History :The west and the World

Primary Sources

#1 Morita Akio – Made in Japan (1986)

The Japanese economy was arguably the world’s most productive in the decades after World War II, achieving growth rates that outstripped even the boom years of Western Europe and the United States. In this document Morita Akio, the Chairman of Sony (one of Japan’s most successful corporations) argues that Japanese economic success was, at least in part, a result of its corporate culture. How does he contrast corporate behavior in Japan with corporate behavior in the United States?

[p.203] I have always made it a point to know our employees, to visit every facility of our company, and to try to meet and know every single employee. This became more and more difficult as we grew, and it is impossible to really know the more than forty thousand people who work for us today, but I try. I encourage all of our managers to know everybody and not to sit behind a

[p.204] desk in the office all day. I enjoy showing up at a factory or a branch office and chatting with people when I can…. On a visit to a small Sony lab near Palo Alto one day, our manager, an American, asked me if I would pose for some pictures and I said I would be happy to. Before the hour was over, I had posed with all thirty or forty employees and I said to the manager, "I appreciate your attitude. You understand the Sony family policy….”

A company will get nowhere if all of the thinking is left to management. Everybody in the company must contribute, and for the lower-level employees their contribution must be more than just manual labor. We insist that all of our employees contribute their minds. Today we get an average of eight suggestions a year from each of our employees, and most of the suggestions have to do with making their own jobs easier or their work more reliable or a process more efficient. Some people in the West scoff at the suggestion process, saying that it forces people to repeat the obvious, or that it indicates a lack of leadership by management. This attitude shows a lack of understanding. We don't force suggestions, and we take them seriously and implement the best ones. And since the majority of them are directly concerned with a person's work, we find them relevant and useful. After all, who could tell us better how to structure the work than the people who are doing it?...

I cannot understand why there is anything good in laying off people. If management takes the risk and responsibility of hiring personnel, then it is management's ongoing responsibility to keep them employed. The employee does not have the prime responsibility in this decision, so when a recession comes, why should the employee have to suffer for the management decision to hire him? Therefore, in times of boom we are very careful about increasing our personnel. Once we have hired people, we try to make them understand our concept of a fate-sharing body and how if a recession comes the company is willing to sacrifice profit to keep them in

[p.205] the company. Their wage increases or bonuses might also have to be sacrificed, because we all must share this difficulty. They know that management does not lavish bonuses on itself— only workers get bonuses under our system …. And when a company is in trouble, it is the top managers who take salary cuts before the lower-level employees.

Many Americans seem proud of the adversarial relationship between government and business, as though their aims are naturally antagonistic. In Japan we do not see it that way. To put it bluntly, whether we like it or not, the government is a partner in our business without owning a single share of Sony stock or running any risk. And the American government is a partner of American business, too, in the same way. The Japanese government takes away more than 50 percent of our profits, and that in a sense makes it a majority partner. So from our government's viewpoint, it wants its partner to work hard and make a profit. By doing so, business is able to keep people employed, enabling the company and its employees to pay taxes rather than to go on the public dole. This is done with a long-range viewpoint. So while we often have our disagreements with the government and its bureaucracy, which actually runs the government, and while I often criticize specific government programs or policies, I know the relationship is basically supportive….

In Paris not too long ago, someone said rather innocently to me that Japan is a capitalistic country. I said that it would appear so, but that actually, it would be more accurate to say Japan has a socialistic and egalitarian free

[p.206] economic system….

When I leave the company, the Sony philosophy will continue to exist. In the United States it is rare for a company to have its own philosophy, because whenever top management changes, the new person imposes his own very strong views. In fact very often boards of directors will go far out of the field of business of their company to bring in a new top officer to "clean house" and change everything in the company.

[p.207] Recently, one of these outsiders came into an American company, closed down several factories, laid off thousands of employees - and was hailed by other executives in articles in The Wall Street Journal as a great manager. In Japan such a performance would be considered a disgrace. Closing factories and firing employees and changing corporate direction in a business slump may be the expedient and convenient thing to do and may make the balance sheet look better at the end of the next quarter, but it destroys the company spirit….

