I received the following message from a friend and reader of the Investoralist that made my week. Thank you and please keep the feedback coming!
From a Japanese friend I directed to your site:
‘It was quite accurate, and well analyzed. Without this life-time employment royalty and Samurai spirit dedication to work, teams such as [Redacted] business development may not exist. Not too few business men/women see their success at work as reflect of their worth, perhaps identity. I think it is good in a way, I like the idea a person should always have a spirit of “Samurai”. Objectives often happen to be “work”. It is fine, but social norms should not force it to people who want to pick something besides “work” as their core value.’
Every society is by and large a product of its culture, its history and choices made by its leaders through time. Most of us are no more than puppets on strings that operate within confines of a fishbowl stage – a social experiment to those on the outside. I’m not talking about the laissez-faire gold-rush culture of America, nor the joie-de-vivre way of life of the French. Today, I’m more interested in the experiment that is Japan.
Ever since Senator Charles Grassley told the AIG executives to resign or commit suicide like the Japanese, I’d begun to wonder what it was about the Japanese culture that conjured up images of immaculate suits, dedicated salarymen, and repentant businessmen doing away with themselves amidst corporate failures. When it comes to social norms, the outside world looks upon Japan with a combination of admiration, disgust, and confusion. Where else do you find a culture that fuses its very identity with the work it does?
In good times, this identity fusion means economic prosperity and steady growth at the expense of the occasional karoshi. In bad times, such as now, you have an empty national coffer, a collapsed export economy and little internal consumption, where the unemployed camp out in cyber cafes, and the government has resorted to posting signs at scenic forests to dissuade would-be suiciders. Economic inequalities are increasingly glaring. Previously unheard of, homelessness and poverty are also on the rise.
How did Japan get here?
The post-war social contract
Similar to post-WWII Western Europe, Japan was equally anxious over social stability, security, and its particular aversion towards uncertainty. In Germany, the agreement reached between the state, taxpayers, businesses and labour allowed high taxation of businesses, reduced household income, in exchange for a generous social security system and all its amenities. In Japan, the covenant was decidedly different.
From the onset, the government had a heavy hand in guiding the development of what it deemed “strategic industries”. These export-oriented firms were vertically integrated, and became mammoth conglomerates known as keiretsu. Even though large firms made up of only one third of overall employment, they were expected to carry the rest of the economy with them. Those large firms were given low interest loans, loosely regulated, and were allowed semi-monopolistic pricing. In return, they were expected to provide “lifetime employment” as the bargain price for those aforementioned privileges.
To its detriment, Japan staked not only its economic stability and long-term growth on its large firms, but also its social welfare system. In fact, protection against unemployment and old age is scant and under-developed in contrast to most developed nations. Pension payments are low (lifetime employers are expected to contribute the majority), and unemployment insurance and elements of the welfare system in Japan are still comparatively limited.
Nobody is born to love work this much
Everyone who has ever been in Japan comes back with tales that border on folklore. We hear about its obsession with uniformity, order, efficiency, and robots. On the other hand, you have a still chauvinistic society at ease with its binge-drinking male populations and a highly sexualized but subservient female half that’s part housewife and part porn star.
Japan is also one of the only places on earth where workaholics are the norm rather than the exception. The high cost of living, combined with peer pressure, and financial necessity that placed men (more often than not) as the only breadwinner in the family, has driven the average salaryman to spend the all of his waking hours commuting to and from work, working at work, and even after work, drinking with people from work.
To understand this dedication to one’s workplace, we can not forget that Japan emerged from the war not as the victor, but as a vilified and ruinous island. To pull itself up again from economic devastation, the highly homogenous nation harvested long-held cultural underpinnings of its people. The Asian traditions of shame, sacrifice, responsibility, and its propensity towards collectivist, harmonious, and consensual decision-making were invoked for the betterment of the overall society. As a result, the highly macho Japanese identity evolved to become alarmingly intertwined and dependent upon the work that one performed. It seems as though the Samurai culture, where the men fearlessly engaged in clan battles and women maintain the household, has found itself a more contemporary and applicable outlet.
It has certainly worked well as long as the system hummed along. Grueling hours and whole-hearted dedication to one’s workplace has propelled the Japanese economy to number two in the world, and rendered 90% of the Japanese (during the 70s and 80s) middle-class. Yet Japan paid its price. Working oneself to death has become so common, that the government has had to set up public campaigns to alert workaholics of overwork-related health issues such as stress, heart attacks, strokes and infertility. Even more desperately, karoshi hotlines were set up for those that were burnt out and suicidal from overwork.
After the property bubble
For a country that had enjoyed almost four decades of relative stability and prosperity, the burst of property bubbles in the 80s plunged Japan into a myriad of inter-connected problems.
Export-heavy industries faced unprecedented competition from other emerging economies as well as the global push for trade liberalization. Financial deregulation meant higher borrowing cost for Japanese firms, and lost profits for Japanese banks that had previously enjoyed a profit cushion. But restructuring was next to impossible against court-ordained employment contracts. As a result, more and more companies sank under the heavy payroll burden and eventually went under, the ones flexible enough moved more of their operations oversea. What little momentum the country had towards welfare reform was sadly crushed by the vast destruction of wealth and social disarray.
The government became more and more involved in protecting employment, knowing the very foundation of the Japanese social contract is built upon this certainty. Therefore, every political pressure push for sweeping corporate, and particularly banking restructuring was countered by more compensating countermeasures that protected those corporate entities.
The new disillusionment
Even before the onset of the current recession, Japan was known for having the highest suicide rate of the industrialized world. Its rigid social structure, tolerance of depression, and cultural traditions that condone the act, all lent a hand to this unhappy statistic. The picture has turned noticeably grimmer: the number of suicide from this January has risen 15% from same period last year. Considering evidence suggesting strong correlation between the state of economy and the rate of suicide, this is hardly surprising.
It may also be interesting to consider the Japanese economic success, and now relative decline, as contradictory but contributing factors to this tragedy. Wealth and prosperity has driven a wedge between the collectivist Japanese mentality and its newfound isolationism. Even as prosperity signaled wealth, consumerism, and individualism, a sense of isolationism runs through the Japanese psyche. This fear also parallels a steady decline of lifetime employment and the crumbling of a previously cohesive society. All these socio-economic changes are piling on top of each other at a time where Japan also faces phenomenal demographics pressure. Caught between a rock and a hard place, and unable to take decisive action, it’s no wonder that Japan has been lost for the past two decades.
Now at long last, will Japan finally be able to face the facts of a fundamentally broken economy, relinquish the broken social contract from the last century, and begin the reforms necessary to ensure its survival into the future? Will the government repeat its past appeals for self-sacrifice and social cohesion? And will those calls work to its benefit or detriment?
We will find out soon. Japan does not have time on its side.
picture source: ~MuuuSaki