Japan’s Economic Boom
Examining different theories of how Japan’s economy managed to boom since the Second World War.
Japan has performed a miracle. The country’s economic performance following its crushing defeat in World War II is nothing short of astounding. The economic expansion of Japan is second to none. All of the elements are in place for Japan to continue increasing its share of the world’s wealth as America’s gradually declines. The country is on track to becoming the world’s largest economy. How did Japan do it? There are many theories and studies that have traced the Japanese miracle without success. The answer to the mystery can be found by examining Japan’s culture, education, and employment system. Japan’s success is not just a case of good technique and technology in business, but a real recognition and development of the necessary human skills. A better understanding of the Japanese society provides the framework to understanding the workings of Japanese business (and possibly the Japanese mind.) The ways of the Japanese provide a foundation for their economic adaptability in modern times. Japan is a culture where human relations and preservation of harmony are the most important elements in society. “It is their sense of identity and destiny which gives their industrial machine its effectiveness.”1 “Among the Japanese, there exists an instinctive respect for institutions and government, for the rules of etiquette and service, for social functions and their rituals of business. Japan is a traditionally crowded island, the people are forced to share the limited space with each other and to live in harmony.. The Japanese are very protective of their culture. They are very conservative to outside intrusion. Their distinctive ways are a source of pride and national strength.”2 Japan’s striving for purity is very different form a North American idea of open doors and diversity as strength. Japan is relatively closed to immigration to outside countries. However, this feeling of superiority does not stop them from being careful. “This is probably because the Japanese know their economic house is on shaky ground, literally. Japan is eternally at nature’s mercy, vulnerable to the sea that surrounds it, to earthquakes of the soil beneath it and a real shortage of raw materials, particularly food and fuel.”3 A period of extended isolation could be disastrous to the country. Japan’s trade surplus is its only generator of wealth. This is a fact of life that is preached through the media and taught constantly to Japanese throughout their lives in school, from parents, and when they enter the working world. The message is clear: Japan is always vulnerable, we must protect her. “Obsessed with national character, the Japanese are proud and ambitious, constantly measuring themselves against the world’s best and biggest. Accordingly, one of the main sources of Japan’s strength is its people’s willingness to sacrifice, to be regimented and homogenized, and to subordinate personal desires to the harmony of the working group.”4 The Japanese people have had to become a group-oriented society. While in the western world, individuality and independence are highly valued, Japanese society emphasizes group activity and organization. The people accept that they will belong to one social group and work for one company for life. The crowded island conditions have driven society to value conformity. “The highest priority is placed on WA, or harmony.”5 The Japanese have learned to share their limited space and value the precious distance between themselves and others. The culture that Japanese people are brought up in causes them to recognize that they have to work together to succeed. Only harmony will provide improvement. This development of the human nature and attitude relates directly to Japan’s business practice and provides a basis for good business relations. Japan’s education system has grabbed the world’s attention as it is specifically designed to teach the children skills and aptitudes to give them an edge in the business world. “The educational system, based on the principle of full equality of educational opportunity, is widely recognized as having greatly contributed to the prosperity of Japan by providing a highly qualified work force supplemented by extensive intraining programs by many of the major employers.”6 “The primary and secondary educational system is probably the most comprehensive and most disciplined in the world.”7 Where North American students attend school 175 days a year, Japanese students attend 240 days. . Japanese students attend elementary and secondary school six days a week and for two months longer each year than North American students. In addition, they have long hours of homework. A large majority of Japanese students attend juku, or preparatory schools, in the evenings and on Sundays. In higher education, while lacking the strong University system which exists in North America, the curriculum is equally rigorous, and “Japan is graduating 75 000 engineers per year, 3 000 more than the U.S., from a University population one fifth the size.”8 “The education system itself is a unifying force. It molds children into group oriented beings by demanding uniformity and conformity form the earliest ages. The attainment of excellence within this complex environment, and the importance it holds for one’s future is stressed early.”9 This emphasis places a great burden on the young to perform well in school an to earn admittance to high status universities. The public school system not only produces good, obedient citizens, it produces good workers. A willingness to give oneself to the corporation’s best interest, to arrive early and stay late, and to produce good work are attributes learned in the Japanese schools. Those who cannot learn these skills do not do well in school or do not rise in the ranks of the corporate world. The education system is an excellent example of how the Japanese recognize and develop the necessary human skills that are needed in society and stressed in the business world.. One of the most important aspects of Japan’s successful economics is