Citation: (“Moita Akio”)

Works cited:

“Morita Akio on the Collectivist Principles Guiding Sony.” In The World Transformed, 1945 to the Present: A Documentary Reader, ed. Michael H. Hunt. Bedford St. Martin’s, 2004.

#2 Deng Xiaoping – Interview with Time Magazine (October 23, 1985)

Deng was the Chinese leader who steered China away from the command economy imposed by Mao to a system that relied on international trade and the free market to a much greater degree. How does Deng address the seeming contradiction between these capitalistic practices and the ideology of China’s ruling Communist Party?

Henry Grunwald (Editor-in-chief of Time): The Chinese Communist Party has always told people to be selfless and serve the people. In the current economic reform you are telling people to become prosperous, but some cases of graft and corruption and abuse of power have cropped up. What measures are you going to take to solve these problems?

Deng Xiaoping: We shall solve them mainly by two means - education and law. These problems cannot be solved overnight. Nor can they be tackled effectively with a few words by a few people. But we are confident that our Party and our country are capable of gradually reducing these negative phenomena and eventually eliminating them.

Grunwald: Are these phenomena indicative of a latent contradiction that is hard to resolve - a contradiction between a market economy and the socialist system?

Deng: There is no fundamental contradiction between socialism and a market economy. The problem is how to develop the productive forces more effectively. We used to have a planned economy, but our experience over the years has proved that having a totally planned economy hampers the development of the productive forces to a certain extent. If we combine a planned economy with a market economy, we shall be in a better position to liberate the productive forces and speed up economic growth….

If we are to keep to the socialist system, it is essential for us to develop the productive forces. For a long time we failed to handle this question satisfactorily. In the final analysis, the superiority of socialism should be demonstrated in a greater development of the productive forces. The experience we have gained over the years shows that with the former economic structure we cannot develop the productive forces. That is why we have been drawing on some useful capitalist methods. It is clear now that the right approach is to open to the outside world, combine a planned economy with a market economy and introduce structural reforms. Does this run counter to the principles of socialism? No, because in the course of reform we shall make sure of two things: one is that the public sector of the economy is always predominant; the other is that in developing the economy we seek common prosperity, always trying to avoid polarization…. I am convinced that the negative phenomena that can now be found in society will gradually decrease and eventually disappear as the economy grows, as our scientific, cultural and educational levels rise and as democracy and the legal system are strengthened.

In short, the overriding task in China today is to throw ourselves heart and soul into the modernization drive. While giving play to the advantages inherent in socialism, we are also employing some capitalist methods - but only as methods of accelerating the growth of the productive forces. It is true that some negative things have appeared in the process, but what is more important is the gratifying progress we have been able to achieve by initiating these reforms and following this road. China has no alternative but to follow this road. It is the only road to prosperity.

Citation: (“Selected Works”)

Works cited:

"Selected Works of Deng Xiaoping Vol. 3.” Archive.org, n.d. Web. 18 August 2016.

Secondary Sources

#1 Michael Hunt – The World Transformed - Required

In this selection Hunt looks at the economic rise of various Asian countries after World War II, particularly Japan and China.

[p.210] The Japanese pattern of government involvement, sometimes described as "guided capitalism:' had as its overriding goal the accumulation of national wealth through promoting exports and limiting imports. This approach produced the second Japanese economic miracle, surpassing the first one early in the century.

By the late 1950s Japan had demonstrated that it could grow at a rate that exceeded even the most optimistic expectations. By the 1960s the economy was

[p.211] booming. Its rate of GDP growth was stunning even by comparison with the robust European performance, averaging 9.2 percent between 1950 and 1973. The torrid pace helped lift the purchasing power of the Japanese people from less than one-fifth of the U.S. level in 1950 to two-thirds by 1973. Japanese goods were increasingly competitive within the U.S.-guaranteed international free trade regime. Its exports boomed, tripling their share of total world exports between 1955 and 1970…. By 1968 Japan's economy was not just the leader in East Asia but also the third largest in the world. The loser of the Pacific War had become an economic superpower.

