High-water mark: police comb a beach near Fukushima for bodies, following the 2011 tsunami. Photo: Jeremy Sutton-Hibbert/Getty Images.
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Staying power: the seemingly exceptional economics of Japan

2013 was the year the world’s financial markets suddenly became interested in Japan again.

Bending Adversity: Japan and the Art of Survival
David Pilling
Allen Lane, 432pp, £20

Until December 2012, Japan was proverbial in the City as the graveyard of global investors. It seemed impossible to get right. How many false dawns on its stock market had the optimists endured over the two “lost decades”, since the collapse of its great bubble in 1990? Then again, how often had the pessimists – warning of imminent default, as Japan’s pile of government debt grew bigger and bigger – turned out to be crying wolf? A frustrated fund manager of my acquaintance summed up the way in which many financial types had come to think of Japan: “I don’t understand what is happening there and I never will: sometimes, I wish it just didn’t exist.”

Yet Japan continued to exist – and despite its lost decades was still the world’s largest creditor nation, its third biggest economy and the undisputed technological leader in a whole host of its most important industries. This apparent paradox has been troubling visitors for years. In the middle of David Pilling’s new book there is a photograph of Tokyo’s dazzlingly futuristic neon cityscape at night. “If this is a recession,” said a visiting politician who witnessed this sight with Pilling, “I want one.” Somehow, Japan has managed to remain both a byword for economic catastrophe and an object of economic emulation. No wonder my friend was so baffled.

The trouble is that Japan resists simplification, and the risk for any book about it is, therefore, that it resorts to caricature. That is a danger for a book about any country, of course. But it is a special risk in the case of Japan, with its confusing economic paradoxes – to say nothing of its white-gloved taxi drivers, its Tamagotchis and its musical loos.

Pilling – a Financial Times journalist who was the paper’s Tokyo bureau chief from 2002-08 – is not just alert to this danger. He turns it to his advantage.

To begin with, he confronts Japan’s supposed exceptionalism head on. It is a notion dear not just to orientalising westerners but, he explains, to many Japanese too. Pilling locks horns with some of the most obsessive proponents of nihonjinron – the study of Japaneseness – whose fanatical claims sound hollow next to his disarming irony. The real ingenuity in Pilling’s approach, however, is not to attempt the impossible task of capturing in a single, seamless portrait the essence of Japan but to assemble instead a highly readable collage of evocative vignettes, drawing on historical episodes and his own experience.

The core of the book consists of four sections. The first explains how Japan’s history before the Meiji restoration and in the early 20th century led to its isolation from the rest of Asia. The second covers the decades of Japan’s economic miracle after the Second World War. The third is an exploration of “Life After Growth” – a series of despatches from the Japan of the 2000s, whose economic and demographic stagnation at high levels of wealth and income have recently begun to haunt the west. The last concerns the important implications for Japan of China’s rise.

The overarching theme is that the puzzling combination of an alleged economic depression with exceptional economic success is just the beginning of Japan’s complexities. The Second World War, for example, left westerners convinced that the Japanese were innately totalitarian, and the seemingly inexorable advance of its monolithic zaibatsu (business conglomerates) confirmed them in this prejudice. Pilling quotes the Meiji-era reformer Yukichi Fukuzawa to remind us that, in reality, Japan had a liberal political tradition as venerable as that of many other countries, even if it could be expressed in apparently self-contradictory terms: “the feudal system is my father’s mortal enemy which I am honour-bound to destroy”.

Pilling might equally have plucked a line or two from the poignant letters written by young Japanese pilots to their families during the war in the Pacific. “I am very proud of being chosen as a kamikaze pilot,” wrote one, but “if I listened only to my reason . . . I would know that freedom is certain to triumph in the end. Perhaps I might be reproached with ‘liberalism’. But freedom is the very essence of human nature and cannot be annihilated.”

Yoshi Imagi, the young man who wrote those words in his last letter, before crash-diving his aeroplane on to an American warship in May 1945, knew that the Japanese are not innately different from anyone else. They just live under different institutions.

In the nationalist era those institutions were murderous. In the postwar period, Japan developed a new set of institutions that were equally unusual but much more benign – most famously, the unique corporate system that served as the basis of its economic miracle. Here, too, western prejudice was quick to chalk up Japanese success to racial difference or “Asian values”. But again the truth is that it was really down to the deliberate choice of different, and more efficient, practices – as their later adoption by western firms confirmed.

Yet there is one aspect of Japanese society that Pilling believes is unique. This is the quality of resilience to which the book’s title, Bending Adversity, alludes. To illustrate this point, the core of the book is bracketed by two sections that describe in compelling detail the catastrophic tsunami that devastated Japan on 11 March 2011, and the extraordinary achievements of the Japanese in overcoming its impact and aftermath.

The hardships that the Japanese endured were awful. Whole communities were wiped out in the north-east. The disaster at the Fukushima nuclear plant prompted the shutdown of Japan’s entire nuclear power industry almost overnight. Yet the country coped. There was no Hurricane Katrina-style breakdown of civil order in Tohoku. Japan’s ultra-modern metropolises instantly adapted to life without lifts and air-conditioning.

The stories have visceral power and are beautifully told. They also give a book that is deliberately fragmentary a satisfying narrative arc. If there is a key to Japan’s history, Pilling argues, it is in its phenomenal ability to turn calamity to advantage.

Pilling’s command of structure is enviable. His sense of timing isn’t bad either. The year 2013 was the year when the world’s financial markets suddenly became interested in Japan again. After 20 years of half measures, the Japanese elected a prime minister in December 2012 – Shinzo Abe – who promised to do things differently. A new governor at the Bank of Japan promptly embarked on the most aggressive programme of monetary easing the world has yet seen.

