Dore, Ronald (1987) Taking Japan Seriously.

London: The Athlone Press.

Book a reflection on differences between Japanese and British economic organization vii Argues that diff. between Japanese and British economic approaches stem in part from belief in original sin as opposed to Confucian belief in "original virtue" Former puts focus on self-interest, coercion, etc.; latter on cooperation, loyalty... [all very dubious!] Ch. 1: Introduction 3 5 What is Japan's "underpinning social technology"? Important govt budget in Japan is that which deals with expenditures, not taxation. Subject to wide debate prior to decisions. Reflects different conceptions of state: developmental as opposed to regulatory Many differences between J and B reflect J's status as late developer, as much as cultural differences J jumped "straight into the large-corporation era of product-market oligopoly and segmented internalized labour markets," as opposed to beginning with a competetive K-ism Thurow's distinction between "wage competition," which neoclassical economic focuses on, and increasingly prevalent "job competition," ie competition to gain entry into the high-wage sector new Right sees all these signs of economic dualism, a protected sector, etc., as something to be eradicated key ingredients of "Japanese recipe": 1. hard work, even among managers 2. high level of education 3. cooperative work in large corporations 4. extensive use of subcontracting in manu. (with relatively nonadversarial relations between firms and subcontractors) 5. a managerial, product oriented K-ism, as opposed to share-holder dominated (J corporations tend to raise funds more from loans than equity-- and much equity held by banks, etc.) 6. effective incomes policy: simultaneous pay raises every April 1 7. high savings rates; low interest rates 8. relatively small govt economy: reflects low defence spending, and relatively recent wealth, which means "low level of accumulation of social security demands" 9. cartellization: eg recession cartels to organize production reductions; cooperation to tackle common research problems 10. honour for public service (facilitates effective industrial policy) 11. low esteem for politicians! They rarely take their own initiatives (implies "absence of any electoral-cycle swings of economic policy") 16 18 Two types of efficiency: allocative and "X" Economists dont like the 2nd type, because it is hard to quantify J is particularly good at this 2nd type. This, in turn, depends on a widespread sense of the "fairness" of economic arrangements, which cannot come about in "rough and tumble" K-ism: reflects element of compromise. State has played key role in fashioning mechanisms for compromise Ch. 2: Training in Industry 22 B companies have little interest in training employees. Employees themselves, wiht pay/status differentials unrelated to qualifications, have little interest Problem is the "market paradigm," in which people are bought and sold like any other commodity. They own their skills individually. Employer has no more reason to subsidize training than, say, fertilizer production But in the real world, people are not constantly scanning the labour market, deciding where to jump next. There are highly mobile skills (eg word processing), but there are also many enterprise-specific skills [and,

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he will argue, with increasing economic complexity, these are increasing] Thus, distinction between "market jobs" and "organization jobs" Incentives for training generated by the market paradigm have failed In Japan, on other hand, less mobility, and almost none between competitors. Cf PC to contrast J and B models Partly relevant to B, as long-term employment is becoming more common One cannot simply import the model: many problems with life-time employment. Restricts freedom of choice. Mobility also has useful economic effects: spreading knowledge over different sectors, and is vital for economic structural adjustment. J meets this last problem by having firms in declining sectors diversify, rather than lay off workers. Author presents model for training in B: a loan scheme where loan is paid back by company, but employee who transfers would carry the rest of the loan with him How does J deal with training outside the large-firm sector, which shows high mobility? Much more direct involvement in maintaining competence standards, in a remarkable range of fields. B, on other hand, puts money into training, not into testing: polytecnics can reinforce mediocrity, because they could not survive if their internal tests were so stringent that many students failed Alternative is the "driving test principle": state certification, private training. See this in many fields in J. Are cultural factors involved in differences in training? Important that for over a century Japan "has defined itself as a learning society"; humility required for this position does not come so easily in B Ch. 3: Dual Economy or spectrum economy [Basic point of this contrast is lost on me to some extent...]

