VYTAUTAS MAGNUS UNIVERSITY
FACULTY OF HUMANITIES DEPARTMENT OF CULTURAL STUDIES
Aivaras Aronas Smolenskas
The Differences between US’ Western and Japan’s Collective Forms of Capitalism, 1945-2020: A Comparative Analysis
Final Master’s Thesis
East Asia Region Studies programme, Code 6211JX054 Field of Studies: Political Science
Supervisor: Dr. Linas Didvalis ______(scientific degree, name, surname) (signature) (date)
Defended: Assoc. Prof. Dr. R. Eidukevičienė ______(Dean of the faculty) (signature) (date)
Kaunas, 2020
Table of Contents
Santrauka ...... 3 Summary ...... 4 List of Abbreviations ...... 5 Introduction ...... 6 1. Western and Collective Capitalism: Features and Historical Context ...... 12 1.1 Max Weber’s Theory of the Inception and Development of Capitalism ...... 13 1.2 An Alternative Approach: Continuation Instead of Opposition ...... 16 1.3 Economic Liberalism and Marxism ...... 19 1.4 The Theory of Japan’s Collective Capitalism ...... 21 1.5 The Essential Features of Capitalism ...... 24 2. The Development of Capitalism in Japan...... 30 2.1 Post-War Economic Situation in Japan ...... 31 2.2 Japan’s Central Bank and “Window Guidance” ...... 32 2.3 The Financial Bubble of the 1980s ...... 33 2.4 The Burst of the Financial Bubble ...... 35 2.5 End of Recession, Economic Resurgence and Present-Day Economics in Japan ...... 36 3. The Development of Capitalism in the US ...... 40 3.1 The Economy of Post-War US ...... 41 3.2 The Economic Inconsistencies of the 1950s and 1960s ...... 43 3.3 US Global Economic Reach and Further Development of Western Capitalism ...... 45 4. Western Capitalism VS Japanese Capitalism: Key Differences and Takeaways ...... 48 4.1 The Concept of a “Free Market” in Japan and the US ...... 49 4.2 The Outlook on Wage Labour in the US and Japan ...... 51 4.3 The Outlook on Accumulation of Wealth in US and Japan ...... 54 4.4 Market Competitiveness in the US and Japan ...... 56 4.5 The Outlook on Possession of Private Property in the US and Japan ...... 59 4.6 The Main Reasons for the Differences between US’ Western and Japanese Collective Forms of Capitalism ...... 62 Conclusions ...... 66 Literature List ...... 68 Source List ...... 70 Visual Resource List ...... 82
Santrauka
Nors po Antrojo Pasaulinio karo Japonija susidūrė su daug skirtingų įšukių, istorija rodo jog ši šalis sugebėjo sukurti stabilią ir klestinčią ekonomiką pakankamai greitai, ir laikui bėgant tapo viena iš stipriausių ekonominių galių visame pasaulyje. 1960-aisiais amerikiečių ekonomistas Gardineris Meansas sugalvojo terminą „kolektyvinis kapitalizmas“ – šis terminas skirtas apibūdinti unikalią kapitalizmo formą, kuri gali būti pastebima tiek Japonijos ekonomikos istorijoje, tiek šios šalies prieigoje prie kapitalizmo idėjų. Kadangi Japonija perėmė kapitalizmo tendencijas iš JAV, natūralu jog galima pastebėti konkrečius faktorius, kurie lėmė unikalią Japonijos prieigą prie šios ekonominės sistemos – faktorius kurie galiausiai leido Japonijai tapti šių dienų ekonomine milžine.
Šio darbo tikslas yra rasti esminius skirtumus tarp JAV ir Japonijos kapitalizmo formų ir išskirti objektyvias, faktais remtinas priežastis dėl šių skirtumo egzistavimo. Tyrimas suskirstytas į tris skirtingus uždavinius – visi jie reikalingi norint pilnai suvokti ir išvystyti darbo tikslą. Pirmasis uždavinys – pristatyti ir apibūdinti „vakarietiško kapitalizmo“ ir „kolektyvinio kapitalizmo“ terminus bei adresuoti tam tikrus šiuos terminus supančius niuansus. Antrasis tikslas – pristatyti ir aptarti kapitalizmo plėtrą Japonijoje ir JAV, remiantis abiejų šalių istoriniais ekonomikos kontekstais. Trečiasis uždavinys – sulyginti abi kapitalizmo formas lyginamosios analizės principu norint rasti esminius jų skirtumus, pasinaudojant ankstesniuose skyriuose pateiktais kriterijais, bei aptarti galimas šių skirtumų priežastis.
Tyrimas atskleidė, jog nors abi šalys disponuoja visais esminiais kapitalizmo aspektais, jų pozicija atsižvelgiant į kiekvieną iš jų skirtinga. Taipogi pastebima, jog pagrindiniai kriterijai, kurie lemia šiuos skirtumus, Japonijos atžvilgiu yra susiję su šios valstybės kultūriniu kontekstu, politiniais painumais, socialinėmis problemomis ir unikalia ekonomine istorija.
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Summary
Even though Japan faced a lot of hardships after World War II, history would come to show that the country managed to establish a stable and successful economy relatively quick, and went on to become one of the leading economic powers of the world. In the 1960s, an American economist Gardiner Means coined the term “collective capitalism” – a form of capitalism used to describe the uniqueness of both Japan’s economic history, and the country’s take on capitalism, in general. With Japan adapting its capitalistic tendencies from the US, it is only natural that there were some significant factors that came into play within the country in regards to it developing its own form of capitalism – factors that would lead Japan to become a modern-day economic giant.
The aim of the thesis is to find the core differences between the US’ and Japan’s forms of capitalism, and to establish objective, factually-backed reasoning for the existence of these differences, in the first place. The research is divided into three separate tasks, each of them being fundamentally necessary in order to fully grasp and develop the aim of the thesis. The first task is to describe the terms of “Western capitalism” and “collective capitalism”, and address some of the nuances regarding the two terms. The second task is to present, discuss and elaborate on the development of capitalism in both Japan and the US, via the lens of the historic context of the economies of both countries. The third task is to juxtapose, compare and contrast the two forms of capitalism found in the US and Japan in order to find their fundamental differences, utilizing the criteria established in the previous chapters, and to then discuss the possible reasons for the existence of these differences.
The comparative analysis revealed that while both countries do possess and display all of the core aspects of capitalism, their positions regarding each of them differ, to a lesser or more major extents. It is also evident that the main factors that influence these differences from Japan’s perspective have to do with the country’s cultural context, its political intricacies and some social issues, in addition to a unique economic history.
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List of Abbreviations
BoJ – Bank of Japan
GDP – Gross Domestic Product
IPRI – International Property Rights Index
LDP – Liberal Democratic Party
MoF – Ministry of Finance
NPISHs – Non-Profit Institutions Serving Households
OPEC – Organization of the Petroleum Exporting Countries
The UK – the United Kingdom
The US – the United States of America
WWII – World War II
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Introduction
In today’s world, when the term “Japanese economy” is mentioned, most tend to associate it with free-market capitalism and a highly-developed, political economic culture. The country’s economy is the third-largest in the world, with its nominal gross domestic product (GDP) surpassing that of Canada, Germany and the United Kingdom (UK).1 With a period of stagnation during the mid-2010s, Japan surged its economic powers back up in 2013, with the country’s Prime Minister Shinzo Abe introducing a fresh and new economic approach titled “Abenomics”.2
Without giving it much second thought, it is simple to assume that Japan has adapted the features of Western capitalism from the United States (US), and it is thanks to this economic system that the country has managed to grow into an economic giant that it is today. After all, it is considered to be a free-market economy with an emphasis on accumulation of wealth.3 The only discrepancy arises when one takes a look at Abenomics – there, the first signs of the loosely-used term “Japanese capitalism” manifest, albeit in a subtle manner (further analysis of this can be found later on in the thesis).
The confusion relating to Japan’s inconsistency as far as the “traditional” Western capitalistic features are concerned, however, takes place plainly because of the assumption that Japan had taken over the principles of Western capitalism at face value, and failed to mould them in accordance to their own, unique culture. The faultiness of such an assumption can be observed when analysing4 Abenomics and the main reasons why the country would need such an economic plan, in the first place. Such an approach is doomed to be inconclusive and lacklustre from the very beginning, since it does not take into account the uniqueness of Japan’s approach towards the economic system, as well as the country’s economic and political backgrounds. Instead, in order to conduct research relating to Japan’s take on capitalism, attention should be pointed towards the early inception and first development of capitalistic thought within the country, and how the remnants of this inception have developed and can be seen in present-day Japan (i.e. Abenomics). One might argue that, if a
1 “GDP Ranked by Country 2020”, World Population, accessed March 5, 2020, http://worldpopulationreview.com/countries/countries-by-gdp/. 2 The Government of Japan, “Abenomics keeps boosting Japan’s economy”, JapanGov, 2019, accessed March 5, 2020, https://www.japan.go.jp/abenomics/about/. 3 Lechevalier Sebastien, The Great Transformation of Japanese Capitalism (Routledge, 2014), 204, Google Books. 4 Merler Silvia, “Abenomics, five years in: Has it worked?”, World Economic Forum, 2018, accessed March 7, 2020, https://www.weforum.org/agenda/2018/01/abenomics-five-years-in-has-it-worked. 6 direct point in time was to pin-pointed, the actual inception of capitalism within the country would be 1854, with the Convention of Kanagawa opening the country to Western commerce.5 Instead, however, in order to maintain a cohesive research with visible capitalistic values found within Japan, the argument is made that 1947 and the adoption of the post-war Constitution of Japan is a better starting point for an analysis relating to the uniqueness of Japanese capitalism.
Arguably the best example of Western capitalism in modern times can be seen by observing the economic system in the US. Consequently, this holds even more truth if one was to take into account the fact that Japan’s strive towards economic prosperity was unquestionably based on the US model. The values of the Western economic system, however, take roots in Europe. Western capitalism, in itself, can be defined with but a few broad values – accumulation of wealth, free market, market competitiveness, possession of private property.6 However, upon deconstructing each of the above- mentioned aspects, it is rather self-evident that there are more subjective factors at play, too. These factors, albeit subjective, could be observed by analysing the development of capitalistic thought in the West, starting from its inception. There are quite a few popular theories about the inception and development of modern Western capitalism, with the most popular ones being that of Weber (the link between Calvinism and capitalism, 16th century) and his critic H. M. Robertson (the inception and development of Capitalism in Italy, in the 14th-15th century). Both theories, however, do support the more-subjective aspects of capitalism, and thus do not take away anything from the argument itself – it being that Western capitalism is much more complex than seen by taking into account solemnly the core aspects of the economic system.
