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Since the midterms, most of the attention has been on what comes next for the Trump administration, from investigations into alleged corruption to possible impeachment. But another question is just as serious：is there a possibility that a Republican defeat could burst the AI bubble and trigger a financial crisis like the one in 2008?
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The first domino may already be falling. AI stocks have sold off, and hedge funds that bet heavily on them could take big losses. Hedge funds are part of the nonbank financial sector and can use leverage to magnify their bets. At the end of 2025, large hedge funds reporting to the SEC had about $4.8 trillion in net assets. Their combined gross assets were 2.6 times that amount.
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Those losses could spill over to the big banks. At the end of 2025, banks had committed about $2.6 trillion in credit to nonbank financial firms. If some of those borrowers can’t repay, banks could take losses. This may incur a situation just after the Lehman Brothers crisis in 2008, when banks grew wary of lending to one another, and short-term funding markets (and the whole economy) seized up.
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In 2008, investors flocked to Treasuries as a safe haven, pushing prices up and yields down. The dollar rose as borrowers around the world scrambled for dollars.
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This time around, there’s a lot more debt to roll over. Federal debt grew substantially in the wake of the 2008 financial crisis and the COVID-19 pandemic. By the end of 2025, federal debt held by the public amounted to about a year’s worth of GDP.
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If yields stay high, federal interest costs will climb as old debt is refinanced. If the government borrows even more to cover rising interest costs and investors start to lose confidence in U.S. finances, Treasury prices could fall and the dollar could tumble, a serious rupture in American hegemony in the world.
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Politics and markets are both putting on quite a show. The haves can worry about their money. The have-nots can worry about their jobs.
(Individualism is often viewed as a concept unique to white Westerners. However, the desire to independently shape one’s own destiny without relying on the group is, in fact, widely found among the Chinese as well. On the other hand, even in the West, waves of fascism that suppress individual rights have repeatedly emerged. Modern individualism emerged in tandem with economic development and the spread of education; it is not the exclusive domain of Western Europe. The balance sought between the interests of society as a whole and individual rights and claims varies depending on the specific society and era. Nevertheless, modern individualism forms the foundation of human rights and should continue to be upheld as a goal.
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The source text is “In Search of Lost Modernity” by Akio KAWATO.
The English edition of this book 〔originally written in Japanese〕 is on
(The copyright belongs to the author, Akio Kawato)
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The Trinity of Rationalism, Individualism, and Liberty Part 2: Individualism
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In Japan, the word “individualism” often carries a negative connotation, suggesting someone who is self-centered or only thinks about themselves. However, individualistic tendencies can be found across all cultures and eras, including in Japan.
During the period of civil war in 16th century Japan, for example, the practice of “gekokujo”—where a retainer would overthrow his lord—was not uncommon. People were considered full adults at the age of 20 and often inherited the position of family head.
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In the West, however, this tendency evolved into a full-fledged ideology and legal framework, becoming a central pillar of society. As we’ve seen, the Renaissance and the Reformation promoted humanism, which liberated individuals from subservience to the Church and placed the human being at the center of thought and society.
Later, the Industrial Revolution raised living standards, allowing more people to break free from dependence on kinship ties, local communities, and agrarian life. Harvard professor Joseph Henrich coined the acronym WEIRD to describe the societies that emerged from these changes—Western, Educated, Industrialized, Rich, and Democratic.
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That said, we should remember that WEIRD societies only became the norm in the West by the end of the 19th century.
Until the 16th century, both Western society and individual consciousness were still quite underdeveloped. The independent and free-spirited Germanic warriors described in Tacitus’s Germania had all but disappeared. In their place were mundane and in some cases even servile figures: lords, priests, farmers, merchants, and artisans. This hierarchical, almost feudal reality in 14th-century Florence is vividly portrayed in Franco Sacchetti’s works.
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Although modern Europeans often present themselves as humanists, their historical record is far more brutal. In his book “European Mercenaries”, historian Tadashi SUZUKI compares the cruelty of the Thirty Years’ War to that of the Mongol invasions, noting that European society of that era was far more violent than today.
In 1631, the city of Magdeburg was besieged and burned, with 25,000 of its 30,000 residents killed. Of the 5,000 survivors—nearly all women—many were subjected to rape. In 16th-century France, the losing side in political struggles or criminal suspects were often executed publicly and in horrific ways.
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Even in the early 19th century, modern “freedom” had not reached many people’s lives. In Britain, the largest occupational group was domestic servants. In Paris in 1754, nearly 200,000 people—about one-fifth of the city’s population—worked as servants. Society remained rigidly hierarchical, as shown in Charles Dickens’s “A Tale of Two Cities”, which is set during the French Revolution in both France and Britain.
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It was in this context that the concept of “individualism” was formalized by the 19th-century French politician and thinker Alexis de Tocqueville (1805–1859). He argued that the most important thing for a human being is themselves—that society exists for individuals, and that all individuals are equal in spirit and must not be exploited.
