Japan also had a fast modernization of technology due to substantiated corporate investment. The corporations were growing so fast they could guarantee senior positions to almost all employees. Although there was no long-term capacity for management positions, the lifetime employment system made sure that only employees approaching retirement received positions. Also, the companies were so well endowed with resources, they could meaninglessly fill high paying positions with no regard of valuable yield. Recent studies have shown that the Japanese population's propensity to spend helped drive the economic recovery.
First, the well trained and motivated workers had very good wages. In the s, a combination of low population growth and increased industrialization resulted in increased wages. At the same time the workers who participated in the lifelong employment system had a friendly relationship with higher management, which allowed for very few labor disputes. Despite the Cold War sucking funds away from nations, the keiretsu were safe since the United States was still a reliable consumer of new technologies. The labor system which was so focused on education and motivation also painted its own destiny and security.
Other global nations recognized the quality and reliability of Japanese exports, giving an international brand to companies such as Sony and Nintendo. The system which closely relied on uniform loyal participation from the labor force could not last forever. In the s extreme environmental pollution accompanied by an environment of overworking and stress became a political issue. The success of both the industrialized and agricultural economies heavily relied on the success of the labor market, with labor efficiency being undoubtedly the largest factor when considering the nation's propensity to export.
In most well developed nations there are two limiting factors when considering successful international trade: an available buyer and an ability to efficiently manufacture. However, Japanese people no longer agreed that economic success should be the national policy. Even though economic stressors such as the oil shock tested the reliability of the economy, quick recoveries from large production covered up the issues that would become apparent later.
It continued to satisfy the workers' desire for job security and helped businesses by making training easy and loyalty a standard. In response to growing displeasure of outdated policy by the labor force, the Liberal Democratic Party passed more social reforms to help create a larger safety net. Japanese society saw the growth as having a negative effect on the people, associating excessive spending with a loss of traditional values.
In an exaggerated way, it was as if people had tirelessly worked for 20 years then excessively reaped the benefits. A society that had been so focused on maintaining a neutral social structure as a mechanism for post-war national recovery evolved to establish a more distinct class structure than ever before. By , ten years later, the number of households dropped to 85, This suggests a trend of reduced entrepreneurial activity in population, which is typically stimulated by having sufficient number of workers seeking new income opportunities, in addition or instead of favoring stable employment at large corporations.
Nonetheless, as Japanese people bought more homes, banks saw the sky as the limit, issuing incredible amounts of loans, not all of which that were secure. Nobel Prize winning economist Paul Krugman states "Japan's banks lent more, with less regard for quality of the borrower, than anyone else's. When the bubble eventually burst, the labor system was undoubtedly one of the biggest perpetrators in the collapse. Despite the loan bonanza enjoyed by large corporation, the banks did not invest as much into new businesses that could provide engine for economic growth and new opportunities.
Statistical data Table in reference  shows that during the 90s and early s Shoko Chukin Bank, Credit Cooperation and Shinkumi Federation Bank actually decreased loans and deposits for small businesses. By , these three banks, in addition to Shinkin Central Bank, Labour Credit Association and the National Federation of Labor Credit Associations all together issued fewer than , loans a year to new business ventures. In essence, the large banks had lost confidence in the potential for small businesses to succeed. In turn, this led to a reduced diversity and increased bureaucratization of the economy with more workers favoring employment at large corporations.
The decrease in private ventures from bankruptcies in the s is also displayed in data showing the number of private institutions. Beginning , the number of privately owned enterprises and individual proprietorships stagnated and slowly decreased by the thousands, especially in Aomori, Iwate, Akita, Tokyo, Ishikawa, Kyoto and Osaka Table in reference . At the same time, the number of corporations and joint stock companies saw a dramatic increase. This further supports a conclusion that entrepreneurialism was no longer viewed as a viable path to achieve economic success and societal preference towards the risk averse economic development relying on larger corporations and stable labor employment policies.
When examining the reason for the unchecked growth many economists agree that inept public policy , corruption, greed, and sentiment that Japan was "different" were root causes.
However, pressure from the United States to maintain a competitive domestic industry through politics of weakening the U. Japanese regulators were too close to the banks since bureaucrats weren't paid well and often decided that working for a large bank would be more profitable. Thus, government regulators were able to retire early and profit at Keiretsu.
This fostered an environment where bureaucrats would focus their time to establishing good relationships with banks in order to guarantee a well-paid position after retirement. When the bubble eventually burst, growth became so dismal that huge corporations people called "too big to fail" were forced to scrap their system of obtaining domestic human capital.