Now, while all of the core principles of modern capitalism can be found within the economy of Japan, it is evident that the intricacies are, indeed, distinct. The “Japanese capitalism” also adopted a more suitable, less ambiguous name of “collective capitalism” (or “state-sponsored capitalism”).7 It is with this term that economists and social commentators aim to distinguish some specific features found within the Japanese economy and its conduction between those found in the West, namely – the US.
Indeed, while one is fast to see the discrepancies and subtleties between US’ Western capitalism and Japan’s collective capitalism, when it comes to pointing out the key, fundamental differences,
5 Britannica, “Treaty of Kanagawa”, Britannica, accessed April 16, 2020, https://www.britannica.com/event/Treaty-of- Kanagawa. 6 Heilbroner Robert L., Capitalism, The New Palgrave Dictionary of Economics. 2nd ed. (Palgrave Macmillan, 2008), Link Springer. 7 Hundt David R., Uttam Jitendra, “Japan’s Collective Capitalism and the Origins of the Asian Model”, Springer, 2017, accessed March 7, 2020, https://www.researchgate.net/publication/318870746_Japan's_Collective_Capitalism_and_the_Origins_of_the_Asian_ Model. 7 this task often proves to be, for the lack of a better term, broad. Naturally, the extension of this would be to inquire about the positive and/or negative effects that the ‘uniqueness’ of the Japanese culture (rather, the effect that this uniqueness had on the country’s adoption of capitalism and capitalistic thought) had on the development of its politico-economy.
In this thesis, the above-mentioned subtle differences between US’ “Western capitalism” and the Japanese “collective capitalism” are analysed. Acknowledging the unavoidable, natural bias of the author being born and raised in a Western capitalism-oriented economy, the methodology of the analysis still lies within the fundamental values of Western capitalism – ones already mentioned earlier in the introduction. Furthermore, the acknowledgment is also made that it would be impossible to coherently analyse the topic (and participate in a theoretical discourse) without including subtleties of both Western (namely – US) and Japanese social and political contexts.
Intertwined with the analysis, the author also debates the effects that the uniqueness of the Japanese culture (in this context, uniqueness refers to capitalism not being conceived in Japan, but merely adopted later) and “collective capitalism” had/has on the overall politico-economic situation of the country. The discussion aims to evoke a clear and cohesive picture of the Japanese economy from an alternative point of view, while also providing non-pabulum contextual material (that born out of patterns) for further informed and educated assumptions about the future of the Japanese economy.
Research object: The nexus of the fundamental differences between US’ Western capitalism and Japanese “collective capitalism”, as observed to be developing from 1947 up to early 2020.
Research relevancy: If viewed as separate topics, both the concept of “Western capitalism” and the Japanese “collective capitalism” have been thoroughly analysed by various researches. Fundamental examples here would include M. Weber’s “Protestant Ethic and the Spirit of Capitalism” (1905) and H. M. Robertson’s “Aspects of the Rise of Economic Individualism; A Criticism of Max Weber and His School” (1935) in discussions pertaining to the concept of Western capitalism, and J. A. Dattor’s “The Protestant Ethic in Japan” (1966) and P. W. Kuznets’ “An East Asian Model of Economic Development: Japan, Taiwan and South Korea” (1988) in discussions pertaining to the concept of “collective” or, to an extent, “state-sponsored” Japanese capitalism. That being said, there is an apparent lack of research that would display the differences of the two forms of capitalism, especially that which would be recent and would take into account the possible future trends of the Japanese economy (as observed and contextualised by the findings of said research).
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Furthermore, a lot of present-day research 8 concentrates on certain deviations of capitalistic thought (principles) that are derivatives from the fundamental principles of Western capitalism – in other words, there seems to be a significant amount of “projection” happening as far as analysis of Japanese capitalism goes. The aim of the thesis is to present conclusive and objective differences between the Western form of capitalism and the Japanese version of the economic system, in an unbiased manner. With Japan reaching the brink of recession in early 2020, many questions arose about the validity and successfulness of Abenomics, and the current economic system of Japan, as a whole – this unexpected turn of events further-promotes the relevancy of this type of thesis.
Research problem: What are the essential differences between Western and Japanese forms of capitalism?
Research goal: The goal of the research is to find, constitute and establish the essential differences between Western and Japanese forms of capitalism, and deduce the key factors that are responsible for these differences.
Tasks:
1) To present and describe the concepts of “Western capitalism” and “collective capitalism”;
2) To present and contextualize the history of the development of the political and economic situations in Japan and the US, as it relates to the development of capitalism within said countries;
3) To juxtapose the two forms of capitalism based on the research foundation presented in the former chapters, protrude their core differences and establish a clear pattern of what influenced these differences, and how have they lead to Japan’s current politico-economic position.
Methodology:
Descriptive. Descriptions of the concepts of “Western capitalism” and “Japanese capitalism”, as proposed by prior research done on the topics.
Qualitative research. A theoretical research of main factors that have led the Japanese form of capitalism to become distinct from that found within the West.
Comparative. A comparison (via juxtaposition) between Western capitalism and Japanese “collective” capitalism employing the theoretical framework designated for the thesis.
8 Metzler Mark, Capital as Will and imagination: Schumpeter’s Guide to the Postwar Japanese Miracle, (Cornell University Press, 2013); Gray John, False Down: The Delusions of Global Capitalism, (Granta Books, 2015). 9
Analytical synthesis. Analysis of the essential factors that provoke the differences between Western and Japanese forms of capitalism. Analysis of the pattern(s) that have influenced the development of these differences.
Literature and used sources:
Whilst writing about Western capitalism, the main sources that were used were Max Weber’s The Protestant Ethic and the Spirit of Capitalism (1930) and H. M. Robertson’s Aspects of the Rise of Economic Individualism: A Criticism of Max Weber and His School (1933). Other sources include, but are not limited to: Sebastian G. Guzman’s A Macat Analysis of Max Weber’s The Protestant Ethic and the Spirit of Capitalism, (2016), John Calvin’s Institutes of the Christian Religion (1999), Macat.com’s A Macat Analysis of Max Weber’s Politics as a Vocation, (2016).
Whilst writing about economic liberalism and Marxism, the main sources used were Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations, (2007) and Daniel Liberto’s Marxian Economics, (2020). Other sources include, but are not limited to: Carl Menger’s Principles of Economics, (1976), the debate between Jordan B. Peterson and Slavoj Žižek about Marxism and Capitalism (2019), Stanford Encyclopedia of Philosophy’s Karl Marx (2003).
Whilst writing about Japan’s collective capitalism, the main sources used were Mark J. Ravina’s Understanding Japan, (2015), David Hundt’s and Jitendra Uttam’s Varieties of Capitalism in Asia: Beyond the Developmental State, (2017) and Richard A. Werner’s Princess of the Yen, (2003). Other sources include, but are not limited to: Jesper Koll’s Japan has a form of capitalism that works, (2018), K. Takahashi’s The Rise of Capitalism in Japan, (1933).
Limitations:
This work does no participate in the deeper analysis of political party relations, policies or certain economic intricacies in Japan, except in a purely contextual manner. The nature of the thesis also dictates that the Japanese collective capitalism is viewed / analysed from 1947, and thus prior contextual events are not discussed and / or referenced. Social, political and economic issues pertaining to Western capitalism are taken into account, yet further discussions on the matter are withhold.
Furthermore, the thesis does not aim to discuss, commentate or analyse particular situations and / or standalone events that would represent some intricacies of Western capitalism. Instead, the work aims to substantialize valid, representative features of the economic system, as it relates to using them in a juxtaposition with the Japanese collective capitalism.
Structure: 10
The thesis is made up of an introduction, four main chapters, conclusions, literature, source and visual add-on lists.
The first chapter is made up of five sub-chapters. The first sub-chapter aims to introduce Western capitalism as seen and described by Max Weber, particularly pertaining to his theories expressed in “The Protestant Ethic and the Spirit of Capitalism”. The second sub-chapter introduces an alternative outlook on the inception of capitalism, and advocates that theories and critiques made towards Weber’s work (i.e. those of H. M. Robertson) can be viewed as a continuation, rather than opposition. The third sub-chapter introduces and describes the ideas of economic liberalism and Marxism. The fourth sub-chapter introduces the core principles of “collective capitalism”. The fifth sub-chapter extracts five essential features of capitalism, and argues their place as the groundwork for the analysis part of the thesis.
The second chapter is made up of five sub-chapters. The first sub-chapter discusses Japan’s overall economic situation immediately after the war. The second sub-chapter covers Japan’s central bank and the concept of “window guidance”. The third sub-chapter introduces the Japanese financial bubble of the 1980s. The fourth sub-chapter covers the burst of the aforementioned financial bubble. The fifth sub-chapter explains the end of Japan’s period of recession, its economic resurgence and transition towards present-day economic situation.
The third chapter is made up of three sub-chapters, and discusses the history and development of “Western capitalism” through the lens of the US, from the post-war period to early 2020. The first sub-chapter discusses the post-war economic situation in the US. The second sub-chapter talks about the economic inconsistencies that the country faced in the 1950s and 60s. The third sub-chapter discusses the global reach of the US economy, and how it has furthered developed the concept of “Western capitalism”.
The fourth chapter is made up of six sub-chapters. In the first sub-chapter, the US’ and Japan’s stance on the concept of a “free market” is compared and analysed. In the second sub-chapter, the outlook that the two countries have on the concept of “wage labour” is compared and analysed. In the third sub-chapter, the outlook that the US and Japan have on the prospect of “accumulation of wealth” is compared and analysed. In the fourth sub-chapter, both of the countries’ market competitiveness is compared and analysed. In the fifth sub-chapter, both of the countries’ stance on the concept of private property rights is compared and analysed. In the sixth sub-chapter, the core, essential events and situations that led to the current economic and political situation in Japan are extracted, analysed and discussed.