Tocqueville’s individualism is built on the idea that people are capable of making rational judgments in their own interest. He emphasized independence, self-reliance, and privacy, but also insisted on respect for the rights of others and minimal interference from government.
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In truth, his views reflected the values of the aristocracy. In “Democracy in America”, which he wrote after an eight-month tour of the United States in 1831–1832, Tocqueville noted early signs of populism in American society, which he saw as distinct from the ideal of individualism. Although he praised American equality and democracy, he also questioned whether Americans were truly mature enough as individuals to sustain it. In this sense, Tocqueville exemplified the values of “aristocratic individualism.”
In short, rationalism, freedom, and individualism are all modern ideals—but they do not easily take root in society as a whole.
（Values such as freedom, individualism, democracy, and the market economy began to be clearly recognized in Western Europe from the 17th century onward. While white Westerners regard these values as unique to their own race, the situation was different in medieval Germanic societies.
Modern values took shape as economic development from the Middle Ages onward allowed more people to live independently of local ties and kinship. Modern values are not the exclusive domain of white Westerners.
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The source text is “In Search of Lost Modernity” by Akio KAWATO.
The English edition of this book 〔originally written in Japanese〕 is on
(The copyright belongs to the author, Akio Kawato)
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How the “Modern Values” Came into Being
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As stated earlier, the Industrial Revolution raised living standards in Britain, created a broad middle class, and helped foster democracy as people became more conscious of their rights.
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Western Europe is often credited with giving birth to core modern values: freedom, individualism, and democracy. In 1993, the European Union articulated the Copenhagen Criteria for membership, which include democratic governance, the rule of law, human rights, a functioning market economy, and fair competition.
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But these values were not “invented” by white Europeans. Even dogs desire freedom and independence. What Western societies should be proud of is not the values themselves, but the systems—economic, legal, and political—that allow large numbers of people to enjoy those values and resolve disputes peacefully while respecting each other’s rights.
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The longing for freedom and individual dignity goes back to ancient times. The ideas of Athenian philosophers—especially Aristotle’s discussions of democracy and populism in Politics—remain deeply relevant. Even the art of classical Athens reflected this shift: statues began portraying individual people with greater nuance and realism, in stark contrast to the earlier stylized forms reminiscent of Japan’s haniwa clay figures. Interestingly, this artistic revolution may have come from Egypt, suggesting that individualism has roots there as well.
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Some Westerners today seem to think that their ancestors were always free and democratic—unlike the supposedly collectivist and authoritarian cultures of Asia. But I don’t believe that the peasants, apprentices, and servants of medieval Europe were “free.” In comparison, the outlaws in “The Story of Water Margin” in medieval China seem far more liberated.
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Tacitus’s Germania does portray the Germanic tribes as strong and independent—but those descriptions applied to warriors. Their descendants, living as peasants in medieval Europe, had little freedom or dignity. In truth, “freedom” was a privilege for the few, not a universal right.
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That began to change in the 16th century. The Reformation challenged the dominance of the Catholic Church and opened the door to new thinking. Humanism and rationalism—philosophies that placed humans at the center of inquiry—emerged. In the 17th century, as material conditions improved, philosophers began theorizing about dignity, rights, and freedom.
Let’s now explore this process in more detail.
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The Trinity of Rationalism, Individualism, and Liberty Part 1: Rationalism
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The core values of modern Western civilization can be framed in different ways, but I would emphasize three: rationalism, individualism, and liberty. All humans possess these tendencies to some extent, but over the course of fifty years of observation, I’ve noticed that many Westerners—especially white Europeans—tend to exhibit a strong sense of independence and enterprise. Though I’ve criticized Western culture at times, I recognize this trait.
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Rationalism can be defined in many ways. Here, I define it as the habit of judging facts based on evidence rather than dogma. I’ve especially noticed this trait in Northern Europe. People there don’t seem overly concerned with customs or unspoken rules. They are less bound by ideology and more likely to choose practical actions based on their own logic and objectives. Necessary reforms tend to be carried out in a timely way. In that sense, they stand in contrast to the Japanese, who often defer to social conventions and vested interests and constantly worry about what others think.
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Rationalism is said to have been launched by the French philosopher René Descartes, who famously wrote, “I think, therefore I am,” in his 1637 work “Discourse on the Method”. In truth, others had expressed similar ideas before, but Descartes left the lasting mark.
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Rationalism helped advance science and learning on the European continent, while in Britain, it played a key role in politics as well. It also contributed to England’s separation from the Catholic Church. In the late 16th century, Francis Bacon (1561–1626) built on the ideas of Danish astronomer Tycho Brahe and promoted a new, human-centered mode of inquiry. Bacon championed inductive reasoning—discovering truth through observation and experiment—as a superior alternative to the deductive reasoning that had dominated thought since ancient Greece.
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Deductionstarts with a broad assertion—like “the world is water” or “humans are evil”—and then builds out logical conclusions from that premise. This often leads to dogma. Induction, by contrast, invites continual reevaluation and correction. Bacon’s followers founded the Royal Society in London, which advanced rationalist science and inquiry in Britain.
