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June 7, 2005
Keizo Nagatani on Japanese Economics
When Japan's economy is hot, Japan's social system clearly gets everything right. And when Japan's economy is ice cold, Japan's social system clearly gets everything wrong. No matter our post hoc logical fallacies, the pundits have agreed: Japan's economy is fundamentally different than Western models.
In his interpretative essay on Japanese economics - "Japanese Economics: An Interpretative Essay" - Prof. Keizo Nagatani paints a picture of the "Japanese economic perspective" in opposition to the free-market-obsessed Neoclassical orientation of the West. Nagatani spends a lot of time describing U.S. and Japan in the "Black dudes drive like this/White dudes drive like this" style of overreaching platitudes, but he offers a valid defense of Japanese economic practice:
1) The Japanese notion of equity is ex post (equality of final share/result), not ex ante like America (equality of opportunity) (37).
This is an excellent dichotomy that encapsulates many principles of Japanese social orientation. Japan's low income gap - compared to the awful income inequality in America - offers proof of this fundamental outlook. I wonder, however, why this vigilance against inequity would have let the income gap soar throughout the 80s and 90s. Seeing that the WWII leveling of accumulated wealth and high wage negotiations of labor unions in the 50s mostly explain how Japan started its economic growth in prime conditions for equality, the idea that the Japanese as a nation are "fundamentally against" wage inequality seems unrelated to the actual development of fair income distribution - especially as Nagatani admits, "Most of these equitable customs were never rules of law. (38)"
2) The Japanese are essentially anti-globalist because of its "potentially devastating effect on equity" (40).
This makes sense - globalization is just a drive for efficiency at the cost of domestic workers. American firms open factories at China, which lowers consumer prices in the States, but may further widen wage gaps. The problem is that globalization isn't something you pick - it's a enormous monster swallowing everything in its path. Nagatani explains, "For the Japanese, to follow this global trend is to risk destroying much of their economic culture." Yes, but can Japan slay this monster? Or does it just plan on building walls so large the monster cannot come ashore?
3) The Japanese economic system depends on high-quality goods to create high-prices (41).
As he writes in the footnotes, "Japanese consumers have the most fastidious tastes for quality in the world." No, they had the most fastidious tastes in the world. Now they drink happoushu or "Mixed Alcohol Type-2" instead of beer. The sources he quotes for his idea are George Fields' two books from the 80s - Gucci on the Ginza and From Bonzai to Levi's. It is with no surprise to anyone that Japanese consumers flush with Bubble-era cash and confident about twenty years of Japanese economic growth were extremely quality-conscious, but I find it hard to say that poorer Japanese consumers now have the same strict standards just because they are "Japanese."
In fact, the structure of the Japanese economy - with its half-dozen layers of product distribution, high land prices, and high labor costs - makes high prices inevitable. Therefore, high quality becomes a way to justify the prices, instead of actually raising the prices. When you get a 6000 yen haircut in Japan, you get the two-hour long luxury experience of triple shampoo, head massage, and blowdry as a way to make the price seem fair. They don't lose other customers from keeping you there longer, and they essentially have no choice but to charge that price.
So Nagatani is right: lower prices means destroying the welfare system that lives inside the Japanese market.
This essay was evidently written in the 90s, because Nagatani attaches a postscript to deal with questions of the 21st century "IT Revolution." He's on the defensive from the start - even though no one makes the point that information technology is a threat to Japan. He dismisses the entire Internet mess as a short-term boom and not a "great technological invention" (44).
1) The Internet just "displaces" old ways of doing business instead of creating new ones.
Okay, but perhaps the Internet lowers prices and frees up information. Oh wait, we don't want that...
2) "Computers do not create such new demands for hardware."
Tell that to the silhouetted guy dancing to Jet with the white headphones.
3) The IT Boom will not create jobs in the manufacturing sector.
That's the whole point! These new firms need a totally different set of human capital, which Japan has yet to show whether it can provide.
4) We don't know whether computers can boost productivity.
We don't know this, but why you being such a hater?
At the end of the day, however, Nagatani sees the "Japanese system" of information management being much more equitable and efficient than one based on "competitive individualism." This is an intriguing idea, and worth contemplation, but the Japanese need to dive head-first into Internet culture before we know if they do info better than we do info.
