Learn from Japan?

Mostly we are obliged to remember the 1980s as the “decade of greed”. Less memorable perhaps was the craze promoted in academic, bureaucratic, think tank and journalistic circles that we must “learn from Japan”. Now that Japan is going backwards, there is nothing to learn. Or is there?

Twenty years ago, if we were told that Japan's trade balance had collapsed by 35 per cent and that growth had shrunk so fast in the last quarter, annualised it would have been 12.7 per cent, we would have been shocked but the Americans would have cheered. In the early 1980s most US trade policy was directed at the allegedly “unfair” competition from Japan's electronics and auto industry and the USA was trying to wean Japan off export dependency, just as they are now trying to do the same for China. Japanese companies made things too cheaply. And Japanese consumers saved too much. Now that Japan recently pledged $27 billion to assist developing currency weather the global recession (and a further sum to bail out the IMF) it's probably a good thing that they did.

Even though Australia still exports more resources to Japan, we are likely to be told that we must look to China for our future. China is Australia's biggest “trading partner” (although some of what we buy from China is manufactured by Japanese-owned or financed companies) but we still export more by value to Japan. However, aside from the usual wacky stories about eccentric Japanese manners and hobbies, sumo scandals and the fishing industry's insistence on scouring the oceans for whales, for some years it's been as if Japan the country had disappeared - until the current crisis reminded us how important Japan still is.

For a variety of reasons foreigners, including Australians, now feel they have a special right and even a duty to be especially critical of Japan's failings, but until the bubble burst in the early 1990s a different attitude prevailed. In the 1980s, our newspapers reminded us weekly how not only was Japan Australia's most important trading partner but that our economic policies should reflect and mesh with Japan's requirements.

In particular the need for reliable supplies of coal, iron, bauxite, and gas demanded the compliance of our work force, indeed our labour laws, should be “restructured” to enable that reliability. Supplies of Australian iron, coal, gas and bauxite must never be interrupted, or other suppliers (Canada, South Africa, India) would oblige. The Labor government's famous Accord was partly devised to satisfy that insistence and, later under the Howard government, an aggressive reform of industrial relations started on the waterfront.

But “learning from Japan” was more doing right by Japan: actual Japan-bashing, was an American occupation, as rust belt politicians blamed Japan for stealing their factories and jobs. They now blame China. Ronald Reagan's administration demanded action to liberalise Japanese trade and remove government subsidies. This was known by the Japanese as gaiatsu - pressure from outside - but fitted well with the perception nourished by important elements in the ruling Liberal Democratic Party (the LDP which has governed almost continuously since it was formed in 1955) that the Japanese were being victimised, not only by the victors in the Pacific war, but Nature itself which had denied them the coal, iron, oil and gas they needed to support their population.

In other words, whatever Japan did was fair because its action were only making up for the raw deal handed out when resources were “allocated by the gods” as some official policy documents claimed.

In a series of policy moves (notably the Plaza Accords of 1985) Japan agreed to revalue the yen and restructure its economy. Japan was also urged to “share the burden” of defending the Pacific from communism, which was in tune with the policies of the hawks in the LDP coalition. Its leader Yasuhiro Nakasone (now 93 and still politically active) used gaiatsu to build up Japan's armed forces and subvert the “peace” constitution. Nakasone perversely promised to make Japan “an unsinkable aircraft carrier” - the same phrase used by Winston Churchill when he urged the USA to send arms to Britain at the beginning of the struggle against Nazism. Japan has since been bonded ever more closely to US strategic policy.

Nakasone was keen to restructure the Japanese economy not so much to prise it out of the hands of the bureaucrats, but to block any chance of a government of the Left - as represented by the Social Democratic Party (SDP). Simply by privatising huge national enterprises such as railways and airlines (in a process he called “administrative reform”) he squeezed the SDP's source of funding - the public sector trade unions. They were decimated and the impoverished socialists shrank to a parliamentary rump.

Japan's opposition these days is made up of defectors from the LDP who call themselves the New Democratic Party. Elements in the NSW Labor party may have learned something from that.

After watching Japan's economy “stagnate” through the 1990s, our editorial writers have become bolder and are now inclined to tell Japan how its economy should be “reformed” some more. As was stated in the Australian Financial Review in early January: “Japan needs a competitive system to develop new ideas outside the opaque old world where bureaucrats and LDP factions control the agenda.” Assuming, that Japan and all economies must return to the path of growth.

But, dare we proceed with the upgrades of our rail and port infrastructure on the understanding that the recession is temporary and that mass transit of resources to Asia will resume? Or has some deep movement changed everything forever? Demand may never return to the dream levels of the resource boom years. And how long can we justify selling so much coal to Asia's prime polluters?