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But even induction is not immune to failure. Errors in observation or reasoning can turn it into a new kind of dogma. Consider David Hume (1711–1776), often hailed as the peak of British philosophy. In “A Treatise of Human Nature”, he wrote that Black people and non-Europeans were naturally inferior to whites and incapable of producing art, science, or great individuals. This was bad induction, based on limited and biased data—a dogma masquerading as reason. The West has produced many pseudo-intellectuals like him, but kudos to the common sense of the people, Hume’s books didn’t sell well.
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In the Netherlands, rationalist thinking began as early as the 15th century, backed by economic prosperity. I haven’t read widely on the subject, but early Dutch humanists included Rudolf Agricola, who criticized scholasticism; Hans Folz, who denounced indulgences; and Erasmus, whose 1511 book In Praise of Folly savagely satirized the corruption of the Catholic Church.
（To run a “nation,” a certain number of people with knowledge and skills in politics and administration are necessary. While it is important for every citizen to express their opinions, without people to synthesize those views into laws and policies and implement them, society will fall apart, and uncontrollable power struggles will ensue. Those responsible for the governance of society were called the “elite” or the “political class.”
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Their presence was particularly prominent in Mediterranean cities such as medieval Venice. From the modern era onward, the United Kingdom intentionally cultivated such elites.
If these elites rest on their laurels and look down on ordinary people, the result is autocracy, as seen in modern Russia.
Conversely, in societies like modern Japan that do not recognize the existence of an elite class, politics degenerates into populism. In this chapter, we will look back on that history.
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The source text is “In Search of Lost Modernity” by Akio KAWATO.
The English edition of this book 〔originally written in Japanese〕 is on
(The copyright belongs to the author, Akio Kawato)
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The Formation of the Elite Class
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A modern state—with its complex institutions and large-scale military—cannot be run by a single president or prime minister. It needs a functioning bureaucracy. Without it, the state simply doesn’t work. Politicians, civil servants, journalists, and other actors must possess insight, ability, a wide network of connections, and a strong sense of responsibility toward the public. Ideally, such people form what we call the “elite.”
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One historical example of a flourishing elite is found in Venice during the Middle Ages and the early modern period. In The Story of the City of the Sea, Japanese author Nanami SHIONO writes as follows (somewhat idealistically):
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—“In Venice, there were no great merchants or financiers like in Genoa or Florence, and no single trader dominated the market. The state-operated fleet was run by a system of collective decision-making.
At the end of the 13th century, Venice introduced a kind of aristocracy. Pietro Gradenigo expanded the Republic’s parliamentary membership and made these positions lifelong. After his death in 1323, they became hereditary. Thus, a ‘political class’ emerged that took charge of the Republic’s governance.
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Though rarely discussed, aristocracy and parliamentary government are closely connected. Montesquieu once said the defining feature of aristocratic rule was ‘the spirit of moderation.’ Nobles should not receive special tax exemptions or amass excessive wealth. They should ‘mingle with the people, dress like them, and share in their pleasures without any airs of superiority.’ The Venetian aristocracy met these expectations almost perfectly. Their sole privilege was the right to participate in government.”–
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The concept of a “political class” is largely foreign to modern Japan, which has become a highly populist society. But this term still appears in Russia today. In Russia—often viewed as a presidential dictatorship—governing without regard for the opinions and atmosphere among those of status and influence (the political class) is risky and invites backlash.
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In 18th and 19th century Britain, there was substantial investment in elite training. Although social mobility was higher than in places like France, the country still had strong class consciousness—partly because it had been repeatedly conquered by foreign peoples. Social class even determined the form of language one used. To maintain their status across generations, elites developed a systematic approach to grooming successors—creating a “pyramid” of elite educational institutions.
In Britain, universities began proliferating in the second half of the 16th century. Studying the classics of Greece and Rome—regarded as an antidote to medieval theology—became a mark of elite status.
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Aspiring young men often attended university on scholarships. For instance, Richard Hakluyt, who helped promote overseas colonization in the late 16th century, came from a respectable family and studied at Oxford with support from his relatives.
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Modern America inherited this British model of elite cultivation. There are elite boarding schools for the children of powerful families, the Ivy League group of private universities, and numerous think tanks that offer temporary homes for officials between government roles. The military is another avenue: many officers attend prestigious academies and continue in service as part of long family traditions—almost like military dynasties.
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For centuries, the elite and the political class have been essential to the functioning of modern sovereign states. But today, they are degenerating—in competence and in legitimacy—across much of the developed world. In the U.S., partisan polarization has reached a point where many people assess ideas not on their merits but by asking, “Are you a Democrat or a Republican?” A similar erosion of elite quality is happening in other countries, as populism gains strength.
The Democrats won the midterms. The larger story is that many Americans rejected the rough-and-tumble America that Donald Trump embodies. Trump tries to get his way with bizarre policies that defy reason, with sophistry, invective, and violence.
