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Japanyes; THE SECOND EDITION; (plus US DEBT section)
The following article, JAPANYES, (2nd edition) has gained a lot of interest and
has circulated extensively among some of America's biggest corporations and
universities. When you read it, you'll see why. JAPANYES comes from Internet FTP
site monu6.cc.monash.edu.au. The most recent version is in directory
pub/nihongo. It is also available for free by calling a free public access
computer modem bbs at 516-473-6351.
This paper was written by: Louis Leclerc; lleclerc@nyx.cs.du.edu
His US mail address and information about him are at the end of the article.
Please send him any corrections or additions to this paper.
NOTE: This is a rather long but fascinating paper on how Japan Inc. functions.
For a former free-trader like myself, it has shaken some of my beliefs to the
very core. It will open your eyes a little, it will disturb you, and it will
quite possibly lead you to ask some serious questions about the future of the
United States of America as a world-leader. Reading this, IMHO, is well worth
the effort.
The level of detail and the overall gist is documented in many well-known,
albeit difficult to read, books (see appendix). The author's prime service to us
is the distillation of this information into a (relatively) brief synopsis.
Tom Mathes tom-mathes@email.sps.mot.com
---------------
In the 2nd edition, typographical and content errors/omissions were corrected,
sections re-organized for better flow and less relevant sections were
deleted/condensed to make room for new material. Japanese names were removed to
protect their anonymity.
Sections significantly expanded/added in the 2nd edition:
DISCRIMINATION
TRUE, BUT ONLY ON THE SURFACE
AMERICA IS ALSO TO BLAME
CONCLUSION
COMPANY LISTING (many new names)
Sections deleted/condensed in the 2nd edition:
WHERE IT ALL BEGINS (combined with BUSINESS IS WAR)
-------------------------------------------------------------------------
(ed031993) (orig.ed111292)
Second Edition
D O E S A M E R I C A S A Y Y E S T O J A P A N ?
(A M E R I C A W A N I H O N N I "H A I" T O I U K A)
There are many misconceptions about Japan and its success in the post-war
era. While staying in Japan in mid 1992, I tried to look at Japan's seemingly
miraculous success with the hope to understand it so that maybe we could apply
some of their plan in our own country. "What makes Japan so good?", "How did
they get from a third world country to be the richest in the world so quickly?"
are common questions asked today in America. Today, I will try to answer with
examples, at least partially, these questions.
Going to Japan, I expected to see a very efficient country from which
America could learn in order to regain her former prosperity. During my trip,
the reality began to sink in that what is really happening was quite different
from expectations and in some ways quite disturbing. Today, Japanese companies
are the among the largest in the world and own large US firms like 7/11 stores,
Loews Theaters, Firestone Tires, Spencers mall stores and Columbia Pictures (a
short list among many, see appendix). Ironically, foreigners own very little of
Japanese industry inside and outside of Japan. There are many reasons for this,
some of which one may find surprising and disturbing. The Japanese have a very
different approach to doing business than we do. This paper will elaborate,
justify and try to show what is happening and why it is important that this be
understood here in America.
Don't be afraid to question what you read here as I am confident that if
you research the points yourself (hopefully by going to Japan to see for
yourself or reading materials on the topic), you will find the points made in
this paper to be truthful.
THE "JAPAN PROBLEM":
Some claims echoed in America which are commonly dismissed as "Japan
Bashing" statements, upon investigation are in fact truthful. The following
statements may seem brash right now, but their meanings will become clearer in
the explanations and examples that follow.
Japan is in a kind of economic war against us. Their objective is for them
to win and for us to lose. Through the use of cartels, price fixing,
government-corporate 'anti-foreigner' tactics as well as adversarial trade and
predation strategies, Japan is destroying much of America's strategic
industries, standard of living and military strength. These actions are also
destroying the jobs of ordinary American people. As a result, the greatest
transfer of wealth in the history of the world from one country to another is
happening right now, from the United States, to Japan. Today, Japan (not
Britain) is the largest foreign holder of assets in the US. Japan (a country
half America's population) is also today the largest holder of net foreign
assets in the world.
Those who study these types of topics know that economic wars can be even
more devastating to a country's long term future than conventional wars. Japan
is organized to fight, uses a tactical strategy and has a fundamental plan.
America's economic strategy is in disarray and there is no plan. As a result,
America is losing the economic war by default.
IN THE BEGINNING, THE TV CARTEL:
A very famous example of Japanese national government and corporate
coordination to take over a foreign industry is that of the Japanese TV cartel,
first set up in the 1960's. This is how Japan took the free-world TV industry
away from the United States. PBS Frontline did an excellent documentary on this
called "Coming From Japan", (see Appendix for how to get transcript via
Internet).
In the 1960's, the Matsushita Industrial Electric Company, Sanyo, Toshiba
and others formed a TV cartel in Japan. They got US TV technology from the
giants in the industry (Zenith, RCA, Quasar) in the following way. The Japanese
government prohibited US made TVs from being sold in Japan. Instead, they
insisted that the technology be licensed to Japanese manufacturing companies
rather than importing (still often the case today in Japan). The US companies
thinking they could still make money this way, agreed to these terms which
enabled the Japanese companies to acquire the technology on how to build TVs.
The above Japanese companies, with tacit approval from the Japanese
government, set up a cartel to inflate TV prices in Japan in order to turn
around and use the money to sell below cost TVs in America. This was to drive US
makers out of the American and world markets. US TV makers went bankrupt or left
the industry as they could no longer fund research to continue making improved
and high quality TVs. They could not compete with the artificially low Japanese
TV prices in America and were forbidden to enter the Japanese market to take
advantage of the high prices there. Hence, the US makers could not make money.
Furthermore, secret deals, illegal under US trade law, were set up by Japanese
TV makers and US retailers such as Sears and Woolworths to sell Japanese TVs
under store brand names. As a result, once famous brands such as Sylvania,
Quasar, Admiral, Philco and RCA have vanished or are foreign/Japanese owned.
Zenith is the only remaining US TV maker today. No US companies make VCRs
although they were an American invention.
In the 1980's the Japanese applied this same strategy to the machine tool
industry and now completely dominate that industry as well (a point well made at
a machine tool exhibition I visited in Tokyo). Before that was motorcycles and
computer memory chips (the US tried to retaliate but failed as our companies
couldn't organize with each other during the now famous 'dram shortages' a few
years ago). It will be happening again with major and smaller kitchen/washing
appliances, aircraft and telecommunications equipment during the 1990s. It has
already happened with liquid crystal portable computer displays where the
Japanese today have 100% market share (these were also invented in the USA).
DISPELLING SOME STATISTICS:
Several misleading claims are made in the media about how the trade
situation today with Japan is fine. These will now be dispelled. One claim
states that Japan is opening its market because it has increased imports by 9%
in 1986-87 and 18% in 1988. This is a half truth because Japanese exports during
the same period increased by much more than that. In other words, the trade gap
got bigger, not smaller between Japan and its trading partners.
Another false claim, most often made by Japanese trade representatives,
states that it is naturally expected and ok that Japan has a trade surplus with
America. This is because if every Japanese bought $100 of goods from America,
and every American bought $100 worth of goods from Japan, an imbalance would
occur in Japan's favor as there are twice as many Americans as Japanese in the
world.
In the real world though, this is not ok, and cannot happen for very long
without serious consequences. To see more clearly this picture, imagine a world
with 2 countries, one with 100 citizens, and another with 1 citizen, you. Each
person has $200 to their name. Every year you buy $100 of goods from the other
country, and each of their citizens buys $100 of goods from your country. If you
work out this example, you will see that in a little over 2 years, you will have
accumulated all of the money in the world and the other country will be
penniless. This is the current state of affairs between Japan and its trading
partners. Although things are actually occurring more slowly, this is the trend.
The fallacy in the Japanese argument above lies in the fact that they state
'people buy from countries'. This is comparing apples and oranges. For the
Japanese claim to be accurate, they must compare either countries buying from
countries, or people buying from people. Done this way, the problem with the
Japanese argument surfaces as the numbers will no longer balance to a 'natural'
trade gap between the US and Japan. (for background on this fallacy, and others,
see the book "How to Lie with Statistics" by Huff, Darrell, 1954).
POLITENESS AND CODED LANGUAGES, A BACKGROUND:
Japanese communicate with each other and the outside world a bit
differently than we do. This is often a cause for misunderstanding between our
two peoples, so it will be clarified below.
Because Japan was a communal society, a way of speaking in a way not to
directly offend the other person (who they still had to live close to after a
discussion had finished) has developed over time. There is even a Japanese word,
called 'Tatemae', which refers to this kind of phrase. These kinds of phrases
are a type of 'lie' in order to be polite. Often, when Japanese use words like
'goal' or 'difficult' in reference to a request you make, this is tatemae.
Some recent examples from the evening news will make this point clear.
Recently, George Bush went to Japan to open the Japanese market to US goods and
to get the Japanese to use more US made car parts in the cars they sell to
America. After he left, the Japanese Prime Minister said the agreement they
reached was 'a difficult goal'. This is Tatemae code for 'we have no intention
of meeting your demand'. But of course, the Japanese PM would not say this
directly to George Bush, the president of America. This would be extremely
impolite and Mr. Miyazawa could never say such a thing directly to an individual
of such prestige. The Japanese PM is thus in a difficult position. This is an
occasion for tatemae. Foreigners (especially Americans) who aren't used to
Tatemae have extreme difficulty to understand its usage. Later, when the
'promise' is broken, Americans often end up thinking they were lied to by the
Japanese when this was never the case. Really, the Americans were supposed to
pick up on the Japanese polite refusal, but failed to because they took what the
Japanese said literally.
As another example, an agreement was reached where Japan would allow more
US made computer chips to be sold in Japanese products. Recently, the Japanese
have said this goal would be 'difficult' to reach. This is code for 'we will
renege on the agreement'. If you know about Tatemae, it is much easier to know
what the Japanese really plan on doing when faced with a politically difficult
position as well as what they might be trying to say when they talk on
television.
Finally, a claim is often made by cornered Japanese officials that "Japan
is at a crossroads" and the problems described in this article are being
resolved today. "The Japanese market is opening, but it takes time and Americans
must be patient for Japan to succeed at this difficult task." Japan has been
saying this for the last 20 years.
