America’s Setting Sun

Originally published June 14, 1982

I FIRST became conscious of the Japanese as supermen many years ago, when the 240th Coast Artillery of the Maine National Guard, in which my late brother-in-law was an officer, stood ready to be mobilized because of an uproar, as I recall it, over the exclusionary immigration law. A Japanese fleet was expected to steam over the horizon into the teeth of the 10-inch disappearing guns of Fort Williams, originally emplaced, some time after the event, to protect Portland Harbor in the Spanish-American War. Then as now, the Japanese were regarded as miracle-workers.

Today it is Japan’s industry that evokes awe. It has become fashionable to contrast the performance of that country’s labor with ours-particularly with Detroit’s. Even American management has come in for some criticism. Inventories of parts and components in Japanese factories, it is pointed out, are much lower than those in their U.S. counterparts. It is further claimed, by economists like Lester C. Thurow, that America is doomed to fall behind Japan if we try to support our” sunset” industries, where the Japanese are already beating us (automobiles, steel, electronics), rather than our “sunrise” industries (unspecified), where we can have a lead. Why automobiles are necessarily sunset with us and sunrise with them is not explained.

A new fashion (also popularized by Thurow, among others) emphasizes the fall in the American standard of living. Of course, we are still the world’s richest nation; our GNP remains far higher than anyone else’s, yet that is because there are so many of us. If we look instead at our standard of living, as we should, we have less to brag about. As Thurow observed in a recent New York Review: “German workers have twice as many paid holidays and vacations as American workers. American males can expect to live four years less than those of Switzerland, while American females lag ‘only’ three years behind. America ranks 18th in infant mortality [he doesn’t mean exactly what he says, and what he does mean is no longer exactly true, but no matter). Air pollution in the United States exceeds that in other industrial countries. The homicide rate is eight to nine times that of other major industrial countries.”

These depressing (if somewhat disjointed) statistics can be roughly summed up in one category: GNP per capita. A relevant table, using ordinary exchange rates to convert from one currency to another, was included in a study released a few months ago by the Organization for Economic Cooperation and Development. A more recent OECD report uses an index based on a market basket of some 1,300 items, and as I have previously made clear (“Let’s Put Indexing on the Index,” NL, April 5), I am wary of indices. The point here, though, is that one set of figures is as funny a hook on which to hang an argument for adopting Japanese industrial methods as the other. In the latest, for example, we are number one in 1960, ’70 and ’80. The earlier table, usually referred to in “setting sun” arguments, showed us number one in 1960 and ’70, but only 1Oth in 1980.

Strangely, the people crying up Japan do not seem to have noticed that it is toward the bottom of both lists in all three decades. Even Great Britain, everybody’s whipping boy, has continued to out produce Japan. Can it be that the Japanese performance is as much mirage as miracle? It can be.

In the well-propagated view of things, the Japanese economy turns on a lifetime commitment of worker to company and of company to worker. The relationship is recognized to be a trifle cloying for modern American tastes. A century and a half ago, our mills in places like Lawrence and Lowell, Massachusetts provided dormitories for unmarried “hands,” and that would not be appreciated today. Indeed, the company towns that are pointed to with pride in Japan have long been anathema in the U.S., and no one on either side of our bargaining tables is eager to resurrect them.

Nevertheless, the stability of the Japanese labor-management relationship is much admired. A special virtue of it, we are told, is that the Japanese worker- unlike workers elsewhere since the beginning of the Industrial Revolution- does not fear the introduction of new and more efficient machinery. He knows that if his present job is automated out from under him, his company will find him another job, and will train him for it if necessary. One result is that Japan has 70 per cent of all the robots in the world today. “With that head start,” Thurow remarks darkly, “others are unlikely ever to be able to compete successfully.” (He doesn’t say why, but I suppose it has something to do with momentum, of whose importance I am aware from listening to sports announcers.)

If we look at this arrangement a bit more closely (as in The Japanese Company by Rodney Clark, published by Yale University Press), it does not appear quite so idyllic. It seems that the “lifetime” commitment runs only to age 55, whereupon the worker is either demoted, farmed out at a lower salary to a supplier of his old firm, or turned loose with a couple of years’ severance pay. In all three cases he faces old age without a pension.

This is not the worst situation, however, it is the best. The Japanese economy is hierarchical in an idiosyncratic way. Automobile manufacturers can keep their inventories of components say, fuel pumps-low because they subcontract most of the work. The big companies dominate their suppliers, who have no other market for their products. A fuel pump designed for a Toyota is so much scrap metal if it isn’t put into a Toyota. The suppliers have to carry the inventories to meet the big companies’ shifting needs, and they have to be satisfied with the prices the big companies will pay. Consequently, the suppliers cannot offer lifetime employment. Their workers are laid off when business is slack and are fired outright when technological improvements are made. They are second-class citizens with a vengeance, and you don’t hear much about them in the American business press; yet they make up, in the Japanese automobile industry, roughly 70 per cent of the labor force.

Some will have noticed that I’ve been using the masculine pronoun. That is because men alone are meant. Although women comprise about 36 per cent of the non agricultural work force in Japan, they do not have the men’s guarantees and perks (such as they are), and they neither get a shot at the better jobs nor are paid well for the jobs available to them. That they know their place of course makes them especially attractive to our New Right.