It is true that America has had men like him in every era. But they have stood outside an American tradition of settling differences through debate and in the courts.
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The Democrats’ Victory Came Two Years Too Soon
For the Democrats, victory came two years too soon. If voters grow fed up with them over the next two years, the party could find itself on the receiving end of a reversal in the 2028 presidential election.
The Democrats won votes simply by being the alternative to Trump’s Republican Party. They have neither a coherent agenda nor a strong leader they can rally around.
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If the new Congress convenes as scheduled next year—I hope we see no terrorist attack followed by a declaration of martial law—the Democrats had better have a plan and agree on it. Otherwise, things could go badly for them.
The immediate question is when to begin impeachment proceedings against Trump. I would start with a thorough investigation into whether any laws were broken as Trump and his family accumulated wealth. The findings should guide the decision on impeachment.
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At the same time, Democrats should work through Congress and with policy research institutes to develop a viable strategy for reforming American society and the economy. That should be the platform they run on in 2028.
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It’s Time for Republicans to Adapt to a Multiethnic America
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The midterms showed just how far America has come as a multiethnic nation. In Texas, long a Republican stronghold, voters elected Gina Hinojosa, a Latina Democrat, as governor. In Georgia, voters elected Democrat Keisha Lance Bottoms, the state’s first Black governor and its first woman governor.
Trump’s Republican Party leaned too heavily on white Americans who felt left behind in a multiethnic country. This time, even some of those voters turned away from the party.
America’s multiethnic character is here to stay. Both parties have to think hard about where they will find their support in that America.
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A Few Assumptions Worth Dropping
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Compared with advanced democracies in Northern Europe, where political debate tends to be more measured, American arguments often veer toward extremes and leave little room in between. Suggest even a modest tax increase and someone will dismiss it as Soviet socialism, as though the state were about to run everything and smother private initiative.
The Nordic countries and the Netherlands show that a country can sustain a market economy and a strong democracy while providing generous social benefits.
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There is also a case for restraint when it comes to raising taxes on high earners to improve the lives of people on low incomes. The federal government gets roughly half its revenue from individual income taxes, and high earners already account for more than half of those receipts.
But surely there should be limits on the ability of a handful of business magnates who promote the idea of smaller government to lighten their own burdens, by effectively buying up parties and politicians to get their way.
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A Consistent, Realistic Foreign Policy
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Democrats have tended to poise themselves as anti-Russia and pro-China, Republicans as anti-China and pro-Russia. That way of dividing up the world serves little purpose. The aim with China should be to get Beijing to stop using military force to bend its neighbors to its will and to stop using government subsidies to bolster its companies’ exports.
From there, the United States can work with China, its neighbors and other countries with a stake in the region to build a framework for cooperation and preserve the status quo.
With Russia, the outsized pride of its elite and its appetite for expansion are real problems. Even so, we should refrain from trying to dislodge that elite from its position within Russia’s existing borders, whether through regime change or other means.
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No country has yet built a free, prosperous, multiethnic society whose people take the principle of accountability to heart. America may be the country that can.
（King Charles of the United Kingdom is currently on a state visit to the Caribbean. There, he has expressed remorse for the country’s past—specifically, the fact that, beginning in the 17th century, Britain brought large numbers of African slaves to work on sugarcane plantations, using their labor as the foundation for its own economic development. Before debating ethical issues, let’s first establish the facts. It should also be noted that Britain was not the only country in history to engage in the slave trade. In the Middle Ages, it appears that white Westerners were sometimes traded as slaves by Venetian and Islamic merchants.
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The source text is “In Search of Lost Modernity” by Akio KAWATO.
The English edition of this book 〔originally written in Japanese〕 is on
(The copyright belongs to the author, Akio Kawato)）
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The Caribbean Islands: Sugar Cane and British Wealth
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In 1627, Britain established a colony in Barbados, which had been devastated by Spanish and Portuguese forces, leading to the extinction of the indigenous population. English settlers displaced by the conflict between Royalists and Parliamentarians during the English Civil War migrated there. In 1655, the British Navy under Oliver Cromwell seized Jamaica, establishing it as a base for controlling the Caribbean. By 1670, Britain had also taken control of the Cayman Islands.
Earlier, in the 1650s, Dutch plantation owners expelled from northeastern Brazil introduced sugarcane cultivation—originally from the Madeira Islands—to Barbados, setting up the Caribbean’s first sugar plantations. At first, Irish laborers were used, followed by enslaved Africans.
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The raw sugar produced in the Caribbean was refined in Britain and consumed domestically or exported to the European continent. Rum made from sugar was also used in the transatlantic slave trade to purchase African captives. In Jamaica, planters imported meat and flour from Britain and the North American colonies—despite these being more expensive than the ones which French Caribbean territories imported—and still managed to make profits of 8–10%.
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Britain further profited through shipping and insurance services related to Jamaican trade. By 1773, profits from Jamaica alone were estimated at nearly £1.5 million. Assuming one pound equaled 8.35 grams of gold at the time, and using a modern gold price of $110 thousand per kilogram, this would amount to about $700 million today.
