The left-liberal consensus on Japan: a methodological and political critique

Although most Americans are angry about the deterioration in their living and working conditions, mainstream analysts and decision-makers have nonetheless been remarkably successful in convincing them that only free-market policies can ensure the economic competitiveness required to achieve victory in the global marketplace and a reversal of negative trends. Many progressives have understandably responded to this successful ideological offensive with a strategic retreat and regrouping. Hoping to win a wider hearing for progressive policy initiatives, including a defense of past reforms, many are trying to craft new programs, and arguments or them, that will prove politically viable in the present conservative climate. One outcome of this effort has been the willingness of progressives to formulate and defend their new reforms not on the basis of their ability to advance an anti-capitalist political agenda but rather for their ability to improve working class conditions by enhancing the nation's economic performance.

We want to deal with one very important aspect of this progressive competitiveness thinking@ the framing of policy proposals in terms of the superior, and purportedly more humane and socially progressive, competitiveness of certain national capitalisms in whole or in part. We focus, in particular, on the increasingly common use of Japan as a positive reference point for both left and liberal reform proposals.

Our discomfort with this emerging left-liberal consensus (LLC) on Japan is caused by the conflict we see between progressive characterizations of Japanese institutions on the one hand, and the exploitative, patriarchally oppressive, and even socially irrational reality of these institutions on the other. As we will argue, this misleading characterization of Japanese capitalist practices is largely the result of a flawed understanding of the Japanese experience. Even more importantly, we also believe that this consensus, based as it is on a non-Marxist, non-holistic, and ahistorical understanding of Japanese capitalism, leads to a seriously flawed approach to advancing political change in the United States.

The Methodology of the Left-Liberal Consensus

Liberal policy advocates who oppose the current rightward movement of U.S. economic and social policies tend to believe that current economic and social conditions could be improved if the state played a more active role in the economy, and business adopted more cooperative workplace relations. To defend this position, they often point to the experience of other advanced capitalist countries which have, in their opinion, adopted this liberal policy agenda. Japan is one of their most popular examples.

Japan is widely considered to have out performed the United States on a wide range of economic measures, including trade, investment, productivity, growth, unemployment, and income distribution. What makes the country a positive reference point for liberals, however, is their belief that this outstanding economic performance is the result not of free-market policies, but rather of an investment regime based on stable, long-term planning and a work model based on mutually beneficial labor-management relations. The Japanese experience is thus taken as proof that cooperative relations between workers and managers, and business and government, are the best way to achieve international economic competitiveness which in turn is the best way to guarantee a rising and sustainable standard of living for working people. For many liberal scholars and policy analysts, then, improving the performance of the U.S. economy does not have to come at the expense of the well-being of the American people; both can be achieved by making investment and work practices more those of Japan.

Significantly, growing numbers of leftists have come to accept this liberal characterization of the Japanese capitalist experience, even while continuing to reject capitalism, reformed or not, as their ultimate objective. In fact many have added another reason for viewing Japan as a positive reference point claiming that Japanese investment and work practices generate, in contrast to U.S. practices, a non-militaristics form of international expansion that offers benefits to the third world.

Apparently convinced that it is currently impossible to win popular support for an alternative social project, these left scholars and activists no doubt hope that public awareness of the Japanese experience will lead Americans to turn against current U.S. practices which were themselves justified according to thy mainstream standard of economic competitiveness. Thus, for these leftists, the immediate task appears to be one of mobilizing working people to demand a reformed capitalist system. Once having shattered free market myths, they would presumably seek to engage people in debate over the desirability of transforming capitalism itself.

We believe that left scholars and activists make a serious mistake when they join with liberals in viewing Japan as a positive reference point for transforming U.S. capitalism. We say this because, as we shall show next the LLC characterization of Japanese capitalist investment, work, and globalization practices is seriously misleading.

The Japanese Investment Regime

Those who accept the LLC on Japan almost always argue that Japan's superior economic performance can, in large part, be explained by the country's rapid rate of industrial capital accumulation, which is itself the result of a traditionally high household savings rate and the efficient allocation of these savings into highly productive private and public investments. In the United States, by comparison, the household savings rate is lower, and a larger portion of savings are channeled into unproductive activities which erode or at least fail to enhance labor productivity and competitiveness.