DISCRIMINATION:
Although the Japanese are individually are very polite people, Japan is a
very racist country, maybe even more so than we are. The common name Japanese
use for foreigners (people not of the Japanese race) is 'gaijin'. Although its
literal translation is innocuous, it is a loaded word. 'Gaijin' is a racial slur
somewhat in the way 'colored' or 'nigger' used to refer to a black person in
America. There is however a polite form of this word, 'gaikokujin', which means
literally 'outsider country person'.
When you enter a rental agency to rent an apartment (the only way to get an
apartment in Tokyo), some of the rental books say on the cover 'no gaijin'. If
you are a gaijin, you cannot rent anything in these books. There are also a fair
number of restaurants and bars in Japan that do not welcome/serve 'gaijins' (a
point made once you enter or try to get service at the establishment).
As an example of how deeply all this goes, one may look at the now famous
Konishiki affair in 1992. Konishiki was the best sumo wrestler in all of Japan.
However, he was an American (Hawaiian). The overseers of Japanese sumo
continuously denied him the title of 'Yokozuna' (sort of an entry into the
Japanese sumo Hall of Fame for grand champions like Konishiki). Konishiki won
title after title, but was still refused. When pressed, the overseers claimed
that the holder of the Yokozuna title must possess 'hinkaku', a special kind of
'Japanese grace'. They also claimed that it was impossible for a non Japanese to
be capable of possessing hinkaku. As a result, Konishiki was refused the honor
of the Yokozuna title. In the end, he never became Yokozuna.
Ironically, the subsequent public outcry over this incident may have had an
impact on the way decisions are made regarding who can hold the Yokozuna title.
In 1993, for the first time, a non-Japanese was granted the title of Yokozuna.
Discrimination does not extend only to foreigners. Looking through any
major newspaper, you will see ads which ask for Japanese only (no foreigners),
men only, young women only, or people of a certain age. Discrimination doesn't
seem to be illegal in Japan. A law does exist however stating that it is a
Japanese 'goal' not to have discrimination (hint:this is Tatemae). This 'anti-
discrimination' goal/law does not seem to be enforced in any way. Races are
ranked in a kind of social order in Japan, first are Japanese, then white
people, other asians, then all other races besides black people, who are last.
The government is sometimes a partner in racism and discrimination. There
exists an 'unclean' sect of Japanese society who are referred to as 'Burakumin'.
They are a particular sect whose ancestors had an 'unclean' religious history. A
small square on the top corner of the Japanese birth certificate is filled in if
a person is a Burakumin, or is blank if they are not. This is used by the
government and the companies to deny Burakumin people good jobs and advancement
during their careers.
There exists another dark side to government sponsored racism, dating from
World War II, which exists even to this day. During the war, many Koreans were
forcibly taken to Japan, made 'Japanese citizens' and enslaved, or forced to
serve in the Japanese Imperial Army. Upon the end of the war, Japan revoked
Japanese citizenship from these people and their children. Unlike other
Japanese, they lost all rights to military pensions and healthcare (even for
injuries suffered while fighting for Japan in the war). As a result, today these
people live in Japan, but are stateless, have no passport and cannot travel
outside of Japan. The Japanese government considers these people (and even their
descendants who were in fact born in Japan) to be foreigners. It is 'difficult'
for many of these people to get Japanese citizenship as Japan has no diplomatic
ties with North Korea. One requirement is that they must abandon their real
names and choose Japanese sounding ones (a requirement made on most foreigners
seeking Japanese citizenship). Needless to say, the number of people accepted as
Japanese citizens or as immigrants to Japan is very very small in number each
year. It is claimed that Japan sees it as an advantage to maintain a racially
pure society as it is less 'disruptive' to social order.
SHAME AND HONOR IN BUSINESS:
Japanese people operate on a system of shame and honor (or the appearance
of it anyways). This developed due to the fact that so many people must live
peacefully in crowded conditions. When something does go wrong, there is a lot
of shame on the individual responsible. If the failure was bad enough, he may
commit suicide (a practice dating back to when Samurai committed suicide in
front of their superiors when they were responsible for a major failure). Some
major public figure commits suicide out of shame at least once a year in Tokyo.
For example, while I was there, the CEO of Toyo Rubber committed suicide by
jumping in front of the train because company profits were poor this year. A
couple years back, after a train wreck in which some people died, the manager
responsible for the whole affair also committed suicide.
An interesting side note to this case is the existence of laws discouraging
suicide by jumping in front of trains in Japan. These demonstrate the 'group'
orientation of this society. The government has laws to fine the jumper's
surviving family members based on how much disruption to service was caused by
the suicide of the now dead family member. Apparently, the intent of the laws is
to force the jumper to think about the harm they will do to their family by
choosing the train as a means of suicide, hoping they will instead choose other
means to end their life and minimize service disruptions. In practice though,
these fines are hardly ever enforced.
THE DISTRIBUTION SYSTEM, WHY FOREIGNERS ARE SET UP TO FAIL IN JAPAN:
An extensive hierarchy of small distributers and shops exists in Japan
which hinders the distribution of foreign goods. When Americans say the Japanese
distribution system is 'difficult', 'byzantine' or 'complex', this is what they
are referring to. In reality, the Japanese distribution system is fixed. This is
why it is so difficult and complicated for the foreigner to succeed in the
Japanese market.
Japan, being a communal society, follows a strict code of loyalty.
Shopkeepers have loyalty to their suppliers and customers. They all have loyalty
to the nation, Japan. Undoing this arrangement that brought the country and its
companies so much wealth and power via the entry of foreign goods would be
disruptive to this system of loyalty. This is one reason it is so difficult for
a foreigner to enter the Japanese market. There are higher forces at work too
though:
How important this was became very clear when I befriended a Japanese
government worker I'll call Hiroshi. He explained to me how the system worked
and why a foreigner cannot usually circumvent it. I suggested the following
proposal as an example. The discussion went something like this:
I can sell high quality made in USA GE refrigerators and Hoover vacuums at
a much cheaper price in Japan that Toshiba and Sanyo can (this is in fact true).
I want to start a business. I go to Japan, but no store will carry my products
because I am a 'gaijin' (foreigner), and my products are foreign. Doing so would
anger the domestic suppliers of these distributers who may hold some of the
shop's loans or offer them favorable payment plans.
I decide then, I will set up my own company in Japan, open a shop and sell
the appliances myself since no Japanese store will do so for me. Hiroshi said
"You can't because you are a foreigner. Foreigners typically cannot own
companies in Japan". This is in fact true. It is this government practice which
keeps foreign business ventures in the control of the Japanese (and hence why
they tend not to succeed). It is also the reason there are so many 'joint
ventures' between a Japanese company and a foreign one to enter the Japanese
market. Otherwise, the foreigner is prevented from entering, or is later set up
to fail.
So, anyway to get around this law, I told Hiroshi that I will open the
business in my Japanese wife's name (I told Hiroshi to imagine I was married for
purposes of this discussion), so now a Japanese owns the company. Hiroshi said
"you will still fail because as you find success in the market with your
inexpensive American goods, the other vendors will get angry at you. They will
politely ask you to raise your prices to that of the Japanese made goods so the
system doesn't get disrupted". I, of course, replied that I would refuse to do
this as its not in the interest of my customers. Hiroshi replied "then the
vendors and the Japanese companies (such as Toshiba, Mitsubishi and other
appliance makers) will complain to the government. The government will then
prevent you (subtly though as free competition is 'the law' in Japan) from
operating your business successfully or profitably. New building permits for
your stores will be delayed for months for no reason. Business license paperwork
will get misfiled or lost without explanation causing you legal hardship. Goods
will be delayed unloading off your ships for 'too busy customs officials' or
'lost somewhere on the pier for 6 weeks' making you miss delivery deadlines and
angering your customers..." Such 'subtle' persuasion is how you are brought into
line in Japan.
True-life examples of this abound. Here are a few:
This is exactly what was done when a foreign garment manufacturer tried to
sell their clothing in that country (threatening the domestic garment industry).
Customs delayed unloading of the goods until enough of the summer season had
passed making the summer fashion clothing unsaleable. Making foreign farm
produce which competes against domestic Japanese produce wait on ships long
enough to rot or not be appetizing to the consumer is another practice.
The Feb 10, 1992 of Time Magazine describes how a US lamp manufacturing
company encountered also exactly this problem. It took them 9 months to get
lamps off the ship sitting in the harbor and into retail stores in Japan after
customs, and other government agencies stalled and stalled (which cost this
particular company lots of money).
Many anti-foreign goods laws are often written in the form of 'protection'
to the consumer. These are applied discretionarily and are really written to
prevent or make it expensive/slow/impossible for foreign goods to enter the
Japanese market. For example, one well known Japanese tactic is the intentional
use of too few 'inspectors' who are responsible for 'inspecting' every single
one of an importer's products entering Japan (ie. bicycles or cars). As every
item must be individually 'inspected' (ie. ridden or driven) very carefully and
one at a time, this takes very very long to do (how long is usually unknown).
This intentional bottleneck causes enormous delays and costs the importer lots
of money as well as preventing timely delivery to the customer. Competing
Japanese domestic goods are often exempted from these 'consumer protection' laws
as inspection is 'done at the factory by the Japanese manufacturer'.
As an example of a consumer 'protection' law really created to prevent
foreign competition in Japan, one may look at the auto industry. All non
Japanese cars which enter Japan today must be individually 'inspected' by Japan
for 'safety to the consumer'. The cost of this 'inspection' is several thousands
of dollars PER CAR imported and must be borne by the importer (and consequently
the buyer) of the car. Cars made by Japanese companies (even if they originate
from foreign Japanese plants such as the US Honda Accord plant) are exempted
from the inspection (and the multi-thousand dollar fee per car) as Japanese car
companies are permitted to 'do the inspection themselves' at their factories.
The result of this practice is to make the prices of non-Japanese brand cars
uncompetitive against Japanese brands sold within Japan. This law adds upwards
of $5000 to the price of a US car in Japan. (New York Times, 12/25/92). It is
this law (and not that the steering wheel is on the wrong side) that prevents US
car companies from making headway in the Japanese market. Both GM and Ford ship
cars to Japan with the steering wheel on the correct side for Japanese roads.
On a ironic side note, the 'Ohio made' Honda Accords which Honda ships back
to Japan (claimed by Honda to be the most popular 'US made' car sold in Japan)
are built with the steering wheel on the wrong side for Japanese roads as the
large Japanese company didn't feel it worthwhile to retool their Ohio plant to
build the steering wheel on the correct side.
