THE ASIAN AFFAIRS PUBLISHER'S MOOD
JAPAN: A HOPELESS PLUTOCRACY CRUMBLES (issue nș 09)
Many years ago, while working in the oil industry, I used to deal with Japanese companies such as Nippon Steel, Mitsubishi Heavy Industries, Hitachi Heavy Industries, Nisho Iwai, and the others. Japan was then known for its rising economic might, its ever-lasting increasing trade surplus, and dedicated and efficient manpower. Economists of all shades and persuasion were explaining to bemused Western managers why Japan was so successful. It came down to a very simple explanation. Labor force was cheap, working hours were long. Robots and electronic were used whenever possible. Factories were, for a very good reason since Japan had been nuked no so long ago, state-of-the art facilities. According to the economic textbook, Japan was highly efficient.
But my own experience left me baffled. Whenever we had a meeting with our Japanese contractors or sub-contractors, there were twenty of them or so attending, while we were two of us, and sometimes three, but never four. Now, one might think that such a display of brainpower on the part of the Japanese was the sign of a very stakanovist approach. Each dedicated manager had indeed a very narrow field of competence, and thus, I thought, must be a highly trained and qualified expert in the said field. But I was wrong. The so-called experts were not out-standing in their field. They were rather on the low end of the spectrum.
I started to worry. If twenty of them were about as good as three of us, what was the secret of the Japanese efficiency? For, who could doubt that efficiency was there? The Wall Street Journal was clamoring that the Tokyo market at 30,000 had a long way to go (it went up to 40,000) and the was cheap, given the fundamentals. The fundamentals were Nippon Steel and many others that shared exactly the characteristics I was confronted with. I told myself, the market can’t be wrong. The economist, who had been writing mountains of books on the Japanese models can’t be wrong, and the chairman of Peugeot, a medium size auto-maker can’t be wrong either. Mr. Calvet, it was his name, had established his managerial reputation by bashing the Japanese model every now and then, his main complain being that it was too efficient and would bring disaster if every one tried to emulate it.
The more I dealt with Japan Inc, for a period of more than two years, the less I understood for I could not see where efficiency was. There was a good reason. There was no efficiency at all. Productivity, yes, but efficiency, very little and no more than in any other country. I took me two years to admit that I had been mislead, but it took many more years for the market to come to its sense and for the economists who know very little of the real mechanism of any trade to revise their copy.
Today, they are doing it with a vengeance. Japan is as bad as it was good before. That is the price to pay whenever a myth collapses.
Japan was never as good as it looked. Possibly it is not as bad as the market today tells us. Japan was in its own way a very efficient machine, but it had little to do with good management or low production costs. It had everything to do with the nature of money.
I think it is Malcom Muggeridge, the English writer, that once said in his superb book “The Thirties”, that money is like a dog, trying to settle to rest but finding each chosen place unsatisfactory and looking around for another. Money has little meaning to the ordinary person, with no credit to extend or to freeze, no tendency to flee, from the dollar to the yen or the mark or the pound. Money for most is just a little hoard laboriously accumulated. But for some, and mainly for governments, money is power. They rely on it to sustain their authority, to ensure obedience eventually to comfort.
The monetary system that emerged from the dust of the Gold standard system ensured that money was a commodity. And the Japanese government used it as such. Of course, this is a quick approximation, and I will not here dwell into the prerequisite for such a system to work. Suffice to say that you need to control tightly your out-flow - an easy task for Japan, with an obedient and disciplined society with little taste for the ostentatious. What Japan did not spend, it used it as a weapon in its export panoply. As everyone knows that money beget money, so much so that the country could pump billion of dollars and trillion of yen of loans to enslave the consumers of Europe and America. In the meantime, that is when I was dealing with Japan Inc, the average household in Japan was without a washing machine or a fringe. But you can’t have twenty managers where one was needed and a washing machine per household at the same time. Choices had to be made and were made.
Who made them? The political system of Japan is so much skewed that it looks like politicians are just an irrelevance. Where else can we find politicians who are basically elected time and time again in the family’s constituency, as if it is their due? Where else do you keep having ministers that are sons of ministers who were sons of ministers, without provoking the slightest outcry? There is good reason for the apathy of the electorate. Since World War Two, everything is done so that politicians do not make decision. The truth is that they spend their political life trying not to take a decision. They only, as Prime Minister Obuchi is fond of saying “do their utmost to further this or that”.
That is why the interviews of both Prime Minister Obuchi and Foreign Minister Kono are relegated at the end of the issue. They have little to say and are prepared to say what is fashionable. They have no qualms about it. Don’t count on them to destroy a few myths or to be at the forefront of new initiatives. They are not there to do that.
So, who is doing it? the bureaucrats? the corporate leaders? In short, who is in charge?
That is the question that comes to mind when you deal with twenty people around a meeting table and have one hour to devise a solution to an unexpected problem. The short answer is that no one is in charge. That is the difficulties. It explains why, when Japan’s model became outdated, when peddling money was no longer viable, nobody noticed for a while. And when it became obvious, no one came forward to push for speedy solution. Rather, everyone waited for something to happen. It is typical that the moud changed in the Ministry of Finance only after the collapse of a large financial institution. Although the politicians and the bureaucrats were facing a systemic problem, they did nothing to prevent it happening.
Today, the government is pump-priming the economy. The same people that opposed such a policy two years ago, Ichiro Ozawa for example, are now ardent supporters. There is the obvious risk that the government will continue to do so until too late, for it will turn its attention to the gigantic fiscal deficit only when it has no choice.
So, in a way, Japan is an expert on policies of last resort. It excels at coming-back from the verge of disaster. And I would not discount such capacity. The corporate world has a thick hide and has always been ruthless. It is rather by necessity than altruism that it took over during nearly fifty years the social responsibility that politicians could not morally assumed after their hideous defeat. It is also by necessity as much as tradition that it built up a successful egalitarian society. They were all survivors. But those days are long gone. It is just a matter of time for the corporate world to return to its prime function of generating wealth and only wealth. It will be up to the politicians to decide how to share the wealth in an aging society. But it is doubtful that the existing generation of politicians, very much a leftover of their forefathers is up to such responsibility for it requires dignified courage and straight talks. The current hallmark of the ruling coalition is that those qualities are lacking.
Just a short word about the Indonesian election. Our readers can read an interview of President Wahid on our web site. When I met him, I did not think that he had the vision to make a good President. I hope I am wrong, because as Dewi Fortuna is telling us, the result of the elections, in view of the polarization of the society, was the best outcome. However I still feel that Indonesia is playing with fire. Gusdur reminds me of the pope of Avignon, who was old and sick, and was chosen because he was largely harmless in the mind of the archbishops who could not agree on a strong leader. No need to say that the old and sick pope recovered miraculously once elected. Taking everyone by surprise, he then moved the papacy to Avignon. It was the start of a schism and a war that lasted more than a century. Power is a good medi
cine but Indonesia needs more than that, it needs to be governed, and it is not and in the present political set-up, it cannot. It will lurch from one crisis to the next and will undoubtedly become poorer in the process for while. How it can sustain the process without breaking down remains to be seen.