As an explanation for Japan's allocative efficiency, the LLC cites the country's celebrated government-directed credit policies as well as the relative patience and mutual commitment of investment fund suppliers and industrial fund users. Mutual commitments between japanese banks and industrial corporations are said to be cemented through bank ownership of industrial-corporate stock and through shared directors, both of which help to insulate long-term corporate planning from short-term speculative pressures.

The LLC paints an attractive picture of the Japanese investment regime. Unfortunately, it is a very misleading one. A more accurate picture makes it clear that attempting to reform U.S. investment practices along Japanese lines would be a serious mistake. For example, the LLC generally fails to note that Japan's traditionally high household savings rate is rooted in high housing and other consumption costs (due to the orientation of domestic production toward capital goods and exports) as well as in the need for workers to finance their own income maintenance and retirement schemes (because of the relative lack of social consumption and welfare programs).(1)

The relative patience and mutual commitment of Japanese firms must also be placed in its class context. Without doubt, the long-term and stable nature of Japanese investment planning is intimately related to Japanese capital's dominant position over the Japanese working class. This domination was (re) consolidated, it should be added, largely because of United States occupation policies which helped Japanese capitalists and their state allies defeat a massive anti-capitalist popular upsurge in the period immediately following the end of the Second World War.(2)

In spite of this class domination, however, and contrary to the impression given by many LLC analyses, postwar Japanese industrial growth has been driven by a wasteful and crisis-shaped process of scrap and build industrial accumulation.(3) The first scrap and build cycle began in the mid-to-late 1960s, when rapid economic growth (supported by light-industrial exports produced by low-waged, predominantly female workers) pushed wages in light industry too high for continued profitable domestic production. Japanese capital responded by scrapping and relocating these industries to other East Asian countries. In their place they built new materials-dependent heavy and chemical industries (steel, chemicals, etc.). Most Japanese light-industry workers were either expelled from the wage-labor force or forced to seek employment in Japan's bloated, ultra-backward service sector, thus reproducing the severe segmentation of the Japanese working class by gender and education.

This basic cycle was repeated again after 1973 when increased prices for imported oil and other raw materials undermined the profitability of Japan's new core industries. Since an easy domestic solution to this crisis was ruled out by the activities of Japan's environmental movement, Japanese capital shifted its dirty and import-dependent heavy and chemical industries to the Asian periphery and built a new export-oriented industrial core around transport and electrical machinery industries. This inter-sectoral restructuring and the funds required to finance it were once again obtained largely via an assault on the working class, including in this stage an expansion of temporary labor and subcontracting systems.

As before, however, the competitive "success" of this cycle was itself eventually self-destructing. The growth in machinery exports led to intensified protectionist pressures from the United States and other core capitalist countries. Japanese capital and state functionaries responded to the resulting mid-1980s "high yen crisis" by initiating the third stage of the scrap and build cycle. This time machinery production (especially cars, appliances and more standardized components) was shifted to new locations (in the United States as well as in Asia), and domestic investment was channeled more narrowly into the production and export of less standardized, more knowledge intensive components and information based activities.

Significantly, however, this industrial transformation did not succeed in restoring earlier profit margins. As a result, Japanese firms appear to have begun a new cycle, this one based on a further shift of production activity to Asia and, for the first time, the re-export back to Japan of both consumer goods and industrial components. These trends highlight the fact that Japan is now facing the industrial hollowing out of its economy.

Having misunderstood the logic of Japan's industrial development, it is not surprising that the LLC has also misunderstood the significance of recent Japanese financial developments. It incorrectly views the trend towards financial liberalization and financial instability, including the rise and fall of the "bubble economy," as exogenous to the post-war development of the Japanese investment regime. In reality, this financialization of accumulation is, as in other core capitalist economies, largely a response to the maturation of Japanese capitalism and the resultant emergence of an increasing excess of potential surplus over productive and privately profitable domestic investment opportunities.(4)

The Japanese Work Model

The LLC also credits Japan's labor-management relations for the country's superior economic performance. Singled out for special praise are the institutional mechanisms which allegedly promote worker loyalty, cooperation, participation, high productivity, and rising real wages. Among the most important is the combined use of lifetime employment guarantees with productivity- and seniority-based wage incentives.