The improvement in the standard of living in less than a generation was extraordinary. In 1960 the cabinet of Prime Minister Ikeda Hayato committed to double the national income. By both expanding the country's wealth and ensuring an equitable division, Liberal Democratic Party leaders hoped to promote mass consumption…

The Ikeda plan proved fantastically successful. Japan already had the most equal distribution of income among advanced industrial countries. With prosperity widely shared, Japanese could for the first time in large numbers indulge their taste for consumer goods, mainly appliances and entertainment. By 1970 virtually all urban households had a television, a refrigerator, and a washing machine, and one in five owned a car (rare a decade earlier)….

Central to Japan's success was a statist approach to economic development whereby bureaucrats would help firms gain an edge and maintain it by adjusting quickly to constantly changing market conditions overseas. To that end, government agencies encouraged cooperation among firms and exercised wide discre-

[p.212] tionary power. This "guided capitalism" became orthodoxy during the era of sustained high growth that began in the mid-1950s. In 1955 the government laid down the first of a long string of economic plans, this one geared to 5 percent annual growth. In implementing these plans, the Japanese state orchestrated industrial and export strategies. The Ministry of International Trade and Industry (MITI), created in 1949, worked along with the Ministry of Finance to construct a predictable framework for business growth, to promote efficiency, to ensure cheap capital to encourage investment, and to direct research and development projects toward promising new technologies.

Under this Japanese version of free market capitalism, the state had at its disposal a striking variety of mechanisms to promote its broad goals. The government might intervene to change the tax system, provide subsidies, or encourage new industries by reclaiming scarce land for factory sites or subsidizing the industrial use of water and electricity…. To shelter promising new industry from foreign competition, the state could impose trade restrictions and controls on currency exchange. What the government did not do, in contrast with European practice, was to acquire direct control of important segments of the economy. Nationalization was not in Tokyo's economic tool kit.

Perhaps the most peculiarly Japanese of these government economic tools was "administrative guidance,” which involved laying down "guideposts" for business decision-makers. Bureaucrats, usually in MITI, consulted with business leaders on future levels, of economic activity within an industry, proposing targets on the basis of their overall knowledge of economic conditions, and then persuading businesses to observe them.…

[p.352] While Americans struggled in the 1970s and 1980s, the Japanese continued to enjoy their economic miracle. Nearly four decades of high growth rates had made Japan one of the top three world economies and its people among the most prosperous. Japan's neighbors closely watched this unfolding success story. Taiwan, Singapore, and South Korea applied aspects of the Japanese strategy to their own situations. As smaller craft traveling toward prosperity in the 1970s and 1980s in the wake of the great Japanese vessel, they too would experience high growth rates. With Japan as the model, the region would come to constitute a loose regional bloc united less by formal institutional arrangements than by economic interdependence and a shared economic outlook.

State-led economic growth strategies would begin to transform the broad sweep of countries running from the Korean peninsula to Indonesia and Thailand and produce an extraordinary shift in the percentage of the world's GNP claimed by all of Asia. Only 4 percent in 1960, it would rise to 25 percent by 1990. At the same time the region was becoming a pivotal part of world trade. By 1992 the total exports of countries from the western Pacific Rim exceeded those of the United States or the European Community, and in both cases the trade

[p.353] surplus in favor of Asia was substantial. These vibrant Asian economies made dramatic improvements in the lives of their peoples. In the mid-1970s six of ten households were marked by absolute poverty. By the mid-1990s only two of ten fell into that category….

[p.354] By the 1990s a distinct economic bloc was taking shape in East Asia. Japan's success had been followed first by the "little dragons"—South Korea, Taiwan, and Singapore—in the 1960s and 1970s….