Of some other more famous 'consumer protection 'laws, one for many years
banned US beef from Japan because 'Japanese intestines were the wrong length and
couldn't digest US beef which is too hard'. Another banned european skiis
because the snow in Japan was 'different'. US made towels were banned because
the fibers were 'too rough' for Japanese ears, which are 'softer' than ours. All
foreign rice is banned for 'national security'. Rice in Japan as a consequence,
is the most expensive in the world.
Finally, as an example of the no-foreign ownership rule, the recent
baseball team fiasco comes to mind: Nintendo recently bought the Seattle
Mariners Pro Baseball team. It is in great irony that it is illegal under
Japanese law for an American to buy (very lucrative) Japanese Pro baseball teams
(from ABC News Nightline).
THE BUSINESS CARTEL, KEIRETSU:
Let us go now to a primer on Japanese business organization. Almost all the
significant companies in Japan are aligned into one of about 6 keiretsu or
business 'groupings'. These are loosely linked 'super-corporations' for lack of
a better term. Most of the Japanese companies whose brands we know and love here
in North America are in these keiretsus. These keiretsus have been around a very
long time (before WWII) dating back to feudal-like family run trading houses.
Mitsubishi and Mitsui are two of the more famous ones. Famous companies like
Nissan, Toshiba, Sumitomo Bank are all in keiretsus. The keiretsus were
disbanded by U.S. forces during the occupation because it was feared they could
one day be dangerous to America. However, upon departure of U.S. occupying
troops from Japan, the ex-member companies rejoined each other to reconstitute
the keiretsus which had previously been disbanded.
Here is why this is so important. Each of these keiretsus have under them,
member companies who operate in each of the major critical business areas. These
are: banking, distribution, steel making, heavy manufacturing and
electronics/high technology. Mitsubishi Bank, Mitsubishi Electric Corp,
Mitsubishi Heavy Industries and a wide array of other Mitsubishi companies
(several hundred) making all kinds of other things are in a keiretsu.
(Mitsubishi is unusual as most of their operations have the same name). Each of
the companies in the keiretsu are independent and very specialized in what they
do in all senses of the word except for loyalty. Imagine a keiretsu is something
like a college fraternity, but for companies. Their individual independence is
what keeps things from getting too big and out of control, yet they can make a
united front for issues important to the national or keiretsu effort.
To make the point, a car company and electronics company in the same
keiretsu have a long term relationship to help each other, for example to make a
really fancy computer control system for cars, or to make special lift-loaders
for the computer company's factory. If you walk into a Japanese transplant auto
assembly plant in the United States, you will find that the equipment from the
stamping presses to the forklifts are Japanese brands, even if it is more
expensive (in the short run) to do this. This is national and keiretsu loyalty
at work.
Every Keiretsu has a bank. This is the heart of the keiretsu. The bank is
like a national central bank, but for the keiretsu. The bank takes money and
foreign cash from winning operations and gives it to new ventures in the
keiretsu for investment in foreign countries without the red tape that a bank
would usually give before lending to a new start up venture. Having a bank who
is in fact a part of your company means they will be fiercely loyal, understand
your business and not call your loans for silly reasons like US banks do. This
is much more efficient than the way America does banking and lets companies join
forces to use their capital much more effectively than the US can.
This is also why buying a Japanese product may put buyers of that product
out of a job, even if they work in a different industry. They take the profits
from the product that person bought, shift it through the keiretsu bank to
develop, invest in and dump products into the industry or market that person now
works in, and put them out of a job. See the telecommunications example at the
end of this paper for how this works in practice.
COMMAND AND CONTROL:
Japan's business effort is directed by the Ministry of International
Technology and Industry (MITI). It decides national strategic industrial policy
and determines with the corporations, which industries to target, enter, exit,
take over...etc. This is where Japan's 'united front' when entering a market is
co-ordinated from. This is also why you often see several Japanese companies
entering a particular market at the same time (ie. TVs, and more recently,
luxury cars). By acting in unison, the companies, banks and government can
attack and overrun a foreign industry with a much bigger 'punch' than had they
done so separately. It also enables strategic moves which countries like America
cannot do as American business efforts are not co-ordinated in any kind of way.
In fact, such moves are illegal for US companies under antitrust laws from
the 1930s. This puts us at an enormous disadvantage against US Japanese rivals
as it is legal for example for Ford and Mazda to join forces, but not for Ford
and GM to do so. The US antitrust laws were written at a time when US companies
were the most powerful in the world. This is not true anymore and hurts America
greatly as US firms struggle in the world marketplace against large foreign
firms who are able to join their forces to defeat America's companies.
THE PROTECTED HOME MARKET...JAPAN'S LAUNCH PAD TO THE WORLD:
Japan has a protected home market which serves a very important purpose to
the country and the national business effort. The home market is for trying out
new products, copying and improving foreign designs, getting capital (through
price gouging) without fear of foreign companies entering and ruining the game.
An unwritten rule is that there is no real price competition in the
Japanese home market between Japanese companies which are also strategic
exporters. Real competition occurs in foreign markets outside Japan. The home
market is a 'safe' market where these companies can experiment with their
products, improve upon them, and fix problems with out fear of any real foreign
competition capitalizing on their blunders (a luxury our own companies do not
have in America). For example, SONY and Mazda did or had done this frequently
within Japan. The scheme works as follows and is the critical reason why a
Japanese company can enter almost any world market or industry from scratch and
overrun it so quickly:
Imagine Sony comes out with a new type cassette player which is very small.
It breaks often because the small plastic gears inside are of low quality and
wear out (this was true, actually). This machine though, is only sold within
Japan. Only in the future when it is perfected will it be sold to the outside
world. Now lets imagine GE is the dominant manufacturer in this market
worldwide. They want to sell their player in Japan (which is better than SONY's)
but can't because they are forbidden for all the reasons mentioned in this
article. Sony fixes their gear problems, tests it in the home market (this is
one reason why the latest Japanese products hit the Japanese market at least 6
months before anywhere else) and later exports it abroad. Sony maintains its
good reputation in America as their player works well (the US customer never
receives a machine with the defective gears). Sony sells this player at 3/4's
the cost to make it in order to increase their market share and drive GE out of
the cassette player business. Sony doesn't go bankrupt doing this because they
can sell players in Japan at twice the cost to make them and hence cover their
losses in America. Because GE is forbidden to sell in Japan, and can't make
money at home in America because Japanese players sold there are too cheap, they
surrender and lose market share. GE asks the US government for help but is
refused. Later when this is exposed, GE is accused of 'whining' and 'not trying
hard enough to enter the Japanese market' by the Japanese Prime Minister.
Now, imagine the reverse situation. GE also makes a machine that is poor
quality in its home market of America (this was also true). The Japanese then
enter unimpeded, dump their perfected goods here and drive GE out of the market.
As you can see, whenever a US company makes a mistake in the home market, it
suffers greatly, but when a Japanese company does in their home market, they
don't suffer so much. Hence, even if the American company is more efficient and
generally of higher quality, the Japanese companies will ultimately defeat the
US competition. This is true even if the US companies make fewer and smaller
mistakes over the same period of time because the US company gets hurt for a
mistake in the home market, but the Japanese one does not. For example, Japanese
car companies have also come out with disasters comparable to the 'exploding
Ford Pinto'. But by using their protected market for experimentation and
improvement, they are able to resolve problems like this before they arrive on
our shores. Our car companies have no such luxury and hence suffer the
consequences each time they make a mistake. This is another reason why the
Japanese protected/non competitive home market is so important to their success.
The non-competitive home market serves another important function to
Japanese industry. Smaller/weaker Japanese companies (ie. Mazda) are allowed to
survive because it is possible they may some day have a 'winner' which would be
good for Japan (this actually happened to Mazda with the Miata and other recent
offerings in their foreign markets). If the company were bankrupt though, they
could not come up with 'winners' sometime in the future. It's better to let the
weak competitors survive in Japanese market in the hopes they become strong
someday. Because of laws restricting foreign ownership as well as
'cross-holding' agreements between the Japanese companies, there is very little
risk a non-Japanese company could take over these weaker players and enter the
Japanese market. Unfortunately, the same protection is not bestowed among
America's promising small companies who are easily taken over by major Japanese
players who want their technology.
The no-home-competition point is ironic, because some newspaper reporters
who don't understand the Japanese economy write quotes like "there are 7 car
companies in Japan (a country with 1/2 the population of America) therefore the
car industry must be extremely competitive in Japan". The truth is that there
are 7 car companies in Japan because there is almost *NO* competition in the
home market. This is why their market shares in Japan are stable. They are
basically fixed. If there were competition, the strong players like Toyota and
Nissan would have absorbed or bankrupted their less powerful rivals like Mazda
and Daihatsu long ago.
WHAT IS DUMPING AND WHY IS IT BAD:
A writer for a famous newspaper last year wrote in his commentary that
Japanese companies are foolish because they practice 'dumping' (selling their
products here for a price lower than it costs to make them), and that he hopes
they continue as it benefits the American consumer. His article is misguided and
shows why it is so difficult to understand why Japanese business practices are
so dangerous to America.
Some Americans think buying dumped products is good. This happens because
they don't see the real costs to themselves which are not on the low sticker
price. These costs turn out to be higher to the buyer than the savings on the
product price (otherwise the Japanese would not be dumping... ...there's no such
thing as the deal that's too good to be true). The key is that this cost is
indirect but very real nevertheless. It turns up somewhere else than at the
checkout counter and is how Japan profits by 'dumping'.
The cost to America (and the benefit to Japan) turns up in the long term.
This is why it is not seen so easily. It turns up in America as unemployment,
closed factories and reduced national strength as US companies cannot compete
against this practice. Japan's factories run, their people get jobs and later on
Japan makes much more profit than it originally cost to do the dumping once the
non Japanese competition has been wiped out by the practice. Japan can do
dumping by raising prices in the home Japanese market to pay for dumping in
America. US companies don't have this luxury as the US market is open to the
outside world and prices cannot be artificially raised to pay for dumping
elsewhere.
ECONOMIC STRATEGY, WHAT IT ALL MEANS:
Many people ask, what is a national industrial strategy. Some people claim
it is a form of socialism or communism. Nothing could be further from the truth.
Again, the best explanation is by example, in this case, the successful Japanese
takeover of the very strategic world LCD screen industry.
LCD screens are the special 'flat' viewscreens which are found in almost
every laptop and portable computer on the market today. For a portable computer
to be light in weight, they must have this type of screen (opposed to a
conventional TV screen which is quite heavy and uses too much electricity).
