Lessons from a Troubled Neighbor; lessons also for others who can learn, other than pretenders

12 Jun

Posted by The Ethiopia Observatory (TEO)
by Yan Jiefu, Lessons from a Troubled Neighbor CaixinOnline

Japan’s rapid post-war growth that ended in years of stagnation serves as a mirror for China to reflect on its own economic model

China has looked to Japan for lessons in development for almost a century. Despite frictions between the two countries in modern history, China has long considered Japan as a model among developed nations.

Huang Zunxian, who served as a Counselor at the Chinese Embassy’s in Tokyo for the Qing Court between 1877 and 1882, discussed his observations on Japan’s geography, politics, society, culture and other aspects in his seminal work, Treaties of Japan, published in 1890. Huang is one of the pioneers who reintroduced Japan to the Chinese public after the Meiji Restoration, a revolution that restored imperial rule to Japan in 1868.

The Chinese were eager to learn from Japan’s success not only because of its remarkable achievements in modern times, but also because it was the only developed country in the East.

But as China’s economy took off, while Japan’s growth stagnated starting in the early 1990’s, public perceptions in China about its technologically advanced neighbor have undergone subtle changes. An increasing number of people believe China no longer needs to learn from Japan, because the latter has been embroiled by political and economic turmoil in recent decades.

But is there really nothing worthwhile that China can learn from Japan?

Nearly four decades ago, a U.S. scholar raised a similar question. In 1979, Ezra Vogel, former director of the Fairbank Center for East Asian Studies at Harvard University, published the book Japan as Number One: Lessons for America, after a close study of Japan’s social and economic conditions for well over a decade.

Unlike many Western scholars on Japanese studies at the time, such as Ruth Benedict and Lafcadio Hearn who focused on the country’s distinguishing culture and traditions, Vogel focused on how the country rebuilt itself from the ashes of World War II to achieve what some scholars called “a miraculous growth” that dwarfed the pace of development in many Western countries.

Many scholars tend to attribute Japan’s success to its spirit of nationalism and deeply entrenched traditions. For example, Benedict in her best-known work The Chrysanthemum and The Sword described the extreme sense of “unconditional and unrestricted loyalty” to the Emperor that is valued in Japanese culture. She believed such traits allowed the Japanese to quickly readjust policies to achieve their growth targets.

There are other factors that go beyond those derived from its culture that can explain Japan’s post-war recovery and its ability to sustain two-decades of rapid growth.

At the time when Vogel published his comparative study in the late 1970’s, Japan was the second largest economy after the United States, and its strong growth shook the global economic order dominated by the West. Japan’s GDP at the time exceeded the combined GDP of Britain and France. Its steel production volume was equivalent to that of the United States, but its industrial efficiency was higher. It was also more competitiveness in areas like shipbuilding, automobile manufacturing and automating assembly lines, and Japan’s trade surplus with the United States was widening.

Vogel attributed Japan’s success to its quest for knowledge, its political institutions and practices, as well as its large companies, welfare system and efforts at minimizing crime. These seven factors can be broadly categorized into three areas: developments in education and information systems, effective institutions and sound social policies.

Japan’s education system and advancements in information technology continues to impress many in the world today. Vogel noted that compared to most U.S. think tanks, Japanese research institutions may be weaker at basic research and innovation, but they have a strong capacity to gather the latest information on various topics to provide insights and references to entrepreneurs and policy makers. Therefore, Japanese think tanks were more like sources of information, rather than policy advisors.

Japanese companies were known for their rigid hierarchy and low attrition rates. Most employees worked in one company for life. Critics thought such a system will result in low efficiency, but Vogel argued that this enhanced employees’ loyalty and encouraged them to apply their knowledge to enable the organization to reach long-term goals.

Japan has also outperformed most Asian countries in terms of its social policies. The country has demonstrated its strengths in protecting the environment, controlling crime and at urban planning. Vogel wrote Japan’s social management was partly backed by its sound welfare system. Unlike many Western countries that build a government-backed, unified social security net, Japan asked private companies to play a big role in funding welfare services and encouraged high rates of labor market participation.

But less than a decade after Vogel’s observations were published, Japan was hit by deflation and a recession that lasted for several years. The gap between Japan and the United States hasn’t narrowed but only expanded further, while a number of emerging countries, including China, have risen to replace Japan in many fields.

Japan’s diminishing influence on the world economic stage has shed light on the problems with its growth model. Its rigid economic system and political system where power is concentrated in the hands of a few wealthy or elderly individuals were the main factors stifling growth.
In the conclusion to his book, Vogel warned both Japan and the United States to be cautious so that they do not become arrogant due to their economic achievements.

Japan’s growth trajectory over the past three decades, of experiencing a quick boom that ended in years of stagnation, serves as a mirror to China to reflect on its own economic model. And there are still many lessons that China can learn from the success and failure of its neighbor.
*Yan Jiefu is a literary critic

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