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1. Western and Collective Capitalism: Features and Historical Context
In the first chapter, the concepts of “Western capitalism” and “collective capitalism” are presented and contextualized. Presenting and contextualizing both forms of capitalism provides the theoretical framework for the comparative analysis of the two, and does also form the criteria required for said analysis.
In the present day, the term “Western capitalism” can be seen used somewhat loosely,9 especially when it comes to debates that bring up the opposing side (one of this academic work’s debate – East Asian “collective capitalism”). If there can be a single, overarching distinction made concerning all of the modern definitions of Western capitalism, it would be that referring to this form of capitalism as being the original, “true” capitalism.
That being said, however, a possible question that may arise is one that concerns the differences between “Western capitalism” as it has developed in Europe, and that which is now used to describe the US economy. For the sake of avoiding confusion and some inconsistencies of terminology, in this thesis, the term “Western capitalism” is used to describe a form of capitalism that originated in Europe, was brought to the US with the first settlers10, and then nurtured and developed to end up in the form that can be seen in the US at present date.
Referencing the inception of Western capitalism, research into the topic will lead one towards some branching opinions and multiple interpretations of the history of this economic system, an argument can be made that all of these branches may be segmented into two differing camps – that which relates to Max Weber’s theory of conception and nourishment of capitalism as observed in “The Protestant Ethic and the Spirit of Capitalism” (orig. German – Die Protestantische Ethik und der Geist des Kapitalismus), and that which opposes Weber’s theory and proclaims the imminent rise of capitalism to be observed in the 14th -15th century Italy (coincidentally, this theory can be seen discussed by one of Weber’s better-known critics – H. M. Robertson, in the “Aspects of Economic Individualism: A Criticism of Max Weber and His School”).
9 Soto, Hernando de, “Knowledge lies at the heart of western capitalism”, FT, 2012, accessed March 7, 2020, https://www.ft.com/content/4520ccda-4769-11e1-b847-00144feabdc0. 10 McRaw Thomas K., “It Came in the First Ships: Capitalism in America”, Harvard Business School, 1999, accessed May 4, 2020, https://hbswk.hbs.edu/item/it-came-in-the-first-ships-capitalism-in-america. 12
For the sake of retaining transparency, both of the overarching theories of the inception and development of Western capitalism shall be presented in the upcoming pages of the academic work.
1.1 Max Weber’s Theory of the Inception and Development of Capitalism
Max Weber (full name – Maximilian Karl Emil Weber) was a German sociologist and political economist that was born in Erfurt in 1864.11 In 1905, he took his series of essays relating to protestant beliefs and the inception of capitalism and composed them into a book titled “The Protestant Ethic and the Spirit of Capitalism”.12
The book aims to explain how a specific branch of Protestantism (Calvinism) was responsible for the birth of capitalistic thought in Europe in the late 16th – early 17th century. In his work, Weber goes on to argue how some specific sets of protestant beliefs led these people to conceptualize, nurture and develop what would later be viewed as the core concepts of Western capitalism – accumulation of wealth, acquisition of private enterprises, profit seeking and so on.13 In his own right, Weber explains that the actions that led to such processes and that were taken by Calvinists were not, in fact, intended to conceptualize a new economic system, but were instead based on religious beliefs.
At the core of these belief stood a notion that a person cannot perform actions in order to earn his place in heaven, no matter what those actions would manifest themselves to be. Instead, the decision on the matter is actually made with the birth of that person – God pre-decides this aspect, and it cannot be altered in any way during a person’s lifetime.14 Naturally, this presents itself to be rather grim, and the religious effects that such beliefs had on Calvinists led them towards a unique set of conclusions.
The conclusions in question relate to what Weber would go on to define as the “Protestant ethic”. In his set of essays, Weber described how Calvinists came to believe that, by living ascetic lives and embracing hard work, they would thus signify their places in heaven15 – in other words, that they were among the chosen ones for salvation.
11 Mitzman Arthur, “Max Weber: German Sociologist”, Britannica, 2019, accessed March 7, 2020, https://www.britannica.com/biography/Max-Weber-German-sociologist. 12 Guzman, S. G., A Macat Analysis of Max Weber’s The Protestant Ethic and the Spirit of Capitalism, (Audible, 2016). 13 Crossman Ashley, “A Book Overview: “The Protestant Ethic and the Spirit of Capitalism”, ThoughtCo, 2019, accessed March 7, 2020, https://www.thoughtco.com/the-protestant-ethic-and-the-spirit-of-capitalism-3026763. 14 Calvin John, Institutes of the Christian Religion, (Christian Classics Ethereal Library, 1999), CCEL. 15 Weber, The Protestant Ethic and the Spirit of Capitalism, (Allen and Unwin, 1930), accessed April 14, 2020, https://is.muni.cz/el/1423/podzim2013/SOC571E/um/_Routledge_Classics___Max_Weber- The_Protestant_Ethic_and_the_Spirit_of_Capitalism__Routledge_Classics_-Routledge__2001_.pdf. 13
Weber does also explain that even concepts such as economic prosperity, let alone the conscious creation of a new economic system, were never the focal point of the Protestants.16 Instead, this came to fruition as a side effect of a mixture of features that Weber described as the Protestant ethic – hard work, ascetic lifestyle, and the notion of “the calling” (more on this later). It is important to also note that, as far as the Protestant understand of “good deeds” went, charitable actions (those of financial support) towards the beggars of society were deemed to be damaging. With the belief that this would foster laziness, and a corresponding notion of wealth accumulation for accumulation purposes being inappropriate, Protestants turned towards investing – another important factor in the early development of capitalistic societies.17
As noted earlier in the thesis, whilst analysing Weber’s theories on the birth and development of what has come to be known as “Western capitalism”, three main features of the Protestant ethic surface and showcase themselves to be the essential cornerstones that lead to the above-noted processes – asceticism, hard work and the concept of “the calling”.
While asceticism can be observed within most branches of Protestantism, it is especially-so- evident within the Calvinist ideology. An ascetic lifestyle, admittedly, was one of the main, fundamental principles that related to the Calvinist beliefs in the assurance of salvation after death. Asceticism refers to living one’s life while rejecting irrelevant, worldly goods and pleasures. 18 Previous research done on the topic would also support the claim that asceticism should be attributed to be one of the leading principles in the Protestant development of the economy – in 1963, Gerhard Lenski (an American sociologist) (1963, p. 350-352) pointed out that “<...> Protestant asceticism and dedication to work, as noted both by Wesley and Weber, seem to have been important patterns of action contributing to economic progress.”
As it pertains to hard work, this aspect can be best seen in its most prominent form right after the Reformation. Weber talks about how many people faced significant difficulties while adapting to the new school of religious thought.19 More specifically, this would refer to the Calvinist doctrine of “double-predestination” – the belief that one’s destiny for salvation or hell is chosen upon being born, by God, and that it is not possible to alter it throughout one’s life. Because of the earlier-mentioned desperation that followed with this belief, Calvinist would come to the conclusion that, by being successful financially and socially, they would thus signal to themselves and their peers that they were, in fact, among the chosen ones. As a natural conclusive element, what followed this was hard
16 Weber, 1930, p. 13-39. 17 Guzman, S. G., A Macat Analysis, 2016. 18 Definition taken from Google Dictionary. 19 Weber, 1930, p. 10-12. 14 work, since the notion of performing well and showcasing one’s proclivity to “go the extra mile” would be closely intertwined with feelings of being among the chosen ones.20 In fact, it is important to bring up the comment made earlier – financial success (both of the individual, and later on – of the society) was more of a side effect of hard work, rather than a goal that would be consciously reached.
Lastly, the third essential aspect that led the Protestants, according to Weber himself, was the concept of “the calling”. Weber would go on to describe the calling as “the valuation of the fulfilment of duty in worldly affairs as the highest form which the moral activity of the individual could assume”.21 In layman’s terms, the calling was a notion that accompanied the Protestant people in their everyday lives, both as it related in the work culture, and also religious beliefs. The concept itself refers to living one’s life with the utmost meaning and moral fulfilment, and imbuing one’s actions with devotion and care. The concept of the calling would go on to influence the Protestant ascetic lifestyle, and would also seep into their work etiquette. With the goal of self-betterment and salvation in mind, the concept of the calling would help the Protestants (Calvinists) retain their ethics and morals, even throughout some times of daily hardships and doubt.
At this point in time, it is important to distinguish and note that the three aspects of the “Protestant ethic”, as protruded by Weber and described above, are not, in fact, the solemn factors that would lead the Protestants to develop the conditions for capitalistic growth. Rather, the specific three aspects are chosen to be distinguished from the rest because of three specific reasons – the emphasis made on them by Weber himself, the goal to retain a comparison-oriented objectivity of the thesis, and the lack of possible generalization concerning other factors.
Here, attention should especially be pointed towards the last point in the reasoning. It is self- evident that the Protestant belief and, following this, a set of specific ethics and morals as they are applied to one’s daily life, would not go on to create the specific conditions needed for capitalistic growth. Naturally, there are many more aspects that come into play here – political intricacies, cultural development, social issues and their outcomes, and so on. Even so, broader generalization here is backed up by the assumption that the Protestant ethic was not exclusive in the realm of economic growth, but instead found its way into all of the rest of the important matters in the Protestant lives. Weber himself commentates on the matter by stating that, when it comes to the relationship of a country’s economy and major religious beliefs in the context of noteworthy cultural development,
20 Bayer Oswald, Martin Luther’s Theology: A Contemporary Interpretation, (Wm. M. Eerdmans Publishing, 2008), p. 209-213. 21 Weber, 1930, p. 40. 15
“<…> a glance at the occupational statistics of any country of mixed religious composition brings to light with remarkable frequency a situation which has several times provoked discussion in the Catholic press and literature, and in Catholic congresses in Germany, namely, the fact that business leaders and owners of capital, as well as the higher grades of skilled labour, and even more the higher technically and commercially trained personnel of modern enterprises, are overwhelmingly Protestant. This is true not only in cases where the difference in religion coincides with one of nationality, and thus of cultural development, as in Eastern Germany between Germans and Poles.”22
Furthermore, later in his essays Weber would go on to point out that Calvinism “was the faith over which the great political and cultural struggles of the sixteenth and seventeenth centuries were fought in the most highly developed countries, the Netherlands, England, and France”.23 The sociologist makes a conscious effort to elaborate on how the then-controversial Calvinist doctrine of predestination had managed to become a very real “political danger”, and would go on to influence political power shifts and the overall development of a country’s cultural, political and economic backgrounds.
