Only a few years older than I was at the time, my son
Jonathan is making his first business trip to Japan and China (having traveled
extensively on his own in those regions, and having lived there as well). The confluence of his eduction, business experience, and
language abilities has led to this moment.
I had no such language skills and whenever I traveled in Japan I
needed a translator. This left me at a
disadvantage when it came to negotiations which usually entailed a team of
Japanese executives on the one side and me on the other, they free to converse
among themselves in my presence without my being able to understand a
word. It was the collective
"them" against lonely "me."
While my son is there on a business mission that doesn't
directly involve negotiating, his language abilities are key to his success there. He reports on the number of Japanese women that
are now in the executive ranks, a far cry from when I first went there in the
1970s. The photograph below (circa 1977)
shows me in a meeting with all male executives, a translator to my left. When tea was served, it was brought by women
but they were not allowed to cross into the conference room -- a sacred domain
of the men -- instead handing us the cups at the door. Oh, how things have changed there. The Japanese are finally becoming a more heterogeneous
society.
From the depth of my files, I unexpectedly came across the
speech I had referred to in this entry about a trip I made at the turn of the
New Year, 1990 (I had presumed the speech lost to time).
I've reread that speech and am amused by many of its
observations. Japan was the economic juggernaut
at the time, reveling in a sense of exuberant nationalism that comes with that
territory. To an extent I bought into
that then, but Japan since --- when the Nikkei 225 reached its peak of 40,000, certainly
a genuine case of irrational exuberance -- has paid an economic price for that
incredible bubble, and, making matters worse, their government
"zigged" (raising interest rates) when it should have
"zagged" (monetary accommodation).
It only made their recession, and deflation a multi decade affair.
They too have been impacted by the economic rise of China
and the creative destruction of the Internet.
When I review this speech which I delivered to Tokyo's Rotary Club,
consisting of executives of leading Japanese companies at the time, I'm now fully
conscious of those two giant forces no one at the time could have fully anticipated.
I'm also acutely aware of how China is now in the position of Japan -- an
economic juggernaut that is also flexing its nationalistic muscles. Just witness its recent landing on the moon,
a highly symbolic statement of where it stands today and the rise of its navy.
And the Internet has forged forces of incredible change,
breaking down trade barriers that had stood for scores of years,
"flattening" the world's labor forces, allowing manufacturing to
follow where it might be done best and cheapest. When one looks at the components of a car or
a cell phone, one needs a world map to track the many places they come
from. And the impact of the Internet on
the publishing industry in which I worked for decades are self evident, rendering
some of the observations I made in the speech about the future of huge multinational
publishing conglomerates more a figment of past imagination. Google and Amazon rule!
So, completing the entry I wrote in March, 2011, I can now add that speech itself which I made at the end of 1989.
Still many of these issues exist, although, now, the trade battle, and
our trade deficit, relate to China. The
more things change, the more things do indeed seem to stay the same. Over to you, the next generation!
Speech to the Tokyo
Koishikawa Rotary Club on December 29, 1989
by Robert Hagelstein
It is truly an honor
for me to stand before you today and to have an opportunity to discuss Japan
and United States economic relations as viewed by an American academic
publisher. By Japanese standards, our business is a fledgling one, established
only 23 years ago. During that time, we have grown both internally and by
acquisition and we have very successfully sold our books in Japan. This sales
success is attributable to the excellent work of our Japanese business partner
and the continued expansion of Japan's fine educational system.
Thus, I have had some
first-hand business experience dealing with Japan, and I have watched it emerge
as a leading economic power. One of the reasons I am particularly honored to
speak on the topic of Japan-U.S. economic relations as the decade closes, is
because we may be on the eve of a new stage in world economic development. Not
only will there be an economically unified Western Europe in 1992, but the
recent move away from communism in Eastern Europe and the embracement of
democratic and capitalistic philosophies, even in the Soviet Union, will create
a completely new political environment and new economic opportunities.
Unfortunately, with
the opportunities come the danger of political instability, and we need to make
the right decisions. What evolves over the next decade very much depends on
whether Japan, the economic community of Europe, and the United States trade in
harmony or whether splinter groups succeed in creating an environment of mutual
suspicion.