A few years ago Japanese industry co-ordinated a successful attack to take
over the entire world commercial supply of LCD computer screens by selling them
at 1/3 the price to make them, (PBS Frontline, "Losing the war with Japan") and
waiting for the small US upstarts who invented them to go bankrupt. As a result,
today all LCD screens in any non military computer in the world are made in
Japan. This is a very strategic component because it will be used in portable
computers, medical imaging equipment, videophones, HDTV, touch sensitive visual
programmable refrigerators and stereos..etc.
If you are a non Japanese maker of any of the above items, this is very bad
for you, because you will have to go to the Japanese to buy these screens to put
into your product (say a portable PC computer). However, the Japanese companies
also want to make these products too (entering your industry is part of their
long term strategic plan (which is 200 years long)). As a result, they want to
make you uncompetitive. They do this by selling these screens to you at a price
higher than they sell the same screens to Japanese PC makers (which might even
be the same company as the screen maker). They can do this because they have
destroyed the US competition. You are forced to go to them if you want these
screens.
You need these screens though so your PCs can compete with the Japanese PCs
which will be on the market soon, so you must buy them as there is no other
supply. This means though, that your PCs are more expensive then the Japanese
ones because you are paying more for your critical components than the Japanese
companies are paying. ...You lose...
Besides offering to sell you the screen at some ridiculously high price,
the Japanese will often offer to manufacture your entire product at a reasonable
price and put your name on it. For example, some of the Apple Mac Powerbook
portable computers are not Macs at all, but really SONYs. Most portable PC
computers today are made in Japan for the above reasons (even if they have
American brand names on them).
This type of deal is really nice for Japan because it gives the Japanese
companies the rest of the technology to make your product (besides the strategic
component). This also makes you dependant on them for all your manufacturing
(because your factory is now closed, your workers unemployed and new ones too
hard to train quickly). Finally, your Japanese supplier can bypass you entirely
at a future date and sell the computers they make for you, but with their own
name on them. They do this in the factory your sales helped them to build in the
first place. Mitsubishi did this to Chrysler with cars, first it was the Eagle
Talon, then later the Mitsubishi Eclipse....both cars are identical, but really
Mitsubishi's.
The LCD screen monopoly is what enables Japanese companies to have such a
large market share in portable PCs which use these screens yet almost no market
share in desktop PC computers (which don't need these screens). Japan hasn't
been able to take over the desktop PC market because its still advancing too
quickly and they have no monopoly on any critical components in these machines.
As a result, this industry can still belong to America. America is able to hold
on rapidly advancing industries through innovation, but Japan cannot. This is
because by the time Japan copies a foreign design, it is already obsolete. Japan
has poor luck trying to hit a moving industrial target and will usually miss. So
long as an industry moves fast enough, and the Japanese don't succeed in taking
hold of some critical component of that industry, the US will be able to hang on
to it until it slows down or matures, then the Japanese can successfully take it
over.
By focusing on taking over markets like LCD screens, critical computer
chips, high precision machining, and auto manufacturing, Japan has significantly
reduced America's ability to make these things in time of national need. Japan
lost World War II because they had a poor manufacturing base (they had to
stockpile for 4 years before starting World War II). They have learned very well
from that mistake, which now America is making.
This example shows why something like LCD screens are a strategic component
and why Japan needs to dominate this industry. If one pauses to look, one will
notice that Japan is the dominant or a very major player in practically every
strategic world industry today. This is what is meant by a famous Japanese
phrase: 'Business is War'. Key markets overlooking industries are like peaks
overlooking cities. The national strategy in a business war and economic war is
the same, and the outcome is the same. Domestic factories are gone because the
industry has been killed economically (rather than being bombed), workers are
out of a job, and the target country has much less power and safety in the
world. It is like a real war, but less bloody.
THE ECONOMIC WAR, A SUMMARY OF THE GLOBAL PLAN:
It is said that because of the stock market crash in Tokyo, Japan is now
weak and America need not be so concerned. This is false. Manufacturing,
marketshare and technological knowledge are what make a country strong. Wealth
and power in the world comes from making and selling things, not exotic 'junk
bond' financing scams and stock mergers, which make companies so debt ridden,
they can no longer be competitive in world markets. If manufacturing and
marketshare in key industries is robust, the stock market will recover to become
stronger than before as this real manufacturing power becomes reflected in the
stock and financial markets of the country. Today, this is the case for Japan
industries and stock market, but not for America's.
Free world trade is a good thing for all countries. Generally, countries
raising protectionist barriers against each other is very bad. This in fact,
helped cause the 1929 depression. What is happening now though is worse.
Although some will tell you that the US and Japan are practicing free bilateral
trade, this is not true. Today, Japan and America have basically a one-way trade
relationship. Japan closes their market towards us, but we don't towards them.
Some may think that only America is having trade problems with Japan right
now. This is not true. Most other industrial countries in the world are in the
same predicament. Today, Japan has a huge trade surplus not only with America,
but with almost every other country in the world it trades with. This happens
when Japan buys less in products from other countries than the other countries
buy from Japan. This is bad because it means Japan takes money out of America's
economy and uses it for their own purposes (such as buying our real estate, or
companies).
It is said that Japan has a national strategy to control economically, what
it could not get militarily 50 years ago. An impulsive claim perhaps. But,
today, I am not so sure.
Japan's trade surplus is no accident. It is not the result of Japanese
efficiency, American laziness or anything else the Japanese government officials
may tell you on TV. The real cause is this: Japan trade patterns are not
bi-directional in the common sense where two countries buy each others exports
and a happy state of affairs results. Japanese policy is to intentionally use
foreign cash profits not to buy a foreign country's exportable products, but
rather its capital assets like companies, real-estate and art, while preventing
the other countries from doing the same thing in Japan. This enables Japan to
get wealthy and powerful extremely quickly while still being more inefficient
and averse to business risk than its trading partners. When 'whiners and Japan
bashers' claim Japan is 'cheating', the following is what they are trying to
say. Here is an explanation of how it works.
-->Defense:
There is a three tier economic defense which the Japanese use. First is a
set of laws which severely restrict/prevent foreign ownership and control of
Japanese companies and assets in Japan. As a consequence, GM must sell their
cars through Isuzu and Ford through Mazda (Autorama). Chrysler doesn't sell many
cars in Japan. Long ago, Ford used to have a large market share (around 70%) in
Japan but the Japanese government closed their operations and forced them out of
the country.
Today, foreigners typically cannot own Japanese companies, especially those
in strategic industries such as manufacturing and technology. This is because of
many 'structural' laws and regulations which are really designed to
prevent/restrict foreign ownership. As an example, one such regulation states
that foreign businesses must have a Japanese guarantor 'to insure that their
debts will be paid'. For various reasons, it is very 'difficult' for a foreign
company (particularly a small or medium sized growing one) trying to enter Japan
to get such a guarantor. Conversely, Japanese companies entering America face
very few such restrictions and are allowed to enter the US market quite easily.
These types of laws are also the reason why you hear about so many 'joint'
ventures between US and Japanese companies, where the venture is intended to
help the US company penetrate the 'difficult' Japanese market. These joint
ventures really enable the Japanese companies to get foreign technology without
having to invent it themselves. The foreign company receives only a token market
share in the Japanese market in return.
It was in this way Japan learned from the US companies how to make TV's in
the 1960's. More recently, the Japanese government recently forced Texas
Instruments to join a venture with SONY, where SONY got technology in exchange
for TI being able to sell some of their products in Japan.
The second defense mechanism is the wide 'cross holding' of stock shares
between the companies in Japan. This basically works by having the Japanese
companies print up lots of shares and exchanging equal values of these shares
with other Japanese companies. This is very cheap for the companies there to do.
As these shares are never given up or sold, they are effectively taken out of
circulation. Because companies own such a large percentage of each others
shares, it is impossible for a foreign firm or individual to accumulate enough
shares (51%) to take over a Japanese company. As a result, a foreign takeover of
a major Japanese company has never occured.
A side note of all this is that Japanese companies are able to think long
term because they don't have to answer to stock holders at the annual
shareholders meeting. Because so many shares are cross held, private
shareholders tend to be not so significant in number and hence not a threat to
the board. This is why US companies must worry about short term performance so
much, often at the expense of wiser long term decisions. Japanese companies do
not have to worry about this, so they tend to invest much more in the future
than we do and hence are much more successful.
The final defense system is a well set up structure of government laws,
behaviour and corporate co-operation which prevent foreign companies who get
around the first defense system from succeeding to make money by selling
products in Japan. The government delays foreign entry of goods through lots of
intentional customs and other regulatory snafu's as well as red tape designed to
hinder a foreign company to the point it becomes non competitive in the Japanese
market place.
As an example of all this; today, in industries such as personal computers,
bicycle manufacturing, and home appliance manufacturing (just to name a few),
American companies are able to outcompete Japanese manufacturers in both price
and quality. Unfortunately, they don't get the chance. Lets look at the example
of bicycle manufacturing to make the point:
A one speed bicycle in Japan costs about $300 (in this case it was a
Mitsubishi, but other comparable Japanese brand bicycles are similarly priced).
There was nothing extraordinary about this bicycle to justify its high price.
Fancier ones were even more expensive. Contrast this with US made bicycles,
which are much less expensive, vastly superior (10 speeds, better brakes), and
higher in quality for the same price. I could find no foreign made bicycles
available for sale in Japan at any price. US manufacturers of these goods fail
in Japan as they are either forbidden from entering the Japanese market or are
forced to incur hardship that the Japanese competitors don't have to bear, to
the point that the US makers are not able to compete. Ironically, Japanese
bicycle and accessory makers such as Suntour, Shimano and Miyata are now
beginning to defeat domestic manufacturers.
-->Offense:
The offensive strategy is also a three tiered system. Firstly, government
(through the Ministry of International Technology and Industry) and corporations
co-ordinate and select targeted strategic industries which they want to enter,
or take over.
Secondly, they obtain the basic technology (often from the current foreign
firms in the industry), then copy and improve upon it. They do trials, have
failures and make further improvements in the Japanese home market which is
protected against encroachment by foreign firms which may be already established
in the rest of the world within that particular industry.
