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Consider Japan

Chapter XIII

Unions, Management, Competition

So far these surveys have seemed to be quite largely concerned with eulogies of the efficiency of Japan’s economy. What of the criticisms to be made? As so often with Japan, one finds oneself at this stage plunged into a discussion of paradoxes. The usual left wing critic’s picture of Japan is that of a country where feudal employers beat trade unions into the ground in a ruthless search for labour economics and productive efficiency; but in point of fact an extreme wastefulness in the use of labour, both on the factory floor and at the junior executive desk, is one of Japanese industry’s most glaring failings. The usual right wing picture of Japan is as a nation bent on cut-throat competition (particularly, say its rivals crossly and as if this were an unfair action, in matters of price”); but in fact a social atmosphere which frowns on price competition is one of Japan’s worst international handicaps.

The story of the foundation of postwar trade unionism in Japan is one that would be best fitted for a novel by Mr Evelyn Tough. Between the end of the war and the end of 1946 the number of Japanese trade unionists rose from nought to five million, because the American occupation authorities (this branch of the occupation administration was very largely filled with reforming New Dealers) had proclaimed that voluntary joining of a trade union was the good democratic thing for everybody to do. In some cases, it is said, even the manager joined the union and was respectfully elected to head the shop floor organisation which was supposed to bargain with himself. But in many more cases, as Professor G. C. Allen pointed out in his excellent book on Japan’s Economic Recovery (Oxford University Press, 1958.), the right man to put in charge of a trade union organisation was deemed to be somebody who had been imprisoned by the Tojo and earlier regimes. This was often an ex-student zealot with pronounced syndicalist views, and with ideas on organisation which he had read up almost solely out of books. The temporary and meteoric rise of these men – who were often near-communists of a lustily disorganised kind – went much further than most people in the West realise. In the first two years of utter demoralisation of Japanese industry after the war the left-wing trade unions actually seized control over several plants, and quite often became responsible for the employment, dismissal and discipline of the workers. By early 1947 the trade unions were reading up in foreign textbooks how to call a general strike; and the American occupation authorities, horrified at the rather dreamy monster which they had conjured up, began to clamp down.

This has set the pattern for one part of the trade union movement ever since. Even today the main national trade union organisation Sohyo (1960 slogan: “To hell with the US Security Pact and Fatter Share of Improved Productivity for Labour”) is decidedly to the left of, say, Mr Cousins in its political views. It has learned from, and formalised, British practice in trying to secure an annual wage rise for its members; each spring it marches into battle against the Japanese employers’ federation by proclaiming an annual offensive of strikes. Unfortunately for Sohyo, although there is a real degree of trade union militancy in some branches of government service and in a few industries such as coal mining, workers in the big and prosperous manufacturing industries are singularly unwilling to follow its lead. In these industries the so called “company unions” are the main forms of organisation; the national bodies that exist are loose federations of unions which are themselves limited to workers in particular firms.

Western trade unionists tend to regard these company unions as the managements’ tame poodles. This is an underestimate of at least many of them. They play a real (and sometimes damaging) part in seeing that firms engage most of their workers as “regular” workers (i.e., workers they can practically never sack) instead of as “temporary” employees; and many of them negotiate seriously and hard about the size of the Christmas bonus and family allowances and other fringe benefits. A typical tactic of these enterprise unions, indeed, is to move on from one fringe benefit to another in a constant stream of negotiations that lasts the whole year round. What they do not do, however, is to impose any restrictive or demarcation rules about who will do what job; by British standards they seem virtually to delegate to the management the sole responsibility for deciding upon manning schedules for different types of new machines and for deciding in which types of job women can be employed instead of men.

Yet the impression remains that most Japanese firms carry many more workers than the simplest system of time and motion study would suggest they can really need. In the longer-established firms this may be largely the result of the “lifetime” system of employment, and of the fact that pay and promotion are supposed to be determined almost wholly by seniority, with a factory worker in his forties being entitled to get twice as much as a factory worker aged about 21. Many firms are paying older workers more than they are relatively worth (which provides another reason why, as soon as they reach the painfully early retirement age of 55, they so incontinently retire them). In the very large number of new factories which have been opened only in the last ten years this burden from the “pay by seniority” system is lighter; but it will grow as the average age of the workers in the factories grows. Many cost comparisons of the difference between Japanese and British wage levels tend to ignore this point.

Moreover, wasteful overpadding of junior executive posts seems to be almost universal. In some aspects of management – such as the pre-planning of new operations and meticulous attention to the paper work required for each operation – Japanese industry is first class, largely because so many jobs that in Britain would be done by clerks are done in Japan by university graduates. But whenever any small hitch occurs, the whole machine is apt to catch up in a bureaucratic seizure of immobility. This is partly because under the system of promotion-by-seniority no junior executive has any incentive to show any capacity for making snap decisions on his own; partly because in Japan procrastination in the face of difficult problems is sometimes regarded as a national virtue rather than a maddening vice (after all, it was the hero Abe Masahiro who laid down the line for dealing with Commodore Perry: “Our policy shall be to evade any definite answer to their request, while at the same time maintaining a peaceful demeanour”); but largely because it seems to be a tradition in Japan that if any changes in any plans are to be made they must be agreed to by everybody. Even at boardroom level decisions are not taken by majority vote but theoretically only by unanimous agreement.

