UK: EAST OR WEST - WHICH WILL PREVAIL?

UK: EAST OR WEST - WHICH WILL PREVAIL? - Sir Peter Parker, chairman of Mitsubishi Electric (UK), has been sampling books about the Asia-Pacific region. He speaks Japanese and was with the army in Japan after World War II.

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Last Updated: 31 Aug 2010

Sir Peter Parker, chairman of Mitsubishi Electric (UK), has been sampling books about the Asia-Pacific region. He speaks Japanese and was with the army in Japan after World War II.

Sea Change

By James C Abegglen

Free Press/Maxwell Macmillan; £19.95

Keiretsu

By Kenichi Miyashita and David Russell

McGraw-Hill; £20.95

This century is fast running out of certainties. It seems no time since that heady moment after the collapse of the Wall, a cosmic spasm of hope when the free world suddenly felt sure of itself. Prophecies thundered confidently at the dawn of the '90s. Bestsellers rode high on the flood of optimism: Fukuyama's End of History, Ohmae's Borderless World, O'Brien's End of Geography. Alas, since then the earth has gone on quaking with nationalism and tribalism, and it is not frontiers that are fading - more the rosiness of the dawn. End of Prophecy?

Never. There's a brand-new certainty that the world seems literally to be banking on - the rise and rise of the East Asian economies. And Japan, of course, is setting the pace 50 years after its catastrophic defeat. Who foresaw that at the time? The only guess I have found was, embarrassingly, made by Hitler. In the record of his 'Table Talk', January 1942, it is written that 'Japan will be one of the richest countries in the world. What a transformation! The country that as recently as a few weeks ago was regarded as one of the poorest. There are few examples in world history of a more rapid and complete reversal of the situation.' And so it has come to pass. The West, too slowly for its own good, has come to take the Japanese seriously. But that's no longer good enough. Now, taking Japan seriously means taking East Asia seriously.

How the Japanese see this perspective for themselves is vividly stated in Noburu Makino's Total Forecast - Japan 1990s, based on work by the 1,000-man Mitsubishi Research Centre and recently translated. This has sold more than any other Japanese business book since the war: it is essential reading, informative and fun. It is the pearl's remarkably uninhibited view of its oyster, the world, and specifically its premise is that the Asia Pacific region is 'where it's all happening'.

And how is the West responding? Not all that convincingly is the conclusion I come to after studying the latest work by James C Abegglen (Sea Change: Pacific Asia as the New World Industrial Centre). This is a thorough and thoroughly necessary analysis. Abegglen deals with the macro (10 countries which, including the coastal provinces of China, make up a market of 800 million people) and the micro (the industrial sectors, and the Western companies that have committed themselves to being there). Some glittering stars of Western enterprise are showing in the Eastern skies, but they are not enough.

Too few Western companies have learned the first lesson: the necessity of making a wholehearted commitment to the region. The second is suggested by a question Abegglen poses for himself: 'Are substantial businesses in Japan a precondition of Asian success? Probably, in most industries.' Amen to that. After all, Japan is nearly three-quarters of the total economy of East Asia. Its enterprise and technology is the quality competition in virtually every field in which Western companies will want to win.

Those who have penetrated the Japanese economy are not likely to underestimate the challenge they have faced. Those who have not could hardly do better than get hold of a new study of the corporate groupings which have been at the heart of Japan's phenomenal success competitively. Keiretsu: Inside the Hidden Japanese Conglomerates traces - with original research - those complex, incestuous networks, vertical and horizontal, which have managed the Japanese miracle of combining stability, dynamism and teamwork. The history of this victory for management - and that's what it is, not politics or economic ideology - pivots postwar on the period of MacArthur. Although it was not quite what the Allies had in mind, they did a fine job of 'unbundling' the great family-led corporations, the zaibatsu. Dedicated managements were left to get on with things (with MITI's crucial help in industrial policy), and the balance of government and business in a mixed economy developed to astonish the capitalism of the West.

The outcome is a system that would make any good Thatcherite weep. Corporations wallow in consensus; shareholders are paid as little as possible; the community of employees is the decisive reality. Koji Matsumoto, a MITI man himself, meticulously described this in 1972 in The Rise of the Japanese Corporate System, now, thank goodness, out in a new edition (published in paperback by Kegan Paul at £14.95). It focuses brilliantly on the creation of Kijyoism, the pluralistic welfare system in which the boss is the apex of the employee group, not somebody apart and rewarded spectacularly more than the team.

Matsumoto is totally frank about the process of forming modern Japan's business system. He and his determined colleagues in the government machine and the unbundled zaibatsu were creating a unique corporate system, a new variety of capitalism. He makes no bones about it: Japanese capitalism is not Western capitalism.

As the East Asian region surges ahead, which variety will prevail? As an international manager, my hope is that, in a magi-mix of transnational markets, East and West will blend. But we have learned (have we not?) to keep scepticism intact about prophecies. The '90s are likely to surprise us yet with varieties of capitalism, and varieties of democracy.

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