(Nagatani's Essay is featured in the book Japan at the Millenium edited by David W. Edgington)
Posted by marxy at June 7, 2005 2:24 AM
Comments
There's a huge difference between the ex post and ex ante systems (and even if the Latin terms are new to you, the distinction shouldn't be: I've been hammering away with this message on Click Opera for a while now). Ex post (equality of result) requires the entire society to be rationally ordered according to the principle "from each according to his ability, to each according to his need". Ex ante is just a bunch of people protesting to each other (and themselves) that "I coulda bin a contender". In other words, one is an actual social structure, the other a dream. And one of the problems with the American system is that people don't seem capable of voting according to their actual class interests: they vote as individuals, and they vote according to their dreams. How many Americans were reported to believe themselves to be in the richest 1% of the population?
"A poll conducted by Time/CNN on the estate tax issue in 2000 revealed that 39 per cent of Americans believe that they are either in the wealthiest 1 per cent or will be there ‘soon’."
David Runciman, Tax Breaks For Rich Murderers, London Review of Books
Posted by: Momus at June 7, 2005 3:25 AM
ABOUT EX ANTE:
Except that the American system has, generation after generation, shown that ex ante works. See: rise of Irish/Italian/Cuban/etc., etc. from poor, discriminated immigrant classes to the fabric of middle class America. See: any number of personal success stories (example: Secretary of State Rice comes to mind; heck, even my own father was the first in his family to go to college, and now I'm getting a higher degree).
Of course when you give equal opportunity, there will be those who fail as well as those who succeed.
ABOUT GLOBALIZATION:
I'd say that Japan can't slay this monster, because 1. if they put up [more/stronger] walls against imports, they'll face stronger walls against their exports, and 2. they don't have enough domestic demand to live without exports.
I haven't seen any studies/data to back this up, but perhaps it is more than coincidence that Japan's slump since the late '80s came at a time that global trade was finally opening up (China, India started opening up; NAFTA was created; EU trade barriers fell; etc.)
Very interesting topic!
Posted by: Japanese Business Digest at June 7, 2005 4:04 AM
I think you could have just said "why you being such a hater" - "player hater" sounds kind of redundant. Am I wrong here?
Posted by: farley at June 7, 2005 7:05 AM
Japan of now compared to Japan of yore: yes, the 'good taste' is not as good.
Japan of now compared to the rest of the world now: still on the lead with a good margin.
Posted by: dzima at June 7, 2005 12:41 PM
How many Americans were reported to believe themselves to be in the richest 1% of the population?
This is a red herring. The Japanese are known to think they're all 90% middle class, when that is far from the truth. Everyone everywhere perceives themselves in higher social classes, just in America that's the very top and in Japan that's the middle.
Ex ante is just a bunch of people protesting to each other (and themselves) that "I coulda bin a contender"
I think you're doing yourself a grand disservice by completely denying that America has anything good going for it. America's opportunities for upward mobility are absolutely not just "rhetoric." The new need for skills in the tech world is making the rich richer, but I can't imagine anyone on earth easier to get tech training than in American universities - especially the numerous state schools with low tuition and high-quality instruction.
On a legal and political levels, America does have policies that encourage upward mobility, but the problem is that it is difficult to create drive and create cultural/social capital in populations who have been in the lower classes for several generations. Harvard gives free tuition to poor students, but how many poor students will get to harvard when educational capital is correlated with wealth?
But I think it's silly to deny that we all have immigrant grandparents and greatgrandparents who literally came with nothing and became something within their own lifetime. That was certainly my great-grandfather's story.
I get the sense that Japan is ex post, but I don't think there's any structural proof that this is so. The tax code is less punishing than Europe. Incomes happened to be equally distributed for a while because of historical circumstances, and then the Gini coeffecient went way up after that. For a while, they've fought against an economy based on skills and talent, but these are fundamental to an IT-economy.
America has a working ex ante system and because of it, has a real problem with income inequality, but the question is: if an ex post system like Japan stops working, what exactly is it providing for its citizens?
Posted by: marxy at June 7, 2005 12:50 PM
I'd say that Japan can't slay this monster,
Of course they can't. And Japan's entire social system hinges on the concept that they are a protected nation-state trading without nation-states. That era is over.