Therefore it is
important that Japanese business leaders, like yourselves, understand how many
Americans perceive past Japanese growth to an economic superpower status and
how Japanese relations with the United States are perceived. Incidentally, I do
believe that many of these same perceptions are gaining ground in the European
community, an arena where Japanese exports and Japanese investments are
becoming significant.
But please let me
underscore that I am talking about perceptions, how people think things are,
not necessarily how they really are. If steel is the raw commodity most widely
used in the business of selling automobiles, ideas are the main commodity of my
industry, publishing. Therefore it is fitting, although perhaps unfortunate,
that two recently published books may have a significant impact on U.S. - Japan
economic relations. The first, The Japan Which Can Say No by Akio Morita
and Shintaro Ishihara, is not available in the United States except in a
bootleg translated edition, but it is already having quite an effect. The book
is seen as a strong expression of burgeoning Japanese nationalism which views
America's present trade dilemma as being rooted in bigotry and the decline of
the American will and competitive ability. It argues that Japan can say
"No" to any American suggestion by simply playing the U.S. off
against the Soviet Union for technology components.
The second book that
will undoubtedly have an impact on American policymakers and the media is one
that was recently published in the United States, and which was named one of
the outstanding business books by Business Week, The Enigma of Japanese
Power by a Dutch journalist, Karel van
Wolferen. This book argues that Japan is actually an oligarchy and while Japan
professes to be engaged in free market trade and to have democracy, it is run
by a tiny group of huge mega-corporations. These corporations have access to
cheap capital and compliant labor, and they are protected by the government.
Van Wolferen also contends that the Japanese standard of living is not much
above that of some Eastern European nations, even though the Japanese worker is
enormously productive.
As I said these books
may very well have a negative effect on how Japan is perceived by the broader
American public; they may give intellectual support to those who want to raise
barriers to Japanese imports and Japanese investments in the United States.
While even the vociferous protectionists recognize that Japanese workers are
among the most productive in the world, and that Japanese industry has
succeeded all too well in producing well engineered durable consumer goods,
many Americans perceive that the transformation of Japan in the decades after
1945 into an economic superpower occurred, not because of hard work, sacrifices
and ingenuity, but, rather, because the United States and Western Europe were
left with the responsibility to blunt the threat of Communist aggression,
thereby having to put extensive human and monetary resources into defense.
Even today, while the
United States spends six percent of its gross national product on defense,
Japan spends only one percent. Many in the West cite such figures (as well as
the comparatively low--at least until recently--levels of Japanese foreign aid
to developing nations) as one of the primary reasons for Japan's rise to
economic power. By having been able to concentrate on internal industrial
investment and foreign trade, Japan is perceived to have captured--unfairly to
some extent--our overseas markets and thereby transforming itself into the
economic power it is today.
The argument continues
that while the United States was forced to play the role of the world's
policeman, making the huge miscalculation of becoming involved in the Vietnam
War in the 1960s and then having to pay for it in the 1970s, Japan, under the
leadership of Prime Minister Tanaka, methodically
pursued its strategy of building exports. Automobile exports to the United
States, for instance, rose from some 381,000 units in 1970 to 2,527,000 by
1985. By 1985, the U.S. - Japanese trade balance, which had been tilted in the
U.S. favor in the early 1970s, became a U. S. deficit of some $46 billion.
Fortunately, as I said
at the onset, we may well be on the eve of a new stage of world economic
cooperation, and the widely held negative perception of how Japan got to where
it is today may become far less important. The major changes, of course, are
the rapid disintegration of the Eastern European military bloc and the
continued steps toward military disengagement and disarmament. If these changes
continue, tremendous amounts of capital and technical manpower can be shifted
from creating new generations of advanced weaponry, and maintaining large
military forces, into devising new generations of industrial and consumer
products as well as rebuilding America's infrastructure, from schools
and-hospitals on the one hand, to highways and housing on the other.
You and I recognize,
that these economic and political changes will not be completed overnight. But
they are underway, and they will help to strengthen very significant economic
changes already occurring in the United States.
This change began when
America's self-image reached its nadir in 1979. American military and civilian
personnel were seized by radical elements in Iran and held hostage for more
than a year. The Carter administration appeared to be impotent and American
feelings about themselves were at an all time low. The United States was
completing a decade of inflation, stagflation, and high interest rates. Most of
this pain was inevitable, as the United States had to pay for its policy of
guns and butter in the 1960s and for the enormous cost of putting a man on the
moon.