The final and most critical stage in the offensive system is the practice
of product dumping in order to gain market share overseas. Japanese companies
will initially export a product overseas at a price usually lower than it costs
to make it. The same product is usually sold in Japan at a higher price so the
Japanese company doesn't go bankrupt. This lets the Japanese companies increase
their marketshare as foreign buyers tend to buy the lowest price quality
product. This places stress on non-Japanese competition. Sometimes the foreign
competition is a well deserved target (ie. poor quality US autos of the 1970s),
but more often they are not. Once the foreign competition has given up, or has
been sufficiently weakened and the Japanese dominate that industry, they bring
the prices to a level reflecting cost of manufacture and development and move on
to the next market they want to take over. Using this technique, the Japanese
can enter and take over in a short while, almost any industry they choose no
matter how unrelated (which they have done).
Because several of their companies participate when Japan attacks an
industry, the industry doesn't become monopolistic on a company level and
monopoly pricing usually doesn't happen. What does happen though is, when the
attack is over, the players are mostly or all Japanese, meaning Japan as a
nation, gets the industry, jobs, technology and US dollar cash profits into
their economy (for use in buying up US real-estate or companies) instead of
America. It should be noted that Japan's goal is not to make excessive profits
by charging monopoly prices once the takeover is complete. The goal is simply to
ensure that the major players in the industry are Japanese so that manufacturing
and technology arising from that industry goes to Japan rather than elsewhere.
Their system is virtually foolproof as long as you have trading partners and
individual consumers who tolerate or don't understand the dynamics of what's
really happening.
It should be noted that raising the price of a good within Japan in order
to pay for dumping in the foreign country is becoming less and less prevalent as
the Japanese companies today have enough cash to finance dumping in the foreign
country strictly from cash reserves. Once they have wiped out the foreign
competition, the profits start to roll in.
In some ways this is America's fault as Japan has taken advantage of the
open US market, as well as America's tolerance to Japan's closed market in order
to help them rebuild their country after WWII. Ironically, America's best
scientists and engineers are working for military projects, whereas Japan's are
working on commercial ventures, where the war is actually being waged.
SUCCESS DOESN'T ALWAYS COME THE FIRST TIME:
Sometimes, the Japanese will fail at first to enter a market. For example,
the Japanese auto companies entered, and retreated from the US auto market
several times before making their successful onslaught. During the intervals
that they were not so active in the US market, they were learning from their
mistakes, improving, refining and testing their products in their protected home
market, preparing to enter the US market again at a later time, which ultimately
they did.
This strategy is still used today. For example, recently the Hitachi
company, a major Japanese telecommunications maker announced it was withdrawing
from the US telephone switching market (large specialized computers used by
telephone companies to make your phones work). It would be foolish on the part
of the US telecommunications makers to believe that they have defeated Hitachi
(some actually believe they have) because telecommunications is a Japanese
government designated target strategic industry and Hitachi will most certainly
be in it in the future (as they have been for the past 40 years). As happened in
the auto industry, Hitachi is at home right now refining and improving their
products based on what they learned from their last campaign in America. They
will be back stronger than before. I know this because I saw some of their new
and upcoming products when I was Japan. Once their improvements are complete and
proven in the home market, they will re-enter the US market, possibly surprising
America's domestic makers.
INNOVATION:
A serious problem, which the Japanese themselves have acknowledged, is the
lack of originality and innovation. This is quite notable when you look at their
companies' histories. The Toshiba company in Tokyo has a big science center with
a time line of its history on a wall. On it were its achievements. It read
something like 'transistor imported into Japan 1950, manufactured here in 1953',
'teletype imported 1931, manufactured here 1935'...etc. There were no
inventions, only refinements. Hitachi, NTT (the telephone company), Nissan and
Matsushita had similar 'timelines' in their centers with quotes like above.
This happens because inventing means failure (for a time at least) and no
guarantee of success. Because the Japanese cannot be seen to fail (this is
shameful and very bad in Japan), they do not invent. As their companies become
more powerful, I wondered who would be around to make the discoveries like
xerography, the transistor and LCD TV (all invented in USA). I found two
Japanese government sponsored organizations in Japan with the task of short
circuiting this problem.
One, the Technology Transfer Institute, specializes in finding small
companies around the world with new technology and helping Japanese firms buy
the technology. If the Japanese firm wants it but can't buy it, they sometimes
steal it by patenting similar items copied from the foreign company's original
and then intimidating/bankrupting the small company through a blizzard of legal
action. If the company is publicly traded, or the owner wants to sell, the
company is bought outright by the Japanese. America, unlike Japan, makes no
effort to protect its strategic companies from foreign takeover. Imagine your
small company and its patents versus the attorney war chest of Mitsubishi
Industrial Company.
This is actually what happened to Fusion Systems, a small American firm
which invented and patented a new way to get spray paint to stick on pop cans
(PBS Frontline, "American Game, Japanese Rules"). Mitsubishi bought one of this
firm's machines and came out a few months later with one of their own. The small
firm sued. Mitsubishi then made many small modifications to the machine (not
improvements, just voluminous iterative changes), patented all of them and sued
the US company many times over (for each patent). Mitsubishi just waited for
Fusion Systems to run out of money defending them all (and offered to drop the
cases if the small company sold them the rights to the machine).
If Japan can't get technology this way, they get it free from public
foreign research. A Japanese institution exists which is called the 'Japan
Research Foundation'. It actually does no research, but translates foreign
research papers into Japanese for the Japanese companies to use.
A major reason for getting foreign research this way is that Japanese
universities themselves don't do much research. Their equipment is extremely
outdated (in contrast to corporate labs). These schools are literally straight
out of the third world (possibly the last physical part of the third world still
in Japan). University is a place for students to drink and party before joining
a company, often for life. At the main campus of University of Tokyo, the most
prestigious university in all of Japan, the buildings are in extreme state of
disrepair. Stench of raw sewage permeates and leaks down the hallways of the
buildings and the (often drunk) students live in extreme squalor. Academics did
not seem to be taken seriously by the students who were too busy drinking or
playing sports. The libraries were almost devoid of students. Some buildings
like the Library for American Studies were very nice, but many others were in
shambles. Half of all the windows in many of the buildings were broken and glass
was strewn about the floors. There were no working safety/fire control systems.
Electricity wires were hanging exposed in hallways and lighting was not
functioning (for many years it seemed) in parts of buildings. Old gas stoves
were running unattended in kitchens with cardboard covering broken windows.
Piles of garbage and wrecked cars were strewn about the campus and behind
buildings. Nothing had been painted or cleaned in about 20 years. The grass
hadn't been cut in a very long time and had reached full height. Cats and other
creatures lived in some of the buildings. The school swimming pool was a filthy
algead mess. If this seems unbelievable, one can get off at Todai-komaba station
in Tokyo and go see for themselves. This is all the more surprising as the rest
of the country is so rich and modern, more so than most parts of America today.
There is an important reason for all of this. In the world, universities
typically do research to advance learning and science for the world. This is
extremely expensive to fund, and is a lousy way for a country to get the most
value for its money, so Japan does not do this. The Japanese government makes no
effort to seriously support its universities. Furthermore, unlike their US
counterparts, Japanese companies give no money to universities. This does not
mean that Japan does not value basic university research. Quite to the contrary.
It is far cheaper to let the other countries' schools and governments do and pay
for basic research (which is published openly to the world) and to simply
translate and read their papers.
Japanese research money and results stays in the corporate and government
labs, where it may be kept secret from the foreign countries, which are the
enemy in the economic war. Japan does do research (lots of it actually), but not
for public dissemination and world advancement. Research is done to gain
advantage over their rivals. In 1991, the Toshiba Company alone spent more on
research than was spent privately and publicly in all the country of Canada (CBC
News;Venture "Racing the Rising Sun"). This is the fundamental reason why Japan
refuses to fund universities and diverts it to corporate research instead. It is
something we must understand.
Ironically, it may not be a weakness of theirs that their universities are
so awful. If they know that they can get research from America for free, they
are smart to put their money in their private and company labs instead; where
they can use it against US companies in order to defeat them.
In spite of all this, Japanese workers still get an excellent education.
This is because education up to (but not including) university is very good and
extremely well funded. In great contrast to the universities, the elementary,
secondary and tertiary schools are very well stocked with the best of equipment,
facilities and teachers. They are as nice as anything in America. Furthermore,
highly specialized training programs are provided to newly hired workers when
they join their companies. This makes up for the weakness of the Japanese
university system. In cases where advanced training unavailable in Japan is
required (ie. in certain types of engineering, or technology), the student will
be sent to America or another foreign country that has good universities to
study.
A further point to this, companies do not to give grants to charities (nor
universities). Corporate citizenry doesn't not exist in Japan in the way we know
it here. This is why it is extremely rare to find Japanese corporate run
foundations in Japan or America. This is also why it is extremely unusual to see
for example, a PBS program sponsored by a Japanese company (though recently,
this is changing for the US branches of Japanese firms as they learn how
important Americans relate charity to a company's image).
JAPANESE PEOPLE AND THE MARKET:
The Japanese people are extremely kind and polite, don't go stealing things
out of each other's houses nor do they go shooting each other as much as
Americans do. They are however naive about the forces in their world around them
(a point which probably can also be made about America's own citizens). There is
little individual thought nor questioning of the government and companies, which
is very dangerous. This is compounded by the fact that 1 political party (the
LDP) has ruled the country ever since it has had a democratic constitution.
Results of this include the fact that many cartels operate in the country yet no
one seems to notice this occurs. Many Japanese aren't even aware that foreign
countries make the same products that Japanese companies make. Formally, Japan
has laws against cartels, but they are not enforced. Only one major cartel group
has been prosecuted in the last 15 years (plastic wrap companies), and this was
only after a lot of pressure from the United States. As America's power in the
world diminishes, so will its ability to exert such pressure.
Ordinary Japanese don't have much idea of why they can't buy foreign goods
at reasonable prices in their stores. When I asked Japanese people why they
don't buy American (or other foreign goods), they often say because they can't
find them, or they are much too expensive. This is true.
Foreign goods are often impossible to buy at any price and are usually very
expensive when found. For example, I looked for, but found no Korean products at
all in Japan even though this country is very close to Japan on the map (1000
miles max distance). Because Korea has little political influence, it cannot
pressure Japan to allow their products in. As a consequence Korea cannot sell
their products in Japan even though they make many of the same types of high
quality electronics and automotive goods the Japanese make, but at a lower
price. US (and other foreign products) which must face a Japanese domestic maker
are also extremely hard to find in Japan. Even the American flags in the
Tokyo-Shinjuku Mitsukoshi department store were made in Japan.
