FYI
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Anthony P. D'Costa
Associate Professor Ph: (253) 692-4462
Comparative International Development Fax: (253) 692-5718
University of Washington Box Number: 358436
1900 Commerce Street
Tacoma, WA 98402, USA
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---------- Forwarded message ----------
Date: Fri, 23 Mar 2001 09:56:07 -0800
From: John O. Haley <[EMAIL PROTECTED]>
To: Japan-U.S. Discussion Forum <[EMAIL PROTECTED]>
Subject: NBR'S JAPAN FORUM Economic Stagnation: Institutional Patterns
(link)
Dear Eric--Following is a copy of a letter I have sent today to the
Wall Street Journal in response to Michael Porter's op ed piece of
yesterday:
"Michael E. Porter (WSJ, 21 March 2001) adds the critical element
of competition to the on-going discussion of Japan's decade of
economic stagnation. He misses, however, two important aspects
of the failure of competition in postwar Japan . One helps to
explain the cause of Japan's economic doldrums; the other a major
impediment to any politically acceptable cure.
The first is relatively simple. Whatever may be said about the
anticompetitive features of postwar industrial policies under the
Ministry of International Trade and Industry (MITI, currently the
Ministry of Economy, Trade and Industry or METI), they did not
deter new entry or effective inter-firm rivalry within Japan's
leading manufacturing industries. New entry was in fact a
prevailing characteristic of the automobile, consumer electronics,
integrated steel, machine tool, pharmaceutical, and other
manufacturing industries between 1950 and 1975. The result was the
emergence of internationally competitive producers of tremendous
wealth. In stark contrast licensing controls rigidly enforced by
the Ministry of Finance during the same period to prevent new
entry--domestic or foreign--stifled competition and retarded
innovation throughout Japan's highly segmented financial services
industry. The consequences, as Professor Porter points out, have
been devastating.
A failure of competition also hinders any cure. In this instance,
however, the problem is not a consequence of government policy.
Nor is it isolated to financial services. In a word, Japan has no
market for experienced workers.
No single institutional feature of postwar Japan has been more
influential on the patterns of political, economic and social life
than the pattern of entry level hiring coupled with a central
personnel office staffed by senior career manager with full
responsibility for the recruitment, training, assignment and
promotion of career staff. Aside from universities no large or even
middling public or private organization departs from this
organizational pattern. Nothing like it exists in the United
States, to my knowledge, except for the armed services and perhaps
the Federal Bureau of Investigation.
The prevalence of this organizational pattern means that nearly all
Japanese who work in public and private organizations with more
than a few managerial employees began their careers as generalists
in their early twenties. Because no lateral hiring exists except
for marginal positions, corresponding legal and social protections
have developed to ensure against termination without significant
cause. For a half century career workers thus knew with reasonable
certainty as they entered the managerial workforce that they would
remain with one employer for the duration of their careers--that
is, until retirement thirty or so years hence. Their economic
future has thus been irreversibly tied to their employer's success.
This pattern of employment and organization helps to explain many
if not most of the more prominent characteristics of postwar
patterns of worker and organizational behavior, such as
institutional loyalty, firm rivalry and corresponding protective
we-they and insider-outsider attitudes, as well as emphasis on
collective employee welfare with concomitant controls that may
suppress individual employee interests.
The pattern also means, however, that no market--at least among
public and private organizations of any size--developed for
experienced workers. Without lateral hiring, there has been no
demand for mid career managers no matter how skilled. Without such
demand, there can be no market. And without a market, terminated
middle aged workers have no place to go.
Any effort to restructure or reform the Japanese economy involving
large scale loss of employment for workers between the ages of 30
and 55 is therefore apt to have extremely high economic and social
costs. Thousands of workers in their prime could face the bleak
prospect of no job and an inadequate economic safety net. Economic
reform thus involves risks that would cause even the most astute
political leader to hesitate."
John O. Haley
March 22, 2001
>>> Eric G Dinmore <[EMAIL PROTECTED]> 03/21/01 03:49PM
>>>
Dear Forum Members:
In case you have not seen it yet, the March 21 Washington Post
included an article concerning the differing reactions of the US
government and American manufacturers to the Bank of Japan's
new inflationary policy. The article is avaliable at:
"Japan's Economic Plan Could Hurt U.S. Companies"
http://washingtonpost.com/wp-dyn/world/asia/
Eric Dinmore
Assistant Moderator
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