The Japanese work model appears considerably less progressive, however, once it is viewed holistically. This is true even for the privileged minority of core workers. For example, their "lifetime employment" ends in forced retirement at around 55 years of age. With no national social security system, the great majority of these retired workers therefore have little choice but to seek employment at smaller subcontracting firms (or in the least privileged positions in core enterprises) at much lower wages.

The LLC also holds that the reason Japanese core corporations are so successful in securing maximum work effort and loyalty from their permanent employees is that they, in contrast to U.S. firms, are willing to offer positive incentives to achieve the desired behavior, including accelerated wage scales, housing allowances, and retirement bonuses. But this one-sided view ignores the threat core workers face of being prematurely pushed out of the core and into the peripheral low-wage sector. From a class perspective, both the positive and the negative incentives built into core labor-management schemes appear to be designed to raise workers, material insecurity to the point where they will accept work hours and labor intensities that would be unacceptable to U.S. workers.(5)

Similarly, although the LLC views the apparent insulation of Japanese corporations from short-term financial pressures as one of the more positive features of the Japanese capitalist system, it ignores the fact that some of this insulation is achieved by using subcontractors as a buffer for cyclical and financial pressures. Insofar as the relative insulation of Japanese corporations from budgetary pressures is gained at the expense of increased insecurity and immiseration for workers in the smaller subcontracting enterprises, it represents a transfer of these pressures downward in the corporate (and class) hierarchy rather than a net reduction of these pressures. Recently, pressures by the big corporations on their subcontractors have reached an historic extreme, producing a wave of bankruptcies among small- and medium-sized enterprises and a growing unemployment crisis.(6)

The Japanese Globalization Model

Leftists associated with the LLC have also ranked Japan's investment and labor@ management systems superior to those of the United States on the grounds that they lead to a more progressive process of economic globalization. They argue, for example, that while Japan is drawing East Asian countries ever more tightly into its own network of finance, technology, and trade, it is also helping them to develop their own forces of production.

In making this argument, however, the LLC pays little attention to whether Japan's scrap and build pattern of domestic and international economic activity is rational from the viewpoint of Japanese workers. The implicit assumption seems to be that what is rational for Japanese capital is rational for the Japanese people. Left unaddressed is the fact that Japan's competitive success has not protected workers from growing economic insecurity as big business continues to demand new cuts in real wages, further increases in labor intensity, and maintenance of long, work-hours, all in the name of still greater competitiveness.(7) Also unaddressed are possibilities for instituting alternative programs involving increased social appropriation and allocation of the fruits of labor productivity and the ecologically friendly restructuring of "dirty" industries.

For similar reasons, we also do not find Japanese globalization to be progressive from the standpoint of the peoples of the Third World. Japanese transnational manufacturing, mining, forestry, fishing, and agricultural operations are known world-wide for the absolute ruthlessness with which they exploit local workers and the natural habitat.(8) Moreover, a growing share of Japan's recent foreign investment has been concentrated in financial and commercial real estate activities, including construction of hotels, golf courses, and the like, in connection with the development of vacation spots for higher-income japanese professionals and managers - with the sex industry being a major beneficiary of such activity. Workers in third world countries (and many workers even in other core countries like Australia, where Japanese capital is very prominent) wind up serving the luxury consumption needs of the Japanese elite before addressing their own more basic needs.(9)

It remains to address briefly the issue of militarism. Some leftists have argued that Japanese capitalism represents an historically progressive form of capitalism because, unlike U.S. capitalism, it does not depend on militarism to support its internal or external growth. We disagree. We must not forget that japanese capitalism, having been formed in the imperialist late nineteenth century, began with greatly accentuated military and economic expansionist tendencies which led to its violent attempt to create an East Asian empire. It is also worth recalling that the post Second World War recovery of Japanese capitalism occurred symbiotically with the evolution of U.S. imperialism, as the United States, in order to redistribute the costs of its own hegemonic activities, encouraged and supported Japanese elite efforts to reconstitute its East Asian sphere of influence. This symbiotic development also included the economic jump-start that japanese capitalism received from U.S. military spending associated with the Korean and Vietnam Wars.