I realized that Japanese people would buy American goods if they could when
I told them the prices of US and Japanese goods in America. I used some of the
examples in this paper to try to explain why there was 'Japan bashing' in
America. I also happened to have a US newspaper, so I showed them product prices
of US and Japanese goods in America. I took them out into their shops and proved
the differences to them. When I finished, they were shocked at what I had just
shown them. Japanese goods are sometimes cheaper in America than in Japan and
non Japanese goods are much more expensive in Japan than they should be,
especially if the goods are in an industry targeted by the Japanese companies
and government.
For example, the major Japanese appliance manufacturers are planning to
enter the US market for appliances (refrigerators, stoves, vacuums) in the
1990's. In a major Hiroshima appliance store (the only store I could find any
foreign appliances), I saw a GE refrigerator selling for $3000 (US). This was a
very low end model you could buy here in America for about $600. The Toshiba
right next to it was a high end model and sold for $2500. It is these Japanese
cartel tactics which lead ordinary Japanese people to believe that US goods are
inferior and overpriced.
In America, Japanese made Sears brand refrigerators similar to the Toshiba
I saw in Japan sold for about $1000. This didn't seem right to me. The
government and more elite business people I spoke with already knew about these
points and acknowledged that they could see it was a 'problem' for America.
ESCALATOR DOLLS AND OFFICE LADIES:
An escalator doll is a young women in her 20's who stands by the escalator
all day and welcomes you to the floor of the store or office building. She says
goodbye and thank you when you leave. You find these at Mitsukoshi (the
classiest department store I've ever walked into), the Toyota main showroom in
Tokyo, the government offices and the corporation offices (Sony, Toshiba,
Nissan..). Other women serve as temporary labor to bear the bumps generated by
the economic cycle. It is these people (and foreigners) who get laid off in
order to permit a system of lifetime employment for the Japanese males.
Escalator dolls (and their counterparts within corporate offices, 'Office
Ladies') must often sign a contract with the employer stating that they will
quit when they reach the age of 25. The true purpose of these girls (besides
serving tea and welcoming guests) is to be marriage material for the men, who
are at work for such long hours that they have difficulty to find women on their
own.
Young women in Japan are typically expected to marry by 25 years old. A
well known quote in Japan makes the point bluntly: "Single women are like
Christmas cake, after the 25th, useless, so they go for 1/2 price." Marrying by
25 is important. If a women is nearing 25 and can't find a mate, chances are she
will have a pre-arranged wedding to an eligible bachelor set up by the parents.
I sometimes wonder how much of a willingness to change the system exists in
Japan, even among the women themselves. While there, I met one Japanese woman
who went to university in America and studied Political Science. I'll call her
Tomoko. I asked Tomoko what she thought of the way Japan treated their women.
She didn't see a problem. In her opinion, women should stay at home as it leads
to family stability and enables the husband to concentrate on his work and not
family affairs. I asked Tomoko where she was working. She works at a Japanese
company as a tea server (office lady). 'What would you like to do at your job in
the future', I asked. Tomoko replied 'they told me that if I did a good job now,
I could be a secretary in a few years and file things'. Tomoko has a university
degree.
In Japan, the percentage of women who are managers of men is much lower
than in America. Furthermore, women typically don't hold any positions of
importance. They are more like office decoration or marriage material for the
men. It may also surprise you, but most women in Japanese companies, regardless
of professional status or level in the organization are required to prepare and
serve tea daily for the men as part of their daily chores.
"BUSINESS IS WAR":
This is a well known quote in Japan. It may be surprising, but this has
more meaning to the Japanese than you may first think. The word 'business man'
in Japanese translates literally into English as 'Company Soldier'. Japanese
businessmen often do not have pictures of their family or loved ones at the
office because as a Japanese expression goes, they 'do not mix family with
battle'. When a Japanese man joins a company, he often does so for life. His
first allegiance and loyalty is to this company and his team. His family, if he
has one, is secondary in importance. It should be noted that this philosophy
does not begin when one joins a Japanese company. It begins much earlier in
life; in elementary school:
While I was in Japan, I went to an elementary school to see Japanese
students participate in their 'Olympic Sports Day'. This event though, was quite
unusual. There were no individual activities, and the theme of the day was
extremely militaristic in nature. There were two main teams, the red and white
teams symbolizing the country's national colors. They had big banners (red or
white) and taiko/battle drums which the team leader beat on while chanting the
team slogan. The contests were team oriented and set up such that if one person
made an error in the competition, the whole team would suffer. Rewards, and
failures were shared among all members of the team. Stress and peer pressure
were very high, as they are for most Japanese throughout their lifetimes. Before
the competition, everyone on the teams sang the school anthem louder and more
clearly than I ever heard any anthem sung here in America. Their diligence and
effort were quite remarkable.
What we call individuality in America is called deviation (be it in school,
or at work) in Japan. It is not tolerated nor tried very much. A well known
Japanese quote which goes "The nail which sticks up gets pounded down" makes the
point clearly. As an example of how far this goes, often, kids whose hair is not
black enough get it dyed so as not to get in trouble at school by the teacher).
An individual with an "outsider's" mind usually rejected by the others, even by
the teacher. A consequence resulting from this fact appears when families who
have lived outside Japan for a few years return to the country. These people
typically have a lot of trouble being accepted and integrating back into
Japanese society.
'Peer stresses' in Japan are very strong. Many kids can't take it and
commit suicide before reaching university age. Many Japanese suffer from a wide
variety of stress related nervous ticks and twitches (if you ride the subway in
Tokyo and look at the other riders, you will notice this readily).
MILITARISM:
In the book 'Japan that can say no! (to America)', by Akio Morita (CEO of
SONY) and Shintaro Ishihara (an influential parliament member), the authors
state that Japan has under development the world's most advanced military jet
because American made planes are not suitable for Japanese terrain, which is
'different' because it has mountains. I also learned about one Japanese who quit
the Fujitsu company partially because they were working on a nuclear weapons
research project and didn't feel a Japanese company should be involved in such
work. In Japan, Fujitsu has built several nuclear breeder reactors (such
reactors are sometimes used to make plutonium for nuclear weapons). The Japanese
claim however, that they are for peaceful purposes. Hopefully this is so.
The military mindset even extends to city planning. Most streets in Tokyo
have no names in order to 'confuse the enemy' in the event Japan was ever to be
invaded again. The US Army did name many of the streets during the occupation,
but these were removed by the Japanese shortly after US occupying forces left
the country.
There also exists a well funded extremist nationalist movement in Japan
which posts large posters at most major intersections and subway stations in
Tokyo calling for restoration of the emperor as ruler and re-militarization of
the country. Every day in the business and shopping areas of the city, vans
drive around with huge loudspeakers blaring nationalistic music and making the
above demands. Apparently, the older Japanese ignore this, aware of the west's
generosity after the war, but feelings of the younger people who don't have the
memories of Japan's dark past are more uncertain. What is happening today in
Germany may be a foreshadowing of things to come.
This may seem implausible at first, but not after one looks at Japanese
elementary students' textbooks. In the texts, the sections about World War II
are extremely distorted. In these books, Japan is played out as the victim to
world aggression and the atrocities of the Japanese Imperial Army are not
mentioned anywhere. Furthermore, as unbelievable as it may sound, the Japanese
government to this day maintains and uses its legal right to overrule book
authors in order to 'whitewash' and dictate textbook history when it is in is
national interest to do so. They have recently done this to prevent disclosure
to the Japanese people of World War II Japanese atrocities in China and germ
warfare experiments on prisoners held by the Japanese (Toronto Globe &
Mail;A1;03/17/93 : LA Times;03/18/93).
Even more unbelievable is the fact that the massive US aid to rebuild Japan
after the war is mentioned on only one line in the Japanese elementary text
which went "America provided Japan with some help". Japan's postwar success is
credited only to the hardworking values of its people (partially true), and not
to the massive US aid for reconstruction of its industries (paid for by American
taxpayers), free access to the US market, and US tolerance of Japan's closed
market. After reading these books, one is lead to believe that WWII was
America's fault. It is hoped that the younger Japanese learn what really
happened before their parents grow old and die, or America and Japan may face
new misunderstanding and confrontation in the future.
EFFICIENCY:
Japan is perceived by the outside world to be an efficient country. In
actuality, Japan is a very inefficient country. Many subway people count change
out of tin plates. The valuable intellectual resource of women is wasted by
giving them only the most menial jobs such as 'escalator dolls' and tea servers.
The farming system is one of the most inefficient you will find in the modern
world. Because of this inefficiency, there are a lot of people employed on the
farms who otherwise may not have a job. Although this is an inefficient use of
people and resources, it helps maintain a low unemployment rate. Japan prevents
all this from collapsing by keeping foreign products and services out of their
country. As a result Japan can be inefficient, non innovative, yet still get
enormously rich at the expense of its trading partners. Japan is now per-capita,
the richest industrialized country in the world (and is expected to be the
richest absolutely by the year 2000, surpassing America). Ironically, it may
surprise many people, but the most efficient country in the world today is the
United States ($49,600 production per person), not Japan. Japan ranks pretty far
behind ($38,200 production per person (New York Times 10/13/92)). In
manufacturing though, Japan is the best in the world.
TRUE, BUT ONLY ON THE SURFACE:
it is claimed that Japanese transplant factories in the USA are good for
America and create jobs. Although a Japanese transplant factory may be good for
the town which gets it, its bad for the country as a whole. Japanese factories
opened here tend to be only assembly plants. This is important because most of
the value of manufactured products resides in the research and development of
machine tools, plastics, technology as well as the manufacture of parts which
make up that product. There is little value in assembling pre-made parts
together to make a final product. Parts machining and manufacturing (and those
jobs) is typically done in Japan, with the finished parts being shipped to the
US for final assembly. This is true even for Japanese products 'made in USA'
like the famous 'US made Honda Accord'. As a result, when a Japanese auto plant
opens in the US; for every 1 job created, another 4 are lost (in the parts and
high tech sectors of US industry). Hence, the true consequences are bad for
America as we lose the technology on how to make advanced manufactured
components. Final assembly of Japanese auto parts is pretty low tech and also
doesn't keep money in America. Final assembly only adds about $700 to the price
of a car. This is the only money which stays here when you buy a 'US made'
Japanese car. The costs of paying for welfare and unemployment for unemployed US
engineers and parts maker employees are much much higher and later wind up on
American's tax bills.