1.2 An Alternative Approach: Continuation Instead of Opposition
The theory of the birth and development of capitalism, as proposed by Max Weber in “The Protestant Ethic and the Spirit of Capitalism”, has unsurprisingly received a lot of valid criticism throughout the years.24 Even though Weber himself published his essays in the form of a book with his own responses to critics in the footnotes after people would read and criticise the work,25 to this day, the debate of the validity of Weber’s work, as well as the actual roots and historical development of capitalism, are subject of arduous debate.
22 Weber, M. The Protestant Ethic and the Spirit of Capitalism. Chapter: Religious Affiliation and Social Stratification, p. 46. 23 Weber, M. The Protestant Ethic and the Spirit of Capitalism. Chapter: A. Calvinism, p. 99. 24 Cantoni David, “The Economic Effects of the Protestant Reformation: Testing the Weber Hypothesis in the German Lands”, Journal of European Economic Association, 2014, accessed March 8, 2020, https://onlinelibrary.wiley.com/doi/abs/10.1111/jeea.12117. 25 Mitzman Arthur, “Max Weber: German Sociologist”, Britannica, 2019, accessed March 7, 2020, https://www.britannica.com/biography/Max-Weber-German-sociologist. 16
With the limitations of the thesis in mind, the conscious decision is made to introduce the main opposing theories, yet accept that they are, in fact, a continuation of Weber’s insights, rather than completely opposing issues. Acknowledgement should be made here that the author of the thesis is aware of matters such as the labor theory of value being proved to be incorrect,26 yet the argument here is that this does not, in fact, change the outcome of what would become the essential virtues (traits) of modern Western capitalism. Such inconsistencies should remain as the focal point of analysis in a separate work, in which the objective is to conceptualize the proper historical timeline of the development of capitalism – the current thesis does not, in fact, intend to achieve this goal, and this first part serves as a mere introduction to the main theories of the development of capitalistic thought in the West, rather than an extensive debate on the different factors that led to the history of Western capitalism to branch out into multiple different theories.
Furthermore, the acknowledgment of these issues (even with the limitation factors in mind) does, indeed, contextualize Western capitalism in a manner that is even noteworthy in the current thesis. The different theories, their interpretations and inconclusive elements, if anything, serve as an argument for the complex and multi-layered development of the economic system.
As eluded to earlier on in the thesis, H. M. Robertson was one of the most notable critics of Weber and “The Protestant Ethic and the Spirit of Capitalism”. Robertson was an economic historian, and a senior lecturer of Economics in Cape Town. 27 In his book “Aspects of the Rise of Economic Individualism: A Criticism of Max Weber and His School”, Robertson criticizes Weber’s remarks on capitalism being born out of a Protestant society, and points out that 14th century Italy is actually the place and time where / when capitalistic tendencies had first emerged.28
As history would come to show, Weber’s theories have indeed been refuted time and time again, albeit not on a fundamental level. It is noteworthy that, in recent times, there has been a significant shift in the general opinion regarding Protestantism and its influence towards capitalistic development – instead of throwing Weber’s ideas aside as inconclusive and faulty on a fundamental level, suggestions of the Protestant influence on capitalism through the promotion of literacy have emerged.29
Whatever the actual case might be, it is evident that, instead of completely opposing Weber’s theories with those of his critics, a somewhat-concise line may be drawn that would encompass the
26 Menger Carl, Principles of Economics, p. 146-147. (Institute for Humane Studies, 1976). 27 Robertson Hector M., Aspects of the Rise of Economic Individualism: A Criticism of Max Weber and His School, (Cambridge University Press, 1935). 28 Robertson, Aspects, p. 57-88. 29 Korotayev A., Malkov A., Khaltourina D., Introduction to Social Macrodynamics, (URSS, 2006), p. 87-91. 17 essential ideas of both sides – that of Weber’s Protestant ethic, and that of capitalism emerging in the 14th-15th century, in Italy.
One of the key elements referenced when talking about capitalistic thought in Italy in the 14th-15th century is the book titled “Summa de Arithmetica, Geometria, Proportioni et Proportionalita”, written by Luca Pacioli in 1494.30 According to some, this is one of the most prominent and important examples of the development of economics towards capitalism found in that time. 31 The book introduced the concept of “double-entry bookkeeping” – a system that requires every entry of an account to have an opposite entry to be made on a different account (in other words, credit and debit).32 In the book, Pacioli makes the distinction between the divine and money, stating that the latter is a form of science that can be learned and practiced, and has little-to-no connection to the divine.33
The “Summa de Arithmetica” is, without a doubt, one of the most important creations as far as the development of capitalism goes. However, a point can be made that capitalistic thought came about even prior to this – some sources talk about forms of capital existing in Renaissance Italy (more specifically – Florence) in the forms of renting, lending, and alike.34
Here, an argument can be made that both Weber’s theories and those that oppose them can work together, if one was to view Western capitalistic development as an intricate timeline, discounting the discussion concerning the main starting point. In order to do this successfully, however, Weber’s statements about the birth of capitalistic thought from Protestantism should be discounted as well, and instead, his work should be viewed from the lens of capitalistic development, and the factors that furthered it – some educational sources do, in fact, utilize this timeline-based approach.35
If done so, the natural conclusions that arise should indicate not only towards the complexity and inconsistency of the development of Western capitalism, but also showcase that there have been multiple actors at play in the Western world, all of which did contribute.
30 ICAEW, Summa de arithmetica, (ICAEW, 2020). 31 The School of Life, “History of Ideas – Capitalism”, YouTube, 2015, accessed March 8, 2020, https://www.youtube.com/watch?v=dIuaW9YWqEU. 32 “What is double entry bookkeeping and how does it work in the general ledger?”, Investopedia, 2015, accessed March 8, 2020, https://www.investopedia.com/ask/answers/022615/what-double-entry-bookkeeping-and-how-does-it- work-general-ledger.asp. 33 The School of Life, “History”, 2015. 34 “Cradle of Capitalism”, The Economist, 2009, accessed March 8, 2020, https://www.economist.com/books-and- arts/2009/04/16/cradle-of-capitalism; Robertson, Aspects p. 57-88. 35 The School of Life, “History”, 2015. 18
1.3 Economic Liberalism and Marxism
Up to this point in the thesis, some of the main alternative approaches concerning Western capitalism and its development have been introduced, with their most prominent examples given. This includes some more subjective, society-involving cases (i.e. Weber’s theory about the Protestant ethic and how it fostered the features that were essential for capitalism), and those of more objective, fundamental achievements (i.e. Luca Pacioli’s “Summa de Arithmetica”). While appropriate context has been established from a historical perspective, it would be faulty to claim sufficiency without making an argument about the opposing theories of economic liberalism (with Adam Smith being the guiding figure) and Marxism (with Karl Marx and his theories on economics being at the forefront).
The features of economic liberalism are most prominent in today’s Western capitalism.36 The Scottish philosopher and economist Adam Smith is often considered to be father of economic liberalism.37 In 1776, Smith published what would become one of the core cornerstones of not only economic liberalism, but also modern Western capitalism, as a whole – “An Inquiry into the Nature and Causes of the Wealth of Nations”.38
In his work, Smith argued for what would become the main aspects of economic liberalism – free market economy, free trade, possession of private property, and alike. The core idea of “The Wealth of Nations”, however, was simple – economic decisions should be made almost entirely by private parties, without interference of the government. A note, however, should also be made that some governmental interference would be tolerated, but the key idea is for the private entities to possess the means of decision-making towards the economic processes happening within the state.39
As a continuation (and, naturally – basis) of these ideas stood the liberal mindset towards capitalism as a natural expression of some of the core principles of the human nature. Liberal economists believe that entrepreneurship and freedom to participate within the market without the
36 Ebeling Richard M., “Liberal Capitalism as the Ideology of Freedom and Moderation”, AIER, 2018, accessed March 8, 2020, https://www.aier.org/article/liberal-capitalism-as-the-ideology-of-freedom-and-moderation/. 37 Sharma Rakesh, “Adam Smith: The Father of Economics”, Investopedia, 2020, accessed March 8, 2020, https://www.investopedia.com/updates/adam-smith-economics/. 38 Blenman Joy, “Adam Smith and “The Wealth of Nations”, Investopedia, 2020, accessed March 8, 2020, https://www.investopedia.com/updates/adam-smith-wealth-of-nations/. 39 Smith Adam, An Inquiry into the Nature and Causes of the Wealth of Nations, (MetaLibri, 2007). 19 interference of state are a natural expression of human behaviour, and such a form of capitalism only works to foster it.40
Evidently, considering the factor of economic liberalism being the current magnum opus of Western societies, a point should be made that it is not without fault. Wealth disparities among individual parties, ecology-related issues and a general unhappiness and unfulfillment of one’s life41 are prominent points of discussion among today’s scholars – that is even ever-so-true among intellectual discussions on the validities of liberal capitalism and Marxism, as well.42
Marxism, when speaking in politico-economic terms, is the opposition to economic liberalism.43 It is an ideology first started by Karl Marx – a social theorist and economist of the 19th century, one that was heavily influenced by the works of the before-talked-about Smith.44 In his famous book “Capital” (orig. German – “Das Kapital”), Marx eluded that there are but two forces that act in and shape society, as a whole – the rich and powerful, and the labourers (to which Marx referred to as the “proletariat”). According to the economist, the first group aims to acquire all of the wealth they are able to, and so thus rule the economy and the market, while the latter group is doomed for economic inequality and the inability to prosper in the economic sense of the word.45
To put it simply, Marxism refers to capitalism as a sort of inequality of classes – the rich against the labourers. Marxists explain how capitalism allows the rich and powerful to seize the means of production and determine what the benefits are going to that are granted upon the less-fortunate.46 Following in the footsteps of Marx himself, Marxists state that a better economic system should replace capitalism – one that would promote equality and further equalize the economic situations of the two before-mentioned groups of people.
