Report on GISPRI Symposium
'93
On July 15 and
16 of last year, "GISPRI Symposium '93," the international
symposium sponsored by Global Industrial and Social Progress Research
Institute, was held in Yokohama under the joint sponsorship of Nihon
Keizai Shimbun Inc. and the City of Yokohama. This year's symposium,
the theme of which was "Thinking About Capitalism: Seeking
to Achieve the Harmony and Development of the World Economy,"
and at which lectures were given and panel discussions held, was
attended by a total of thirteen speakers representing the academic
community, the public sector and private industry, including, from
Japan, Dr. Ken'ichi Imai (Professor at Stanford University and Director
of the Stanford Japan Center & Research); Dr. Iwao Nakatani
(Professor at Hitotsubashi University); Dr. Seiichiro Yonekura (Associate
Professor at Hitotsubashi University); Mr. Saichi Nakazawa (Director
of the Industrial Structure Division, Industrial Policy Bureau,
Ministry of International Trade and Industry); and Mr. Jiro Ushio
(Chairman of Ushio Inc.). Also attending were eight speakers from
overseas, including Dr. Lester C. Thurow (Professor at the Massachusetts
Institute of Technology and Dean of MIT's Sloan School of Management);
Dr. Alexis Jacquemin (Economic Advisor to the Forward Studies Unit
of the Commission of EC and Professor at the University Catholique
be Louvain, Belgium); and Dr. Noordin Sopiee (Director-General of
the Institute of Strategic and International Studies (ISIS), Malaysia).
On the first day
of the symposium, attended by roughly 700 persons (including invited
guests and general applicants) assembled at the Pacifico Yokohama,
Mr. Shinji Fukukawa (Senior Advisor to the Global Industrial and
Social Progress Research Institute), and Mr. Hidenobu Takahide (Mayor
of Yokohama), both delivered sponsor's opening remarks, after which
lectures and discussions were held at the first session, titled
"Various Forms of Capitalism and Competition Among Them."
The second session, which began in the afternoon of that day,
was titled "The Role of Government and the Corporate System."
The following day, the symposium shifted to the ballroom of the
Yokohama Grand Intercontinental Hotel. Additional lectures and discussions
were heard during the third and fourth sessions, titled "Industrialization
and the Market Economy" and "The Market Economy System
in the 21st Century" and held in the morning and afternoon,
respectively. This lively two-day, four-session symposium was a
huge success, judging from the thought-provoking presentations of
the distinguished lecturers, the comments and discussions that followed,
the intentness with which the participants listened while jotting
down notes, and particularly the many questions and comments during
each session.
An outline of
each speaker's lecture and panelists' comments during each session
are summarized below.
First Session:
Various Forms of Capitalism and Competition Among Them
With Mr. Akira
Kojima (Senior Editor, Nihon Keizai Shimbun, Inc., Japan) as moderator,
lectures were given.
by Dr. Ken'ichi
Imai, Dr. Lester C. Thurow and Dr. Alexis Jacquemin.
The thesis of
Dr. Imai's lecture, titled "Competition Among Different Capitalism
Systems," was that, as advanced by the economist Schumpeter,
competition between different forms of capitalism leads to evolution.
This argument can be summarized in the following six parts. (1)
Innovation is the engine that drives capitalism, but its pattern
differs from country to country, and such differences must be recognized
in order to assure mutual evolution. (2) The issue of how to create
human resources and capital in preparation for the 21st century
is of greater fundamental importance than methods of distributing
resources and lowering costs, for instance. (3) Innovation in Japan,
the U.S. and Europe is mutually supplementary, and competition among
these regions will lead to evolution in capitalistic economies.
(4) A new mechanism should be created to avoid the monopolization
that results from the strategy in the Japanese system of increasing
returns. (5) The high rate of savings in Japan is a cause of the
trade surplus, while the expansion of domestic demand is a countermeasure
thereto, and so we must examine policies in this area. (6) There
is an optimum mixture of disparate systems, and capitalism will
survive through policies for actively incorporating the advantages
and modes of other systems.
Dr. Imai also
discussed the new trend of promoting evolution through cooperative
relationships within the framework of capitalism that are nongovernmental
and voluntary.
