Japan and its Broken Social Contract

Japan

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

Comments on this entry are closed.

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  • http://tokyocounseling.com Andrew Grimes JFP, JSCCP, M.Sci. Pth

    I read this article with interest, particularly to the press references to suicide in Japant. Personally speaking as someone who has lived and worked over twenty years here in Japan as a psychologist and group psychotherapist I do not see nor experience Japan as a social experiment but as a real country with a population of over 126,000,000 real people with real hopes, ambitions and concerns for their families and friends. No one here, as in any other country in the world, wants to grow up to become depressed and suicidal. Western media sources too often dwell on archaic and sometimes historically inaccurate and misleading notions that somehow suicide is social acceptable the post war era of Japan. Mental Health professionals in modern 21st Japan have long known that the reason for the unnecessarily high suicide rate in Japan is due to unemployment, bankruptcies, and the increasing levels of stress on businessmen and other salaried workers who have suffered enormous hardship in Japan since the bursting of the stock market bubble here that peaked around 1997. Until that year Japan had an annual suicide of rate figures between 22,000 and 24,000 each year. Following the bursting of the stock market and the long term economic downturn that has followed here since the suicide rate in 1998 increased by around 25% and since 1998 the number of people killing themselves each year in Japan has consistently remained well over 30,000 each and every year to the present day. The current worldwide recession is of course impacting Japan too, so unless very proactive and well funded local and nation wide suicide prevention programs and initiatives are immediately it is very difficult to foresee the governments previously stated intention to reduce the suicide rate to around 23,000 by the year 2016 being achievable. On the contrary the numbers, and the human suffering and the depression and misery that the people who become part of these numbers, have to endure may well stay at the current levels that have persistently been the case here for the last ten years. It could even get worse unless more is done to prevent this terrible loss of life. During these last ten years of relentl the English media and press someone goes through the files and does a story on the so-called ‘suicide forest’ or ‘internet suicide clubs’ without focusing on the bigger picture. Economic hardship, bankruptcies and unemployment have been the main cause of suicide in Japan over the last 10 years, as the well detailed reports behind the suicide rate numbers that have been issued every year until now by the National Police Agency in Japan (the NPA only just began to issue monthly reports in January 2009) show only to clearly if any journalist is prepared to learn Japanese or get a bilingual researcher to do the research to get to the real heart of the tragic story of the long term and unnecessarily high suicide rate problem in Japan.

  • http://tokyocounseling.com Andrew Grimes JFP, JSCCP, M.Sc

    I read this article with interest, particularly to the press references to suicide in Japant. Personally speaking as someone who has lived and worked over twenty years here in Japan as a psychologist and group psychotherapist I do not see nor experience Japan as a social experiment but as a real country with a population of over 126,000,000 real people with real hopes, ambitions and concerns for their families and friends. No one here, as in any other country in the world, wants to grow up to become depressed and suicidal. Western media sources too often dwell on archaic and sometimes historically inaccurate and misleading notions that somehow suicide is social acceptable the post war era of Japan. Mental Health professionals in modern 21st Japan have long known that the reason for the unnecessarily high suicide rate in Japan is due to unemployment, bankruptcies, and the increasing levels of stress on businessmen and other salaried workers who have suffered enormous hardship in Japan since the bursting of the stock market bubble here that peaked around 1997. Until that year Japan had an annual suicide of rate figures between 22,000 and 24,000 each year. Following the bursting of the stock market and the long term economic downturn that has followed here since the suicide rate in 1998 increased by around 25% and since 1998 the number of people killing themselves each year in Japan has consistently remained well over 30,000 each and every year to the present day. The current worldwide recession is of course impacting Japan too, so unless very proactive and well funded local and nation wide suicide prevention programs and initiatives are immediately it is very difficult to foresee the governments previously stated intention to reduce the suicide rate to around 23,000 by the year 2016 being achievable. On the contrary the numbers, and the human suffering and the depression and misery that the people who become part of these numbers, have to endure may well stay at the current levels that have persistently been the case here for the last ten years. It could even get worse unless more is done to prevent this terrible loss of life. During these last ten years of relentl the English media and press someone goes through the files and does a story on the so-called ‘suicide forest’ or ‘internet suicide clubs’ without focusing on the bigger picture. Economic hardship, bankruptcies and unemployment have been the main cause of suicide in Japan over the last 10 years, as the well detailed reports behind the suicide rate numbers that have been issued every year until now by the National Police Agency in Japan (the NPA only just began to issue monthly reports in January 2009) show only to clearly if any journalist is prepared to learn Japanese or get a bilingual researcher to do the research to get to the real heart of the tragic story of the long term and unnecessarily high suicide rate problem in Japan.