As history would go on to show, Marx’s ideas on solving the economic discrepancies of the classes would seem to make sense when placed on paper, but result in further inequality, censorship and significant numbers of casualties when put in practice. To this day, however, there are Marxists who
40 Sewpaul Vishantie, “Neoliberalism”. International Encyclopedia of Social and Behavioural Sciences, Science Direct, 2015, accessed March 8, 2020, https://www.sciencedirect.com/topics/economics-econometrics-and-finance/economic- liberalism. 41 Admittedly, while the latter is inadvertently subjective, there is more than enough reasoning to claim its objective existence. Furthermore, it is a point important in the later chapters of the thesis, as it is inseparable from the discussion centred around Japanese “collective capitalism”. 42 Jordan B Peterson, “Marxism: Zizek/Peterson: Official Video”, YouTube, 2019, accessed March 8, 2020, https://www.youtube.com/watch?v=lsWndfzuOc4. 43 Liberto Daniel, “Marxian Economics”, Investopedia, 2020, accessed March 8, 2020, https://www.investopedia.com/terms/m/marxian-economics.asp. 44 “Karl Marx”, Stanford Encyclopedia of Philosophy, 2003, accessed March 8, 2020, https://plato.stanford.edu/entries/marx/. 45 Liberto, “Marxian”, 2020. 46 Wood Ellen Meiksins, The Origin of Capitalism: A Longer View, (Verso, 2002) p. 73-125. 20 claim that the major faults of the theories are not the theories themselves, but rather their poor implementation in practice.47
As it stands today, further comments concerning economic liberalism and Marxism are going to be withheld for the time being, since they do not aid with the purposes and aims of the thesis at the current point in time. Instead, any further comments and points that relate to the topic are brought up in the appropriate contexts, whether given in advance or described in the situations themselves. Nonetheless, it is evident that while Smith’s theories and, as an extension, the cornerstones of economic liberalism are a somewhat comprehensive and appropriate reflection of the modern Western capitalism, Marx’s work does challenge them, with highlights on the glaring issues of capitalism being the least amount of credit that can be given to this opposition.
1.4 The Theory of Japan’s Collective Capitalism
In order to begin discussing the concept of “collective capitalism”, a distinction should be made that this theory of economic structure is somewhat loosely defined, since it does not necessarily hold as much contextual and historical matter as, say, the theories of traditional capitalism (be it those of Weber, or else).
Indeed, it is believed that the term itself – collective capitalism – was born in the 1960s. It was established and dictated by an American economist Gardiner Means.48 Means emphasized that, at the time, there existed single corporate entities that were so large in their shareholding, employee and client count, that no single unit could assume the role of the manager of the instruments of production, or even the policies of production themselves.49 Means is famously quoted as to saying that
“<…> we now have single corporate enterprises employing hundreds of thousands of workers, having hundreds of thousands of stockholders, using billions of dollars’ worth of the instruments of production, serving millions of customers, and controlled by a single management group. These are great collectives of enterprises, and a system composed of them or dominated by them might well be called ’collective capitalism’”.50
47 Razer Helen, “Why I’m a communist-and why you should be, too”, Quartz, 2017, accessed March 8, 2020, https://qz.com/965740/why-im-a-communist-and-why-you-should-be-too/. 48 The Great Soviet Encyclopedia, Collective Capitalism, Theory of, 3rd edition, (The Gale Group, 2010). 49 Lee Frederic, S., Samuels Warren, J., The Heterodox Economic of Gardiner C. Means, (Routledge, 2015), p. 189- 191. 50 Ibid, p. 191. 21
In essence, the theory of collective capitalism aims to oppose “private” capitalism, stating that huge corporations are too broad to claim the possession of the means of production, and thus share them collectively. Needless to say, such a claim is rather prone to criticism. One of the main critiques offered towards the theory of collective capitalism is that Means is outright wrong to assume the non- existence of private ownership of the means of production, be it by large corporations, or any other entity that would fit what he defined as “collective capitalism”. The critique itself states that, while large corporate bodies might as well be “broad” in how they deal with those same means, they should still be considered as private entities, since they are not opposing sides of the “pre-monopolistic” and “monopolistic” eras of capitalism, but rather belong to the same type of capitalism – that of the traditional kind (with emphasis here put on the said corporations acting as private entities, same as individuals that possess the means of production in a traditional capitalist society).51
Furthermore, the critique continues by emphasizing that Means had only stressed the common features of capitalism and socialism, blending them and blurring the lines, but has failed to mention the core features that do, in fact, differentiate them.52 Based on the arguments made in this critique, and taking into account the ideological bias that might be present within it, an observation is then made that the core principle of the critique is to name “collective capitalism” as a lacklustre theory that would not suffice (at the very least – would not prove itself to be efficient) in a real world scenario.
There does exist another, more publicly-known form of critique aimed at collective capitalism, too. The criticism in question, however, is not necessarily collective capitalism-oriented, but instead aims to disprove the Japanese model, as it refers to illogically high demand from the employer aimed towards his/her labourers, which then results in the workforce being overworked and prone to experiencing social issues.53 As noted, however, this form of criticism is quite evidently case-specific, and thus any and all further comments, lest they would prove to be more beneficial later on in the thesis, and since they do not provide further contextual basis for the theoretical part of the thesis, are intentionally withheld, with the assumption that the mere acknowledgement of this type of criticism serves the point of illustrating an alternative approach towards the theory of collective capitalism.
Admittedly, Means’ theory of collective capitalism is rather prone to misinterpretation and criticism. It might even arguably fall short as nothing more but an attempt to compartmentalize
51 The Great Soviet Encyclopedia, Collective, 2010. 52 Ibid. 53 Weller Chris, “Japan is facing a ‘death by overwork’ problem – here’s what it’s all about”, Business Insider, 2017, accessed March 24, 2020, https://www.businessinsider.com/what-is-karoshi-japanese-word-for-death-by-overwork- 2017-10. 22 various capitalistic phenomena into some more rationally-explainable units, if it was not for a single example of the theory being observed in the modern world – Japan.
At the time when Means established his theory of collective capitalism, Japan was experiencing a surge of economic growth. With the help of the US, the country had not only climbed out of the immediate aftermath of World War II (WWII), but had already started establishing a strong economic outlook, with LDP as the leading political party in the country. Ironically enough, Japan was observably on a clear path of becoming the perfect example of Means’ theory of collective capitalism.
Admittedly, a note should be made here that, while traditional Western capitalism finds its roots in the 14th-15th century Europe, collective capitalism is a new concept that has, to date, been rather poorly researched and covered. The reasoning behind this might lie in the fact that there were no specific-enough examples of collective capitalism in action, except for Japan. Furthermore, when speaking about Japan’s form of capitalism, another term that is somewhat often used is “state- sponsored capitalism”. An acknowledgement is made here that this particular form of capitalism is not solemnly attributed to Japan, but rather the majority of the East Asian region – this is why it is often referred to as “the East Asian model”.54 This sub-form of capitalism refers to a phenomenon where the government invests money into a certain specific private sector, thus hoping to foster economic development and growth in that very sector. Be that as it may, this outlook might prove itself to be useful when analysing Japanese capitalistic tendencies from a purely economic sense – Means’ proposed idea of “collective capitalism” is deemed to be a more on-point alternative to describing and/or commentating the modern form of Japanese capitalism, since it does not only address the economic side of the spectrum, but also references the cultural and social sides, too. Both of these prove themselves to be essential when analysing Japan’s capitalistic tendencies and their journey from the post-war period to present day.
A point that would further this notion is one that explains collective capitalism not via the relationships between corporate entities and the means of production, but rather through a more fundamental level of employer-to-employee relationship. Here, an acknowledgement is made that the concept of “overworking” has already been mentioned earlier in the chapter, and while it is crucial to this very point, it does only represent that one side of the argument, and is thus left to be attended at a later time, as mentioned earlier.
On the fundamental level in question, collective capitalism explains the unprecedented relationship held between employers and employees in some firms. Again, this is a phenomenon mostly seen in Japan – employees dedicate their lives to a single job, spend long hour perfecting their skills, put in
54 Kuznets Paul, W., An East Asian Model of Economic Development: Japan, Taiwan and South Korea, (1988), JSTOR. 23 a lot of hard work and climb through the corporate ranks. On the flip side of this, the employer guarantees the employee a lifetime of employment, all of the necessary social benefits, a stable and gradually-increasing salary and a pension, when the time comes.55 In this regard, the employee dedicates their lives to a single company – acknowledging the trust and risks involved in such an action, it is evident that it is only possible (assuming the success of such a situation) in some very strict set of circumstances, and with a significant historical and cultural context to back it up – something that Japan is rather well-known for possessing.
This “dependence” relationship does extend even further than the “employer-employee” situation, however. Collective capitalism does also allow large corporate entities to invest by purchasing shares of some other firms and corporations, be it on the same market, or a different one.56 This process, albeit unusual in its nature, allows the market to prosper in a very unique manner – companies are incentivized to work with one another, and if they are successful in doing so, this will not only result in some traditional models of success, but will also bring in financial gain from the before-mentioned investments.57
1.5 The Essential Features of Capitalism
Now, while it is evident that both forms of capitalism – that of traditional, Western nature, and “collective” capitalism – are rather different in how they approach the economic structure of a nation, an argument should be made here that the core, essential features remain the same for both types of the economic systems. This assumption should not prove to be a controversial one, for both systems fall under the same umbrella – capitalism. Furthermore, it appears to be self-evident when analysing the differing approaches of Western and collective forms of capitalism – despite their differences, both of these systems share the same values that supply them with their umbrella name. No matter the sub-types of the same economic system, while the characteristics and approaches might differ, the main values and features do remain the same. Keeping that in mind, by default, and in accordance with the context provided in the first chapter of the thesis, an argument is then made that there are five features by which any and all subtleties of the differing types of capitalism (in this case – Western
55 Gopal Rohan, “Collective Capitalism: A Look into Japan’s Economy and Corporate Culture”, Rohan Gopal, 2017, accessed March 31, 2020, https://www.rohangopal.com/policybusiness/2017/3/17/collective-capitalism-a-look-into- japans-economy-and-corporate-culture. 56 Ibid. 57 Ibid 24 and collective forms of capitalism) should be evaluated, compared and contrasted by: free market, wage labour, accumulation of wealth, market competitiveness and possession of private property.