Japan now possesses a modern military machine based on the second largest military budget in the world. Moreover, developments such as Japan's participation in the 1992 Kampuchean peace keeping operation in direct violation of Japanese constitutional law have justifiably raised fears throughout Asia that this military machine is being prepared for active use.(10) While we are certainly not predicting an imminent full-scale resurgence of Japanese militarism, it does remain an open question whether japanese capital can continue to dominate its own regional periphery without the supporting military political infrastructure that has up until now been provided by the United States.

In short, the notion of economic competitiveness and power without the ability to project military force should be viewed as a developing contradiction in Japanese capitalism and imperialism, not simply as a given established fact. How this contradiction will work itself out is, for now, impossible to predict.

Political Critique of the Left-Liberal Consensus

In our opinion, the LLC attempt to build a progressive political-economic project on the basis of non-holistic and a historical interpretations of the key underpinnings of Japanese competitiveness is not only methodologically flawed, it is also politically dangerous. One reason is that this attempt implies that if capitalists and state-policy makers think and behave rationally, they will see that progressive competitiveness reforms are in their own interest and therefore deserving of support. This view of reform possibilities is not only wrong, it also leads to a technocratic approach to politics that minimizes popular mobilization and emphasizes the formulation and provision of policy advice in and through elite-level think tanks as well as participation in establishment media and politics.

Unfortunately, the LLC's demobilizing tendencies are not limited to its technocratic bias. To see this, it is necessary to recognize that by accepting capitalist competitiveness as a valid criterion for, or constraint on, progressive visions, LLC-type thinking is forced to redefine what is feasible and progressive in line with the latest uneven developments in national capitalist competitiveness.(11) Not surprisingly, positive LLC treatments of Japan rarely mention the fact that Sweden and Germany were once the primary models for left-liberal visions of a humane and efficient capitalism. These countries have become less attractive, however, now that pressures, contradictions, and profit opportunities created by global overaccumulation, stagnations, and capital restructuring have encouraged their own respective ruling classes to reshape their domestic political economies according to U.S. standards.(12) LLC-type perspectives and strategies are thus on a greased incline leading from European social democracy to Japanese capitalism. With Japan's growing economic difficulties in the 1990s, the next stop is unclear.

To appreciate the political limitations inherent in the LLC, one has only to imagine what would happen if workers in Japan were to begin effectively organizing to challenge and transform japanese capitalism. The progressive movement here (insofar as it has been influenced by LLC-type thinking) would be placed in a most difficult position, unable to explain or even acknowledge such a development, because to do so would undercut its own arguments that Japan has systems (or at least some crucial systemic features) that are workable and superior to those in the United States. In short, LLC logic makes international solidarity difficult if not impossible to build.

To be clear, our objection to the LLC is not that it is interested in policy but that its proposals are divorced from any attempt to mobilize people in a way that, while helping to defend their immediate interests, simultaneously generates an alternative vision of society. The result of LLC efforts is thus a chimerical picture of a capitalism that can be technically restructured in such a way that its major problems can be solved without a revolutionary push beyond capitalism. This mirage is concocted by deriving both the problems of U.S. capitalism and their solutions from other "better" capitalisms, in an ahistorical and non-holistic fashion.

By contrast, we believe that in order to effectively serve popular struggles for a better world, we must ensure that capitalism's priorities do not determine our own priorities and strategy. This means that our values (in particular those involving our conceptions of individuality and collectivity, solidarity and competition, security and meritocracy, peace and justice, etc.) must be consciously articulated before we consider the best means to achieve their fulfillment. This effort, insofar as it is informed by, and firmly rooted in, the struggles of working people, need not involve any utopian moral reductionism or moralistic exhortation.