the countries employment system. The system is very complex and has many hidden but powerful aspects that help Japan maximize its output. The system’s three main principles of lifetime employment, company unions, and seniority pay, work together to form a system worthy of notice. “The system is based on comprehensive labour regulation, and it has been consciously invented as Japan’s answer to a Western labour system that Japanese leaders have long believed is inappropriate for an advanced economy.”10 “The whole system is based around a people-centered management. Japanese companies undertake their annual hiring of recent graduates expecting all the people they hire to work with them until retirement.”11 Lifetime employment is often regarded as a key factor behind Japan’s industrial success. Yet, “lifetime employment as practiced in Japan is no more than a general guiding principle. It is by no means a guarantee and only the large companies can afford to assure employment.”12 The obvious value of such a system is the sense of stability it presents. But there are many advantages to such a system. “Consider how valuable the lifetime employment system is in winning worker cooperation for the introduction of productivity enhancing new technologies. Japanese workers see no downside risk in helping their employers improve productivity, they embrace new technology knowing it will enhance their company’s future and their own jobs. Workers can then be reassigned to different work, typically making improved products.”13 “The American hire-and-fire system sets works and managers against each other over new technology. American workers are suspicious of new technology because employers often use such technology to cut jobs. If a company is to innovate, it must train its workers to handle ever more sophisticated tasks.”14 “Here again the Japanese labour system provides Japanese employers with a vital advantage in that they can undertake expensive training programs knowing they will enjoy a good return on the investment.”15 By contrast, American employers see such training as a risk because the workers are free to take their skills to rival employers. Japanese management is also a major source of Japan’s success. “A Japanese manager knows that the decisions he makes today remain permanently on his record and he may be asked to account for them many years down the road. He cannot simply sweep problems away. The company’s long term success always has to be on the mind of the manager.”16 “The lifetime employment system also enables Japanese corporations to groom prospective executives for many years.” The managers know that the path to success is to dedicate themselves single- mindedly to the success of their companies. The lifetime employment system contributes greatly to raising employees’ desire to work and to fostering loyalty and commitment to the company.”17 The merits of the Japanese employment system are endless. The healthy relations provide a basis for growth. All the aspects of the employment system develop skills necessary for a stable company. Ever since the Tokyo stock market entered a period of decline in 1990, the Western press has attacked aspects of Japan’s economics and portrayed Japan as in an economic slump. Westerners endlessly attack the Japanese employment system. It is true that the system was supposed to make workers fiercely dedicated to their employers, but it prevented Japanese companies from cutting the size of the work force in hard times. “While Canadian companies emerged from the recession leaner and more competitive, Japanese firms stagnated.”18 The argument is always the same: as the world economy “globalizes”, Japanese corporations are being drawn into increasingly head-to-head competition with Western counterparts and face extinction if they do not adopt the “more efficient” Western system of employment. This argument was “never more insistent than in the recession of the early 1990’s”19, but, as on previous occasions, the Japan Employment system triumphantly silenced its critics by emerging from the recession as strong as ever. Westerners cut jobs to increase profits, the Japanese cut profits to increase jobs. Western critics also attack the Japanese education system. “Although often noted for their rigor and high test results, the school system is seen as presenting a dark side with conservatism and conformity.”20 A modern economy is argued to “need creative thinkers willing to take risks, which Japan’s schools are not producing.”21 This may be true as Japan has a history of copying Western products detail by detail. The lack of creativity is dismissed by the Japanese. They feel that “copying is common sense. Relieved of the burden of having to come up with original designs, Japanese manufacturers can concentrate all their creative talents on the far more economically effective task of beating Western rivals in productivity.”22 The school systems are producing thinkers and problem solvers. All of these attacks are underestimating the power of the Japanese. Is it an economic slump when “in the first four years of this decade, Japanese exports soared by 32 percent, the yen rose 27 percent, and Japanese employers created 3.2 million new jobs. Japan is not crumbling, it has now surpassed the U.S. to become the world’s largest manufacturing economy and is ready to claim the lion’s share of the world’s growth.”23 Attacks on Japan’s ways are countless. Obviously there are many problems with the way they run their country. Yet, no one can ignore the economic success that Japan has had. The roots of the success can be traced back to the skills developed through culture and education, and the healthy attitudes developed by the Japanese employment system. The Western world could learn much from what makes the Japanese successful in business. It is not just a case of adopting Japanese techniques and technology but of recognizing and developing the necessary human skills. The East has borrowed heavily from the West in improving its business performance; the West could also take note of the lessons of Japanese history and culture and consider applying them in its own organizations.