Japan May Be Just Catching Its BreathRobert Neff
Why Japan Is Still on Track to Overtake the U.S. by the Year 2000
By Eamonn Fingleton
Houghton Mifflin 406pp $27.50
JAPAN: WHO GOVERNS?
The Rise of the Developmental State
By Chalmers Johnson
Norton 384pp $25
Tokyo's stock market has lost 15% of its value in three months, private economists are dismissing the government's modest growth estimates as inflated, and the mighty yen has Japanese exporters writhing in pain. Is Japan on the ropes? Not by a long shot, say these two authors. Instead, each makes a forceful case that Japan has refined an economic system that's markedly different from Western-style capitalism and that will continue to serve the country well while giving competitors fits.
Most striking is Eamonn Fingleton's polemic. Blindside is prodigiously researched and engagingly argued. Noting that the West always seems to underestimate Japan, the Irish financial journalist hammers the notion that a permanent hardening of arteries is underway. This myth, he contends, stems from Western hubris, deliberate efforts by the Japanese to play down their strengths, and widely differing assumptions.
"Japanese leaders do not share the Western view that the economy should be primarily run to provide citizens with a good life," Fingleton writes. "Rather, they see the Japanese economy mainly as an instrument of power. And the mighty yen, which has trebled against the dollar since the early 1970s, is one of the principal levers of that power."
Fingleton goes on to explain how the strong yen benefits Japan, contrary to Western conventional wisdom and despite the howls from Japanese exporters. It allows Japan to hire top Western scientists, inventors, and software writers and to spread foreign aid--and new export markets--around the globe. But this is only a warm-up for the book's sweeping analysis of Japan's competitive strengths.
Although some of the ingredients--research and development collectives, targeted industries, industrial cartels-- will sound familiar to those who have followed Japan, new ideas abound. Fingleton shows, for example, how Japan's high airfares underwrite the country's auto industry through an elaborate system of cross-subsidies in which service industries support manufacturers. He demonstrates how Japan's successful pursuit of worldwide "monopolies" in key industries, such as production of flat-panel computer displays, gives it powerful leverage over U.S. industry. Japan, posits Fingleton, has created a system that "is not capitalism at all but a new formulation that is as sharp and portentous a break from capitalism as capitalism was from feudalism."
Along the way, Fingleton disabuses Western readers of any assumptions that Japan suffers from the costs connected with the inefficiency of cartels, lifetime employment, and low productivity in its distribution, banking, and white-collar sectors. To the contrary, he says, cartels eliminate wasteful duplication of R&D and generate profits that are plowed back into new manufacturing technology, while lifetime employment ensures a loyal workforce that won't oppose automation. Low service-sector productivity, he insists, is a myth.
Occasionally, Fingleton indulges in alarmism, overstatement, and conspiracy theories. "By pumping its huge savings single-mindedly into a narrow range of high-growth, monopolistic industries," he writes, "Japan's economic leaders can realistically aim to control the world's economic future." This is going too far, as are sweeping statements regarding the unique nature of Japanese capitalism. Fingleton fudges on questions of comparative productivity and Japan's high prices, and he doesn't seriously address potential new competitive threats to key Japanese industries, such as from Korea. But overall, this startling, fresh take on the world's second-largest economy is well worth absorbing.
Chalmers Johnson long has been America's most penetrating, provocative analyst of Japan's political economy. For those who have missed out on his previous works, Japan: Who Governs? offers a chance to catch up. That's because this book is a collection of Johnson's essays dating from 1974.
Since the entries span so many years, some passages are noticeably out of date or repetitious. And because the essays jump from one topic to another, the book feels disjointed. But Johnson's writing is usually felicitous, the scholarship superb, and the analysis persuasive and enlightening.
If the book has a central theme, it's an elaboration and vindication of the "revisionist" school of Japan thinking that came to the fore in 1989. Back then, Johnson emerged as the "godfather" of the revisionists, whose basic analysis was that Japan's politico-economic system differs far more from the Western model than most Westerners realized.
This book provides an accessible, handy compilation of insights that undergird revisionism. These include explanations of Japan's creative theory and practice of market economics, industrial policy, managerial autonomy, mercantilism, and politics. Johnson's chapter on amakudari, or the "descent from heaven" by bureaucrats into private industry, is delicious. As usual, he is merciless in his denigration of mainstream, neoclassical economics as a useful tool for understanding the world.
A few essays will seem obscure and irrelevant to nonexperts, such as one on the translation of Japanese words into English. But juicy insights, such as Johnson's explanation of structural corruption as it's revealed by the career of the late Prime Minister Kakuei Tanaka, provide more than enough meat to chew on and relish.