A free market is often viewed as one of the – if not the – guiding forces of capitalism. It is believed that, without a free market, it would be impossible for a capitalistic society to develop and prosper beyond its initial inception. That said, it is important to address a common misconception that free market and capitalism are, in fact, the same economic force, while in fact, they differ.58
Capitalism, in itself, creates an innate focus on accumulating unlimited amounts of wealth. By its own right, the free market is not concerned with such a notion, and is instead fuelled by constant exchanges of goods and currency.59 As an extension of that, however, it is rather self-evident that capitalism would not exist without a free market system in place – there would be no ability to accumulate wealth without true restriction, and a certain cap would be set on the accumulation process itself. Here, it is acknowledged that a cap may also be set in a capitalist-driven economy (i.e. that of social pressures), but such a scenario is deemed to be more circumstantial than unavoidable, and is thus only taken into consideration.
If the free market is the guiding system of capitalistic development within a society, then by that account, wage labour may be considered as the actual implementation of the means needed to attain capitalistic prosperity. Wage labour, on a fundamental level, refers to the relationship held between an employer and an employee – more precisely, how the employee exchanges their labour power for a set amount of payment from the employer.60
Here, a note should be made that wage labour, by default, and looking at it from a fundamental perspective, is likely to be one of the most controversial topics concerning capitalist societies. This point can be seen both from socialist and Marxist critiques of the concept. As it shall be revealed later on within the thesis, however, some criticisms do span in between capitalist societies themselves – it can be observed that it is as much of a cultural and social phenomenon as one of the economic kind. With that being the case, though, any and all appreciation for the complexity of wage labour as a core concept of capitalism is reserved for the fourth chapter of the thesis.
Accumulation of wealth, as a core principal of capitalism, is also not void of controversy. If one was to standardize the stereotypical modern Western capitalist, it may be observed that they shall
58 Nickolas Steven, “Is Free Market the Same as Capitalism?”, Investopedia, 2019, accessed March 31, 2020, https://www.investopedia.com/ask/answers/042215/what-difference-between-capitalist-system-and-free-market- system.asp. 59 Ibid. 60 “Definitions for Wage Labor”, Definitions.net, accessed March 31, 2020, https://www.definitions.net/definition/wage+labour. 25 accumulate large amounts of wealth, and then disperse it in a few major directions – investments, purchase of expensive goods and services (participation in the free market; acquisition and possession of private property), hiring of staff in order to further accumulate wealth (participation in wage labour), and so on. While it may be deemed to be self-evident, an observation is made that the concept of accumulation of wealth is likely the most intertwined with other features of capitalism, be it those of acquisition, or of expenditure.
As noted earlier, the concept of accumulation of wealth is not free from controversy. The main controversial aspects arise almost exclusively from societal and cultural pressures – they can be observed in various scenarios, among which the most prominent would take place during some extreme circumstances, massive social tragedies or injustices directed from an employer towards an employee (i.e. the “Stop BEZOS” act of 2018).61
Market competitiveness, in an allegorical sense, may be viewed as the fuel that drives capitalism to develop and avoid stagnation. A competitive market ensures that corporate entities and individual capitalists do not follow a single strategy toward accumulation of wealth, but instead have to constantly analyse the competition and adapt to the ever-changing economic climate.
In a general sense, market competitiveness is viewed in a positive light. Instances of it mutating into something socially unacceptable and/or immoral are not necessarily all that common, and when they do occur, they are almost never due to the solemn factor of a competitive market. Instead, while an argument can be made that some other features of capitalism may be the solemn causes of an individual or a corporate entity to becoming immoral and/or unjust (this is especially true with accumulation of wealth), as it relates to market competitiveness, there are almost always other factors at play, too (i.e. reselling of medical masks and disinfection fluids during the COVID-19 outbreak62).
Finally, possession of private property may be seen in one of two scenarios – either as means of further accumulation of wealth, or as a symbol of capitalistic success. When it comes to the former, the private property would be traded, flipped or exchanged, and as far as the latter is concerned, it may be seen as nothing more but a subjective symbol of status (although, in modern capitalist societies, it may also bring individual profit via the means of social media exposure).
61 Porter Jon, “Amazon raises minimum wage to $15 for all 350,000 US workers following criticism”, The Verge, 2018, accessed March 31, 2020, https://www.theverge.com/2018/10/2/17927478/amazon-minimum-wage-15-dollars- increase-bernie-sanders. 62 Slisco Aila, “Canadian Couple Made Over $70,000 Reselling Lysol Wipes on Amazon at Inflated Prices”, Newsweek, 2020, https://www.newsweek.com/canadian-couple-made-over-70000-reselling-lysol-wipes-amazon-inflated-prices- 1492307. 26
Now, that being the case, it is still crucial to note that possession of private property is also one of the most heavily criticised features of traditional capitalism. The criticism stems from socialists and Marxists, and is centred on the idea that capitalists, possessing private property as one of the elements of the means of production, exploit the working class via the means of wage labour, and further protrude the distance between the two social classes.63
Here, a follow-up and a remainder is consciously made about the more-subjective traits of capitalism mentioned in the introductory part of the thesis. As opposed to the core principles of capitalism, these subjective traits are, in fact, unique to each of the different sub-types of the economic system. This is why a decision is made here to not mention them, and keeping in mind the fact that they are very culture-dependent, they do instead serve a more productive purpose by being referenced in the analysis part of the thesis, within the instances where extra contextual information is needed.
Finally, an important point to acknowledge before discussing the historic context of the two forms of capitalism is one that related to the term “consumer-oriented”. Whilst talking about the US’ form of capitalism, this term is one that is used as a descriptor, and also as an opposing point to Japan’s collective form of capitalism. Consumer-oriented capitalism (or simply – consumer capitalism) can be defined as a form of capitalism in which large and small corporate entities manipulate the consumer (via the means of various marketing channels) to purchase a designated product or service.64 Here, an acknowledgement is made that Japan has begun turning towards a more consumer-oriented economy in recent times, yet the conscious choice is still made to utilize the term in a manner discussed above. This is done while keeping in mind the notion that the US has long been the leading example of a “consumer-oriented economy” (this will be further explained and elaborated on in the latter chapters of the thesis), and is thus used as an opposing example herein, too. An argument to support this claim can be seen by observing Graph 1 – it illustrates the household and NPISH (Non-Profit Institutions Serving Households) final consumption expenditure per capita (USD) in the time period of 1970 – 2018, for both countries in question. The visual data showcases that the household expenditure in the US has been growing increasingly fast over the last 48 years, while the growth of Japan’s expenditure rate in this regard is significantly slower.
63 Westmoreland John, “Marx and the meaning of private property”, Counterfire, 2019, accessed March 31, 2020, https://www.counterfire.org/theory/37-theory/20205-marx-and-the-meaning-of-private-property. 64 Schrader Andrew, “Consumer Capitalism: Definitions, Examples & Effects”, bizfluent, 2019, accessed June 01, 2020, https://bizfluent.com/about-6589518-consumer-capitalism-definition.html. 27
Graph 1. Households and NPISHs Final consumption expenditure per capita (constant 2010 US$) – United States, Japan
Source: The World Bank, Final consumption expenditure per capita (constant 2010 US$)
The information presented in Graph 1 is further complemented by information presented in Graph 2 – these visual resources showcase the percentage of the GDP of exported goods and services in Japan and the US, respectively.
Graph 2. The percentage of GDP of export goods and services in Japan and in the United States (respectively) 2008 - 2018, %
28
Source: Trading Economics, United States – Exports of Goods and Services (% Of GDP)
From the visual information presented in the two aforementioned graphs, it is evident that while the US can be seen as the ultimate example of a “consumer-oriented economy”, a big portion of Japan’s percentage of GDP is made up of export goods and services. All of this information is used to justify the opposition made later in the thesis between the US-style consumer-oriented capitalism, and Japan’s collective capitalism.
In this chapter, both forms of capitalism (Western and collective) have been presented and introduced, with their development and main criticisms addressed. At the end of the chapter, in accordance with the theoretical information presented earlier and using it as the guidance point, the core principles of capitalism (it being used as an umbrella-term in this instance) have been named. These principles, together with the contextual baggage of the first chapter, shall serve as the evaluation points in the analysis part of the thesis. In order to provide not only theoretical background of the two forms of capitalism, but to also contextualize them in the appropriate settings and timeframe, the upcoming chapter discusses the historic development of both Japan’s and US’ economies, dating from the post-war period till present day.
29
2. The Development of Capitalism in Japan
The goal of this chapter is to provide historic context of the development of Japan’s form of capitalism from 1947 till present date by providing proper context on the history of Japan’s economy, as a whole. The goal of the chapter extends towards making a point that any and all discussion about the country’s form of capitalism is both inconclusive and, frankly, impossible without first establishing clear and concise context regarding the history of its economy.
For anyone aware of the historical background of Japan (both that of the political nature, and as it relates to the country’s economic development), it is rather self-evident that the processes of the country’s road towards capitalism – especially that of its unique take towards the economic system in question – are rather complex and multi-layered. It is because of this reason, and that of the limitations of the thesis, that a conscious choice is made to segment the aforementioned development into five different stages – post-war political and economic situation, central bank relations with the Ministry of Finance (MoF), the financial bubble, the decline of economy and, finally, present day politico-economic situation of the country.
Each of the stages / topics act as theoretical umbrellas for a variety of different social, political and economy-related events and situations that transpired in Japan since 1947. Thus, without taking into account the possible subjectivity of the chosen benchmarks, it is deemed essential to separate and discuss all five of the stages separately, providing proper historical (meaning, intertwined65) context along the way.
Lastly, an observation should be made that, as it relates to Japan and its economic history, an insurmountable connection can be seen between the country’s economic and political sectors. While it is true (and very much self-evident) that this is also the case with any other country in the world, the current part of the thesis focuses on Japan in an exclusive manner, while the previous one was devised in a more overarching, generalized manner.
65 Rosenbluth, Frances McCall, Thies, Michael F., Japan Transformed: Political Change and Economic Restructuring, (Princeton University Press, 2010). 30
2.1 Post-War Economic Situation in Japan
History would show that the period after WWII and the end of the Cold War would later come to be referred to as the period of the “economic miracle of Japan”.66 This, however, was not an expected outcome in the immediate sense of the term.
