GISPRI No. 10, 1994

The Conference on Global Problem

This conference was held on 1993 with Associate Professor Seiichiro Yonekura of the Institute of Business Research, Hitotsubashi University as the lecturer.

This series of conferences is for the younger generation in the Ministry of International Trade and Industry and business circles, and each conference offers a lecture given by a specialist followed by free discussion.

Here is an outline of the lecture.

The Intellectual Infrastructure of Japan in the Global Environment

Seiichiro Yonekura
Associate Professor
Institute of Business Research
Hitotsubashi University

I specialize in business history. While thinking about what it means for a country to become rich and for industry to develop steadily, I ran into a question, and it is that question I shall speak about.

To give a familiar example, there are two kinds of buildings in Hitotsubashi University. Originally this university was in Hitotsubashi, Kanda, in the center of Tokyo, but it was destroyed in the Great Kanto Earthquake of 1923, and was then moved to the present site in Kunitachi, 30km west of central Tokyo in 1927.

Today Kunitachi is a city with wonderful city planning, but in those days it was still an undeveloped area. We have to admit that the choice of the location had a great insight at that time. The campas now has two kinds of buildings, by which I mean those built between 1927 and 1930, and those built after the war.

Typical of the former is the Kanematsu Auditorium, which was built with 500,000 yen contributed by Kanematsu Trading Ltd. Using the current deflator this sum is equivalent to 10 billion yen. If the interior of those buildings is renovated, it is entirely adequate for use in the 21st century.

On the other hand, typical of the latter is the International Exchange Hall built last year. The expense of building was only 450,000 yen per tsubo (3.3 square meters), while the cost of an ordinary residential building was 600,000 yen per tsubo. It is simply a square building, neither artistic nor attractive; in fact, to put it bluntly, it is a cheap building.

In 1929 (when the auditorium was built), Japan's GDP per capita was $1,162 (by the 1980 deflator), which was the lowest among the sixteen OECD countries. The standard was about equal to that of the Philippines, which was $1,091.

What I am trying to emphasize is that Japan strategically invested in higher education when the country was very poor. Yet last year when Japan had become numerically richest in its entire history, its investment in education was only a cheap building of 450,000 yen per tsubo.

The problem is thus whether Japan has any strategy or long-term plan for education.

Professor Nathau Rosenberg of Stanford University has written a book entitled "How the West Grew Rich." He points out the importance of compulsory education as well as the separation of politics and economy and freedom from religion.

Though the education it offered was not compulsory, Terakoya, a private elementary school of the Edo period (1603-1867), had a very high percentage of attendance. Because of this Terakoya system, it is said that the introduction of the compulsory education system was easier after the Meiji Restoration (1868). But even in Meiji Japan, however, there was not a little opposition to the compulsory sending of children, who were important in the work force, to school. Overcoming this opposition, Japan did make education mandatory about 30 years after the Meiji Restoration. (Student attendance was 28.1% in 1873, 81.5% in 1900, and 98.1% in 1910..

According to calculations made by Professor Ryoshin Minami (Hitotsubashi University), the percentage of those registered in school to the population was, in 1870, 3.9% in Japan, 17.4% in America, and 5.5% in England. But in 1940 it was 21.1% in Japan, 23.4% in America, and 13.6% in England.

What does this mean after all?.

It means that most of the ability to compete is the result of a one hundred year long investment in human resources.

England is stagnant in many aspects today. Some say this is because of failure like that of entrepreneurs and others claim it is due to the country's cultural climate. But a new fact has also attracted attention: that is, since education, particularly practical business education tends to be neglected, the percentage of those registered in school to the population is only 13% to 15%.

As for higher business education in Japan, Tokyo High School of Commerce became the College of Commerce (the present Hitotsubashi University) in 1923 and the total number of graduates up to that time was about 5,400. Hundreds of these were employed by Mitsui, Mitsubishi, and other big business enterprises. It was unusual even in America for more than one hundred college graduates to be employed by a single enterprise.

About the same time College of Commerce founded in Birmingham, England, was consistently below its student capacity and the total number of graduates, under the same conditions as its Japanese counterpart, was just 150.

