LAUSANNE, Switzerland — The late Shigeto Tsuru’s “Japan’s Capitalism: Creative Defeat and Beyond,” which I referred to and quoted in my Aug. 26 column, urged Japan to “work hard, through both aid and trade, to wipe out the poverty that plagues the Third World.”
In the course of the 1990s, Japan did, in fact, significantly increase the amount of aid it disbursed to developing countries. Currently it stands as one the biggest providers of overseas aid in absolute terms, though in relative terms its share of aid to gross domestic product (0.26 percent) is still modest, falling well below the Organization for Economic Cooperation and Development’s target of 0.7 percent. Thus it is significantly lower than generous countries such as Denmark, Sweden and the Netherlands, below most other EU countries and at about the same level as Ireland and Portugal.
In addition, in many rich countries the amount of public government aid is considerably complemented by funds provided by private foundations. These private foundations exist in Japan, but they are comparatively small.
In other areas of global economic activity — imports, inward investments and immigration — Japan’s levels are the lowest among OECD countries, and especially low compared to France, Germany or Britain. The Japanese economy today is a broken locomotive. Even when it was running on full throttle, it was never properly put to global use and never carried many passengers.
This analogy applies not only to the physical movement of goods, technology, capital and people, but also to the movement of ideas. Japan’s astonishing success for several decades as an export powerhouse notwithstanding, the country’s contribution whether in terms of institutional or intellectual leadership has been negligible.
There are several reasons why. One is that Japan is viscerally protectionist. Japanese policymakers and many of its economists — with prominent exceptions such as Tsuru (educated, however, in the United States) — are fundamentally mercantilist. The idea that imports are good and that in order to be able to import you need to export is as remote to the Japanese mind-set as go-go dancing would be to a cloistered nun. American trade negotiators recently commented to me that while the French, Spaniards and Italians are also viscerally protectionist, at least they admit it. The Japanese are protectionist while pretending to be supporters of free trade.
This business of Japanese protectionism is a bit of an old chestnut. Based in Japan during the heyday of trade friction, I remember all the arguments, claims and disclaimers. “Foreign firms do not understand Japan and do not try hard enough” was a frequent refrain, with foreign firms generally understood to be American and European.
My point, however, is different. When a Danish, Czech or Greek exporter gets up in the morning, he or she first looks to Germany. When a Korean, Taiwanese or Thai exporter gets up in the morning, he or she looks to the U.S. and possibly to the EU, knowing that Japan is pretty hopeless.
There are more Korean cars in Frankfurt, Germany, alone than in the entire archipelago of Japan! Alhough Germany, like Japan, is a world-class producer of automobiles ranging from the low to the very top end of the market, foreign cars are a common sight in Germany. At one point Renault had a 12-percent market share.
Of course, Japanese manufactured imports from Asia, China in particular, have greatly increased during this last decade, but these are primarily imports from Japanese corporations’ regional subsidiaries rather than from indigenous manufacturing firms. Japan’s resistance to imports includes not only manufactured goods, but also, as the recent trade battles with China over shiitake mushrooms, leeks and rushes illustrate, basic commodities as well.
While Japan is highly resistant to the inward movement of goods, it is even considerably more so in respect to the inward movement of people. It is in the area of migration that rich countries will have the biggest contribution to make in the global era.
The population of the developing world will dramatically increase over the course of the next three decades. For example, between 2000 and 2010, 700 million young people from these countries will enter the labor market — a number higher than the total labor force in the industrialized world. Of course, proper governance and investments should be aimed at avoiding having too many seek employment beyond their countries’ borders. Inevitably many will have to.
When Europeans and Japanese view immigration today, they forget that when they were undergoing their industrial revolutions, it was their populations that were being exported en masse to the rest of the globe. From the 1868 Meiji Restoration to the 1930s, Japan’s population increased by 250 percent from some 30 to 75 million. The fact that economic growth was unable to keep up with demographic growth in good part explains all the tensions in Japanese society that ultimately launched the country on the road of militaristic nationalism and imperialism.
But also during this period, millions of Japanese migrants settled in the U.S., Canada, Latin America and, of course, in colonies such as Korea, Taiwan and Manchuria. In industrializing Japan, as in industrializing Europe, emigration provided a social safety valve and a means of survival for millions of people.
As developing countries experience exponential population increases, rich countries must contribute to their development by opening up their borders as much as possible and making every effort to make the new arrivals welcome and well integrated. The jobs they will obtain, the skills they will learn, the remittances they will send home will all be of great importance. As their countries develop and achieve higher levels of prosperity and governance, many of these immigrants can be expected to return home. In the meantime, however, they will also have contributed considerably to their host societies, through their vitality and very often their entrepreneurship.
Since one of Japan’s biggest liabilities in the global era is the excessive homogeneity of its population, changes that bring about greater diversity, more languages and more foreign customs will have fantastic results. The benefits that countries with a high rate of foreign migrants have gained, such as Sweden and Switzerland, should serve as a model lesson for Japan. Lausanne, where I live, has a highly attractive patchwork of races, colors, nationalities and languages, making what would otherwise be a rather sedate and boring Swiss city very lively and exotic.
With large-scale migration, Japan will be fulfilling Tsuru’s vision of contributing to the development of poor countries, and will greatly benefit in many ways itself. It is a win-win solution.
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