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According to Wikipedia, trade between Britain and its Caribbean territories, such as Jamaica, was nearly equal in volume to that with British North America. While imports and exports were roughly balanced, both routes were profitable for British merchants. Early export destinations for British-manufactured cotton textiles included Africa and the Caribbean, while North American colonies exported grain, timber, and rum to the Caribbean and used the proceeds to import British goods. Under the Navigation Act of 1651, only British ships could carry goods between colonies and Britain, securing enormous profits for British shipping firms.
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The close economic and political ties that remain today between Britain and territories like Jamaica, the Bahamas, and the Cayman Islands have their roots in this colonial history. It can be said that Caribbean sugarcane helped finance the British Industrial Revolution.
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The Slave Trade
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Following Spain and Portugal, the Netherlands, Britain, and France all embraced the colonial model of using African slaves on large plantations to generate profits. This practice fueled the development of sugarcane plantations in the Caribbean and cotton and tobacco farming in North America. At first, sugar was shipped to Britain for processing, later followed by cotton. Profits from exporting these goods around Europe and the wider world helped finance the Industrial Revolution.
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Slave traders from cities like Liverpool and Bristol are also recorded as having invested their profits into emerging industries in the 19th century. As mentioned earlier in this book, while capital from within Western Europe—such as that from Mediterranean cities—played a major role in Europe’s economic rise, there is no doubt that the profits from slavery and the exploitation of enslaved people contributed significantly to the capital that fueled Britain’s Industrial Revolution.
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Mechanism of the Slave Trade
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The European “business” of enslaving large numbers of Africans began in 1442, when Prince Henry the Navigator of Portugal captured Berbers. Portugal alone is estimated to have transported about four million Africans to its colony of Brazil. In 1502, Spain began importing African slaves to make up for labor shortages in South America.There are various estimates as to how many African blacks were taken as slaves by white Europeans, but the average annual figure was fifty to sixty thousand.
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It is important to note that Africans were not enslaved because they were “backward.” They were often sold into slavery by the kings of local African states. According to “1492: The Year the World Began” by Felipe Fernandez-Armesto, medieval Africa had powerful empires like Mali, which exported gold to Europe, and 12th-century Ghana, where kings lived in palaces adorned with artworks and glass windows, wore silk garments, and accumulated gold bars. In Kumbi Saleh, believed to have been Ghana’s capital (in present-day Mauritania), excavations have revealed a town covering about 1.5 square miles, built in the 10th century with grid-patterned streets and multi-story buildings that may have housed about 20,000 people.
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It is likely that African kings sold war captives or those who failed to pay tribute to European traders. In the late 17th century, the British Royal African Company purchased slaves from the Dahomey Kingdom (now Benin), whose rulers conducted slave raids and waged tribal wars to capture prisoners.
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Magnitude of the Slave Trade
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The business of buying slaves in Africa and selling them in the Caribbean and the Americas was enormously profitable, often yielding profits of over 100%. Nearly all major European powers were involved.Between 1501 and 1866, about 12.5 million Africans were forcibly taken from their continent.
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Of these, approximately: 6 million were enslaved by Portugal and the Netherlands, 3.26 million by Britain, 1.38 million by France, 1.06 million by Spain and Uruguay, 0.3 million by the United States, and 0.11 million by Denmark.
By around 1650, the Netherlands had overtaken Spain and Portugal to become the leading maritime trader, including in the slave trade. It’s estimated that the Netherlands transported around 0.55 million slaves, of whom 75 thousand died at sea and were thrown overboard. Moreover, many slaves sold to Spain and France were transported by Dutch ships.
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England entered the slave trade in 1562, when John Hawkins, a pirate who later became a naval admiral, led a voyage to Africa. However, it wasn’t until the 17th century—after Britain had established colonies in the Caribbean and adopted the Spanish model of large-scale sugarcane plantations—that the slave trade became a major industry. From 1663 to 1698, the Royal African Company, granted a royal charter by the king, held a monopoly over the trade.
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By 1698, Britain had become the world’s largest slave-trading nation, with Jamaica as a key destination for enslaved Africans. Although today we often associate black slavery with plantations in the American South, at the time, far more enslaved Africans worked in the Caribbean, and sugar plantations there generated huge profits for Britain.
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As mentioned earlier, after winning the War of the Spanish Succession, Britain additionally secured the exclusive right (known as the asiento) to supply slaves to Spain’s colonies in South America under the Treaty of Utrecht in 1713.
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The Slave Trade and the Economic Development of Western Europe
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The European transatlantic slave trade, which involved the forced migration of an estimated 10 to 12 million Africans had a profound impact on the economic development of Western Europe.
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Around 1730, a merchant from Bristol transported 270 slaves and made a profit of 7,000 to 8,000 pounds in gold at the time. At that time, one pound contained about 6.7 grams of gold. This is equivalent to about 700 dollars at the current price as of July 2025. .