Once our values and visions are historically rooted and thereby clarified, they should serve as both inspiration and guidance for the development of our political strategy and policy proposals. This value base is absolutely essential, for without a clear sense of vision, there will always be a tendency for capitalist values to fill the resulting vacuum. And when that happens, we find, as in the current era, a strong tendency for the immediately possible to displace, or to be redefined as, the historically progressive. With capital becoming less and less accommodative to anything other than its own profit-driven priorities, we need to expose the social irrationality of these priorities and work to build a movement capable of envisioning and fighting for an alternative global system.

NOTES

(1.) Rob Steven, "The Japanese Working Class," in The Other Japan: Postwar Realities, E. Patricia Tsurumi, ed. (Armonk, N.Y.: M.E. Sharpe, 1988). (2.) Joe Moore, Japanese Workers and the Struggle for Power, 1945-1947 (Madison, WI: University of Wisconsin Press, 1983). (3.) Steven, "The High Yen Crisis in Japan" Capital & Class 34 (Spring 1988); Japan's New Imperialism (Armonk, N.Y.: M.E Sharp, 1990). (4.) Steven, Ibid; Paul Sweezy, "Japan in Perspective" Monthly Review 31, n.9 (February 1980); Shigeto Tsuru, Japans Capitalism: Creative Defeat and Beyond (New York: Cambridge University Press, 1993), Chapter 7; Makoto Itoh, "Is the Japanese Economy in Crisis?" Review of International Political Economy 1, n.1 (Spring 1994). (5.) Steven, "The Japanese Working Class"; Carl H. A. Dassbach, "The Japanese World of Work and North American Factories," Critical Sociology, 20, No. 1, 1993; Totsuka Hideo, et al, "Myths of the Managed Society," AMPO, 25, No. 1, 1994. (6.) Norihiko Shirouzu and Michaell Williams, "Pummeled by Giants, Japan's Firms Struggle With Change," Wall Street Journal, July 25, 19995, pp. A1, A5; David P. Hamilton, "Japanese Economy Shows Signs of Life, But Job Losses Rise," Wall Street Journal, December 27, 1995, p. A6; "Japan: One in Ten?" Economist, July 1, 1995, pp. 26-7. (7.) Dassbach, "The Japanese World of Work;" Hideo, et al., "Myths of the Managed Society," Itoh, "Is the Japanese Economy in Crisis?"; Ben Watanabe, "Promise of Lifetime Employment is Disappearing in Japan," Labor Notes, No. 170, May 1994 pp. 1, 13; Michaell Williams, "Japan's Labor System Survives Recession," Wall Street Journal, November 8, 1994; Labor Research Association, "Japanese Workers Feel the Squeeze," Economic Notes, 62, No. 3, March 1994, p. 7, and "Competitiveness Hits Japanese Labor," Economic Notes, 64, No. 1, January 1996, p. 6. (8.) Jon Halliday and Gavan McCormack, Japanese Imperialism Today; Co-Prosperity in Greater East Asia (Harmondsworth, Middlesex, England: Penguin, 1973); Steven, Japan's New Imperialism; Michael C. Howard, "Introduction," and Rene F. Ofreneo, "Japan and the Environmental Degradation of the Philippines," in Asia's Environmental Crisis, Michael C. Howard, ed. (Boulder, CO: Westview Press, 1993). (9.) Gavan McCormack, "The Price of Affluence, The Political Economy of Japanese Leisure," New Left Review, n.188 (July/August 1991), pp. 130-2; Tsuru, Japan's Capitalism, pp. 201-4. (10.) Ikeda Itsunori, "Giving the SDF New Fangs" AMPO 25, n.2 (1994), pp. 7-9. (11.) Leo Panitch, "Globalization and the State" in Socialist Register 1994: Between Globalism and Nationalism, Ralph Miliband and Leo Panitch, eds. (London: Merlin Press, and New York: Monthly Review Press, 1994). (12.) Peter Cohen, "Seden: The Model That Never Was," Monthly Review 46, n.3 (July-August 1994).

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