When Ronald Reagan
became president in 1980, the stage was set for a significant turnaround.
President Reagan promised to lower the inflation rate and restore American
values while maintaining a strong military presence, and to promote capitalism
throughout the world. It is remarkable that, in his decade, he accomplished
many of his objectives with the very notable exception of
balancing the federal budget.
We also began to
recognize that American schools, in contrast to Japanese schools, were
graduating poorly trained students, who, in contrast to Japanese students, were
inefficient workers. American industry, also in contrast to Japanese firms,
could not design quality goods, could not organize their work forces
efficiently, and would not invest for future growth.
However, it seems to
be coming clear, at least to Americans, that our own "American
bashing" has gone on for too long. Paul Craig Roberts, who is with the
Center for Strategic and International Studies in Washington, said that it is
America's own self-loathing that is giving Japan the mistaken message that we
are really a declining economic power. He said that if we, ourselves, give the
mistaken message that the 1980s were a failure from an American economic
perspective, we will be failing to recognize the stunning accomplishments
achieved in this decade by the United
States. It will also be unlikely that our trading partners will also recognize
those accomplishments.
In fact, while there
are still many problems, such as the trade imbalance, lack of savings and a
growing national debt, counterbalancing these are improvements such as more
productive workers, lower levels of unemployment, stable inflation, and
leadership in industries that have become truly global: software, entertainment
and service industries. For instance, American engineers may have transformed
the entire debate over high definition television, an area perceived in the
United States to be a prime area for technology spinoffs in the 1990s and
beyond, by devising a digital, not analog, approach. And even in the automobile
industry, Detroit is now being seen, at least in the United States, as able to
design and build a moderately priced and well-engineered durable product.
Confidence in the long term prospects for the American economy is growing.
Perhaps of equal
importance, in the fall President Bush convened a domestic summit conference in
Williamsburg, Va., only the third such domestic conference in American history.
It was specifically concerned with finding ways to improve American education.
While no tangible improvements in education have emerged from that conference
yet, as with reductions in military spending, this meeting could be the
beginning of a movement that will have a significant impact on American
economic growth in the 1990s.
Speaking in regard to
my own industry, publishing, I believe that the global opportunities will also
be significant in the coming decade. In the 1980s, two very significant trends
emerged: one, a trend of consolidation through acquisitions by large
multinational firms and, two, an explosion of information publishing which has
now become even more dominant in the U.S. than trade publishing. In fact, by
1988, according to an estimate prepared by Veronis Suhler & Associates,
gross expenditures on business information services was 19.7 billion dollars in
the United States, surpassing book publishing's 18.4 billion dollars.
Multinational companies, for example Reed Communications, Pearson,
International Thompson, Elsevier, and McGraw Hill, are positioning themselves
to become dominant forces in the 1990s. These companies are dedicated to
information and scientific publishing. Meanwhile, the trade publishers have
been teaming up with entertainment and consumer magazine conglomerates. John
Suhler recently speculated that Japanese publishing firms may soon begin to
acquire Western publishing properties, following the lead of Japanese
investment in recording and film companies. Global giants will emerge in the
publishing, entertainment and communications industries.
I have talked about
how Japan's economic stature is perceived, how the United States (and perhaps
others as well) perceived American economic power in the 1980s, and how
Americans are beginning to perceive a stronger economic future for themselves
in the 1990s. How Japan is perceived as an
economic superpower in the 1990s is something that the leaders in this room can
affect.
With a reduction in
international tensions, I suspect few in the United States and Western Europe
will be calling for Japan to shoulder the burden of increased military
spending. But you can anticipate that calls for Japanese aid to the developing
world will increase. Then calls for Japan to streamline its distribution
system, to open them more to Western influences and to diminish the influence
which its large business cartels have will also increase. But, by working to
create the same conditions and environment for foreign goods and investment
that you enjoy, or that you want for your goods and investment abroad, you will
ensure that Japan is recognized as a responsible economic superpower. You will
also help to ensure that Japanese workers will enjoy more of the material
rewards of their decades of hard work.
Indeed, there are
epochal opportunities in the 1990s and we must all decide how we can develop
common interests and common goals. If the leaders in this room apply the same
ingenuity and hard work you applied to transform Japan, you can be a very
positive force in transforming U.S. - Japanese
business relations and the world economy. Thank you.