  • http://investoralist.com Dana

    Hi Andrew,

    Thank you for the comment. I don’t think anyone is seeing suicide in Japan as a purely cultural phenomenon, nor one treated with indifference. Economic impact resulting from the recession(s) as well as the highly conformist work culture have all compounded the problem. I think what people are curious about – which is unfortunately played up by the media that sometimes loves to sensationalize, is how the Japanese deal with pressure (collectively as a people) compared to the rest of the world.

    Historically, Japan has always had higher suicide rates. Where most Christian societies view suicide as a sin and have traditionally frowned upon the practice, the Japanese have always had a different relationship with the idea of suicide. For example, conformist pressures in the US are very strong at times too (there’s little cushion for any mistakes), but people tend to find outlets one way or another. They may go crazy, but proportionally less decide to off themselves. Whereas in Japan, many people succumb to the pressure and find suicide as the only respite.

    In modern days, this cultural proclivity is exaggerated at times of economic hardship. I don’t think the journalists I have quoted in the article are biased in accusing the Japanese of not understand the severe social cost and ill that is suicide. But oriental cultures, particularly Buddhist ones, “sufferings” are supposed to be the default human state. So the article on Japan’s relative tolerance to depression cannot be too far from the truth. Although I’m certain that sooner or later, medication will be the norm and not the exception in face of such high human cost.

    Again, thank you for the comment, I’m learning more about it with your input :)

  • http://investoralist.com Dana

    Hi Andrew,

    Thank you for the comment. I don’t think anyone is seeing suicide in Japan as a purely cultural phenomenon, nor one treated with indifference. Economic impact resulting from the recession(s) as well as the highly conformist work culture have all compounded the problem. I think what people are curious about – which is unfortunately played up by the media that sometimes loves to sensationalize, is how the Japanese deal with pressure (collectively as a people) compared to the rest of the world.

    Historically, Japan has always had higher suicide rates. Where most Christian societies view suicide as a sin and have traditionally frowned upon the practice, the Japanese have always had a different relationship with the idea of suicide. For example, conformist pressures in the US are very strong at times too (there’s little cushion for any mistakes), but people tend to find outlets one way or another. They may go crazy, but proportionally less decide to off themselves. Whereas in Japan, many people succumb to the pressure and find suicide as the only respite.

    In modern days, this cultural proclivity is exaggerated at times of economic hardship. I don’t think the journalists I have quoted in the article are biased in accusing the Japanese of not understand the severe social cost and ill that is suicide. But oriental cultures, particularly Buddhist ones, “sufferings” are supposed to be the default human state. So the article on Japan’s relative tolerance to depression cannot be too far from the truth. Although I’m certain that sooner or later, medication will be the norm and not the exception in face of such high human cost.

    Again, thank you for the comment, I’m learning more about it with your input :)

  • sanders

    Japan is a contrast in so many thing esp if you compare to a modern Western society. They are modern but yet very traditional but all things traditional come under attack. Take food, Japanese has some of the greatest food yet MickeyD’s is changing their diet
    http://japansugoi.com/wordpress/okinawa-crisis-more-obese-japanese-japanese-diet-under-threat/

  • sanders

    Japan is a contrast in so many thing esp if you compare to a modern Western society. They are modern but yet very traditional but all things traditional come under attack. Take food, Japanese has some of the greatest food yet MickeyD’s is changing their diet
    http://japansugoi.com/wordpress/okinawa-crisis-more-obese-japanese-japanese-diet-under-threat/

  • http://investoralist.com Dana

    Hi Sanders,

    No doubt, traditional cultures all around the world are becoming just a tad bit more diluted and blawh everyday. Yet I think the Japanese has managed to hang on to their culture better than most. Perhaps a bit too well …

    Thanks for dropping by, appreciate the comment.

  • http://investoralist.com Dana

    Hi Sanders,

    No doubt, traditional cultures all around the world are becoming just a tad bit more diluted and blawh everyday. Yet I think the Japanese has managed to hang on to their culture better than most. Perhaps a bit too well …

    Thanks for dropping by, appreciate the comment.

  • Gaurav

    You might have read this already – according to the NYT, Japan is paying its foreign workers to go home: http://www.nytimes.com/2009/04/23/business/global/23immigrant.html?_r=1&em

    Japan has also suffered, along with most of East Asia, because of exports. None of the Eastern economies – Japan included – really consume. The savings rate is uncommonly high and has remained so with Japanese rates being near 0 since as long as one can remember. Yet consumption is weak and so the economy will remain weak given that its biggest export market has rediscovered the joys of saving.