Japan has two options: intentionally change itself into a globalist economy that resembles the West or do nothing and watch globalization rot the current system out slowly. My hope would be that quick action could create a compromise system that protected some of Japan's more cherished institutions, but I don't know if the gov't actually cares about protecting anything outside of their own power.
Posted by: marxy at June 7, 2005 12:55 PM
High quality goods? I mean, most of the clothes sold are designed to last only one season and then come flying apart. The cell phones are specially coated with space-age super-easy-to-chip paint that makes them look as though they were a relic from the firebombing of tokyo within four months, and this in a country that doesn't sell slightly bruised bananas. It seems that most houses are designed to last 30 years, absolutely tops, this maybe coming from the idea of rebuilding shinto shrines every 30 years to "detox" them or whatever. My muji teapot scalds my hand every time I try to pour water when the first drops touch the superheated metal in the spout and explosively vaporize. Ergonomics? Disposable! Even the conventions of classic animae, the frozen faces with yammering mouth, the recycled and extended shots; products of cutting costs.
It seems to me that appearance and fetish value is much more important than quality when it comes to pricing.
Posted by: farley at June 7, 2005 2:18 PM
High prices are very important for maintaining the Japanese economic system. An image of high-quality is the easiest way to sell high prices to domestic consumers.
Back in the 60s and 70s, however, Japanese goods were low-priced and high-quality for foreign consumers and this put Japan on the map. But I think Nagatani's talking about domestic markets and the need to keep prices high to keep wages high.
If a Japanese company can introduce low-priced, high-quality products made in China, that doesn't help the Japanese "ex post" system very much.
Posted by: marxy at June 7, 2005 3:12 PM
Japan of now compared to Japan of yore: yes, the 'good taste' is not as good.Japan of now compared to the rest of the world now: still on the lead with a good margin.
You mean urban Japanese from the upper economic classes have good taste.
Posted by: marxy at June 7, 2005 3:22 PM
marxy: You mean urban Japanese from the upper economic classes have good taste.
Damn straight! Bad taste is well represented in my neck of the woods. Quite well.
Can a system really be all that ex ante if it's not ex post as well? If there's no equality at the other end, where you start to raise your brood how on earth can the disparities in income not have a dramatic effect on your real opportunities from childhood on?
To me, the only thing standing in the way of japan being as ex ante as the states is a bit of corporate and governmental largess to put college and other educational opportunities within the reach of the lower income families. As far as I can see, a proper education is the only thing that's really stratifying the 上京 population.
Posted by: nate at June 7, 2005 6:06 PM
If there's no equality at the other end, where you start to raise your brood how on earth can the disparities in income not have a dramatic effect on your real opportunities from childhood on?
At least traditionally, there have been strong pockets of pro-education sentiment in American immigrant communities. This certainly makes social mobility possible. The problem is that low income parents who had low income parents don't usually have pro-education attitudes, and this makes it difficult for those kids to use the opportunities given to them.
Meanwhile in Japan, colleges do not train students or necessarily educate them, since companies want to train their employees without any pre-existing knowledge or ideas (no, this is not an exaggeration). And you can't get the good jobs without going to a top-ten "name" school. So, poorer kids not only will often not have the resources to get to one of these schools, but will receive a social demerit for NOT attending these particular schools nor can they gain real skills in a less-prestigious academy.
Having higher education as a real disseminator of skills is very helpful for increasing oppportunities for social success. Having higher education be only about "branding" just preserves the static social order. The requirements of an IT economy may destroy the brand > skills orientation of Japanese universities, but the current system sits firmly within the "the elite have all power, but they don't earn that much" style of Japanese ex post economy.
Posted by: marxy at June 7, 2005 6:31 PM
Off-topic, but here's an odd but intriguing little glimpse into James Heisig's views on Japanese situationist ethics:
http://www.barcelona2004.org/eng/actualidad/noticias/html/f043322.htm
The article is somewhat garbled and unfortunately a quick glance at Heisig's page of essays (mostly on theology and commentary on the Kyoto school of philosophy) doesn't seem to have anything more elaborate.
Heisig is well known for his kanji learning aids.