To prevent this tradition of unanimity from being eternally stultifying many Japanese organisations seem to have a man whom the outside observer finds himself disrespectfully calling the Emperor-figure. Conversation with and even between different executive grades in Japanese industry can go forward most interestingly and pointedly until this Emperor-figure arrives; then, your correspondent found, everybody falls into a deep and respectful hush. As the Emperor figure (who may belong to the family owning the firm) does not seem always to be the man best fitted to make big decisions, the system is puzzling at first; but in fact his function is probably often to work merely as a constitutional monarch. When there is a controversy about some line of action to be taken, he lays down what has already emerged as the majority opinion as his own decided view; everybody then agrees that he must be right and so the tradition of unanimity is maintained. The system does not make for speed in operation, but it has some achievements to credit. After all, it was by this method, with the Emperor, that Japan called off the war in 1945.

This tradition of always seeking agreement can have enervating results within industries as well as within individual companies. Because the Japanese in their recent great economic success story have followed some fiscal and economic policies in line with precepts that The Economist has long preached, it would be nice to be able to say that they are also keen believers in competing between themselves in a free market. Unfortunately, this would be quite flamboyantly untrue. The American Occupation left behind it an Anti-Monopoly Act and a Fair Trade Commission, on orthodox American trust-busting lines. The commission still exists, but the Japanese will explain that its main bias now is towards regulation of “unfair and unethical trade practices” (which means towards stamping out competition).

This is not to say that some forms of Japanese competition – vis-à-vis customers, if not vis-à-vis competitors – do not deserve to be stamped on. In 1960 the Fair Trade Commission set what the Japanese press called a “historical precedent” by threatening to act to stop the “selling of canned whale or horsemeat under labels designed to give the impression that beef was the content.” (The phrase “give the impression” is a fine understatement.) However, this matter was all settled very chummily, in a typically Japanese way. In co-operation with the Fair Trade Commission, the designated packers of whale and horsemeat “launched corrective action by setting up committees on specifications and betterment of trade practices”; once set up, these committees promptly devoted themselves to stopping “excessive price competition” in their industries as well. This sort of thing is very common in Japan; it is constantly a surprise to find how far industries composed even of minuscule firms can continue to keep up prices, often with some form of official support. This applies even – indeed perhaps especially – to goods destined to be sold on export markets. The orthodox British idea, that by toning down demand on the home market one can encourage enterprising small firms to cut their prices and speed up their delivery dates and thus boost exports, is the precise opposite of the policy followed by Japan’s Ministry of Trade and Industry. Under the Law on Export Goods Inspection, 1957, many manufacturers have to submit their goods to compulsory pre-export inspections; in mid-1962, despite the balance of payments crisis, some inspection organisations were grossly understaffed, which resulted in lengthy and officially created delays in some shipments. Moreover, when the Ministry imposes export quotas and official check prices, its object is to keep prices to particular markets up, not down.

What will be interesting, however, will be to see how far import liberalisation serves to introduce some much needed degree of competition into Japan. When your correspondent was in Tokyo in the summer of 1962, Japan was preparing, with a fanfare of trumpets, to march forward in the following autumn into what it hoped it would be able to call go per cent liberalisation of imports. It had better be said straight away that this most certainly does not mean that it envisaged that 90 per cent of all that might be imported into Japan would be free of restrictions. In the first place, the figure refers only to go per cent by value of Japan’s spending on imports in 1959; if imports of anything were nought in 1959 (and imports of very many things were) 90 per cent of nought is still nought. Again, imports were still to be authorised only within the limitations set by an overall foreign exchange budget; it was pretty clear that liberalisation was being steered into fields where the government hoped that domestic producers would be least hardly hit; and some tariffs had already gone up to counter the effect of the quota restrictions coming down. Nevertheless the “Long-range Economic Plan of Japan” was specific about the principles that should be followed:

While it is advisable to give protection to incipient industries which have potentialities for development . . . the government should refrain from giving relief to declining ones.... Such a government attitude ... would be felt as rather severe on industries and enterprises. But only by going through such a phase will Japan be strong enough to compete in the world market and gain a solid basis for economic growth.

It will be of enormous advantage to the next step forward in Japan if, as a gradual consequence of the removal of the most onerous part of the import controls, this precept begins at last to be put into effect. Japan has advanced massively in the last decade, largely because it has had a steady stream of technologically educated school-leavers coming on to its labour market to take up their first jobs. The government has followed exactly the right budgetary, economic and planning policies to attract these youngsters into modern, expanding and high productivity industries, instead of following the stagnationist policies which could have left them to sink into the traditional and lower productivity industries of a past age. But now Japan has reached the stage where its objects should also be to draw existing and older workers out of inefficient firms into the new industrial structure; its sociological set-up, its industrial customs, and its innate habits of mind will not make that switch an easy objective at all.