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Therefore, each slave would yield a profit of about 20 thousand dollars. If the UK traded 3 million African slaves from 1700 to 1866, when the slave trade was banned, the total profit would be roughly 60 billion US dollars. This makes 360 million dollars per year in average, which is equivalent to 1.5% of the British GDP around 1750, a significant amount.
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The economic impact extended beyond direct profits. The sugarcane and cotton produced by slave labor generated even greater wealth. In 1798, British Prime Minister William Pitt estimated that tax revenue from large Caribbean plantations alone brought in four million pounds annually, with an additional one million pounds coming from other colonies. At that time, the British government’s entire annual budget was about 30 million pounds: colonial revenues were crucial to Britain’s finances.
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Dr. Eric Williams—later prime minister of Trinidad and Tobago after its independence from Britain in 1956—made a powerful argument in his book “Capitalism and Slavery”. While he acknowledged that the slave trade did not provide all the capital needed for the Industrial Revolution, he wrote:
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–“The profits flowing into England became one of the main sources of capital accumulation to meet the capital needs of the Industrial Revolution. The Caribbean islands became the center of the British Empire and came to have immeasurable significance for the greatness and prosperity of England. The British Empire was a grand superstructure of naval power built on the foundation of trade with America (based on Black labor), with a large proportion of that trade coming from the Caribbean islands.”–
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The Sugar Revolution
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Today, it is largely forgotten, but in the late 17th century, people spoke of a “Sugar Revolution.” Sugar was once a vital and extremely expensive commodity. Britain, the Netherlands, and France occupied the Caribbean islands—where the indigenous populations had been nearly wiped out—and brought in African slaves to cultivate sugarcane. This trade generated enormous profits. The sugar produced by enslaved Africans was shipped to Europe for refining and sale, bringing in immense wealth.
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The system peaked around 1680. To put this growth into perspective, in the 15th century, Cyprus—then one of Europe’s major sugar-producing regions—produced about 50,000 tons of sugar annually. By the 18th century, the Caribbean islands, especially Dominica, were producing about 70,000 tons a year. By 1800, Britain’s annual sugar consumption had soared to 150,000 tons, fifteen times the level in 1700. If sugar today sells for about $17 per kilogram, the 150,000 tons consumed back then would be worth roughly $2.6 billion in today’s money.
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In the 17th century, Caribbean islands like Jamaica and the Bahamas held a crucial position in British trade. In 1697, imports from the Caribbean made up 9% of Britain’s total imports, surpassing the 8% from the North American colonies. In total trade, the Caribbean accounted for 7%, compared to North America’s 6%. Even between 1714 and 1773, one-fifth of Britain’s total imports came from the Caribbean (including goods from other countries’ colonies), while one-ninth came from North America. On the export side, 6% of British exports went to the Caribbean and 9% to North America. As the white population grew in North America, imports from Britain increased, and by the 1770s, 20% of British exports were headed for the North American colonies.
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Trade with Africa, by contrast, made up only a small share. Between 1714 and 1773, it accounted for just 0.5% of Britain’s total imports and 2% of its exports. However, since much of the Caribbean and North American trade involved transporting enslaved Africans and exporting slave-produced goods to Europe, Africa’s role in the broader “triangular trade” was highly significant.
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In short, the Caribbean islands—and especially the sugarcane cultivated by enslaved Africans—played a vital role in Britain’s trade from the 17th to 18th centuries. They helped fuel the capital investment needed for the Industrial Revolution, increased British incomes, boosted consumption, and ultimately helped propel industrial development even further.
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One important question arises: why didn’t the Netherlands, despite dominating global shipping in the 17th century, develop its own triangular trade and trigger an Industrial Revolution? Even though Dutch wind-powered industries thrived in the 16th century, the Industrial Revolution happened in Britain, not the Netherlands.
I’ll explore this question later—and the same issue applies to France.
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It’s also important to note that Britain’s wealth did not rely solely on the triangular trade. Trade with other European countries remained even more significant. However, because many European industrial goods were based on materials from Asia and Latin America, it’s difficult to completely separate their growth from the profits of colonial trade.
These days, talk of Japan’s decline is everywhere. By 2027, we are told by IMF, even Britain will overtake Japan in GDP, pushing it down to sixth place in the world. Or Japan already ranks around 35th in GDP per capita, so the country is finished.
These gloomy conclusions arise from converting Japan’s GDP into dollars and comparing it with other economies on that basis.
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Convert Japan’s current GDP into dollars at the 2010 exchange rate—an annual average of roughly 88 yen to the dollar—and it comes to about $7.6 trillion. That is considerably larger than Germany’s current $5.1 trillion, calculated at today’s euro-dollar exchange rate.
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The yen’s depreciation since 2010 is not the result of a decline in Japan’s underlying economic strength. Let me explain how we got here.
After the 2008 Lehman Brothers collapse, the United States and Europe lowered interest rates to stimulate their economies. The Bank of Japan held its rates steady at the time, leaving Japanese rates relatively high and driving the yen to excessively strong levels.