Dr. Thurow, regarding
the attempt to solve the problems facing capitalism today, first
stated that current conditions are similar to those of the 19th
century, then used actual cases to show that (1) communism and socialism,
(2) the social welfare state, (3) Keynesian macroeconomics, and
(4) guaranteed jobs all failed to achieve a satisfactory solution.
Dr. Thurow then
continued with an extremely pessimistic outlook on capitalism:
Inequality is
expected to increase during the extended worldwide economic recession,
the reasons being the globalization of the labor market and the
existence of workers unable to adapt to technological progress.
The development of transportation and communications, in particular,
has made possible the procurement and remote management of developing
nations' labor, thus lowering the wage structure of advanced nations,
which will result in lower rates of growth, first in the United
States, then Europe and even Japan. When the demand for property
and services fails to keep up with the rate of increase of productivity
and constant shrinkage in scale progresses, joblessness rises and
it becomes necessary to take into consideration the income of the
unemployed. The disadvantage of an American-style consumer-driven
economy is that as social welfare systems increase and the costs
of health care and annuities increase, budgetary allocations for
R&D, education and other style of long-range investment, which
is the responsibility of the government, are held down. On the other
hand, the problem with a Japanese-style producer-driven economy
is that decreased demand in the consumer-driven economies leads
to excessive production (in relative terms), resulting in a glut
of products on the market. Unable to prosper even with a trade surplus,
the country must implement drastic systematic changes. However,
with a threat like communism no longer present, it is unlikely that
capitalism will effect the necessary changes on its own.
Dr. Jacquemin
gave a lecture titled "Which European Capitalism?" His
lecture can be summarized as follows.
Although Europe
has begun to recognize the positive social effects of market competition,
in order to compensate for the incompleteness and failures of the
market itself, public policies for controlling or supplementing
the market are necessary; European-style competition and the purpose
of industrial policy agree with this philosophy. A greater emphasis
on fairness and collective responsibility over economic efficiency
is the essence of the European approach to capitalism; even in the
business world there is support for various social models &
like investments in social stability & that are unique to European
capitalism. In short, although European capitalism is a central
model, it is not the basic unit of the EC. In addition to the market
mechanism, factors such as the extent of democratization and the
protection of human rights also characterize patterns of capitalism;
in developing nations, authoritarian systems can be used to promote
rapid economic development. It should be remembered that, at any
rate, the formation of the EC has lead to further democratization.
Finally, as Japan, the U.S. and Europe currently face common problems
as their patterns of capitalism are tending to converge, we are
now at a turning point at which we shall head either towards a plus-sum
game through healthy competition between systems, or towards a zero-sum
game.
The panel discussion
was then begun, with Dr. Iwao Nakatani (Professor at Hitotsubashi
University) stating that Japan is developing increased resistance
to foreign pressure as its economic power grows, while the EC has
failed to find a solution to the problem of structural unemployment,
reflecting a general loss by the various styles of capitalism of
the ability to effect changes themselves. He then stated that the
momentum for change is likely to come either from significant innovation
in the democratic process or from the economic stimulation of rapid
growth in Southeast Asia. Dr. Thurow stated that worldwide cooperation
will not be possible unless the nations of the world are visited
by a crisis simultaneously, and that it will also be difficult to
achieve unless Japan, the U.S. and Germany, as well, are prepared
to have their citizens shoulder an increased burden and undergo
a certain amount of hardship in order for these countries to serve
as the "locomotive of the world economy." Hence, he concluded,
tripolar cooperation will be impossible, at least politically. Dr.
Jacquemin then stated that because of the strains in Eastern and
Central Europe caused by insufficient regulation of activities in
macroeconomic policies, these regions must strive to effect structural
changes without depending on the market economy. Dr. Imai, touching
on the differences between capitalism and the market economy, proposed
that the definition of a market economy be widened to include volunteer
activity. Dr. Nakatani commented that government activity and other
supplementary measures could conceivably compensate for failures
of the market, and that morals, public spirit and other aspects
of mentality must be taken into consideration when promoting innovation
in democracy. Participants then commented on and discussed problems
concerning R&D and technological development, dynamism in Asia's
economy, regional economies, and the appearance of fundamentalism,
after which Mr. Kojima concluded the session with this summarization
of the discussion: (1) Revisionism is histori-cally necessary now
that the East-West conflict has ended, and the Japanese-style of
capitalism is unique. (2) Although this uniqueness has been the
foundation of success so far, (3) the necessity of voluntary change
has not been recognized Japan, and so (4) other nations have begun
to believe that their approach to Japan must be changed.
