan is the most equal society on earth. The top 10% of earners have 4.5 times the income of the bottom 10%. In Britain the top 10% grab 13.8 times the share taken by the lowest 10%.

I suppose I was experiencing a street-level view of Richard Wilkinson and Kate Pickett's superb book The Spirit Level: Why More Equal Societies Almost Always Do Better. Yet in a week spent visiting companies, speaking to economists and interrogating investment analysts, I think I was supposed to reach a rather different conclusion.

The Anglo-American school of capitalism scoffs at Japan. It's a bubble economy that burst and which, two decades later, still can't revive. Companies won't shed labour or cut costs. Runaway public spending floods into pork-barrel construction projects creating a fiscal deficit that makes even Greece look prudent. The country is, they say, quite literally on a road (and a bridge, and a tunnel) to nowhere. Meanwhile in the west – but especially in the US – dynamic capitalism destroys but then renews.

If your head never left the pages of right-wing economic textbooks (and you swallow the guff that manufacturing doesn't matter any more) you might believe all this. Indeed, World Bank figures show that back in 1995, Japan's nominal GDP was $5.3tn (£3.5tn), or not that far short of the US's $7.3tn. Since then, Japan's nominal GDP has actually fallen to $5.1tn, while the US is now at $14.3tn. The economic evidence is clear: Japan is a basket case, and the US is our only model.

Yet there are no Detroits in this supposedly failing economy. Instead you realise the price we pay for winner-takes-all capitalism. Arriving back in Britain, I came through BAA's gruesome Heathrow terminal three (thank you, the money makers behind its debt-laden takeover). In the underground, I shoved coins into the ticket vending machine. Of course it was broken. The District, Circle and Jubilee lines were all out of action (thank you, public/private partnership). At Victoria, I boarded a depressingly dirty train (thank you, train-leasing financiers).

Japan has its problems, not least its 200%-plus public sector debt. But it has a lot to teach us about social cohesion, while still producing world-class companies – and bosses who take pay cuts rather than make redundancies.

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