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The Abe administration, which took office in late 2012, moved aggressively to lower rates to break the deflation that the strong yen had helped create.
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But this failed to stimulate the economy and merely weakened the yen. The thing is that companies were unwilling to raise wages, so consumers strongly resisted price increases in stores. Deflationary pressures persisted.
As the interest rate gap between Japan and the United States and Europe widened, Japanese investors put more money overseas in pursuit of higher returns, pushing the yen down further.
Meanwhile, Japanese manufacturers had expanded production abroad, so a weaker yen did not bring any particular increase in exports. Passenger car exports actually declined in volume. Japan also had to buy more dollars to pay its increasingly expensive oil import bills, adding still more downward pressure on the yen.
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Japan, then, is not becoming an economic lightweight. Its problem is that it has become caught in a weak-yen trap of its own making and cannot find a way out.
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In July this year, Japan began intervening by selling dollars. In August, it brought the United States into coordinated intervention, briefly strengthening the yen to nearly 150 to the dollar. Now, however, the currency has weakened again to around 157.
If Japan steps up its dollar sales much further, it could end up having to sell some of its holdings of U.S. Treasury securities. Washington would do everything it could to prevent that. Japanese sales of Treasuries would mean Japan was withdrawing funds from U.S. financial markets, pushing up American interest rates. Treasury prices would fall and yields would rise—a nightmare scenario for U.S. government finances.
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Even so, the yen’s excessive weakness must be corrected, and without driving up long-term U.S. interest rates. One possibility would be for buyers other than Japan to absorb large quantities of Treasuries. Perhaps further liberalizing the use of stablecoins could help.
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Somehow, we need to turn the tide toward a stronger yen. Yen appreciation would not reduce the volume of Japan’s exports. Automakers have already shifted much of their production overseas. Certainly, a stronger yen would reduce Japanese companies’ export earnings when expressed in yen, and share prices would fall accordingly. But that would not be fatal; lower export earnings would be offset by lower costs for imported raw materials, leaving the gains and losses roughly balanced.
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For ordinary people, meanwhile, a stronger yen would be beneficial overall. When I traveled to Denmark this summer, eating in restaurants was so expensive that I settled for cheap prepared food from convenience stores.
And with a stronger yen, Japan’s economic weight, measured in dollars, would look far greater than it does today.
（“Patriotism” is a concept that was formed quite artificially in the nation-states of modern Western Europe. While love for one’s family or hometown is natural, love for the abstract entity known as the “nation-state” is sometimes deliberately imposed by those in power. It is an ideology designed to conscript people and levy taxes on them. The nation-state as an institution should be valued only to the extent that it is useful; it is by no means something worth blindly sacrificing one’s life to defend. This becomes clear when we look at the history of modern Western Europe.
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The source text is “In Search of Lost Modernity” by Akio KAWATO.
The English edition of this book 〔originally written in Japanese〕 is on
(The copyright belongs to the author, Akio Kawato)
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Patriotism as a Tool of the Modern Nation-State
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We often assume that patriotism is a natural human sentiment. But in reality, it’s a modern invention—an emotional slogan designed to rally the masses, especially in wartime, to defend the interests of the modern state.
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In ancient Rome, the word patria (from which “patriotism” derives) meant loyalty not to the nation, but to law and to the freedom of the elite—reflecting the mindset of Rome’s republican aristocracy. It was a value of the ruling class, not the common people.
Ordinary people don’t usually care much who governs them—be it a lord, king, emperor, or president—as long as they can live in peace. Calls to “defend the country” often sound to them like, “risk your life to protect the elite’s power.” Benedict Anderson’s famous book “Imagined communities” vividly captures this dynamic as follows:
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–When Western empires lost their colonies, it was the elites who grieved. Ordinary people in countries like Britain and France largely shrugged off the losses. That detachment speaks volumes. It is always the ruling class that clings to the memory of empire.–
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In medieval Western Europe, the concept of the nation was an even more ambiguous one. At that time, royal territories were scattered and disconnected, lacking the coherence of a modern nation. The idea of patriotism as we know it simply didn’t exist.
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For peasants, the world was small. Lords and churches were nearby; the king was an abstract figure in a far-off city, and the Pope felt like someone on another planet.
If life in a village became too difficult, people often migrated to another realm—or went on pilgrimages to distant places like Jerusalem. Until the late Middle Ages, Western Europe was, in effect, “a patchwork of village communities called Europe,” loosely held together by the legacy of the Roman Empire, the Catholic Church, and the Frankish kingdom.
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Later, with the rise of large linguistic blocs—English, French, German—a sense of national identity began to form. This process was not entirely organic. In medieval and early modern Europe, mercenaries and even national armies were composed of men from diverse ethnic backgrounds. Since communication could be difficult, military units were often organized by language group.
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As modern nation-states emerged, nationalism became a banner under which the ruling class mobilized the general public into the military. Rather than relying on general and abstract ideals such as the “rule of law” in Roman times, they began to exploit emotional attachment to specific “ethnic groups” that shared a common language.