[p.355] Their development of vibrant economies with vital export industries was not just an imitation of Japan's guided capitalism. Taiwan and South Korea both built on infrastructure and an educational foundation laid by Japanese colonial administrations. Both, along with Singapore, had benefited significantly from Japanese investments drawn by low labor costs and the prospect of getting around host country and U.S. import restrictions. Finally, they had benefited from U.S. Cold War policies favorable to foreign trade, U.S. cold warriors' preference for strong leaders who could maintain political stability, and the economic stimulation from U.S. military spending (the equivalent to the role the Marshall Plan had played in Europe). Thanks to this set of favorable conditions, the little dragons had moved successfully into the production of household electronics such as radios and televisions and then on to semiconductors. The addition of the big dragon (China) in the course of the 1980s, followed by Vietnam, broadened the zone of Asian prosperity.

All these successful economies relied on strong state direction. They started from the premise that the international free trade regime offered significant opportunities for growth but that success required more than outdated technology and low wages. The state had to provide promising industries incentives in the form of subsidies and capital available on easy terms. The state also had to buffer these industries against outside competition by raising tariffs and other barriers to imports. At the very time that neo-liberals in the West were mounting their attack against state intervention, these economies were demonstrating that state capitalism and import substitution did in fact work.

The cultural-economic characteristics of this East Asian bloc might best be summed up by the term "Confucian capitalism.” The values underlying bloc success arose from long dominant social and political patterns often described as Confucian. Political legitimacy rested not on abstract laws or constitutional arrangements but rather on the virtue evident in the ruler's character. A well-ruled state was marked not by ideological diversity and debate but rather by broad acceptance of a state-sponsored sociopolitical orthodoxy. Finally, society was in Confucian terms not a collection of competing, self-interested individuals. Members of society were mutually dependent, with common goals that transcended individual interests and that required a modicum of group cooperation and sacrifice. This strong and widely shared set of values helped sustain the very conditions that made East Asian economies work so well, including notably authoritarian politics, a stress on public order, loyalty to family and organization, an ethic of hard work, and a faith in the importance of education. The Japanese and their neighbors operated on the principle that a market mechanism driven primarily by self-interest would not create a decent, moral society and might not even make for an efficient economy. Individualism, with its rejection of group obligations, seemed from the Asian vantage point a dysfunctional trait….

[p.357] While the successes of the little dragons added to the margins of the East Asian bloc, China's turn to capitalism and the international market revolutionized the region's economic landscape, dramatically expanding the scope of the bloc and creating a potential competitor for bloc leadership. Gradually, beginning in the late 1970s, China abandoned central planning in favor of state-guided growth while preserving the dominant role of the Chinese Communist Party (CCP). The result might be described as capitalism with Chinese characteristics. The resulting economic transformation of China, the world's most populous country and once the region's most prominent revolutionary standard-bearer, stands in importance on a par with Japan's "miracle" of the 1950s and 1960s.

[p.358] Deng Xiaoping was the party leader who sharply reoriented the direction of China's development path….

[p.359] Deng decided that he could not lead the party forward without first confronting its past. He and his colleagues needed above all else to examine Mao's record for the lessons it might yield, for the mistakes to be avoided or corrected, and for the legitimacy Mao's genuine achievements might confer. In June 1981 party leaders offered a public reassessment that praised Mao's early leadership but condemned his later errors, notably the Great Leap Forward and the Cultural Revolution, and his imperial style of governance with its frequent and ill-considered policy shifts. The CCP's efforts at coming to terms with its past invites comparison with Khrushchev's own attempt earlier to deal honestly with the legacy of Stalin….

The chief task of a restored party was in Deng's estimate to implement a practical, careful program of economic development….

Deng committed the CCP to a rapid, market-driven economic strategy linked to greater openness to the outside world. He described his approach as "building socialism with Chinese characteristics," but "four modernizations" is the term that finally stuck…. To develop, so the proponents of this course argued, China had to advance on four major fronts—by promoting advanced technology and science, a modernized military, competitive industry, and productive agriculture.