Second Session:
The Role of Government and the Corporate System
After the lecture
by Dr. Michele Schmiegelow (Professor at University of Lourain)
and Dr. Nakatani, a discussion moderated by Mr. Youichiro Ichioka
(Director and Chief Editorial Writer, Nihon Keizai Shimbun, Inc.,
Japan) was held.
A researcher on
industrial policy, Dr. Schmiegelow stated that industrial policy,
which began 300 years ago in France and has been practiced by countries
around the world, involves the negative aspect of protecting weak
industries and the positive aspect of helping to nurture new ones.
She then went on to discuss the systems and actions for making industrial
policy successful.
In terms of systems,
Dr. Schmiegelow continued, a system for ensuring cooperation between
industry, the public sector and academic world is necessary, as
is the exchange of information between the public and private sectors
and banks. The fiscal, monetary and currency policies adopted by
governments to hold down inflation and stabilize exchange rates
& i.e., indirect government intervention & are important
for encouraging banks to invest in corporations that require development
capital. As governments must also provide vision and indicate courses
to take in research and development, the cooperation of universities
engaged in innovative research for the private and public sectors
will also be needed. Investment in basic research in the private
sector and other long-term research involving risks will continue
to be important.
However, she added,
whether such policies can actually be implemented is another matter.
In terms of action, a crucial point is whether or not the private
sector is prepared to assume these risks itself in performing research
and development.
Dr. Nakatani,
praising industrial policy as having served an important role during
the stage of capitalism's development, and stating that Japan's
corporate system is currently at a crossroads, discussed the style
of industrial policy that is needed now.
In the past the
Japanese corporate system was concerned with catching up with other
nations by borrowing original concepts from advanced nations and,
through repeated improvements, creating products better than those
made by the originator, and consequently there was a very effective
incentive mechanism in place. Corporations acted as a community,
emphasis was on growth, and strategies involved low risk and low
return.
Dr. Nakatani went
on, however, to add that four styles of limitations have appeared:
quantitative growth, globalization, capital costs, and personnel
shortages. To overcome these limitations it is necessary to effect
a transformation from a catch-up system to a pioneering system,
and therefore the government must become actively involved in reforming
the capital market, the tax system and, to produce personnel possessing
originality, the labor market.
Comments made
by panelists in response to these lectures include the following.
Mr. Nakazawa remarked
that although the industrial policy of.
the Ministry of
International Trade and Industry has been consistent with its basic
objective of bringing out the strengths of the private sector within
the framework of the market mechanism, some areas of industry have
changed along with the times, and a system for supporting reform
in Japan's corporate system, which is now in a transition phase,
is now needed.
Mr. Ushio, after
stating that the many catch-up industrial policies of Japan's private
sector were one reason for the country's success, stressed the universality
of Japanese-style management and the importance of the role and
decision- making of top management in introducing original technology.
Dr. Thurow commented
that the slowdown in worldwide economic growth is due to factors
unrelated to the technological revolution, and that measures to
prevent the exclusion of nations' state-of-the-art technology are
now necessary.
Central topics
in the panel discussion were policies for changing the corporate
system from a catch-up one to a pioneering one, and how to coordinate
different nations' industrial policies on a global scale. Dr. Schmiegelow
remarked that although policy cooperation involving the exchange
of information on technology, for instance, is necessary, the coordination
of industrial policies on a global scale is an issue that affects
the protection of each nation's workers' interests and would therefore
be very difficult politically.
Dr. Nakatani stated
that an aspect of Japanese-style capitalism that must be rectified
is the tendency to bind the individual to an organization beyond
what is necessary, and added that the coordination of industrial
policies would be extremely difficult. Mr. Nakazawa commented that
governments must play an active role in areas such as environmental
issues, technology transfers, the breakup of monopolies, research
and development on elemental technology, and systems involving corporate
activity that transcends national boundaries. Mr. Naohiro Amaya
(Director, Dentsu Institute for Human Studies) pointed out the difficulty
in knowing when to implement industrial policy and when to terminate
it, and stated that advanced nations should concentrate on public
finances in their industrial policy.