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In 18th-century Britain, the national anthem “God Save the King (or Queen)” began to be sung at public gatherings and became Europe’s first formal national anthem in 1825. Napoleon needed strong nationalist sentiment to build his massive army of 500,000 men—many of them conscripts—to wage his wars. “La Marseillaise,” France’s national anthem today, became popular during this time.
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In the United States today, it’s customary to stand for the national anthem at public events. The American flag was adopted shortly after independence, and the national anthem, “The Star-Spangled Banner,” was written in 1812 during the War of 1812. While it expresses pride in the country, it’s less about blind nationalism and more about affirming the nation as a shared foundation of civic life. But what about today’s deeply divided America—especially since the rise of Donald Trump?
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In Eastern civilizations, there is no direct equivalent to the Western concept of “patriotism.” In China, for instance, expressions of “love of country” have existed for centuries, but they usually refer to attachment to one’s hometown. Perhaps because monarchs wielded such immense power, the state was seen more as something to fear than to love.
What It Means That Pyongyang No Longer Seeks Korean Reunification
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Mention North Korea, and certain associations spring to mind: “dangerous,” “poised to invade South Korea,” or “eager for a meeting with Trump.” Yet the underlying paradigm seems to have changed considerably since around 2024.
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At a meeting of the Central Committee of the Workers’ Party of Korea in late 2023, General Secretary Kim Jong Un defined relations between North and South Korea as “relations between two hostile states, two belligerents at war—not relations between people of the same nation or a shared identity.”
That statement alone may leave readers wondering what he meant.
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But in a speech to the Supreme People’s Assembly the following January, he said that North Korea had “put an end to nearly 80 years of inter-Korean relations and established a new legal framework for our republic’s policy toward the South, based on recognition of two states coexisting on the Korean Peninsula.” In other words, North Korea had decided to stop pursuing reunification.
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At a recent seminar, one of Japan’s leading experts on North Korea made the following observations:
“North Korea does not want closer exchanges with South Korea as it is today. It fears that young people will be drawn to K-pop and other aspects of South Korean culture, undermining the government’s ability to control them.
Moreover, if relations between the two Koreas improve, U.S. forces in South Korea will lose their reason for being there and presumably withdraw. The ‘threat posed by U.S. forces in South Korea’ has long been the single most important rallying point for keeping North Korea’s military of more than a million troops in line. Pyongyang cannot afford to lose it.”
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Until now, I had assumed that North Korea would be more than happy to secure a lasting peace between the two Koreas so it could concentrate on economic development—and that it would welcome the chance to use Trump to conclude a peace treaty.
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But its support for Russia in the war in Ukraine has brought in a huge influx of money. North Korea, whose annual GDP is estimated at roughly 26 billion US dollars, is reportedly receiving the equivalent of 6.5 billion US dollars a year in return for supplying artillery shells and troops. For the time being, it no longer needs money from the United States, South Korea, Japan, or elsewhere.
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Under these circumstances, Pyongyang has no particular reason to be eager for a meeting with Trump. Its ideal outcome is to preserve the current confrontation while keeping the peace.
Its attitude toward Washington may now amount to little more than: “If you’re willing to recognize us as a nuclear power, we might agree to meet with you.”
Trump has already suggested repeatedly that he wants to talk to North Korea. The considerations outlined above probably explain why, despite those overtures, nothing has moved forward.
German Chancellor Friedrich Merz is scheduled to visit Japan on October 28. He will then travel to South Korea and Singapore. Since his itinerary appears to deliberately bypass China, some in Japan may see this as an opportunity to draw Germany into a coalition aimed at containing China.
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However, Chancellor Merz already visited China in February, a country with which Germany maintains deep economic ties. During his upcoming visit, he may join Japan in cautioning China against restrictions of rare earth exports. But he is unlikely to go any further and participate in any scheme to “contain China.” Prime Minister Sanae Takaichi, for her part, will probably also avoid provoking China.
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Instead, I hope Merz’s visit will provide an opportunity to advance the idea of cooperation and partnership among middle powers, as advocated by Canadian Prime Minister Mark Carney and others.
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By “advance,” I do not mean merely paying lip service to the idea. I mean laying the groundwork for middle powers to speak with one voice and thereby restrain the major powers from acting unilaterally.
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One possible approach would be to establish a number of relatively open-ended forums, each devoted to a major area of international affairs.
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These could include a forum on political and security issues, another on preserving the values of freedom and democracy, one on maintaining market economies and free trade, and yet another on promoting the free exchange of information and culture. Each forum could have a rotating chair country, which would also serve as its secretariat.
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This is just one example of what could be done. I do not know what the Japanese government has prepared for Merz’s visit, and I certainly do not expect the two leaders to reach major agreements on such matters during this brief encounter.
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Still, I very much hope that the two leaders will at least express their intention to “deepen discussions on how to translate cooperation and partnership among democratic, market-oriented middle powers into concrete action.”
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Even if no preparations have been made for such an initiative, a simple statement to that effect at their joint press conference would be a good start.
