Looking Back, Looking Forward
Image Credit: Flickr / trialsanderrors

Looking Back, Looking Forward


When Prime Minister Naoto Kan gets to the point where he can begin work on his ‘New Japan’ pledge, he probably won’t have much trouble convincing the population of the need for reform. Even before the current crisis, few Japanese were satisfied with the status quo. The disagreement is over the nature of the reform.

Uneasy about upending existing institutions, conservative reformists (yes, they exist) have often favoured calls for Japan to embrace its traditional values. Journalist Yoshiko Sakurai is a good example. This isn’t unlike conservative calls elsewhere, but for Japanese the argument resonates because modern Japan’s sharply fluctuating fortunes have produced two relative golden ages: the Meiji period and the post-war economic ‘miracle.’ So it isn’t surprising that some commentators urge people to embrace values they feel were evident during those two periods.

Precisely what those values are and how exactly they could help Japan today are often left a little vague, but generally they include concepts of diligence, thrift, community-spirit, patriotism, and the like. The idea is usually that if people would just show the will of their forefathers, Japan will recover and go on to recapture past glories.

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This argument may be about to get a boost, given the widely noted stoicism and community spirit demonstrated by the Japanese in response to their recent tragedies. Many Japanese outside the disaster areas have felt galvanized by a desire to help their country recover, and there’s evidence of a new spirit of altruism and community pride.

Nobody could argue that a stout heart and generous spirit aren’t traits worth having, nor that there’s nothing to learn from the achievements of the past. But as Japan begins to grapple with both the post-disaster restoration and the reforms the country has long needed, it’s going to have to rely on more than traditional values.

To start with an obvious point, the Japan of yesteryear wasn’t so great if you were a woman, disabled, a foreigner, a member of the underclass, or generally of an independent mind. And neither of the two golden ages ended well, ultimately resulting in militarism and recession, respectively.

Indeed, some traditional values seem downright unhelpful—it’s hard to see, for example, how traditional Japanese gender views are going to help solve the baby shortage, which requires alleviating the opportunity cost of childcare for modern, educated, and career-minded Japanese women. Or how traditional notions of individual thrift will assist a country whose primary fiscal problem is a lack of tax revenues. Or how relying on a hereditary elite—the sons and grandsons of politicians—can provide real political leadership.

Take monozukuri, a term that has entered the local lexicon in the past decade or so. It literally means ‘making things,’ but it is meant to connote a commitment to manufacturing excellence. It’s used very justifiably in celebrating Japan’s long tradition of craftsmanship. But it has been hijacked by certain policymakers and commentators, and touted as a cure-all for the challenges confronting Japanese industry. Rediscover our monozukuri, goes the thinking, and we’ll restore Japanese industrial pre-eminence.

The argument overlooks an inconvenient fact: post-industrial Japan is primarily a service economy. According to IMF figures, manufacturing in Japan accounted for just 21.9 percent of GDP in 2009. Only France had a lower figure. Services, by contrast, accounted for 76.5 percent. And many segments of Japanese manufacturing already boast enviable efficiency; the services sector, by contrast, lags OECD rivals, primarily because of a lack of openness and inadequate investment in IT. In short, a focus on craftsmanship is likely to do little for the Japanese economy.

In fact, look through the OECD’s excellent online economic database and you quickly realize two things. First, that Japan is very frequently an outlier—in debt, investment, birth-rate, immigration, and the employment status of women. And second, that other advanced economies are following in its footsteps; the fact that they aren’t quite where Japan is now can be largely explained by their higher immigration levels.

This suggests that Japan, for the first time in its modern economic history, is in the position of having to navigate uncharted territory. It needs to define and achieve success in the post-industrial era of low growth: low birth-rates, an aging population, rising entitlement burdens, declining demand, deflationary pressure, declining manufacturing, and climbing debt. It can of course make some progress with quick fixes—assuming the political will is there—such as corporatizing the farm sector, opening the services sector to foreign competition, and making it easier for women to balance kids and career. To its credit, the Kan administration has already tried to take some tentative steps in this regard, mostly notably with its plans to join the Trans-Pacific Partnership.

But for Japan to meet its long-term challenges of reining in its runaway public debt while restoring a measure of vibrancy to its economy, offering opportunity to its young and security to its old, it will need both traditional values and true policy innovation. In other words, look forward, as well as back.

If it manages to do that, it just may be a pathfinder for the rest of the industrialized world.

James Pach is the publisher of The Diplomat and the founder of Trans-Asia Inc., a Tokyo-based translation and investor relations company.

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