Having lost the war, Japan was now under the direct influence of the Allied forces – namely, the US. With General Douglas MacArthur acting as the lead figure in the entirety of the ordeal, and constant pressure arising from the US, in 1947 Japan received (the term is used in a direct, albeit frank sense of the word) a new constitution67 – one that would retain its focal point among political party discussions even until present day.68 The pacifistic and regional democracy-aimed document, while being surrounded by significant amounts of controversy, would apparently be placed aside with economic growth becoming the immediate focus of the country, even though the later discussions concerning the topic would divide the people into different camps (nationalists, mercantilists, and so on).69
One of the main aspects worth paying attention to here as far as the mentioned economic growth and economic development are concerned is the fact that, right after the war, many of the wartime bureaucrats became heavily involved in the economic processes of the country.70 They occupied high- ranking spots in the MoF – at the time, this was regarded as the most influential and biggest power- possessing governmental institution in Japan. It inspired awe in people, and working in the ministry was a goal that many citizens of Japan aspired to achieve.71
The immediate post-war period is also the time during which the currently-leading Liberal Democratic Party (LDP) was established.72 The then-Prime Minister of Japan – Kishi Nobusuke – is often credited as the person who established the conservative opposition towards the Japanese Socialist Party, and gave rise to the LDP.73 Notably, Nobusuke deemed himself to be a defender of
66 Kiprop Joseph, “What Was The Japanese Economic Miracle?” World Atlas, 2019, accessed March 15, 2020, https://www.worldatlas.com/articles/what-was-the-japanese-economic-miracle.html. 67 Parisi Lynn, “Lessons on the Japanese Constitution”, Stanford, 2002, accessed March 15, 2020, https://spice.fsi.stanford.edu/docs/lessons_on_the_japanese_constitution. 68 Sieg Linda, “Mission unaccomplished – Abe’s drive to revise pacifist constitution”, Japan Times, 2019, accessed March 15, 2020, https://www.japantimes.co.jp/news/2019/11/19/national/politics-diplomacy/shinzo-abe-revise- constitution/#.Xm40rHL7T3g. 69 Hirata Keiko, “Who Shapes the National Security Debate? Divergent Interpretations of Japan’s Security Role”, Asian Affairs, 2008, accessed march 15, 2020, https://www.jstor.org/stable/30172691?seq=1. 70 Werner, Richard A., Princess of the Yen: Central Bank Truth, (M. E. Sharpe, 2003), Google Books. 71 Ibid. 72 Christensen Raymond, “Liberal-Democratic Party of Japan”, Britannica, 2015, accessed March 15, 2020, https://www.britannica.com/topic/Liberal-Democratic-Party-of-Japan. 73 Werner, “Princess”, 2003. 31 democracy, even though he is said to have proclaimed himself to be a “national socialist” during the war. The LDP went on to become the dominant political party in the country, led by wartime bureaucrats (same as the Ministries of Finance and Education).74
Discussing the early development of Japanese capitalism, another important actor that needs to be mentioned in this chapter would have to be the Keiretsu. Keiretsu would become the coalitions of various different businesses and industrial corporations in Japan that would replace Zaibatsu.75 On their own right, Zaibatsu ruled and dominated the country’s economic scenery for a long time (from the Meiji period), but their dominance was put down by the Americans after the war. US initiated the redistribution of land within the country, and labelled the Zaibatsu as “supporters of criminal war”, taking a step further and preventing these corporations from doing business again.76
2.2 Japan’s Central Bank and “Window Guidance”
As noted in the previous chapter, the MoF of Japan had nearly absolute power when it came to any and all economic processes within the country. It also directly ruled over the central Bank of Japan (BoJ) – the bank would have to report back to the ministry about all sorts of different affairs. There was, however, an exception – the one thing that the MoF had no power over was the allocation of credit.77
This is where the concept of “window guidance” came into play. Window guidance refers to the process of a central bank maintaining certain quotas on all of the other banks within the country on just how many loans these banks should (could) issue during a specific period of time.78 To be quite frank, the BoJ could thus have nearly absolute say in which industries would reign supreme in the country, and which would be diminished.
Window guidance created a lot of wealth in Japan.79 In essence, it is obvious that the concept is very ill-aligned with capitalistic ventures and capitalist way of thinking, in general (especially when it comes to such concepts as accumulation of wealth or even free market economy). This being the case, however, it is also evident that the development of capitalism was not, in fact, the core objective
74 Ibid. 75 “Zaibatsu”, Britannica, 2019, accessed March 15, 2020, https://www.britannica.com/topic/zaibatsu. 76 Werner, “Princess”, 2003. 77 Ibid. 78 “window guidance”, Lexico, Oxford, accessed March 15, 2020, https://www.lexico.com/en/definition/window_guidance. 79 Pham Peter, “How Do Asian Central Banks Distort And Destroy?” Forbes, 2017, accessed March 15, 2020, https://www.forbes.com/sites/peterpham/2017/12/04/how-do-asian-central-banks-distort-and-destroy/. 32 of the BoJ. At the point in time during which window guidance was most prominent, the Japanese working class sector flourished – the economic tool of loan distribution created relatively equal conditions of life to the average working class citizen in Japan, and the country prospered economically, as a whole.80 With the equal distribution of wealth81, the core target of the economic tool was to satisfy industries that focused on producing consumer goods and services. 82
With time, it became obvious that window guidance – rather, the diminishing effects that it had on certain industries – was not a flawless system as far as Japan’s economic development went. Various companies began competing not for money, but for market share – this led some of them to bankruptcy, thus coining the term “excess competition” in Japan’s business sector for decades to come.83 The central bank’s solution to this issue would come to be financial cartels – business institution coalitions that associated with one another in order to improve their potential earnings.84 This is also where the term Keiretsu first manifested – as noted earlier, a set of businesses that held a for-profit relationship,85 Keiretsu would go on to replace what was known as the Zaibatsu in pre-war Japan.
2.3 The Financial Bubble of the 1980s
While cartels were a successful tool in managing and keeping businesses in-line in Japan, their power did not extend overseas. For this reason, and because industries were looking to expand their reach further than the country, some certain Japanese companies started dominating in other parts of the world.86 This phenomenon, together with the rapid financial growth and economic development within Japan itself, gave rise to the ever-so-popular notion of the Japanese success model – one that has been referenced and admired even in modern times.87
80 Werner, “Princess”, 2003. 81 Now, this is not referencing the initial interference of the US and the diminishing of Zaibatsu, but rather due to the window guidance of the Bank of Japan and equal salary conditions to the before-mentioned working class. 82 Pham, “How Do Asian Central”, 2017. 83 Bird Allan ed., Encyclopedia of Japanese Business and Management (Routledge, 2002), chap. Commercial Code, Google Books. 84 “Cartels”, Economics Online, accessed March 15, 2020, https://www.economicsonline.co.uk/Business_economics/Cartels.html. 85 Liberto Daniel, “Keiretsu”, Investopedia, 2020, accessed March 15, 2020, https://www.investopedia.com/terms/k/keiretsu.asp. 86 IUN, Japanese economic takeoff after 1945, (IUN, 2002). Chapter 3: Financing the Japanese economy and cooperation between the state and businesses. 87 Tetsuji Okazaki, “Lessons for the Japanese Miracle: Building the Foundations for a New Growth Paradigm”, Nippon, 2015 accessed March 15, 2020, https://www.nippon.com/en/in-depth/a04003/lessons-from-the-japanese-miracle- building-the-foundations-for-a-new-growth-paradigm.html. 33
An important note that needs to be made here is that, contrary to biased belief, Japan managed to create economic dominance and prosperity without relying solemnly on the free market – a notion that is usually deemed almost impossible by modern-time capitalists and capitalism advocates. While further analysis of this aspect will follow in the later part of the thesis, it is a point worth mentioning here, since it fall directly in-line with the timeline of the development of the economy of Japan.
While financial prosperity and relatively equal distribution of wealth were the two major successes of Japan’s then-wartime economic system, the BoJ was not very keen on referencing or talking about the window guidance model.88 It was actually a relatively shameful aspect of the country’s economic model, since it related all too much to the actual wartime financial governance model, and was seen by Western developed countries as possessing short-term effectiveness.
It was at this time that the 5-year and 10-year plans were first proposed in Japan’s economic sector.89 90 The latter – initiated by a former governor of the BoJ Haruo Mayekawa – advocated for economic reforms, with the intent to turn Japan towards a more Western model of economics, and create Western living standards for the Japanese people. A conscious choice to mention Mr. Mayekawa is made here, since it is acknowledged that he was one of the thought leaders that first advocated the abolition of bureaucratic powers in Japan, and the country’s transition towards a completely free market economy – one of the essential cornerstones of a successful capitalistic society.91
The BoJ advocated the proposed reforms heavily, yet, the reaction from the general population of the country was rather negative.92 In order to replace the current system that was in play, a clear set of actions needed to be established, and a plan devised – this was something that the proposed reforms did not have. The only way for the BoJ to achieve the goal of such reforms was to showcase and prove the flaws of the existing economic system – this manifested in the creation of the famous economic bubble of Japan.93
The economic bubble stretched all throughout the 1980s (especially the second half of the decade), reaching climax in the early 1990. The bubble was created by the BoJ invoking the window guidance model and forcing other banks to issue vast amounts of loans (in other words, setting difficult-to-
88 Werner, “Princess”, 2003. 89 Ibid. 90 Yoshioka Shinji, Kawasaki Hirofumi, “Japan’s High-Growth Postwar Period: The Role of Economic Plans”, ESRI, 2016, accessed March 15, 2020, http://www.esri.go.jp/jp/archive/e_rnote/e_rnote030/e_rnote027.pdf. 91 Werner, “Princess”, 2003. 92 Ibid. 93 Ibid; Colombo Jesse, “Japan’s Bubble Economy of the 1980s”, The Bubble, 2012, accessed March 15, 2020, http://www.thebubblebubble.com/japan-bubble/. 34 meet loan quotas, and thus placing the banks into some very difficult situations).94 In order to meet the quotas, the banks would have to issue loans to existing risk groups – history would go on to show that this was one of the key factors in the creation and eventual burst of the financial bubble. That, and the insurmountable increase in real estate prices.
2.4 The Burst of the Financial Bubble
Even though there were many questions raised surrounding the ever-growing issuing of loans, the BoJ did not decrease its resolve up until the very end. Among the most notable results of this process was the rapid increase of real estate prices (this can be observed in Graph 4).
