Strategic Capitalism

JAPAN IS without a doubt the most thoroughly, most widely, and most consistently misinterpreted major country in the world. This has just been confirmed for the umpteenth time in the ubiquitous media commentary about the Japanese public choosing a new political system that will cater to their interests as "consumers." Americans have long been told that in 1945 Japan was remade in the American image. Since the late 1950s they have read serious articles about a changing Japan, one beginning to resemble the United States even more closely. Thirty years ago Japan's youth no longer accepted the old ways and was remaking the country once again. Twenty years ago the consumers and grassroot activists were creating a more responsive politics. Seven years ago, the Japanese economy was going to be destroyed by its "death yen." Two years ago respected economic publications around the world were announcing the end to Japan's great economic performance, while Tokyo was busy building skyscrapers. Scandals have punctuated Japanese political life throughout the post-war period, each time prompting rampant and ignorant speculation about a Japan becoming more open, more democratic, and a more "responsible" member of the international community.

This misinterpretation is dangerous, for Japan is a very powerful country. The Greater East Asia Co-Prosperity Sphere, which Tokyo failed to establish by military conquest, is now becoming a reality as significant economic decisions for the countries in Southeast Asia are made by Japanese economic institutions. The United States and Japan together account for some 40 percent of the world's GNP, and how their troubled relationship eventually turns out will probably help determine what life is going to be like in the next century. Since continued blindness is likely to nullify future attempts at preventing diplomatic disaster, we need to ask why Westerners, especially Americans, cannot conceptually come to grips with Japan.

Ideology masquerading as science continues to be a major conceptual hindrance. Mainstream economists, and advocates of the Reagan/Thatcher world view, have taken Adam Smith one step further by postulating that liberty in economic pursuits is a necessary condition for economic success. This free-market ideology has recently been reinforced by two contradictory impulses: 1) It appears to have been vindicated by the demise of the command economies of Eastern Europe. 2) It is becoming more dogmatic and strident as secret fears that it may be false arouse the psychological urge to wall it off against evidence.

These fears are prompted by Japan. Simplified, the implied argument of the defenders of the faith goes: The Japanese must have organized their economic system according to free-market principles because they have been successful. If they haven't, this is scary, giving us ever more reason to insist that they have.

The staunchest defenders of this faith can be found filling the editorial pages of the Wall Street Journal. Let me try to place the Journal's considerable contribution to the misinterpretation of Japan in perspective with a story of an attempt to do something about it. On the 11th of March this year, the Journal ran a long article by Karl Zinsmeister, whose firsthand experience of Japanese economic reality can only have been severely limited. It presented the familiar notion that Japanese government bureaucrats, rather than having helped Japan's postwar economic development, actually hindered it. His points perfectly reflected the Journal's position that if MITI officials and other bureaucrats had not meddled so much, Japan's businesses would be doing a lot better than they are now.

One of Tokyo's best informed foreign financial journalists, Eamonn Fingleton, decided to write a letter to the editor demonstrating that virtually every sentence in the article was a "misconception or an outright misstatement of facts." Fingleton absolved the author from blame, since he could "hardly be held accountable for error which he has absorbed in good faith from reading the Journal" A draft of the letter circulated among academics and journalists who know Japan--but hold diverse and often conflicting opinions--with the result that thirty-three wanted to add their signature to it. Among twenty-four academics who had the opportunity to join, only two declined. After about a month of negotiations, the Journal offered Fingleton two options: they would print the entire letter with only two signatures, or they would run all the signatures, but delete all but two paragraphs of the letter, thereby eliminating the substance of the critique.

An expanded version of Zinsmeister's article, entitled "MITI Mouse: Japan's Industrial Policy Doesn't Work," was published in the summer 1993 issue of the Heritage Foundation's Policy Review, whose editor asked some experts on Japan, including myself, to contribute 300 words to get a debate going. I had visions of the editor of Nature sending letters to geographers, navigators, and astrophysicists soliciting their comments on the ongoing debate about whether the earth was round or flat.