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B does not have a single market: fact that real wage rates continue to rise in much of private sector in time of high unemploy testifies to this Interesting analysis of different fairness principles: --equal pay for equal work (EPEW) --equal % pay increases for all (EPPI) --equal shares in the fruits of shared effort (ESSE) ie company with above average profits should have above-average wages --equal pay for enterprises of equal standing (EPEES) ie in J, unions in large companies look to other large companies for guidance in wage demands; don't look to small ones EPPI has become important in times of high inflation ESSE can of course begin generating differentiated wage levels: perhaps growing in importance Reflects distinction between company law and community models of the firm: cf PC Various factors may be pushing firms towards community model in B Note that this model is not "better": can range from paternalistic firm to a coop ESSE stronger today: not clear whether, in practice, it operates by sequence: better productivity leads to higher wages; or monopoly control leads to readiness to concede higher wages, passing these on to prices, leading to higher nominal productivity only Latter possibility suggests need to regulate this process We are seeing a "spectrumization" of the educational system: in practice, everyone makes distinctions between nominally equal schools Growth of community model and ESSE principle would weaken current B trade union structure and the class loyalties on which it is based

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What are implications for social equality? unequal than B ones Ch. 4: Building an Incomes Policy to Last

J wages do not appear more

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J does not have an explicit incomes policy, yet its institutions tend to generate a consensual incomes policy bargaining institutionalized, and predictable, centred around the "Spring offensive" leading to April 1 wage increases After a few major companies have settled, the norm is established for whole economy Some (minor) fluctuations from norm: looking at 22 major industrial groups, 1982 increases varied from 6.05% to 8.09% In B, on the other hand, whole focus is on ensuring conformity with "govt norm"; but that norm is not persuasive Worst B strikes based on sense of indigation: "To have a wage system dominated by a sense of fairness and to have no institutional means of creating a consensus about what fairness means, is a recipe for industrial anarchy." To move beyond this, there must be widespread participation in setting the norm, and there must be some consensus on the procedure to reach that point. Must make distinction between discussion around the norm, and discussions around exceptions to the norm J policy of simultaneous wage increases is helpful, particularly in times of high and fluctuating inflation, so that everyone has suffered the same inflation since last pay increase. [thus, the norm can focus around the nominal increase] If all unions negotiating at once, would be harder for each one to ignore the constraints of the nation's capacity to pay Control over labour incomes must be matched by control over investment income "what the Japanese achieve by courtesy of their cultural heritage, or the late-development effect, or teh accident of history (like being forced into institutional rebuilding by shattering military defeat), we have to try to achieve by taking thought and deliberately creating new institutions." Ch. 5: Authority, Hierarchy, Community

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J capitalism based on traditional docility of J worker? Remnant of feudalism? Definitely is a lively sense of hierarchy. Does this correspond to greater inequality or exploitation? Note that, before a large J company asks workers to take pay freezes or lay-offs, top managers must take a pay cut. Quite distinct from B! In J, not in B or USA, we find managers wearing same uniform as workers, eating in same cafeterias Cites observer who notes that "Japanese tend to disagree with their superiors frequently and politely; Americans less frequently and mroe violently." But is this all "false consciousness"? "One man's false consciousness, of course, is another man's keen sense of justice." Argues that much labour conflict in B tied in with machismo (!) Legitimacy always more problematic in B: since it depends much more on the individual than the office, relations between superiors and subordinates become much more brittle, since superiors always feel under pressure It is this dependence of authority upon the person exercising it that leads to physical separation of managers Where does all this come from? Genes, history, institutions? J not always this way: J in feudal times not marked by unassertive leadership and acceptance of hierarchy Tokugawa period (250 yrs) intervened prior to modern J: period of browth

