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?

Politicians everywhere are now telling us that we must spend our way out of the recession, but voices that suggest over-spending might have caused it are ignored. We might eventually learn something the Japanese have known for centuries: consumption for the sake of it may not be such a desirable way of life.

During the 1980s the Japanese certainly knew how to save not just their income but their energy. I remember when I first visited Tokyo in the (northern) autumn of 1983 the metropolis followed a compulsory program of organised brown-outs. Everyone was warned in advance when their neighbourhood or business would lose power for two hours and had to work accordingly. It was a policy left over from the oil price hikes of the 1970s. Ironically, by the 1990s the Japanese were being urged by the power companies to use more electricity (because of over-supply thanks in part to all the nuclear power stations built around the coastline). And suddenly, in the years of stagnation, the toilet seat warmer became a household must.

That first year I was told the Japanese never bought second-hand goods, so my friend and colleague Rick Tanaka easily furnished a flat in Shibuya from discarded but usable furniture and appliances he found in the street. This year at the annual two-day Tokyo boroichi (“rag”) market in January half a million people jostled for bargains - anything from home made string and used car parts to deep fried fishballs and pre-loved kimono.

It's been a strange ride: from enforced national abstemiousness to obligatory greed in less than three decades. Perhaps the relatively recent adoption of consumer avarice and a throwaway culture in Japan is skin deep, with only one generation growing to maturity through the era of the rampant consumerism, whereas in America from the early 1950s, most people took it for granted they had a right to borrow to consume.

Those who want to get things back to “normal” are hoping the recession will recede. The international consensus of finance journalists says the Japanese still save too much; and maybe beneath the Australian critique of Japan's “failure” in the 1990s there is a sense of deprivation. If Japan had continued on its growth trajectory Australian life might have been even sweeter.

Professor Tony Aspromourgos, a Sydney university economist, wrote to the Sydney Morning Herald in mid January, that the Japanese might now teach us something else from that experience: how to survive the deflation that follows a property bubble.

They have their ways: a Japanese man recently completed a round-the world drive in a 4WD powered by used cooking oil cadged from local restaurants. In Kyoto you might think that there's something wrong with the ignition system on municipal buses, because at every stop, to set down passengers or pause for traffic lights, the engine cuts out so the heating, air conditioning and display system run off the batteries. I'm not sure what the total efficiency of such a ploy is, but it's an instant do-it-yourself mass transit manifestation of the hybrid vehicle, and less disruptive than the brown-outs I encountered in 1983. And do hang on to those pieces of string.