As is often pointed out, cumulative numbers like these indicate effectiveness.

In the 1950s Japan's GNP was 16% of America's and 30% of the average of OECD countries. GDP per capita was about the same as that of Brazil and Mexico. A period of about fifty years is required for the cumulative number to reflect a real ability to compete.

Moreover, university graduates in Japan are actually engaged in management, accounting, and judicial affairs, and engineers are directly involved in production. These circumstances also are seen as having steadily strengthened Japan's ability to compete.

Process and product innovations were also important in building up Japan's competitiveness. Process innovation refers to lowering the cost of what already exists and product innovation to creating a product with a new concept.

It is now clear that what is really important for an ability to compete is process innovation.

As you know, the commodities in which Japan has a competitive advantage are those whose concepts were developed in America or other countries. Let me repeat that process innovation, excellent compulsory education, higher education, and the unity of higher education and production are responsible for Japan's predominance in competition.

Now, compare the present situation of Japan's investment in education with those of other countries.

First, the percentage the government spends on higher education to the GNP is 0.27% in America, 0.1% in England, and in Japan and France only 0.06%.

Next, the percentage of government research and development expenses to the GNP is 0.15% in America, 0.1% in England, Germany and Norway, and 0.05% in Japan, France and Italy.

Further, the percentage of ordinary government aid to institutions of higher education to the GNP is 0.75% in America, 0.97% in England, and 1.03% in Germany, while in Japan it is 0.36%; that of government aid to research is 0.149% in America, 0.067% in England, 0.048% in Germany, and 0.013% in Japan.

Japan now has a population of 130 million and the average wage is the highest in the world. When I think about a grand strategy for the nation one hundred or two hundred years in the future, I believe the most important thing for the country's survival is intensive investment in the basic research and product innovation, though, of course, I am not ignoring production itself.

With an American scholarship, I have studied in the United States. Whenever I had discussions with other scholarship holders from Europe, Iran, or China, though we sometimes criticized America, we were all deeply grateful to that country. Anticipating that the age of China would come in time. Now American universities have granted scholarships to many Chinese.

Providing scholarships leads to the creation of bonds among people as well as making an investment in peace.

For these reasons, I propose a strategy of intensive investment in highly specialized graduate education. Just as Japan adopted a priority production system and invested heavily in four strategic industries after the war, so it should now invest heavily in higher education. Here, of course, "strategy" means not perverted equality, but investment based on performance and results.

My second proposal is that a new type of graduate school be set up. Students should be from a variety of segments of society and should include those from university, working members of society, and those from abroad.

For example, individuals who have actually worked with a company for three or four years have learned something that cannot be acquired through an academic education. Some aged thirty years or over may want to go back to university and study. Both can play roles in broadening university education.

Students spend four years at a local university with outstanding aspects of its own, then work for two or three years, and after that go on to graduate school. From the viewpoint of a company, it is desirable to entrust judicial affairs to one who is qualified as a lawyer or has a Master's degree in law. By the method I have proposed it is possible to create a university education which has its own characteristics. If the ultimate goal is a graduate education, ranking of universities based on deviation value will no longer be applicable.

Among American universities the ranking may change simply by the replacement of the dean. In short, I believe that by shifting the greater part of the emphasis from undergraduate to graduate education, the intellectual infrastructure of Japan will be greatly changed.

Finally, I would like to speak about something in connection with PKOs. The Peace Corps begun by J. F. Kennedy was a wonderful idea, and it is an excellent model for Japan to use to spread its pacifism all over the world.

Beyond question, either in local disputes or in racial problems, cooperation in matters of economy, education and technology will greatly contribute to the peace and stability of the world.

Following the strengthening of graduate education I have mentioned, and as an example of one special feature of undergraduate education, I would like to propose that it be the duty of sophomores or juniors and professors of national universities to participate in the Japan Overseas Cooperation Volunteers, or to work with an international organization for at least one or two years. This educational contribution to the world will gain a global respect and reputation for Japan. We have to show that we are more than economic animals.