Posted by: sparkligbeatnic at June 7, 2005 7:15 PM
Thanks for pointing that to our attention, S.
I don't think that "situational ethics" means that actions can't be unethical or ethical failures.
I don't see why anyone needs "kanji learning aids" - all you need is a little hard work and moxie!
Posted by: marxy at June 7, 2005 7:22 PM
I myself abandoned the Heisig approach at about 800. But it was fun while it lasted.
Posted by: sparkligbeatnic at June 7, 2005 7:25 PM
Straying far from the original topic, but...
What is the jist of his method?
Posted by: marxy at June 7, 2005 7:38 PM
I stuck through with heisig, and am pretty damned good at kanji for one year of study.
Actually at least the public schools, and maybe the privates too have entrance policies so tightly tied to test results that they are infinitely more fair than american admissions policies in public and private colleges. Harvard is a lot easier to get into for rich kids (through legacy, mass donation, preffered private schools, etc) regardless of the scholarships they give. Toudai, to my knowledge is equally hard to get into for everyone, though much easier to afford for the wealthy.
I may be utterly naive here, but excluding the college cash squeeze, I don't really understand why modern japan gets labeled as a country of socioeconomic immobility.
Posted by: nate at June 7, 2005 7:40 PM
heisig makes every single piece of kanji into radicals with meanings, and gives a single meaning to each kanji. at first he tells a story to help you hold together the kanji, eventually leaving the reader to write his or her own.
The rough stuff is:
his radicals meanings are sometimes contrary to the real ones (though now that I'm studying bushu, it's not usually far off)
the order of studying kanji has nothing to do with frequency or usefulness, only the specific learning order for the radicals that he's created.
you don't learn the readings along with the writing. (that's in the second book, and the on-yomi teaching is actually really great... he just leaves kun yomi to you)
Posted by: nate at June 7, 2005 7:47 PM
Harvard is a lot easier to get into for rich kids (through legacy, mass donation, preffered private schools, etc)
I think these are less than 10% of admissions to the Ivy League schools; the number of legacies is certainly decreasing and the rise in overall competitiveness probably ends up challenging the traditional pipe from Andover/Exeter/Milton etc.
Keio and some of the private schools do have direct admittance policies with their own high schools and other prestigious private academies. Todai may be 100% meritocratic, but you can get into Keio or Waseda without even taking the test if you have parents willing to pay for your private high school education.
Merit-based educational entrance systems are inherently ex ante, not ex post. And they all have the problem that educational capital tends to accumulate with the professional classes.
I don't really understand why modern japan gets labeled as a country of socioeconomic immobility.
I think it's just as immobile as anywhere else in the world, but only the kids from the "right" schools (less than a dozen) can get on the elite tracks. This is certainly not true in America, where there are plenty of milionaires without college degrees. But that's mostly because there are thousands of "paths to success" in America, but only 1 or 2 in Japan. So if you fail to get on early, you'll never get on.
Posted by: marxy at June 7, 2005 8:03 PM
marxy: could you clarify Nagatani sees the "Japanese system" of information management being much more equitable and efficient than one based on "competitive individualism."
I thought about that statement for a while but couldnt understand it. I dont know if I've seen anything like this in my time in IT here.
Posted by: Chris_B at June 7, 2005 9:18 PM
He doesn't clarify either. I think he's talking about the Western idea that information becomes a private good opposed to a some vaguely-defined alternative "Japanese" super-efficient information system. This is, however, total nonsense seeing that Japanese firms are much more enamoured with proprietary software and the Japanese powers that be absolutely hate the idea of open information that is available to the whole public. Right, what is he talking about?
Some communal, efficient "Japanese" info system sounds intriguing, but doesn't seem to exist.
Posted by: marxy at June 7, 2005 9:25 PM
AFAIK any form of information sharing within a company is pretty much taboo anyways
Posted by: Chris_B at June 9, 2005 12:18 AM
Is Nagatani's paper a contribution to Nihonjinron? Is Momus? Is this alright?
Posted by: Issey at June 9, 2005 7:38 AM
His article strikes me as being "of the Nihonjinron mode." There's a lot of reductionist "Japanese are like this, Westerners are like this" without actually showing proof of those values being implimented in society.
Posted by: marxy at June 9, 2005 1:19 PM