Another claim goes that "America is successful in Japan and one only has to
look at Mcdonald's, Disneyland and others to see America's success". These are
not 'American successes' in Japan because in reality, these are Japanese owned
franchise companies. Their appearance is American, but their ownership,
production and management is Japanese. A very small token number of foreign
companies are allowed to have a presence in Japan (ie. Toys-R-Us, P&G, BMW,
Kodak, IBM), but their overall market share is kept quite small via the means
described in this paper.
EXAMPLE, HOW ALL THIS WORKS TOGETHER:
Buying a Japanese product, even in an industry unrelated to yours can cause
one to lose their job. This is much more likely than one may think. Many
otherwise smart people do not understand this so I will explain it with the
following true example:
AT&T is a large US telecommunications manufacturer that is well placed in
the world market and hence pays its employees very well. Many of them like to
buy Hondas, Acuras, Mitsubishis and Toyotas. Most of these Japanese companies
are in one of the 6 or so keiretsus in Japan.
MITI and Japanese industry have publicly declared the world
telecommunications manufacturing industry to be a Japanese national priority
(target). As a result, they have planned and are starting to execute a strategy
to enter and to become the major player (today, they are a very minor force) in
the telecommunications industry during the 1990s and beyond. In fact, they have
a plan to wire every house in Japan with fiber optic cable within the next 10-15
years in order to perfect making fiber and its associated communications
hardware.
Japan will have to spend money to research and develop their new
telecommunications equipment. This will be very expensive and they will need the
help of the keiretsu banks to do it. Where do the banks get this money? From
their biggest export of course, automobile sales. This means that although AT&T
managers and engineers only bought cars, they are helping fund Toshiba's, NEC's,
Hitachi's and Matsushita's effort to put them out of a job.
Imagine one of AT&T's engineers recently bought a new Honda automobile. One
day, that engineer loses his job due to fierce Japanese competition in the
telecommunications industry, gets into his Honda, goes home, yet never ever
equates the two events!
Let's continue this example a little further to summarize this paper. The
Japanese want to enter a new industry, telecommunications. Based on previous
experience, this is how they are likely to do it.
Firstly, telecommunications in the future will be based on something called
digital technology. This will enable those picture-phones you used to see on
Star-Trek to be a reality. Fiber optic cable and data transmission are very
important to do this too. This is why they want to get good at making fiber
optic cable by making and putting fiber cable all over their entire country.
Today, the Japanese are lousy at making high quality major
telecommunications equipment that your telephone company would buy. In the world
market though, there is lots of money to be made in this, which right now AT&T
mostly gets. Because Japan doesn't know how to make good telecom equipment, they
will need to do three things:
>1) get some good telecom equipment so they can copy it and improve it.
>2) pick a very strategic but simple niche market in the industry and take it
over completely (ie. dumping) to get a foothold so they can use it as an anchor
to increase the market share in telecommunications (same strategy as the LCD
screens example above).
>3) start with small or peripheral products
It turns out they have already started to do these things. For (1), they
promised some US big name telecom makers that they might get a piece of the
Japanese telecommunications market in return for a small sale of their best
equipment to the Japanese national telephone company. AT&T and other North
American firms fell for this scheme (maybe the laid off TV maker executives went
to work for AT&T). AT&T sold them one copy of their most advanced equipment for
a promise from the Japanese to 'possibly' buy many more. This is foolish as AT&T
has just let a country which has made a public declaration to be the world
leader in telecommunications get a copy of their best equipment. AT&T's
equipment will get copied and show up as Japanese brands a few years from now.
Perhaps AT&T doesn't understand that Japanese phone companies and Japanese
manufacturers work together to defeat foreign firms like AT&T. Hence, selling
equipment to a Japanese phone company is not much different from selling it to a
competing Japanese manufacturer.
For (2), Japan already has acquired two main strategic industries. Firstly,
as you know they have 100% market share in the small LCD screens that the new
picture phones and tele-computers/tele-bank machines will use. If AT&T wants to
make a picturephone, they have to get the screen from their competition who also
makes these phones (which I saw when I was Japan). Imagine the laptop computer
example above all over again. This is another reason why these small LCD screens
are so strategic. Secondly, Japan has made an effort to be the best and cheapest
(via dumping) at making a highly specialized component of fiber optic data
transmission systems which America uses in its network. Now Japan's salesmen
talk to almost every phone company in the US to sell them this part. Now on his
future visits, he can use his existing contacts to sell them other things Japan
will soon be making.
For (3), you probably have already seen what's going on when you go
shopping. Panasonic, Murata, Fujitsu and others all make very fancy electronic
phones. They also make small telephone switching equipment (like AT&T's smaller
products). Eventually, these will get bigger and bigger until they make the
bread and butter items of AT&T. This is the same strategy they used to enter the
car market too. They started with motorcycles, moved to cheap cars, then to
trucks, then to sports cars, then to luxury cars. Today we know the results.
Again, this is also true with TVs, first they made black and whites, then color
TVs. Finally, the conquered the rest of the tele-video manufacturing industry,
such that if you walk into any TV production/broadcasting station in the US
today, almost all the equipment in the station is Japanese. It used to be all
American 25 years ago. Today the TV in your house is most likely Japanese (even
if its a store brand). Remember, this was an industry which America had 100%
market share about 25 years ago. This is what is likely to happen to
telecommunications too.
AMERICA IS ALSO TO BLAME:
American's behavior when trying to do business in Japan is not what it
should be. After seeing how some American firms operate there, it is little
wonder our success rate is often so poor. For example, something of an annoyance
(and also advantage) to the Japanese is American business people working in
Japan who don't speak Japanese, or know nothing about the country they are
dealing with. These included some trade representatives from an Oregon company,
some people from Boeing whom I met at a Nissan factory, and some from the
Government of Wisconsin at a machine tools fair trying to attract Japanese
industry to their state.
The group of businessmen I met from the Oregon company I met in Roppongi
(an entertainment district in Tokyo). These people were a disgrace to American
industry and opened my eyes to why the Japanese are able to take advantage of us
in business. Firstly, these men spoke no Japanese at all (so they couldn't
understand what their opponents at the negotiating table were saying) and knew
nothing about the culture. They asked me what it was like to be a 'gringo' in
Japan. It seemed that they thought the business adversaries they were
negotiating against in Japan were running some 2 peso Mexican hot dog factory.
My conversation with them was a real eye opener to many of America's problems
when dealing with the Japanese in business.
At least their company didn't send a women to do their negotiating. This
would have been a mistake of huge proportions. Japanese corporations and
businessmen typically treat any company who sends a woman with ridicule. Its one
of the best ways to lose a contract. Although Americans may dislike Japanese
sexism, Japan is fast becoming the world's economic power which means they get
to make the rules, not us. This is part of the price Americans pay for buying
all those Toyotas and Sonys for so many years. As Japanese industrial influence
spreads throughout the world, more of this type of treatment of women by
Japanese companies will take place (as many women working in Japanese transplant
companies in the US can attest).
The very presence of the trade group from Wisconsin at the machine tools
fair is the result of a very foolish, self destructive and shortsighted US
practice which will now be explained. With so many jobs leaving America (due to
many of the above Japanese tactics), some states have decided to go to Japan to
try to attract Japanese companies and plants to their state. Because America
(unlike almost all other industrialized countries) doesn't co-ordinate or
regulate this in any way, what happens is that states get played off against
each other by Japanese companies and the Japanese government. The state which
gives the most tax breaks or contributes the most money to build the plant gets
the plant. This is probably good for the winning state in the short run, but is
much worse for the country as a whole (and that state) in the long run.
Here's why; What this leads to is Japanese companies opening US branch
plants paid for by the US taxpayer and which pay little or no taxes themselves.
With many states doing this to each other to 'win' a few jobs, everyone winds up
losing. This is because after each state has 'won' a plant from some other
state, the final tally shows that no one state has gained any jobs from any
other state (or very little anyways), yet every state is short lots of tax money
which must be made up by placing more taxes on individuals, or pre-existing US
businesses (who must now compete against the American state subsidized Japanese
businesses). The only winner in all of this is Japan who receives property tax
free (or discounted) factories and in worse cases plants which we the taxpayer,
sometimes pay to partially build through government grants. The Honda Accord
plant in Marysville, Ohio was a result of this practice. Japanese companies
producing out of tax free plants are also at an advantage to defeat US
companies, who must pay taxes. Ultimately, this practice makes America lose, not
gain, jobs (see above section 'assembly plants') and pay more taxes. This very
topic is the subject of many sick jokes in Tokyo about America's greed and
foolishness today.
-->"Foreign Agents"
So, why does our government even allow the things explained in this paper
to take place? The reason is due to another problem (and is also the subject of
many good jokes in Tokyo). It lies at the highest levels of our federal
government and has to do with much of the recent talk in the last federal
election about 'foreign agents'. These are very high level Federal public
servants and elected members Americans sent to Washington to represent them, who
go work in the U.S. Federal government for a short time, make contacts in the
government or US Commerce Department, then betray the country by selling
themselves out as representatives to foreign interests.
These people were our front line trade negotiators, staff members, trade
attorneys, elected officials and have the inside knowledge the foreign interests
need to circumvent our trade laws, defeat our companies and find out what our
confidential future trade laws are likely to be. These people sell themselves to
the other side in order that they may personally get rich through the resulting
huge amounts of 'blood money' as they use their contacts they made while serving
the public, in order to betray America. The amount of money involved is in the
millions of dollars per person. Some claim these are delayed bribes which are
paid after public service is completed for favors done while in public office.
Often, these people start representing foreign interests within weeks of
quitting their government job.
The book 'Agents of Influence' (1991) by Pat Choate, contains the list of
people who became foreign agents, a thorough explanation of how this scam works,
and how this is obliterating our status as a rich industrial country. The book
also explains very well the point made on the Nov 27, 1992 edition of ABC's
20/20 (which did a segment on this problem) about how much more the Japanese
"invest" in bribery and how we have lost billions of dollars and hundreds of
thousands of jobs as a result of this small handful of people willing to sell
out their country and their kids for cash.
For one example of bad this all really gets, one can look in the very
highest level of our national government, at the case of Mr. Ronald Brown (who
is by no means an exception). Ronald Brown has been appointed the Secretary of
Commerce by President Clinton. This is the highest position in the US Commerce
Department, the agency whose job it is to ensure US interests are protected in
the world trade arena. Mr. Brown however, is a foreign agent who until recently,
worked for the Japanese for big money. After leaving his past government job as
a US senate aide, Mr. Brown went to work as a lobbyist for big Japanese
companies such as Toshiba and Sony who wanted government insiders to help
further their interests in America. Now he is again "working for America"
('against' his old cronies at Sony, Toshiba and others) as he has been appointed
chief of the agency which is supposed to ensure that foreign companies
(including the ones Mr. Brown lobbied for) do not have undue advantage or resort
to illegal tactics (such as those mentioned in this paper) when competing
against US companies at home and abroad. The foreign agent list is US government
public information. See the appendix of this article for how to get a free copy
of it (rank, position and cash received per official) from the Internet computer
network.
