What makes the Japanese economy tick?

Press, 20 April 1982, Page 20

What makes the Japanese economy tick?

By

KIYOAKI MURATA

in

Japan has become a bete noire to other industrialised countries of the world for being an almost unrivalled success. “What makes the Japanese economy tick?”, is by now a time-honored question, but it bears repeating because the answer is often forgotten, and may also be brought up to date.

Relevant data to go into the answer are found in a report made public earlier this year by the labour problems study committee of the Japan Federation of Employees’ Associations (Nikkeiren). The 39-page brochure is obviously not designed as an explanation to outsiders of why the Japanese economy is viable in spite of the recent oil crunches. Rather, it is intended for domestic consumption — to be read by business leaders, labour unionists, et al, for possible use in making the economy even more viable. It is alsoimportant as a reflection for.. the thinking of Japan’s business world.

One of the principal factors in Japan’s success story, according to the federation's report, is that Japanese businesses grappled squarely with the first and second oil crises by taking "appropriate measures." In this regard, the report discounts the fabulous “administrative guidance” by the central and local governments while stressing the “rationalisation efforts” made by the private sector. One of these “appropriate” measures taken was the “moderate wage raise” agreed upon in the post-oil crises years. Following the annual “spring offensive,” which was particularly virulent in 1974, the average wage raise turned out to be 32.9 per cent, an unprece-

“The Japan Times Weekly” dented rate, which caused serious anxieties about the consequences of it being maintained in subsequent years. But because of this sobering prospect, the following year saw a raise of 13.1 per cent. From 1976 on, the percentage remained at the one-digit level: . This “moderation” in wage settlements, ■. the report observes. was possible because the labour.-unions themselves realised that a wage raise' exceeding the rate of productivity increase only brings inflation and the worst victims of inflation are the workers themselves. ' •

Another key factor is the effort made by the whole nation in economising energy, which is the sine qua non for a country like Japan completely subject to changes in the availability and, the cost of energy sources abroad. How successful Japan was in the economy drive is clear from the following figures. During the pre-oil shock, period, Japan’s energy consumption rose by 1.1« per cent per one per cent f’:.e in the GNP in real terms. Yet, for the 1977-80 period, the corresponding figure was only 0.29 per cent; or less than onethird .that of the earlier period.

The "rationalisation” of management was another factor in the Japanese economy’s successfully tiding over the crises. It resulted in the lowering of the break-even point for businesses, that is, less-expenditure for breaking even by general economy and elimination of wastefulness. 1

. Underlying the fact that these measures were taken effectively are the basic characteristics of labour-manage-ment relations.: essentially peculiar to Japan. One con-

cems the very nature of the labour union. Unlike in the West where labourers are organised as trade unionists, who have only lateral, not vertical, loyal*., Japan’s workers belong to enterprisebased unions. Trade unions as such, are “federations” of these “employees’ unions” of various, independent enterprises. Because of the postwar “democratisation” of labour relations, furthermore, there is no dichotomy between the “capitalists” who own and sell and buy at will corporations without heed for the employees, and the “labourers” who earn a living from them. A “company” is . usually described, and perceived as a group of people “sharing, the same destiny.” a community of interests. Japanese. labour union leaders, accordingly, talk about labourmanagement relations in terms of economic issues rather than political or social issues, says the federation’s report. . By the same token, there is little “class consciousness" in Japanese labour-management relations. This is reflected in the fact that the leaders of employees’ unions often become executives in later years. The chairman of an employees’ union is often a promising young man, to whom the union stint is a valuable experience for his later career possibly as an executive in the same business organisation. The federation’s report says, in fact, that one out of six Japanese executives once served as a leader of an employees’ union. This figure is based on a survey conducted in 1981 with a sample of 313 corporations. Among them there were a total of 6121 executives, of whom 992 (16.2 per cent) were previously union leaders. There is no “class” structure within Japanese - businesses,

and the son of a company president may be found serving as the chairman of the employees’ union, or, conversely, the son of a labour union leader may end up the president of the same company. None of these people are “traitors” to their “class” because they belong to no class. In Japan, a corporation is usually run by managers who have “grown up” with it, that is, those who were employed immediately upon graduation from university without any personal tie with any member of the board as of that time. The Japanese phrase “salaryman executive” means an ordinary white-collar worker going up the corporate, hierarchy to its apex by virtue of his own ability rather than by

monetary connections. Statistical proof of this “classlessness” is the comparison between the per-annum incomes of the corporate president and the freshman employee. In 1927, the average income of Japanese presidents was Y 151.000 (Y 165.000 before tax) whereas the new employee’s was Yl5OO, making the ratio about' 100 to one. The disparity, however, steadily declined during the following half-century, helped partly by the stiffly graduated income tax that reduced the net income of executives.

In 1975, the average annual income of presidents was Y 22,593,000 before tax and Y 11,533,000 after tax. On the other hand, the freshman employee’s income was Y 1,546,000,

which is 7.5 per cent of the net income of his president. The federation's report 'says: “A business leader tries to' achieve the growth and development of his organisation rather than to augment his own income.” In spite of these apparent advantages that favour the Japanese economy, the federation is not without worries. One of them concerns education. The report says that the level of Japanese education in terms of the percentages of young people going to senior high school and university is the second highest in the world after the United States. But it asks: “Are the schools teaching them our national history correctly and making them open their eyes to the proper course our country should tread?” .