Although U.S. and British-style capitalism has prevailed throughout the world, Japan should fight to preserve the positive aspects of its traditional economic systems, scholars and economists said at a recent seminar in Tokyo.
Ronald Dore, a senior research fellow at London School of Economics and Political Science, said the convergence of varying economic systems into a single pattern is not an inevitability.
“As a result of industrial globalization, individual countries cannot implement selfish rules in many areas,” Dore said in fluent Japanese. “But they can still decide on their own economic systems.”
The seminar on Japanese economic systems, held Oct. 25, was organized by the Japan Foundation and supported by The Japan Times.
Dore, a professor emeritus at University of London, cited what he described as four unique points of Japanese-style capitalism.
First, large corporations work as semi-communities with lifetime employment and company-based unions.
Second, business relations between companies, as seen in close ties between major manufacturers and their subcontractors, are often built on a long-term basis and on a sense of social duties.
Third, competitors in the same industry cooperate with each other more often than their Western counterparts.
Fourth, bureaucrats play a larger role in leading industries to work for the benefit of the public and in mediating conflicts of interest among businesses.
However, Japanese companies have been giving up some of these features in recent years by attempting to Americanize their systems of management.
For instance, Japanese employers have been paying greater attention to shareholders and the market value of their companies, he said.
As Japanese stock prices continue to fall amid a protracted economic slump that has lasted since the early 1990s, the custom of cross-shareholding has begun to unravel, and more foreign investors are acquiring stakes in Japanese firms, he said.
According to the Tokyo Stock Exchange, as of March 2002, foreign individual and institutional investors owned about 18.3 percent of the shares of listed Japanese companies — more than triple the level a decade ago.
This has forced Japanese executives to put greater emphasis on share prices.
“Japan has been Americanized over the past decade,” Dore said. However, while the process is often referred to as globalization, Dore said the pressure has been coming from the United States, not global markets.
Three of the Japanese economists expressed concern over the changes cited by Dore.
Takenori Inoki, an economics professor at the International Research Center for Japanese Studies, said declining interest in long-term investment could have a negative impact on the Japanese economy.
The practice of cross-shareholding, or the mutual holding of shares by companies with close business ties, provided financial stability for Japanese firms and allowed them to make large-scale investments based on long-term plans.
Tadao Kagono, an economics professor at Kobe University, said Japanese firms should care more about stakeholders such as employees, who will be committed to their employers’ activities on a long-term basis.
Tetsuji Okazaki, a professor of economics at the University of Tokyo, said a recent study shows that the adoption of U.S.-style management methods, including the reorganization of corporate executives, does not always result in good performance.
“I think Japanese-style management systems that have enabled efficient management will continue to remain (at Japanese companies),” Okazaki said.
Despite its popularity, the business model prevailing in the United States is not fixed and will continue to evolve, said Dore. In fact, the U.S. corporate systems of the 1960s and 1970s once resembled Japanese-style management, in which employers practice more self-restraint in pursuing their own interests, Dore said.
In the 1980s, however, the social standard for economic activity in the U.S. changed in a way that permitted corporate executives to pursue self-interests in the extreme. This new standard was supported by an academic theory that promoted the assumption that human beings are highly motivated by profit, he pointed out.
One of the results of this way of thinking was the introduction of stock options, which he said paved the way for the widening the income gap between employers and employed.
Today, the U.S. business model finds itself under scrutiny in light of the accounting scandals involving Enron Corp. and WorldCom Inc. These companies typify the type of management that is based on the need to drive stock prices.
“A (different) trend may again appear to modify the economic mechanism that can recklessly drive companies, to one with more social restrictions,” Dore said.
In Japan, the lifetime-employment and seniority-based wage systems are crumbling, and many firms are beginning to adopt performance-based pay. Some say these new systems will give workers more incentive to do a better job.
But Kagono of Kobe University said that Japan’s principle of maintaining equality at the workplace has cultivated a sense of solidarity that has guided employees to work toward their company’s prosperity.
Even though the Japanese society is losing that solidarity now, Kagono said he doesn’t think companies can be revitalized “by just giving more money to employers and some of the workers at managerial posts.”
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