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of bureaucracy: distinct from B, where quick passage from feudalism to confrontational politics did Confucionism play a role, in its concept of "benevolence" (sense of noblesse oblige) must distinguish intra- and inter-class authority patterns In Japan, conflict in the first sphere is attenuated by teh bureaucratic nature of firms, which means that career patterns are relatively formalized. This implies, in turn, that superiors and subordinates to not have the latent conflict that often exists in B and USA, in sense that one is after the other's job. Such a pretension is of little use in J. Authority based on image of competence and non-egoism wrt the first: J one of the most meritocratic systems in the world, both in occupations and schooling. Thus, standardized testing at various levels of schooling. While class background may of course play a role in one's potential for success, it does not in itself entitle one to go to a better school [Thus, J crown prince did not even attempt to go to Tokyo U... went to Oxford instead] Similarly, many occupations filled by educational criteria Compare to B, where education not meritocratic; and, in any case, many positions filled "from the shop floor," for reasons that have little to do with perceivable merit

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wrt the 2nd factor: non-egoism, benevolence is more problematic in B, because of greater degree of suspicion Ch. 6: Long-term Thinking and the shareholders' role

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role becomes more important "as more and more internatioanl trade is in branches of proudction which are research-intensive, where lead times are long, and where non-price factors like quality and product innovation determine competetive success." in the "classical" capital market, the holder of equity has "liquidity without commitment": level of "commitment" of shareholders may have dropped at end of 19th C, when an "efficient" stock market was developed In J we see pattern of more committed stock-holding: large % of stocks are held by agents that have some other relation to the company (ie workers; banks that lend to it; suppliers, etc.) In 1960's, fear of US takeovers led to "shareholding stabilization strategies" In addition, dividends play a much smaller role: shareholders are more concerned with capital gains Part of this does reflect a cultural difference: stock market is the world of "merchants," who are not highly regarded in Confucionism (during the Mejei restoration, new word had to be coined to distinguish risk-taking, productive, businessman, from the "merchant") J word for "takeover" is same as that for "hijack" In B, appears that, when stock market judges companies to be "good" or "bad," company capacity for long-term planning does not play much of a role Ch. 4: Innovation, Entrepreneurship, the Community Model

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key feature of 20th C is the bureaucratization of innovation: reflects need for large markets to amortize R&D expenditures (and the team basis of many new discoveries) Even in areas where small firms are held to have played a major role, eg informatics, one finds many of the leading players in these small firms once worked in large ones; many of the small ones have also eventually had to seek "adoption" But how can one ensure that corporations are innovative? Company-law model relies on the "stand-off bargained contract" This implies recreating within the firm certain market-like relations and incentives to innovation

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But problem in that much innovaiton today requires highly cooperative effort Experience in B of "quality circles"--cites a study that notes that the experience "shows the difficulty of grafting hihg-trust practices developed within consensus organizations onto a host organization where relationships are conducted on low-trust principles and contain adversarial elements." Ch. 8: The firm as community

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The community orientation of J firms does not rest on laws; but laws can make a difference in reorienting conventions One possible area of legislation would be increased control on take-overs to ensure that employee interests are represented In terms of profit-sharing: makes sense to tie it to dividends paid, rather than to profits, because the latter is harder to define Another step towards building company as community is of course employee share ownership This (in fact the whole model) raises the problem of equality between groups of workers B trade unions hostile to the community model, given their own raison d'etre PC here: chart of forces supposedly leading to more interest in the community model Dore suggests scheme in which workers's reps "have as much right to a say in determining managers' pay and conditions of work as representatives of management now have in determining workers' pay and conditions" Proposes "Fairness Council" to look at company decisions that have equity implications Ch. 9: Goodwill

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Rejects the famous Adam Smith quote that counterposes the "benevolence" of the butcher and his self-interest Will understand goodwill in the economic sphere in temrs of "the sentiments of friendship and the sense of diffuse personal obligation which accrue between individuals engaged in recurring contractual economic exchange." We see in J much less vertical integration, much more use of subcontracting. Dore argues this reflects in part willingness of small entrepreneurs to exploit themselves more than salaried workers can be exploited... But it also reflects greater prevalence of "moralized trading relationships" in J, that lower the risk of not vertically integrating system of "obligational contracting" rather than "spot contracting" System implies that, eg, stronger partner in a trading relation should not push advantage to the limit System is abused, leading to calls to formalize traditionally informal obligations In case of relations among equals, eg between buyers and sellers of industrial inputs, in many cases there is really no market for the input. Eg relation between steel producers and auto makers: relies much more on lead bargaining between Toyota and New Japan Steel These sorts of relations are the main characteristic of the "large enterprise groups," or "zaibatsu," which often have no clear hierarchical structure Does all this reflect cultural factors? Could be argued that it reflects "risk aversion and low time-discounts" that lead to putting premiums on long-term relationships Reflects just as much the fact that the Japanese "have never really caught up with Adam Smith. they havge never managed actually to bring themselves to believe in the invisible hand."

