View from Tokyo: Should Japan's industry go West?

IT ALL started in February. As reported in this column at the time, Akio Morita, the chairman of Sony, wrote a long article for the influential Bungei Shunju magazine, in which he launched a broadside against traditional Japanese management. If Japan really wanted to be accepted as an equal by the West, it would have to reform its management and economic policies radically - play the game by the rules, or face international isolation.

At the time, the article caused quite a stir, and it generated the new catchphrase of kyosei, or symbiosis, which was to be the new gentle philosophy for Japanese corporations to pursue in their relations with the outside world. But as the impact of the article sank in, a number of commentators and business leaders began to question its fundamental assumptions. Does Japan really want to aspire to be like the West? Are Japanese management practices necessarily all bad?

This process has generated a fascinating debate on the nature of Japanese capitalism, and the extent to which Japan's economic vision may or may not be actually superior to the 'American dream'.

Mr Morita's article was written after he had made a long trip to Europe and the United States, where he held talks with a wide range of business leaders. Mr Morita said he was taken aback at the degree of hostility to Japan's apparently relentless economic advances and cut-throat competitive tactics, which many of his interlocutors saw as a direct threat to their own countries.

So deep was this antagonism, according to Mr Morita, that Japanese companies would have to completely overhaul the way they functioned to fall more in line with the West. Workers should be paid higher salaries and have their long working hours cut. Corporations should stop ignoring their shareholders, and raise dividends.

The host of small suppliers that surround large corporations and have come to depend on them should no longer be forced to sell their components at prices and volumes dictated by the parent company's efforts to undercut competitors.

Corporations should also contribute more to their local communities and devote more care and money to preserving the environment. Above all, Mr Morita argued, Japanese corporations must switch from their obsession with increasing market share, to the pursuit of profits.

One of the strongest critics of Mr Morita's arguments is Tsuneo Iida, an economics professor at the International Research Centre for Japanese Studies. In an article in Voice magazine entitled 'Don't rein in the Japanese company now', Mr Iida says Mr Morita has in effect joined the Japan-bashers, and created a new tribe of 'self-bashers' within Japan.

Not only will Western companies not benefit from a loosening up of Japanese competitiveness, there is also no reason why Japan should regard the US as a model to follow any more in its economic development, Mr Iida argues. Japan should continue to play to its strengths in manufacturing, and in the process help developing countries to improve their own economies and lifestyles.

Mr Iida begins by outlining Japan's role in the breakneck pace of development in East Asia. Consumers in these countries are benefiting from high-quality Japanese goods - the example he uses is the predominance of Japanese cars and motorcycles, which are inexpensive and reliable, and have more or less monopolised the vehicle market in South-east Asian countries. But the reason these consumers can afford to buy such goods is that Japan underpins much of their economic growth.

'By serving as a model, providing development assistance, and investing in and trading with neighbouring countries, Japan has made a significant contribution to their growth,' Mr Iida says. In Japan's economic sphere, everyone benefits, so why should the West be complaining?

After justifying Japan's economic co- prosperity sphere, Mr Iida moves on to what he sees as the root of the problem. It is not unfair management practices in Japan, but the decline in the West. Even if Japan were to follow Mr Morita's advice, there is no reason to assume that Western industry would recover.

Mr Iida takes as an example the voluntary export restraints of cars from Japan to the US. The restraints were first introduced in 1981, but since then the competitiveness of the US car industry has not risen. On the contrary the American companies profited from the restraints by raising their prices, while neglecting to reinvest and modernise their plants and models. Only belatedly have US car companies begun to stop complaining about Japan and take a long, hard look at themselves first.

This all culminated in the embarrassment of President George Bush's visit to Tokyo in January, when he was parodied in the Japanese press as an elevated car salesman. 'There is no guarantee that even when Japan amends its practices, Western companies will regenerate themselves,' Mr Iida concludes.

He then asks an even more fundamental question, about the true nature of prosperity in today's world. His answer is harsh. 'Why choose America as the role model? After all, American industry has been in decline over the past few years . . . emulating it could have serious consequences.'

America's big mistake, Mr Iida says, was to aspire to a post-industrial society, which would do the planning and design but shift production overseas to cheaper labour markets. But in Japan the attitude that manufacturing is a thing of the past has not caught on, and again belatedly the US is realising this. 'Subsequent events have demonstrated that at least for big economic powers like the US and Japan, service industries alone cannot sustain healthy growth.' He then adds another little jibe: 'The two industries that symbolise the American lifestyle - automobiles and consumer electronics - are in decline in the US and on the rise in Japan.'

The real question, though, is where the developed economies will go from here, now that more or less everyone in the US, Europe and Japan has got the basic range of consumer durables. Mr Iida says a three- way battle has developed between these economies 'to redefine what consumers need to own if they are to consider themselves affluent'.

And this is where Japan will come into its own, at least according to Mr Iida's materialist yardstick of affluence. 'Japan appears to have the lead for the time being, thanks to its highly competitive high-tech industries. If Japanese firms can race far enough ahead to ascertain the contours of a meaningful lifestyle revolution, in the process forming a new view of affluence, future historians will no doubt credit them with creating an asset for all of humanity.'

Mr Iida's unspoken message to Mr Morita: keep making Sony Walkmans - the future of the world is at stake.