Lastly, Mr. Ichioka
summarized the session by saying that with so many problems today
that cannot be dealt with on a level of individual nations, coordination,
in the broad sense, of industrial policy on a global scale is needed,
no matter how difficult it may be.
Third Session:
Industrialization and the Market Economy
Below is a summary
of the lectures given by Dr. Ivan D. Ivanov (Deputy Director of
the Institute of Foreign Economic Studies, Russia), Dr. Wu Jinglian
(Senior Researcher, Development Research Center, State Council of
P.R.C.) and Dr. Sopiee, and the subsequent discussion moderated
by Dr. Hiroyuki Itami (Professor at Hitotsubashi University).
Dr. Ivanov, citing
the privatization of government-run assets, the breakup of monopolistic
corporations and the stabilization of finances as the three primary
objectives of Russia's economic reform that rank in importance with
political democratization, stated that a problem Russia must face
in privatization is management's lack of know-how. Regarding reform,
he remarked that a difference of opinion exists between the radicals
and specialists regarding issues such as the political system, fiscal
stability, government intervention in the market system, gradual
reform, and internationalization.
Dr. Wu stated
that because of the extremely decentralized nature of China's economic
system in the past, reform was begun in rural villages and succeeded
in strengthening nonstate enterprises (such as township and village
enterprises), and that this sector, having developed rapidly, has
served as an example for reform in the state sector and stimulated
the economic growth that is seen in China today. However, he added,
the reform of state enterprises has failed to progress very far,
with a double economy comprised of state enterprises and the dynamic
private sector resulting, while the country is also faced with an
overheating economy at the same time.
Dr. Sopiee, stating
that in order to achieve harmony between the various styles of capitalism,
this variety must be recognized, cited the following as key factors
behind Malaysia's economic development: political stability, a strong
and efficient government, emphasis on the market system, democracy,
an "economy-first" policy, and strategic pragmatism. As
a result, Malaysia's economy has developed through four stages:
the period, up to 1957, of laissez-faire and the production of substitutes
for imported goods under English administration; the period of growing
disparity in incomes (up to 1969); the period of extensive government
intervention (up to 1985); and the current period of market emphasis.
As current policies,
he stated an emphasis on the private sector, shrinkage of the public
sector, assistance for new operations, liberalizing imports while
promoting an export-led economy, infrastructure investment, developing
human resources, holding down inflation, and striving for balanced
economic development, then stated that these strategies have been
effective and added that his country hopes to become "Malaysia
Incorporated.
In the discussion,
Dr. Hal R. Varian (Professor at Michigan University) pointed out
that Eastern Europe and other regions that are switching to a market
economy must supplement their free markets and free economies with
social, political and legal systems. Dr. Yonekura, after stating
that frontiers can be found in countries like Russia, China and
Malaysia, and that these countries differ from the advanced nations,
which now suffer from low growth, added that today's problems include
combining a market economy with industrial policy in Russia, now
that its shock therapy has failed; economic stability in post-Deng
Xiaoping China; and the.
limits of an export-led
economy in Malaysia, where domestic demand is small. Dr. Schmiegelow,
pointing out that what is important in switching to a market economy
is management, stated that in order to train effective managers,
a gradual transition to a market economy as in Germany and Japan
is preferable to merely entrusting everything to the market. She
then expressed her doubts as to how China can assure the solidarity
of its people in the midst of regional differences in income and
social security.
In response to
this, Dr. Ivanov recognized the necessity of government intervention
in the distribution of income, then stated that in Russia, where,
because of its relationship with the IMF, there is now great interest
in the Latin American style of reform, the problem is that the transition
to a market economy is generally taking place without a sufficient
legal framework. He then added that the IMF's "big bang"
approach has had disastrous effects on Russia, and that reform should
begin domestically.
Dr. Wu said that
with reform in China now irreversible, problems like inflationary
pressures and increased disparity between regions are more important
to the transition to a market economy than the individual's loss
of influence, and so the government intends to proceed with reform
in order to solve these problems.
Dr. Sopiee stated
that Malaysia, because it is unquestionable dependent on exports,
intends to seek out new markets in ASEAN member nations and developing
countries, as well as in the advanced nations, and that in terms
of making Malaysian firms more efficient, operating firms as free-market
firms that increase their profits is more important than the transfer
of ownership.
