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The Rise of the Japanese Corporate System: The Inside View of a MITI Official.

This is a translation of an influential 1983 volume, Kigyoshugi no Koryu. Its thesis is that contemporary Japanese kigyoshugi--"companyism" or "corporate corporatism"--is both different from and superior to orthodox Western models of capitalism, socialism, and co-determination. To quote: "A new economic system has developed and been nurtured in Japan inside a shell of capitalism . . . It provided the propulsive energy that enabled the Japanese economy to expand 15-fold between the mid-1950s and the mid-1980s, and to this day it remains the source of the Japanese economy's strong vitality." Mr. Matsumoto wrote the original Japanese text during his long service in MITI, including numerous foreign postings; he has subsequently "descended from Heaven," as the Japanese say, to an administrative post in the (semi-governmental) Japan National Oil Corporation. His views, while hardly heretical within Japan's upper bureaucracy, do not represent the official position of MITI.

The early 1980s, when Kigyoshugi no Koryu first appeared, were years of Japanese complacency and self-assurance, occasionally flavored with polite arrogance and hauteur. Such sentiments it does its best to justify and support. The book should therefore be required reading for negotiators and others still inclined to "talk down" to the Japanese in some condescending manner, or to present some Western way of doing things as naturally superior to any Japanese alternative. (The American Occupation, in particular, ended 40 years ago!)

But what is this new system called kigyoshugi, leaving to one side the question whether it is most conveniently regarded as a form of capitalism or as something new and strange? (Mr. Matsumoto takes one view, as we have seen; this reviewer takes the other, but would discount the entire dispute as more verbal than substantive.) The main point seems to be this. In fact although not in law, Matsumoto tells us, the large Japanese corporation is controlled very differently from the large Western one. It is controlled in the last analysis neither by its shareholders (either by the main body of shareholders or by any strategic body of shareholders, such as a family), nor by its top management as self-perpetuating autocracy, but by one important group of what some Americans call "stakeholders." These are its "permanent" or "lifetime" employees (shain), whom Matsumoto likes to call "members" of the corporation. All shain are apparently equal; Matsumoto stresses the point that blue-collar employees also enter the decision-making process.(1) The company is "liberated" (Matsumoto's term) from its shareholders, from outside directors, and from the determinations of industry-wide bargaining with trade unions. Passing from decision-making to risk-bearing, the shain continue to share, both because of some residual variability in their semi-annual bonuses and because of the gigantic losses they would face if the company were to go bankrupt, leaving them normally with no prospect of acquiring shain status anywhere else.

According to survey data cited by Matsumoto, the shain of large companies like the situation the way it is, but presumably without much knowledge of alternatives. Also, Japanese Marxists are awake to the menance of kigyoshugi, which many regard openly as a major obstacle to the Revolution.

All of this is in a 50-page opening chapter, the heart of the entire book. The next two chapters are comparative and anecdotal. What they compare is product quality and worker motivation in Japan with those of America, Britain, (West) Germany, and Sweden in the capitalist world, and with China and Yugoslavia among socialist countries. (It is not clear how much experience the author has had in which of these countries). The upshot of these comparisons is that neither capitalist nor socialist countries have developed any institutions so effective as Japanese shain status, either for motivating workers, for increasing "x-efficiency," or for reconciling them to frequent changes of industrial technique, including individual job assignments.

The last three chapters deal with the history, economics, and sociology of kigyoshugi. Matsumoto considers it a distinctively modern-Japanese innovation, found neither in Korea nor in other Asian countries with racial homogeneity, Confucian influences, and cultural backgrounds basically similar to Japan's. Nor is it based on Japan's own tradition; the modernizing enclaves of the 19th-century Meiji Japanese economy exemplified orthodox capitalism. Matsumoto wisely stops short of claiming Utopian status for kigyoshugi while presenting it as an Aristotelian "golden mean" or Hegelian "synthesis" of capitalism and socialism, or of the market and the planned economy, and likewise of "dog eat dog" and the welfare state. All at relatively low cost; Matsumoto stresses the small cost of the Japanese government as a percentage of GNP, and likewise the small size of the government bureaucracy which co-operates in kigyoshugi. (His own MITI serves as his example here.)