Another turn of the screw: As always happens when you have two classes of citizens, people scramble to get into the favored class and scramble to stay there. So the big companies have the pick of the young men entering the labor market, and we will not be surprised to learn that they select the best trained as well as the most “cooperative.” Nor will we be surprised to find that fear of falling out of the favored class leads to brisk and careful work on the assembly line, whence comes the vaunted Japanese defect-free production.

This is not a very pretty picture. If it is what is required to create a sunrise industry, we’d better at least think up a new metaphor. And we’d better pause a moment to consider the fact that in spite of all of Japan’s sunrise industries (automobiles, steel, shipbuilding, textiles, electronics, optics), its GNP per capita is still well below ours-even though we are, for various foolish reasons, running our economy at less than 75 per cent of capacity. As Gus Tyler has shown (in “The Politics of Productivity,” NL, March 22), the notion that the Japanese are “catching up” is a statistical flim-flam.

THERE ARE other statistical flimflams lurking in most comparisons of the performance of various national economies.   Switzerland, for instance, is held up as an ideal. Its rate of inflation and rate of unemployment are relatively low. Is this because the sturdy and intelligent Swiss are imbued with the work ethic? Workaholics they may be, yet that is not the secret of their success. The secret lies in their importation of Italian labor for menial and unskilled and ill-paid jobs. As is true everywhere with people holding such jobs, the Italians are the first to be laid off when business slows down. But they don’t then draw Swiss unemployment compensation; they are simply dumped back into Italy. Hence the Swiss unemployment rate is very low and the Italian extra high.

Moreover, when the Italians are working in Switzerland they obviously help swell the Swiss national product. On the other hand, because they aren’t Swiss citizens-and can’t apply for citizenship- they aren’t counted in the denominator used to calculate the Swiss GNP per capita. That the latter is proclaimed to be the highest in the world is therefore to a considerable extent a statistical flim-flam.

The same phenomenon operates in West Germany (where Italians, Greeks, Turks, and Yugoslavs are imported), and in many more high-ranking countries. To some extent it operates in the United States, too, given the uncounted millions of Hispanics eking out precarious existence, especially in the Sunbelt. But because our native labor force is so large, and because the immigrants who go on the relief roles here are counted among the unemployed, our GNP per capita figure is more reliable.

The American style has been different. In addition to importing cheap labor, we have taken to exporting expensive capital. A segment of 60 Minutes the other night showed the shutdown of a GE electric iron factory in California. GE’s pretense was that the market had shifted from steel- frame irons to plastic ones, so it was forced to open a plastics plant in Singapore to meet international competition. Since the molding of plastics is not beyond American know how, there can be little doubt that the real reason for the shift to Singapore was that teen-age girls there will work longer hours, in less pleasant (if not more dangerous) conditions, for less pay than mature men and women in the United States. When all is said and done, similar reasoning is crucial in each of our sunset industries. Also important (as I noted in “How Micro Minds Make Macro Mistakes,” NL, May 3), is our burgeoning practice of making financial rather than productive decisions.

Neither the exploitation of foreign teen-age girls nor the abandonment of our fellow citizens is an honorable objective of public policy-or of private policy. Colorful talk of the sun rising and the sun setting only masks the real problem.

The New Leader

  1. Some very interesting points here. I have lived in Japan for 5 years and am married to a Japanese national. I agree with your assessments of both the pros and cons of Japan’s industry. This is a country where things are made to a high standard of reliability and efficiency, which makes them valued commodities in the world. The efficiency and attention to detail bleeds into all parts of society and I love living here.

    However, I would not want to be a Japanese company employee, nor a student about to graduate into the workplace here. Life-time jobs, which were I think more a hall-mark of the bubble era, don’t exist anymore. Working for a company means long, often unpaid overtime, submission of everything, personal opinions, beliefs and weekends, to those higher on the social ladder. Graduates who miss out on finding employment in the first year out, and there are a lot of them, will find it increasingly difficult to ever get a permanent position in a company. Those who get a job are unlikely to quit, no matter the conditions, for the same reason. My female friends work on temporary, year to year contracts, and probably always will. Everyone lives at home, no one is married.

    I read recently though that Americans are the only country that works longer hours than Japan.

    I think there is a movement here amongst young people. A reassessment of priorities. At the moment, it seems, sadly, to be heading towards an apathetic, rejection of everything. I hope the youth here become more pro-active, but they have a big, corrupt industry and government to change first.

    • Thank you for taking the time to comment.

      The article you reacted to was written 30 years ago but, as I was preparing it for “re-birth” via the blog I couldn’t help but notice that the same issues my father wrote about then are being discussed and fought over in American politics today. From your response it seems the situation for most Japanese hasn’t fundamentally changed either.

      Most think of Economics as being about money or economies, the Adam Smith ideas… In his book “The End of Economic Man” my father argued that Economics is, or should be, about people who make economic decisions for the full array of human reasons, not just marginal advantage. To the extent that Capitalism continues to evolve it would be good to evolve with that consideration in mind.

      Mitt Romney, candidate for President, famously says “corporations are people too, my friend!” Maybe so. Doubtful in my view. But I’ll counter, Capitalism is about people too, or should be.

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