-->The "media war"
The "Agents of Influence" book mentioned above has a very interesting
section on what the author depicts as the 'Japanese propaganda machine'. The
fact that today Japan has so much power in the US government and owns so much of
the US popular media industry has lead many (including the author of that book)
to believe that Japan uses their media power to prevent distribution to the
public of information unfavorable to Japan, such as many the facts contained in
this article. (The film "Rising Sun" however, made by one of America's remaining
non-Japanese movie companies, is a definite exception to this trend as it does
try indirectly to warn people about what is going on). Today, Japan owns many
very large US popular media companies including the following: CBS Records,
Ciniplex Odeon (a big piece), Columbia Pictures, Columbia House Records, Loews
Theatres, TriStar Pictures and Universal Pictures. America is prevented from
owning large Japanese media companies.
Japan's media effort includes positive publicity as well. One example shows
MITI, the Japanese industrial ministry 'helping' foreign firms 'succeed in
complex Japan' by providing short terms of free office space in Japanese cities.
Such actions make Japan look helpful, while at the same time making non-Japanese
firms appear unable to do the job themselves and incompetent in the eyes of the
public (who aren't aware of all the barriers mentioned in this paper which
ensure that this 'token gesture' only remains as such, and that the companies
who are hosted do not in fact succeed in Japan). Secondly, the english news
program "Today's Japan", which appears on some US television stations is an
other part of this effort. A posting I saw on a wall in the Tokyo NHK
broadcasting studio where the program originates from makes the point abundantly
clear, "Today's Japan" primary goal is to portray Japan in a more favorable
light for foreign audiences.
-->Accepting Reality, America's problems at home:
America must pay more attention to the future and not take for granted that
it will always be rich and powerful. One only has to look at the social and
economic troubles today in countries like Britain (which years ago in its time,
was also the richest and most powerful in the world) to see our destiny if we
continue in our erroneous and divisive ways. Britain failed to take action in
time and suffered the consequences. They were once the world's most powerful
economy. They too thought that any damage to their economy would have profound
impact to the world, and hence, thought they were safe as the rest of world
would not let anything bad happen to the British economy. They were wrong.
People saying this today about the US economy are also wrong. Britain's economic
power diminished gradually and unnoticeably, such that today, what happens in
Britain is not so important to the world global economy. They are now a minor
player and now have a much lower standard of living. Our economic power is now
in decline, following the 'British pattern' which occurred many years ago. We
will suffer their fate if we don't change.
America has many problems which are not the fault of the Japanese, but are
of our own doing. Japanese work as a team much better than we do. They struggle
together to save their companies when in need (versus jumping ship, staging
strikes like the recent ones at GM, or selling out to foreign interests). They
don't pay some of their CEO's millions while driving their companies into the
ground. They also realize that management and workers are not each other's
enemy. The competition is the enemy. No war was ever won with internal conflict
and the same goes for this one. Labor strikes (no matter how justified) and
management selfishness and shortsightedness are not the answer to our problems.
The US auto industry is a prime example of this. Managers grossly overpaid
themselves and the UAW bosses kept in power by promising its workers a labor
monopoly, 'job security', outrageous salaries and ridiculously inefficient work
rules. Over the long term, this was of course, unworkable. Like many other
monopolies over time it self destructed. The environment the labor leaders
provided to their workers caused them to lose concern about quality and
efficiency. As a consequence, many of these people ultimately lost their jobs.
However, as much as many Americans want these companies to go bankrupt, it is a
unrealistic and dangerous hope. These are still US companies. We need them in
this country as they are a key part of our industrial base and our wealth.
Rather than destroying them, America will have to change them from the inside by
altering both worker and management attitudes. The current ways (on the part of
both management and labor leaders) only serves to ensure our kids won't have
these kinds of jobs in the future. Co-operation and a common vision are the only
solutions to this problem. On a positive note, it should be noted that quality
in the US auto industry has improved considerably and today is at par with the
Japanese (ironically as a result of the Japanese competition which broke the UAW
labor monopoly). The lesson from this is that America will have to revisit laws
which help enforce labor monopolies (which in the long term tends to destroy
American jobs and industries) and restrict the scams which allow public company
top management teams to set their own and their friends salaries to ridiculous
levels.
One note should be remembered on this example. Some try to apply the model
of the US auto industry to other US industries devastated by Japan. This is
incorrect. Comparisons between the successful Japanese attack on US autos and
other industries must be made carefully, as US auto, a very old and very
unionized industry, is in many ways very different from the other US industries
Japan has successfully targeted. Though the US auto industry was complacent,
this is not true of most of the other US industries (such as high technology)
which were very efficient, innovative and high in quality, yet were still
devastated by Japan.
CONCLUSION:
The article is not meant as an affront to the ordinary Japanese people (to
whom nothing is held against). Like most conflicts, it is the ordinary people
who get caught in the middle and wind up suffering. The same, unfortunately, is
true for this conflict. This paper is not about them, but is about their
companies and their government policies.
America's citizens have failed to realize that Japan practices a different
kind of trade than America does. Japan practices adversarial trade and 'taisen'
or war economics, where the goal is to wipe out the foreign countries'
industries in order to dominate them entirely. For the Japanese, business is in
every sense of the word, like war.
Forty years ago, Japan was a third world country. It had almost no industry
and its people lived in third world squalor. Their 'war' economic strategy,
though devastating to its trading partners is very effective. It has quickly
made Japan the most modern country in the world and average Japanese people much
richer than they would have been otherwise under US style free-market capitalism
(which would have lead the development of Japan to take place much more slowly).
They did what was best for their country, which is what I would expect them to
do. Though I do not blame them for the economic strategy they use against us (a
pretty brave and clever plan on their part), we must still recognize it for what
it is.
Consequences for a country defeated in economic conflict are strikingly
similar to consequences of being defeated in a military conflict. In both cases,
the industries of the defeated country are destroyed or severely weakened and
the nation's technological and advanced manufacturing base are shattered. The
standard of living of the defeated country ultimately declines drastically
(though slowly and steadily over many years in the case of an economic war).
Ultimately, the country tends to become less stable socially and politically as
people try to blame others or take personal/political advantage of the fact that
there is little wealth to go around (which ultimately is the root cause of
instability in most shaky countries around the world today).
The danger of an economic conflict such as the Japanese have mounted
against America is that ordinary citizens generally are unaware or do not
understand what an economic war is, what the consequences of losing one is and
that one is taking place today here in America. Unethical politicians who
recognize the voters' ignorance can tell the people for example, that there is
nothing wrong with Japanese (and other countries) "dumping" because the voters
get cheaper prices. Though true in the short term, the fact that many voters
will lose their jobs as a result is generally not well understood and is not a
concern to many politicians as it occurs several elections in the future.
Conversely, ethical politicians (there are surprisingly many) who do
understand what is happening, tend to lose elections as it is very difficult to
explain complex issues like those in this paper in 30 second TV spots to a
general population that has very little fundamental background in economics.
Such politicians often get painted by their opposition as "Mr. X. is in favor of
a trade law which will prevent you from buying the least expensive products
available, is against [Japanese] factory Y which will create 1000 jobs [but
indirectly cost 4000] from coming to town and he wants to raise your taxes and
cut your benefits [to pay down the national debt so you won't completely lose
your benefits later]". Unless one has taken the time to gain a good
understanding of economics and how they apply to economic wars, it is unlikely
that people will vote for Mr. X. although he is the correct choice. Basically,
the voter has been outsmarted. It is said that "a fool and their money is soon
parted". The Japanese and unscrupulous US politicians know this is true about
many US voters and consumers when it comes to economic war, and have applied
this maxim on a national scale against America.
The Soviets used to parade their bombs every May through Red Square. The
threat to America and its way of life was very apparent and most people could
understand it. As a result, Americans stood up and took action to defend against
the Soviet threat. Economic wars are much more complex to understand and for
that reason, more dangerous.
We either have to learn about and apply Japan's superior (for survival
anyways) economic strategy, or find a way to defeat it. Else, there is little
hope for us. Unfortunately, the world is a tough neighborhood and not a place
for the weak and the righteous. Charles Darwin's "survival of the fittest" maxim
fully applies in this case. If we do not adapt to today's economic climate,
America will most certainly fade away as a modern world leader. Most Americans
however, don't see the world for what it is: an economic and military jungle;
and the laws of the jungle do often apply. The Japanese realize this, we don't.
Americans who buy Japanese goods, unknowingly help them reach the goal of
their economic war. As Michael Crichton wrote in "Rising Sun", The Japanese (and
other countries such as Korea and Taiwan who have adopted the same Japanese
style business practices described in this paper) are not our economic allies,
they are our competitors.
America often complains that Japan must change its ways to become more like
us. This is not true as America is not number one anymore. It is not a request
we can make. Today, the tables are turned. This time, America will have to
change its ways to become more like the Japanese. Japan will likely surpass the
United States to become the world's leading economic, technological and
manufacturing nation by the end of this decade, even though it has only 1/2 the
population of America (CBC News;Venture "Racing the Rising Sun"). History has
pointed out every time, that the richest and most economically powerful country
in the world, ultimately becomes the strongest militarily. We have to realize
this and be prepared to accept it, or we have to do something about it. Japan
will not have to change their ways to become like us, as tomorrow they will
wield the power, not us.
This article by:
lleclerc@nyx.cs.du.edu
Louis Leclerc
P.O. Box 453
Jackman, Maine 04945-0453
Please send me any corrections or omissions and this article will be updated.
The most recent version of this article (JAPANYES) is kept at FTP site:
monu6.cc.monash.edu.au (login: anonymous), in directory pub/nihongo
This article is copyright (1992, 1993) under the laws of the United States of
America. However, I hereby give permission that it be distributed widely and
freely over any media. This article cannot be sold or licensed without prior
written permission.
A P P E N D I X
-->List of companies:
This is a list of some Japanese (or Japanese owned and controlled) companies.
Some of the names that make this list may surprise you, depicted by '*':