YAOUNDE, Cameroon — During a conversation at a dinner in Shanghai recently with some Chinese friends, the comment was made that Japanese businessmen in China were now known quite willingly to accept various forms of bribes and kickbacks. The man who was making this comment, who knows Japan quite well through having done a lot of business there, remarked that while in the past Japanese businessmen in China were notorious for giving bribes, they did not normally accept them. Now, however, since they do not know what will happen to them upon their return to Japan — with lifetime employment no longer secure and career prospects often bleak — putting together a bit of a nest egg has its attractions.
This is one example, out of myriads, of what is increasingly referred to as the “crisis of capitalism.” It is a crisis of confidence, a crisis of legitimacy, a crisis of ethics and a crisis of performance. It is a global phenomenon, to which Japan has contributed unfortunately a good deal.
Capitalism has no great inspirational appeal. One can be a romantic socialist, an idealistic environmentalist, a passionate pacifist, an enlightened humanist, but try putting any of these qualifiers in front of capitalist and it sounds strange, indeed oxymoronic. Great poems, novels, operas have been written about people who die for love, for a noble cause, or for their country, but one cannot imagine an epic on someone dying to enhance shareholder value and with the words “market economy” on his lips.
Daniel Yergin, in his excellent book, “The Commanding Heights,” put it very well when in his conclusion he wrote: “A system that takes the pursuit of self-interest and profit as its guiding light does not necessarily satisfy the yearning of the human soul for belief and some higher meaning beyond materialism.”
The visceral suspicion about capitalism, and especially capitalists, is no doubt one reason why while there is a huge “protest community” pretty much all over the world — though rather small and mute in Japan — fighting against “corporate-driven globalization.”
By contrast, there is no active, global-market-economy “support community.” Many people who are not “against” capitalism are not necessarily “for” capitalism; they feel no emotional commitment, but probably just a pragmatic and resigned realization that it is, perhaps unfortunately, the system that works best. With the collapse of communism, market capitalism became the prevailing system throughout most of the world mainly because the alternatives were not working.
Capitalism ultimately can be sustainable only if two conditions are met: (1) It actually delivers the goods, and (2) capitalists engage in sufficient restraint so that the materialist pursuit of self-interest and profit (i.e., greed) is not excessive. In 2002 both conditions are quite manifestly, indeed blatantly, not being met. Japan, in particular, has been seriously afflicted.
Today the global market economy is in the doldrums. Japan, the world’s second-biggest economy, has been especially deficient in creating new wealth for the last 10 years; alas, the rot seems to be spreading. Frequent references are made now to the possible “japanization” of Germany, and indeed some fear that the United States may “do a Japan” as well.
The poor performance of nations is reflected in the poor performance of companies. While one is especially conscious of the scandal-plagued corporations that have gone bust, or almost bust, in fact shareholder value has been destroyed across a very broad swath. The 75-percent drop in the value of the Nikkei stock average is the most egregious example. But there are many others across the globe. A Polish professor of management said to me recently that he is more concerned about the visible incompetence of business leaders than their dishonesty.
Take the fallen idol Percy Barnevik, former chairman of ABB. His helping himself to such a huge pension raises serious ethical questions. Had ABB thrived, this might have been passed over, but the fact that it has collapsed and today may be worth not much more than the generous pension Barnevik allocated himself is the most serious indictment. So, as I replied to my Polish friend, if business leaders were just incompetent, that would be bad, were they just dishonest, that would be unfortunate, but the general impression increasingly is that they are both dishonest and incompetent.
Whether poor ethics are causing poor results, or poor results are causing poor ethics, or indeed whether there is any correlation at all is a fascinating question, but one I propose to leave aside here. The important point is that both the poor results and the poor ethics are happening simultaneously.
The crises at Enron, WorldCom, Arthur Andersen, ABB, Vivendi, Snow Brand, Tepco are all occurring as the world faces a recession: Jobs are being lost, savings are being wiped out, and insecurity is being exacerbated. Both conditions for sustainable capitalism, profits and self-restraint, are failing.
The picture is pretty bleak. On the basis of the painful experiences of the 20th century, we know that alternatives to market-based capitalism are much worse. Yet the temptation is always there and the backlash is getting stronger. In fact, the world economy and global business are doing poorly not because of the market-based global economic system, but because the market-based global economic system, as currently practiced, is imperfect in that there are still far too much protectionism and too much unethical behavior. Business leaders need to respond positively and strategically.
I quoted The Economist a few weeks ago when it argued that as bad as the situation may be in America and Europe, it does not approach the rot in Japan. The same comment applies in this case also. One of the things that business must do in the industrialized countries is provide the means for developing countries to grow. It can do this, on the one hand, by pressuring their governments to cease discriminating against exports of developing countries. Another way is to engage in business in developing countries, primarily through investment.
I am writing this column from Yaounde, Cameroon, where an international business conference organized by the International Chamber of Commerce is being held to determine how business can contribute to African development in the context of the newly established framework known as NEPAD (New Partnership for African Development). Along with African business leaders from pretty much all over the continent, there are representatives from companies from all of the major industrialized countries, except one: Japan. Just as I mentioned that there was no Japanese business executive who bothered to turn up at the business roundtable at the United Nations-sponsored conference on financing development in Monterrey, Mexico, the pattern was repeated.
Japan is arguably the country that has most benefited in the past from an open global economic system. That it should repeatedly and systematically be conspicuous by its absence at forums trying to promote the global market economy and foster development is a terrible and shameful indictment.
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