In the greatest surprise of all, the new policy lent support to the emergence of a market economy. Dissolving communes and returning individual plots to peasants was the first striking step, taken in 1978. Although peasants did not own their land under the new policy; they exercised formal control as long as they sold a contracted portion of their crops to the government. The rest was for them to sell on their own account at market prices. Responding to the new incentives, peasants raised production by 25 percent between 1975 and 1985, and China exported grain for the first time in recent memory. The liberation of rural entrepreneurs set a precedent for privatizing other parts of the economy. At the same time businesses still part of the government-controlled public sector gained greater autonomy in decision-making. The result of these changes was a mixed economy in which market forces played a generally broader role and in which

[p.360] the state-controlled sector accounted for an ever-smaller portion of national economic activity. Some have described the practical result as a "negotiated economy" because the official role remained substantial; others have preferred the term "market socialism" with its suggestion that the old ideological orthodoxy remained at least partially alive.

These reforms were accompanied by a deepening involvement in the international economy. Foreign investors first began testing the water and then plunging in with greater enthusiasm as the 1980s wore on….

Deng's approach, his supporters explained, represented a blending of Marxism with elements from capitalism, especially the market principle, to make Chinese-style socialism work better. Reformers argued that building socialism required a developed modern economy and that the long-term hope for socialism was thus best advanced by tapping whatever techniques worked to create that economy. Deng himself seemed to take this tack when he observed that whether the cat is black or white is not important as long it catches mice. So too with the economy. Whatever produced growth was good.

Whatever the justification, the reform program was on the whole a success, in marked contrast to the other major socialist reform program initiated by Gorbachev in the Soviet Union, which was already foundering by the late 1980s. China's economy began to boom in the early 1980s, although it had a tendency to overheat, forcing the government to implement a slowdown, quickly followed by recovery, a new round of inflation, and re-imposition of government restraints in what became a familiar cycle. China's overall growth rates—the highest in the world—averaged over 9 percent from the initiation of the Deng reforms down to 1993. This impressive performance pushed GDP (adjusted for inflation) from $1 trillion in 1979 (the year after Deng launched his reforms), to $2 trillion in 1988, then to $3 trillion in 1994, and finally to over $4 trillion in 1999. By then China had become the world's second largest economy….

In Deng's China there was room for only four modernizations, not a fifth—democratization. Political dissidents and some urban intellectuals argued that democracy was essential to China's development. In their view, China could not modernize economically and socially if it did not modernize politically or at least take a step toward political liberalization by loosening party control….

Deng responded to these critics by linking his program of economic modernization to a stand-pat political program. He insisted that the CCP retain its monopoly of political and military power and that the CCP's interpretation of socialism remain the country's official orthodoxy. Deng's adamantly authoritarian stance reflected worry that chaos might erupt if political restrictions were removed….

[p.363] The CCP's eclectic approach to economic development had produced results with few equals in the third world. It is hard to imagine another third-world case where national weakness was so dramatically turned around, and certainly the scale of the enterprise—whether measured in territory or population—puts China's experiment in development in a class by itself.

But the success of the Deng "revolution" came at a price …. Rapid development created marked regional inequalities and tensions. While China's coastal areas were beginning to behave like and integrate with its prosperous neighbors such as Hong Kong, Taiwan, South Korea, and Japan, peasants in interior regions deprived of the opportunities to ride the recent wave of economic growth seethed under agricultural stagnation and exploitation by local party bosses. Many set out to look for employment in the cities, swelling a great floating workforce mounting into the tens of millions that slipped out of state control and set urban order in peril.

[p.364] Employees in the struggling, debt-ridden state sector of the economy faced a future of mass unemployment and an unraveling of the social compact that formerly had given them security. Dissidents kept their heads down and continued to organize, sustained by a burgeoning free enterprise system and by hopes that the next political spasm would find the Communists more vulnerable.

China's" growth-at-any-cost" philosophy was, moreover, incurring a hidden but steep and pervasive cost in environmental degradation. The manifestations, to be found virtually everywhere, included severe water pollution, water shortages in the north, and pollution from heavy use of high-sulfur coal for energy production. China's cities were wrapped in smog, and China's contribution to global atmospheric pollution was growing larger.

Citation: (Hunt pg#)

Works cited:

Hunt, Michael H. The World Transformed: 1945 to the Present. Oxford University Press, 2014.

HI 103 West & the World The “Third World” – The Asian Tigers 1