129. "Forget About Copying Japan Inc" The Washington Post (December 7, 1980). Reprinted as "Should Japan Be Our Model?" Boston Globe (December 14, 1980);
as "Forget About Copying Japan" Minneapolis Star and Tribune (December 1980). "What's Good for Japan Isn't Necessarily Good for America" The Houston Chronicle.
Translated into Japanese in Nikkei Business (November 16, 1981), pp. 155-159.
NOBODY HAS YET recommended that Americans wear kimonos to work, spend their evenings with bar girls or eat rice with short sticks. Never mind that most Japanese don't do these things either. In the present mania to do things the way the Japanese do, such subtleties are quickly overlooked. An intellectual fashion is like a disco pants fad: Everybody gets into it, whether it fits or not.
Suddenly the Japanese are depicted as 10-foot-tall economic superstars. Their cars are cheaper, more fuel efficient and meet or exceed U.S. safety and emissions standards. Hisahi Owada of the Japanese Foreign Ministry has offered the following evidence: The average Japanese auto worker turns out 40 to 50 cars a year versus the U.S. worker's 25; a Japanese worker makes steel at the rate of 421 tons a year versus 250 for an American.
The Japanese, in addition, have more capital to work with because they save more (20 percent of disposable income versus less than 6 percent in the United States) and invest more of their savings in plants and equipment (17 percent of gross national product versus 7.5 percent here).
As a result, productivity in major industries increased in Japan by 9 percent, against 3 percent in the United States.
Harvard sociologist Ezra Vogel topped it all when, in his book "Number One," he declared Japan the winner. Vogel finds Japan first not only in economic achievement but also in education (Japan scores high on international math tests); crime control, equality of income distribution, environmental protection and health (its life expectancy is among the longest in the world).
Above all, Japan is said to offer a model for us to emulate in dealing with industrial problems. Vogel would have us learn from Japan by (1) forming a "comprehensive" industrial and trade policy, of the kind Japan's now famous MITI (Ministry of International Trade and Industry) produces; (2) creating a national center of top administrators to implement the said national policies; (3) turning our large corporations and other "large organizations" into "something people enjoy," the way the Japanese loyally adhere to and salute their corporations, and (4) increasing cooperation between government and business. Similar notions are advanced by other Japanophiles as prescriptions for the reindustrialization of America.
When the TV networks embraced the new truth in "specials," we should have known something was amiss. Typically, NBC ran a documentary on American productivity entitled "If Japan Can . . . Why Can't We?" As R. E. Meuller, chairman of Keith-Stevens, Inc. of Minneapolis, remarked, "The documentary . . . fell prey to the common but erroneous belief that Japan has succeeded in unlocking the 'truth' about productivity, a secret that somehow has eluded the best thinking of corporate America."
This newly popular picture of Japan, in short, is somewhat distorted.
Japanese cars, for example, typically don't last as long as American autos (it is harder to protect them from rust). The Highway Loss Data Institute reports that on the average, imported cars need more repairs than U.S. cars. In National Highway Traffic Safety Administration tests, only one minicompact, the Chevrolet Chevette, passed crash tests at 35 miles an hour; none of the Japanese imports did. Moreover, while Japan weathered the first and second shock waves of oil price increases, it is far from self-evident that it will be able to continue to do so by ever exporting more to pay for ever higher oil import prices. Indeed, Japan's recent increase in inflation rates, from 3.7 percent in 1979 to 7.5 percent as of July 1980, though still modest by American standards, may be but the first sign of trouble.
In America's present mood of self-flagellation, not only is Japan's economic miracle celebrated even more than that of West Germany, but American delegations, often speaking no Japanese, rush over and tour for a week or two and, before the jet lag is out of their system, exhort us to do it right -- the Japanese way. Well, they traveled a bit too far. A good part of what we can import from Japan they copied from us.
Take the whole idea of quality control. It was developed and applied by American engineers and manufacturers. It was urged upon the Japanese by Americans. (The Japanese quality control award, given after annual competitions, is named "Deming," after the American statistician W. E. Deming, who preached quality control to the Japanese).
The Japanese studied methods of quality control in the United States and adapted them to their own culture, which allows for greater pressure on the individual than most American workers or managers, who have grown up in a less crowed, less uptight, more open society, will ever tolerate.
Japan also is using a U.S.-developed steel-making process, the continuous-slab casting method, in half of its production (against 16 percent in the United States). If it is essential to learn this mode of production in Osaka, okay, but Pittsburgh is nearer.
Most important, while there are some Japanese techniques, technologies and procedures we can adopt, most we can't and should not. Take for growing tendency of U.S. executives to play it safe, while the Japanese are more prone to take risks and hence come up with more innovations. Our business schools, from Harvard to Stanford, are told to rework their teaching fast and train less risk-averse executives, "as the Japanese do."