Japanese corporations had to cut costs, let go of useless workers and move expensive manufacturing to other countries. To maximize labor efficiency part time employment proliferated, which meant the end of low unemployment rates and financial security to workers. Savers and retirees were ruined due to their dependence on accumulating funds, which stopped following the collapse.
However, the leading corporations now outsource a large fraction of labor and are always looking for cheap labor rather than investing in domestic human capital. This pattern will likely persist as Japan enters the next Asian free trade agreement, making cheap transactions easier within the region.
The New Community Firm: Employment, Governance and Management Reform in Japan – By Takeshi Inagami and D. Hugh Whittaker. The New Community Firm: Employment, Governance and Management Reform in Japan ‐ By Takeshi Inagami and D. Hugh Whittaker.
The crisis disabled long-term political solutions throughout the s as the country constantly elected different leaders with no long-term vision. One of the crisis's overlooked impact is the social change it caused. People have not only given up looking for stable employment, but also given up on life all together. Although the private sector's inability to stimulate better conditions for development of domestic human capital do not always lead to extreme cases such as that, Japanese standard of living and happiness levels have significantly plummeted.
After a half century of unstable economic climate, the Japanese people have found a resurgence in nationalistic and self-sufficient thinking. Japanese leaders have seen close economic and defense relationships with the U.
Prime Minister Shinzo Abe has taken a very different approach to returning Japan onto the mainstage of global economic superpowers. Abe's plan, commonly named "Abenomics", aims to use three "arrows" -- monetary policy, fiscal policy and economic growth strategy -- to increase private investment.
Although many economists have agreed that Japan's macroeconomic situation is nearly unmanageable due to interest rates already at zero, Abenomics specifically sets negative interest rates to help push Japanese workers into entrepreneurship.
This policy is one of Abe's hardest to be successful due to historical instability of monetary policy and cultural norms in Japan. Fluctuations of the capital market go against the cultural desire for stability over everything else. The government's inability to be consistent on maintaining interest rates and excessive focus on large corporations to remain stable puts pressure on regular middle class Japanese. It will be incredibly difficult for the government to find a way to dispel its past troubles especially since large businesses still dominate the financial sector.
For trust between people and government to emerge, Abe will have to either provide further tax incentives for small businesses or establish stronger regulations on large corporations. However, for either to work, he needs to create something similar to China's five year plan, which Japan used to rely on, where a commitment to the policy is laid out because otherwise people will fear that the tax breaks or low interest rates won't last long enough to develop their business idea.
Nonetheless, even if Abe can do both of these things, the cultural barrier will present a steep obstacle. To succeed, Abe must show that individual employment opportunities will be more stable long-term than the corporate ones, and a culture of economic individualism does not negate the possibility of a fair social contract that broadly benefit everyone and the society as a whole.
Instead of discouraging people who have potential to make Japan more prosperous, the country has to buy into the idea of a national goal similar to the post-war dogma.
Abe's best plan to tackle the pressure that large corporations project on government would be to limit the government's bending to corporate "screw-ups". This would cement a free market approach with basic government planning, show entrepreneurs the government is committed to a leveled economic field with equal opportunities and encourage large corporations to be more scrupulous.
For the "monetary policy" arrow to hit its mark in promoting growth through low interest rate investments, Abe has to develop a more aggressive foreign policy. By decreasing interest rates further, Japan will see a rise in inflation. This will serve to lower the cost of domestic goods, which can be used to create a larger international trade surplus. I would like to emphasize that this is a short term policy to stimulate growth, which will have to be corrected if growth becomes excessive. That being said in the short term this should help not only promote growth via export, but should also eventually increase wages, thus promoting demand in Japanese markets.
Japan's lifetime employment system must also change. The system works only during a period of high growth, due to more tolerance to inefficiencies during the growth periods, and it can only be managed with an excess of wealth. The Ministry of Internal Affairs estimates there are currently 25 million company workers between the ages of late 40s and mid 60s, and in Japan the most productive age is 45, which endangers the company's profitability.
Transferring workers to useless departments and social disconnection emerged as passive methods of encouraging workers to leave. If Abe chooses to emphasize this as the largest consequence of Japanese corporate labor, it could paralyze people instead of forcing them to change their views on employment,. Historically, statistical data shows that the Japanese government has been slow to address the social climate from a young age.
The total facilities and number of trainees focusing on developing the leadership skills also dramatically declined after experiencing peaks in the s.
source link The largest challenge to Japan will be selling the deal to voters.