The Japanese stock market rocketed and the yen collapsed. The consequences for the rest of the world have yet to be fully parsed. But my friend the fund manager is already tearing his hair out at this latest surprise from Japan.

Now I know how to console him: I will give him a copy of David Pilling’s book.

Felix Martin writes the “Real Money” column for the NS. He is the author of “Money: the Unauthorised Biography”

Macroeconomist, bond trader and author of Money

This article first appeared in the 29 January 2014 issue of the New Statesman, The seven per cent problem

Photo: Getty Images
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How can Labour break the Osborne supremacy?

The Conservative hegemony is deeply embedded - but it can be broken, says Ken Spours.

The Conservative Party commands a majority not just in the House of Commons, but also in the wider political landscape. It holds the political loyalty of expanding and powerful voting constituencies, such as the retired population and private sector businesses and their workers. It is dominant in English politics outside the largest urban centres, and it has ambitions to consolidate its position in the South West and to move into the “Northern Powerhouse”. Most ambitiously, it aims to detach irreversibly the skilled working classes from allegiance to the Labour Party, something that was attempted by Thatcher in the 1980s. Its goal is the building of new political hegemonic bloc that might be termed the Osborne supremacy, after its chief strategist.

The new Conservative hegemony is not simply based on stealing Labour’s political clothes or co-opting the odd political figure, such as Andrew Adonis; it runs much deeper and has been more than a decade the making. While leading conservative thinkers have not seriously engaged with the work of Antonio Gramsci, they act as if they have done. They do this instinctively, although they also work hard at enacting political domination.

 Adaptiveness through a conservative ‘double shuffle’

A major source of the new Conservative hegemony has been its fundamental intellectual political thinking and its adaptive nature. The intellectual foundations were laid in the decades of Keysianism when free market thinkers, notably Hayak and Friedman, pioneered neo-liberal thinking that would burst onto the political scene in Reagan/Thatcher era.  Despite setbacks, following the exhaustion of the Thatcherite political project in the 1990s, it has sprung back to life again in a more malleable form. Its strengths lie not only in its roots in a neo-liberal economy and state, but in a conservative ‘double shuffle’: the combining of neo-Thatcherite economics and social and civil liberalism, represented by a highly flexible and cordial relationship between Osborne and Cameron.  

 Right intellectual and political resources

The Conservative Party has also mobilised an integrated set of highly effective political and intellectual resources that are constantly seeking new avenues of economic, technological, political and social development, able to appropriate the language of the Left and to summon and frame popular common sense. These include well-resourced Right think tanks such as Policy Exchange; campaigning attack organisations, notably, the Taxpayers Alliance; a stratum of websites (e.g. ConservativeHome) and bloggers linked to the more established rightwing press that provide easy outlets for key ideas and stories. Moreover, a modernized Conservative Parliamentary Party provides essential political leadership and is highly receptive to new ideas.

 Very Machiavellian - conservative coercion and consensus

No longer restrained by the Liberal Democrats, the Conservatives have also opted for a strategy of coercion to erode the remaining political bastions of the Left with proposed legislation against trade unions, attacks on charities with social missions, reform of the Human Rights Act, and measures to make it more difficult for trade unionists to affiliate to the Labour Party. Coupled with proposed boundary changes and English Votes for English Laws (Evel) in the House of Commons, these are aimed at crippling the organisational capacity of Labour and the wider Left.  It is these twin strategies of consensus and coercion that they anticipate will cohere and expand the Conservative political bloc – a set of economic, political and social alliances underpinned by new institutional ‘facts on the ground’ that aims to irrevocably shift the centre of political gravity.

The strengths and limits of the Conservative political bloc

In 2015 the conservative political bloc constitutes an extensive and well-organised array of ‘ramparts and earthworks’ geared to fighting successful political and ideological ‘wars of position’ and occasional “wars of manoeuvre”. This contrasts sharply with the ramshackle political and ideological trenches of Labour and the Left, which could be characterised as fragmented and in a state of serious disrepair.

The terrain of the Conservative bloc is not impregnable, however, having potential fault lines and weaknesses that might be exploited by a committed and skillful adversary. These include an ideological approach to austerity and shrinking the state that will hit their voting blocs; Europe; a social ‘holding pattern’ and dependence on the older voter that fails to tap into the dynamism of a younger and increasingly estranged generation and, crucially, vulnerability to a new economic crisis because the underlying systemic issues remain unresolved.

 Is the Left capable of building an alternative political bloc?

The answer is not straightforward.  On the one hand, Corbynism is focused on building and energizing a committed core and historically may be recognized as having saved the Labour Party from collapse after a catastrophic defeat in May. The Core may be the foundation of an effective counter bloc, but cannot represent it.  A counter-hegemony will need to be built by reaching out around new vision of a productive economy; a more democratic state that balances national leadership and local discretion (a more democratic version of the Northern Powerhouse); a new social alliance that really articulates the idea of ‘one nation’ and an ability to represent these ideas and visions in everyday, common-sense language. 

 If the Conservatives instinctively understand political hegemony Labour politicians, with one or two notable exceptions, behave as though they have little or no understanding of what is actually going on.  If they hope to win in future this has to change and a good start would be a collective sober analysis of the Conservative’s political and ideological achievements.

This is an extract from The Osborne Supremacy, a new pamphlet by Compass.

Ken Spours is a Professor at the IoE and was Convener of the Compass Education Inquiry. The final report of the Compass Education Inquiry, Big Education can be downloaded here.