Largely omitted and never stressed for Matsumoto's Japanese readership is "the other Japan." This set of "stakeholders" comprises the consuming public, the suppliers, subcontractors, selling agencies, local communities and other auxiliaries of the large kigyo. It also includes that great majority of the labor force which never attains the status of shain.(2) (This majority includes nearly all women and minority workers, as well as those who lose shain status voluntarily or otherwise.) Also, the unsuspecting foreign reader may easily be left with the mistaken impression that the cultures of the large kigyo are essentially alike, whereas they actually differ among themselves just as American corporations do--including in their "kindness and gentleness" toward outside "stakeholders".(3) Another important omission, when Matsumoto ascribes Japan's economic success to kigyo and kigyoshugi, are a great number of other contributing factors. Let me mention a half dozen of these, laundry-list fashion: (1) The initiative and the leadership of the public sector, including Matsumoto's own MITI, in "socializing risks" by assuring that major kigyo would not fail, and protecting the Japanese home market from both foreign imports and foreign direct investments; (2) The Japanese educational system as supplier of high-quality "human capital;" (3) An omitted aspect of kigyoshugi itself, namely the weeding out of potential misfits by rigorous selection processes; (4) The high Japanese saving ratio as a source of capital; (5) The taming of labor militance by the successful winning of the great strikes of the 1950s; and (6) The open access provided Japan to the American market by the United States (until approximately 1965). To put the matter crudely, Matsumoto as an economic historian is a sucker for the elementary logical fallacy of ex post ergo propter hoc.

As I have said more than once, this book deserves reading by foreigners as representative of one segment of Japanese thinking--much as translations of Mein Kampf should have been read by more non-Germans in the late 1920s. On the other hand, it will make few foreign converts to kigyoshugi as "Reality that Surpassed Theory"--nor is it intended to. (Another parallel with Mein Kampf.) Kigyoshugi comes across in Matsumoto's pages as a pragmatic form of industrial policy, redolent of "what helps business helps you." It combines elements of American reformist schemes of profit-sharing and employee stock-ownership with Northern European reformist schemes of Mitbestimmung; it may well become more attractive than either. At present one wonders how and if it will survive the sea change of transportation and transplantation to America and Europe in the wake of Japanese direct investment. But for those non-Japanese interested in "the Japanese model" as a halfway house between laborism on the one hand and Reaganism (or Thatcherism) on the other, but indifferent to foreign terminology like kigyoshugi and shain, I do not believe that Matsumoto's book adds much on net, even in authenticity, to e.g., Ronald Dore's Taking Japan Seriously.(4)

1. All are equal, but as in Orwell's Animal Farm, some are more equal than others. In the large Japanese firm, corresponding roughly to the American "Fortune 500," white-collar workers recruited after graduation from high-ranking universities are considerably more equal than anyone else.

2. Matsumoto admits at p. 111 that "most medium-sized and smaller companies in Japan do not have a strong Japanese quality about them. In short, compared to large companies, they are much more capitalistic."

3. An example from banking illustrates. Two of Japan's largest nation-wide "city banks" were Dai-Ichi (D) and Kangyo (K). They merged to form the Dai-Ichi Kangyo Bank, but the corporate cultures of the two components were so different that to this day some Dai-Ichi Kangyo clients make a point of dealing with "D" rather than with "K" veterans, or vice versa.

4. Stanford University Press, 1987. Addressed primarily to British readers, Dore includes under "corporatism" much of Matsumoto's kigyoshugi, but also much more. Furthermore, Dore seeks to add a "Confucian" perspective which Matsumoto excludes explicitly.
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Author:Bronfenbrenner, Martin
Publication:Southern Economic Journal
Article Type:Book Review
Date:Jan 1, 1993
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