Well, first of all, it is not at all established that taking big risks is wise. Indeed, until recently we used to think that fools take risks -- and pay for them -- and savvy businessmen copy proven methods and tested technology, and market them cheaper because they need not recoup often hugh research and development costs. This is precisely what we used to believe the Japanese were particularly good at. Evidence that being there first regularly pays off I have not yet seen.
More to the point, risk-shy and profit-oriented runs deep in our business system. It reflects, in part, our much greater reliance on the stock market to raise capital, while Japan uses more bonds. Stocks are often dumped if the corporation's quarterly earnings drop, while bonds are not. o
Japan's government is knee deep in allocating capital to industry; most Americans consider such government intervention in credit allocation anathema. Japan's government encourages banks to take risks by allowing investment in corporations which have piled up debts 8 or 9 times their equity; U.S. banks are delicately nudged by the Comptroller of the Currency not to exceed significantly a 1-to-1 debt/equity ratio, to protect investors. Before American executives become significantly more venturesome, all these factors would need to be reversed.
Even if this were done, attempts to redo American executives would face a second set of factors, rooted in American mentality, upbringing and organizational culture.
The Japanese pattern is for an executive to stay with one corporation for life; the loyalty expected is high, as is the corporation's commitment. Sure, you can take risks if under most circumstances you'll be treated like a prodigal son, not shown the door or benched. Are American executives ready to submit to a highly paternalistic corporate bondage? Are they willing to forgo their individualistic upbringing and proclivities to submerge themselves in a corporate collectivity? Is greater willingness to take risks worth that much less intercorporate mobility and flexibility?
All this is not to say U.S. executives could not become somewhat more venturesome. But they would have to be encouraged in ways which are compatible with our own culture, mentality and capital structure, not Japan's. Maybe we should issue earnings reports only annually instead of quarterly. And maybe we should give very high bonuses to those who take a risk an succeed.
The same point holds for the bigger picture, for the way Japan's "industrial policy" is fashioned and implemented. Compared with us, the Japanese are a highly cohesive, closed, self-disciplined society. They have a "vulnerability complex" due to their insular position, military weakness, high dependence on exports of products and imports of raw material and energy resources. This helps drive them to work hard and pull together.
Behind any such consensus, however, there is usually one superior partner which keeps the rest in line as a kind of power underpinning of consensus. Smith points to it: "National economic policy was established by a strong, highly respected, centralized government of technocrats, which was overseen by relatively non-interfering politicians." So much for Congress, the bureaucracy, U.S. corporations, etc.
America's highly pluralistic society, its disappointing experiences with two decades of high government intervention in the economy, and the increasingly conservative mood of the voters all suggest that the American way to reindustrialization will not be based on a high degree of central national planning and control, either by a ministry or by tripartite committees.
There might well be some welcome reduction in the adversary relation between government, business and labor. But mainly the character of American society calls for an approach which provides incentives and signals to the market, leaving the market to make most detailed decisions.
True, such across-the-board incentives are wasteful compared to finely targeted decisions which deliver every ounce of capital, every R & D dollar right where it is needed. But even Japan's powerful MITI slips in its central decision making. In 1955, for instance, MITI wanted Japanese auto makers to concentrate on a single car model, the "People's Car," and it took lobbying in the Japanese Parliament to allow the auto makers to keep a more varied line, which has been part of their marketing success. In the 1960s, Honda and Mitsubishi succeeded by staying out of MITI-guided cartels and going it alone.
Moreover, our more powerful business corporations just will not put up with so much government control, and the voters' mood is to back their view of how to make the country's economy work again: by less, not more, government intervention.
Last, but not least, when we politicize detailed decisions they tend either to favor those with the most clout or to embrace all comers -- not the most deserving by any rational or social criteria. Thus, when the "model cities" program was tried in a few cities, to see whether it would work, first 75, then 150 cities quickly got themselves on the receiving list. By now nearly 85 percent of Americans live in counties which qualify for one or another form of help through the Economic Development Administration. Chrysler was bailed out because of the power of the unions and the role of the industrial states in the election, not because the bailout made sense.
One may say, ah, but this is the point, we must change, we must become unified, work like one team led by our national leaders. The dual response is: First, most Americans will not accept such a system, with its high degree of uniformity and relative lack of tolerance for cultural and regional differences; and, second, there is no way to unify the nation on order, just because some writers think it is useful.
America will reindustrialize largely its way -- or not at all -- and frantic attempts to copy others will only delay us in evolving our distinctive way of doing it. Indeed, the way what is chic tends to flip-flop, soon the Japanese may again seek to copy our ways, which of course leads to the same caveat: By and large, each country best develops its ways -- and reforms them -- in line with its own mentality, traditions, and institutions.