Lastly, Dr. Itami
concluded the session by pointing out the common philosophy that
the actual ability to act independently is more important than ideals
in economic reform in Asia.
Fourth Session:
The Market Economy System in the 21st Centure
The fourth session
consisted of presentations by Dr. Varian and Dr. Ryuzo Satoh (Professor
at New York University), and a panel discussion led by Dr. Schmiegelow,
Dr. Sopiee and Dr. Yonekura and moderated by Mr. Fukukawa.
First, Dr. Varian
gave a presentation, titled "The Market Economy in the Information
Age," about the various effects of the information revolution
on industrial society and the corporate system. He opened by citing
a 1986 prediction he made that the extent of the freedom and ease
of exchanging information would become a factor behind the growing
disparity between democratic and totalitarian countries, then stated
that societies and corporations capable of properly managing this
flow of information will someday rule those than cannot. Then, comparing
this with the standardization of software, decentralized information
management and other aspects of the computer industry, he predicted
future developments in the market economy at a corporate level.
He also stated that the new concept of "hard budget constraints,"
as opposed to the government's "soft budget constraints,"
are effective in preventing the bureaucratization of an organization.
Next, Dr. Satoh,
lecturing on "Industrial Policy in the 21st Century" from
the standpoint of policy stance and capitalism's historical cycle,
stated that in the 21st century Japan will be forced to shift to
import industrial policy and should therefore adopt an industrial
policy for switching from process skill innovation to product innovation.
He then added that there are countries (like some in South Asia)
which, because of cultural similarities, could adopt traditional
Japanese industrial policy, and that styles of capitalism such as
American-style capitalism, British-style capitalism, German-style
capitalism, and Japanese-style capitalism, are, overall, tending
to converge.
In the panel discussion,
first.
Dr. Sopiee stated
his prediction that capitalism and the market system will continue
to exist in the future, and that although the power of governments
will decline, a mixed system of governments and the market will
prevail. Dr. Yonekura pointed out the importance of the method of
implementation of the soft budgetary constraints discussed by Dr.
Varian, citing as an example the fact that keiretsu (groups of affiliated
firms) that had functioned with "soft networks" formed
through a deft combination of competition and cooperation are now
being severely criticized. He then asked whether societies with
organizations of a wide range of sizes should be capable of creating
information, an ability more important than the selection and management
of information.
Dr. Varian responded
that if limited to the organization of information, small organization
are superior in this respect.
Winding up the
session, the moderator asked for comments from each person in attendance
on the following two points (which had been major points throughout
the symposium) to be kept in mind when considering capitalism and
the market economy in the 21st century: (1) how to combine the harmonization
and diversity of systems, and (2) whether self-reform is possible
to maintain a system's dynamism. First, Dr. Itami predicted that
China and Russia will drive the market economy system in the 21st
century and together will create a new style of capitalism. Dr.
Schmiegelow stated three strategies that should be considered: (1)
Rules concerning the protection of weak corporations through government
intervention should be drafted. (2) With the world currently in
the midst of a third industrial revolution, we should consider the
social costs of this transition period. (3) Skill innovation, which
assures dynamism, is the most important issue.
Dr. Sopiee commented
that although capitalism is superior in terms of productivity and
efficiency, we must strive, without being misled by physical progress,
to transform it into a system for perfecting human civilization.
Dr. Yonekura commented that the problems currently faced by the
world's economic system cannot be overcome by a single nation acting
alone; instead, the seven advanced nations must create a large framework,
which, in the case of Japan, would involve doing what it can in
such areas as supplying personnel and opening its markets in order
to create a model of a capitalistic world rich in variety. Dr. Varian
cited the creation, during the current period of low economic growth,
of a system for distributing costs and profits not just domestically
but also between nations; considering the process of lifelong education;
and revitalizing the market structure by preventing the enlargement
and bureaucratization of organizations. Dr. Satoh stated that capitalism
inspires challenge because it enables relative inferiority to be
overcome with hard work, and that it is a superior system that offers
hope for the 21st century. Lastly, moderator Mr. Fukukawa concluded
the symposium by saying that the concept of capitalism is a general
one, and that with human wisdom we should be able to combine infrastructures
and public finances along with market functions to turn capitalism
into a system for the 21st century.
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