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Interesting note that "Japan has management of the national economy"

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But is all this inefficient? Would one not be better playing the market game fully, then concentrating one's "altruism" in non-market forms, like the Rockerfeller's do? J often criticized because these forms of obligational contracting constitutes a very effective non-tariff barrier But system has many efficiency payoffs: the "best practice" in a given area is more easily diffused; stability of trading relations encourages investment in supplier firms System also leads to general emphasis on quality One does see elements of obligational contracting even in hard-nosed USA K-ism Maks and Spencer's known for this (as it is also known for high quality) Possible that J consumers, as they have become more affluent, have become less price- and more quality-conscious D notes that this type of economic was not characteristic of "cut-throat" J K-ism of the 1920's and early post-war period Where market theorists see this type of behaviour in B, they interpret it as an oligopolistic phenomenon that is creating stagflation--fail to see its beneficial aspects But A. Hirschman noted (1970) that growth of voice and loyalty as opposed to exit as "the characteristic disciplining force" is typical of advanced K-ism To ensure that this sort of situation does not become highly inefficient, important to encourage market forces at the level of final consumer goods market Ch. 10: Industrial Policy Generally interpreted in B as "civil servants presuming to pick winners and giving emergency aid, after dubious backroom politicking, to lame ducks." J state much more future-oriented than others Also little political interference in the technocracy: politicians "specialize in charisma and interest-group brokerage accompanied by a good deal of corruption." Nation needs an administrative elite, in sense of group that is highly capable, widely respected, and "conscious of and valuing that respect, and prepared to be disinterested in order to go on earning it." Interesting comparison: "To a Japanese surveying the British scene, it would seem incredible that there should not be a widespread and anxious appreciation of the fact that in ten years' time the fall-off in North Sea oil yields will leave the British economy with a potentially horrendous external payments problem" In J one finds consensus around the long-term situation, which provides legitimacy for measures with long-term payoffs MITI publishes "Visions" every few years, surveying prospects in the world economy Important that when J govt intervenes it does so at an industry level, not that of the individual firm: less possibility of corruption J industrial policy is also not ruthless: it recognizes market forces (eg recognizes that J will never again be a major textile exporter), but state "expects and allows for a bit of delay in the operation of those market forces" Adjustment, in any case, is easier in a growing economy Ch. 11: Meritocracy Much of legitimacy of system comes from "role played by effort" (or at least the belief in that role!) Students streamed at age 15 D holds that as a society becomes more technologically sophisticated,

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becomes more important to take individual capacity differences into account [ie simply not true that everyone can --with enough training-- do any job] Does this lead to situation in which those with less skills can enter permanent unemployment? This question has not even been asked of late, because of distaste for the category "people of low ability" Concept of an "employability threshold, defined as the capacity to be trained to do a job which, at market prices, produces an added-value greater than... the welfare minimum" This threshold is rising, both because of rising welfare minimum (what time frame is the author referring to???), and because of technological elimination of low value-added jobs "There seems to be a sharpening difference between the 'discouraged unemployed' who find it difficult to get into any job, and the 'mainline participants' who find it easy, as soon as they lose a job, to find another." Ch. 12: Home Thoughts from America In general, notes that USA shows much fewer signs of evolution than does Britain. Still considered "disloyal" in US to express admiration for Japanese system US: great hostility to incomes policy In all these American books about Japanese firms, etc., one does not find mention of phenomena such as executive pay cuts in times of difficulty... Notes that in studies of student cooperation, economics students come out as the worst free riders! "efforts to reintegrate the society, and the social concerns that led earlier to such efforts, seem to be weakened to the point of disappearance."

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