    Add to that, (and the article does mention this) that the demographics are so skewed in Japan towards the older generation – there simply aren’t that many young people in Japan.

    It makes you think that why haven’t the Japanese provided more of a fiscal stimulus – maybe, it also has to do, like you mentioned, the inherent culture that Japan has had a hard time letting go of. It might also be difficult for independent entrepreneurship to survive given the above factors, combined with the keiretsu.

  • Gaurav

    You might have read this already – according to the NYT, Japan is paying its foreign workers to go home: http://www.nytimes.com/2009/04/23/business/global/23immigrant.html?_r=1&em

    Japan has also suffered, along with most of East Asia, because of exports. None of the Eastern economies – Japan included – really consume. The savings rate is uncommonly high and has remained so with Japanese rates being near 0 since as long as one can remember. Yet consumption is weak and so the economy will remain weak given that its biggest export market has rediscovered the joys of saving.

    Add to that, (and the article does mention this) that the demographics are so skewed in Japan towards the older generation – there simply aren’t that many young people in Japan.

    It makes you think that why haven’t the Japanese provided more of a fiscal stimulus – maybe, it also has to do, like you mentioned, the inherent culture that Japan has had a hard time letting go of. It might also be difficult for independent entrepreneurship to survive given the above factors, combined with the keiretsu.

  • http://investoralist.com Dana

    Hey Gaurav,

    Interesting choices they make, no? I always wonder what it is that Japanese leadership knows about their fellow citizens and culture that the rest of the world doesn’t. Because it just doesn’t make any sense to me.

    As mentioned in my Why Europe Refuses to Bend article, Germany, and the rest of continental Europe has steadfastly refused to to provide the kind of debt-supported stimulus that Japan and the US have committed themselves to. One of the reasons they cited was demographics. With such an aging population, who’s gonna pay for it?

    So back to Japan. Shrinking population, stubborn refusal to absorb more immigrants. Is this why they are so committed to robotics technology, you think? I think it might have something to do with it.

  • http://investoralist.com Dana

    Hey Gaurav,

    Interesting choices they make, no? I always wonder what it is that Japanese leadership knows about their fellow citizens and culture that the rest of the world doesn’t. Because it just doesn’t make any sense to me.

    As mentioned in my Why Europe Refuses to Bend article, Germany, and the rest of continental Europe has steadfastly refused to to provide the kind of debt-supported stimulus that Japan and the US have committed themselves to. One of the reasons they cited was demographics. With such an aging population, who’s gonna pay for it?

    So back to Japan. Shrinking population, stubborn refusal to absorb more immigrants. Is this why they are so committed to robotics technology, you think? I think it might have something to do with it.

  • Gaurav

    Ah – but Europe is is a whole another beast. The economies are so disparate – Spain, for example, had a nice, big property bubble, and is probably just dying to get some cheaper money, but the powers that be – such as Germany and France don’t want to go down that road, as you mentioned. Not to mention the Irish have just effectively nationalized atleast one bank. Atleast the markets didn’t go as wild as the UK. I wonder if the pound might be attacked the way the Icelandic krone was?

    Coming back to Japan – I wonder, I mean, the automation there is fantastic – never been, only heard from people who traveled there, though would love to visit. If you have been, would be great to hear about it.

    I’ll take a look at your post as well.

  • Gaurav

    Ah – but Europe is is a whole another beast. The economies are so disparate – Spain, for example, had a nice, big property bubble, and is probably just dying to get some cheaper money, but the powers that be – such as Germany and France don’t want to go down that road, as you mentioned. Not to mention the Irish have just effectively nationalized atleast one bank. Atleast the markets didn’t go as wild as the UK. I wonder if the pound might be attacked the way the Icelandic krone was?

    Coming back to Japan – I wonder, I mean, the automation there is fantastic – never been, only heard from people who traveled there, though would love to visit. If you have been, would be great to hear about it.

    I’ll take a look at your post as well.

  • http://investoralist.com Dana

    Unfortunately me neither.

    But from what I’ve learned and read and told through schooling (doing business in the Pacific Rim!), and hearsay from the friends that have been there, this account seems pretty accurate.

    More pictures through this blogger if you’re interested in more of a visual depiction :)

  • http://investoralist.com Dana

    Unfortunately me neither.

    But from what I’ve learned and read and told through schooling (doing business in the Pacific Rim!), and hearsay from the friends that have been there, this account seems pretty accurate.

    More pictures through this blogger if you’re interested in more of a visual depiction :)

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    , 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

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  • overture23

    Interesting article, Japan is too focused on employment issues and a businesses Employment Contract is also a factor in this situation. But I due to the world economy crash I feel Japan has a chance to reinvent its market.

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