Graph 4. Japan’s Real Estate Price Index 1980-2008
Source: Ceicdata, Japan – Real Residential Property Price Index, (Ceicdata, 2020)
The real estate prices skyrocketed during the period of the financial asset bubble, which led to a deepening of verge between the rich and poor classes within Japan.95 As a reaction to this, and to the fact that, due to the poor monetary policies there were huge amounts of money being created, the system of window guidance was terminated in 1991 – this signalled a beginning of what would come to be known as the Lost Decade of Japan.96
The Lost Decade was the direct result of the collapse of the financial asset bubble. As the name implies, it was a period of ten years (1991-2001) during which the economy of Japan experienced complete and utter stagnation (this is especially true when it came to the stock market and real estate
94 Werner, “Princess”, 2003. 95 Ibid. 96 Hayashi Fumio, Prescott Edward C., “The 1990s in Japan: A Lost Decade”, University of Tokyo, 2003, accessed March 15, 2020, http://fhayashi.fc2web.com/Prescott1/Postscript_2003/hayashi-prescott.pdf. 35 prices).97 While it might seem like there is a clear and linear time-lapse of the events that transpired and led to the burst of the financial bubble, it is actually a rather inconclusive and contentious topic, to this very day. Some sources, as mentioned previously, note that this was a direct result of a plan to overthrow the bureaucratic powers that ruled the economic, political and educational sectors of the country and thus eliminate window guidance (also – lousy monetary policies),98 as a whole, while others point out that Japan’s already-then aging society and companies saving too much money and thus slowing down the economy were the actual culprits.99 It is evident, however, that while all of these factors might have contributed to the eventual crash of the economy of the country and the onwards-engagement of what would come to be known as the Lost Decade, there is no denying that the BoJ managed to reach its goal of not only “proving” the faultiness of the old, wartime-based economic system that had been present in the country for close to 40 years, but also suddenly receiving the chance to commence the westernization and Western model-based economic reforms.
The less often talked-about aspect of the Lost Decade, however, is the one that references the struggles that the working class sector had after the decline of the economic situation within the country. After the bubble crashed, and the stock plummeted together with the real estate prices, a huge number of people lost their jobs.100 This period was also notable for the sheer amount of suicides that happened within Japan – no matter the point of view, it is evident that the Lost Decade of Japan had both social and political outcomes, as well as economic ones.
2.5 End of Recession, Economic Resurgence and Present-Day Economics in Japan
At this point in the chapter, it is worth noting that all of the previously-provided historic context of the economic development (and struggles) of Japan serves a purpose of contextualizing the emergence and development of the different forms of capitalism within the country. In the introductory part of the thesis, an argument was made that the roots of capitalistic thought in Japan can be traced back to the Convention of Kanagawa in 1854. That being said, having discussed the wartime (and post-wartime) political and economic situation in Japan, it is rather evident that there is a clear juxtaposition here – while the period of time from 1947 up to the early 2000s has not been a favourable one for US-style capitalistic ventures (and thus, by extension – development of capitalistic thought, as perceived by the West) within the country, all of the information provided in this second
97 Kuepper Justin, “What You Can Learn From Japan’s Lost Decade”, The Balance, 2019, accessed March 15, 2020, https://www.thebalance.com/japan-s-lost-decade-brief-history-and-lessons-1979056. 98 Werner, “Princess”, 2003. 99 Kuepper, “What You Can Learn”, 2019. 100 Werner, “Princess”, 2003. 36 chapter (up to this point, and further on) serves as concrete and factually-based background that shall be subject for analysis in the chapter ahead.
Towards the end of the period of recession within the economic structure of Japan, there developed a significant amount of blame pointed towards the MoF, and the current political structure and it beneficiaries, namely – the LDP. The central BoJ retained its neutrality in the matter, while the MoF was blamed both for the recession, and for the bureaucratic-style capitalism that had been present within the country since the end of WWII. This was further proven by the fact that many scholars who thought that Japan had been living under the US-style economy all along went to US to study economics, and could see that the discrepancies were rather self-evident.101
This period also signalled the point of significant importance in the economy of Japan. The shift, otherwise known as structural economic reform, had started taking place within the country. This was due to a double-sided process concerning the two most influential economic powers of Japan – the MoF and the central bank. The ministry had started to lose its power completely, while the BoJ would emerge to become the leading economic unit.102 Since the fall of the MoF signalled the fall of the bureaucratic powers within the country, in general, this only added to create a noteworthy shift in the political structure, as well – it was the first time that the LDP had lost its almost-absolute power since the end of the war, albeit not for a too extensive period of time.103 Now, with the new political system supporting structural economic reforms, the BoJ could turn the country towards a “new” style of capitalism. The term “new” is presented in quotation marks here, since this form of capitalism was the one that the majority of the people in the country viewed to be present for the longest time – US- style, neoliberal capitalism.
The government of Japan, with the idealistic outlook of adapting US-style capitalist economy, tried to pull out the country out of recession in a few different ways. One of the more notable of these efforts was what is called quantitative easing – a technique where the BoJ would issue out increasing amounts of money in the domestic sector, while simultaneously keeping interest rates low.104 Sources note that this was partially successful, yet it did not stop the deflation of economy.105
This is, in fact, where Shinzo Abe and his economic reform system known as “Abenomics” come in. Representing the reputation- and influence-recovering LDP, during his second and still-lasting
101 Werner, “Princess”, 2003. 102 Ibid. 103 Christensen, “Liberal-Democratic”, 2015. 104 Chappelow Jim, “Monetary Policy”, Investopedia, 2019, accessed March 16, 2020, https://www.investopedia.com/terms/m/monetarypolicy.asp. 105 Kenton Will, “Abenomics”, Investopedia, 2018, accessed March 16, 2020, https://www.investopedia.com/terms/a/abenomics.asp. 37 term as Prime Minister of Japan, in 2012 Abe announced Abenomics and proclaimed it to be the system that would finally pull out Japan’s economy out of the slump that it is currently in.106
Abenomics consists of three different “arrows” – money creation (monetary policy), a newly- created government spending program (fiscal policy) and structural reforms to make Japanese industries more competitive and encourage investments within the private sector.107 Image 1 depicts the three “arrows” of Abenomics, and showcases how the first two not only work as independent units, but also further the third one – the fundamental restructuring of the country’s economic growth strategies.
Image 1. The Three Arrows of Abenomics
Source: North Scott, Limited Regular Employment and the Reform of Japan’s Division of Labor 限定正規雇用と日 本の分業改革, (The Asia-Pacific Journal, 2014)
In essence, Abenomics was deemed to be a successful strategy of reinvigorating Japan’s economy and withdrawing it out of deflation.108 Naturally, though, there was a significant amount of opposition towards statements congratulating the success of Abenomics – this included arguments that the Prime Minister’s proposed economic system does not address / take into account certain key issues that are evident in Japan (i.e. aging population).109
In this chapter, contextual information regarding the development of Japan’s economy (and, by that extent – the country’s form of capitalism) was presented, analysed and commented-on. The
106 Ibid. 107 Ibid. 108 Merler, “Abenomics”, 2018. 109 Mazumdaru Srinivas, “Abe’s reforms to tackle Japan’s ageing population issue”, DW, 2014, accessed April 14, 2020, https://www.dw.com/en/abes-reforms-to-tackle-japans-ageing-population-issue/a-17736639. 38 chapter serves as a contextual cornerstone for discussions relating to Japan’s form of collective capitalism, and how it came to be. In the upcoming chapter, the development and history of the US capitalist-style economy will be presented, discussed and commented-on in a similar manner.
39
3. The Development of Capitalism in the US
The goal of this chapter is to provide historic context of the development of US’ capitalism from 1945 till present date. This is done by providing sufficient contextual information on the country’s economic growth during that period of time. Here, the same sentiment is made as was mentioned in the previous chapter concerning Japan – that it would be impossible to discuss, compare and contrast the two forms of capitalism without first laying down contextual information concerning US’ economy.
In modern-day times, the term “Western capitalism” has become synonymous with US-style capitalism. As established in the previous chapters in the thesis, this was not always the case – this mixture and blending of US-style consumer-oriented economy and the core values of Western capitalism could only be observed taking place after WWII had ended, and the country in question started emerging from wartime expenses and focuses onto some more consumer-oriented industries. That is, however, not to say that the US did not have or show signs of capitalistic development during the period of time leading up to WWII – the contrary may be argued, yet it falls out of the limitations of the thesis, and is thus considered, but not addressed.
Keeping in mind the sheer number of significant social, political and economic events that transpired in the US in the time period of 1945 and present date, the decision is made to segment the analysis of the development of capitalistic thought within the country in question into three separate stages – immediate post-war economy and the social and political situations that might have influenced it, the economic inconsistencies that plagued the country during the 50s and 60s (acknowledging the periods of recession and their causative agents), and US’ turn towards becoming the consumerism-based, global economic giant that it is today.
Each of the aforementioned stages signify the major significant economic and social shifts that had taken place within the country in question. While their subjectivity is acknowledged, the argument is made that it does not influence the analysis and discussion of the economy of post-war US in a negative way, and instead the stages act as contextual tools that allow some better understanding of the unequivocally interesting path that the country took from being an industrial giant to becoming an unquestionably consumer-oriented capitalistic economy.
40
3.1 The Economy of Post-War US
While the US did have a lot to do with the economic outlooks of Japan immediately after the war, the opposite cannot be said. The events and political narratives that were taking place in Japan had not influenced US’ economic surges at all – in fact, the development of US-style capitalism was an almost completely internal process.
This is not to say that outside events that were taking place in the world at that time did not impact the US, however. Instead, a point is made here that, as far as the development of capitalistic thought in the country is concerned, the key processes that led to US being seen as the magnum opus example of what a capitalist society should look like were, at the most part, internal.
Before the historical context of the development of American post-war capitalism is presented, there is a note that should be made that is of essential importance. That note has to do with the situation through which capitalism came to be within the country in the first place. The US is the only capitalist country in the world that has established a capitalist economy out of colonial rule.110 The author of the thesis acknowledges that this information is not necessarily relevant to the proposed time period of the thesis, but the point is crucial in order to understand the uniqueness of US’ situation in the matter, and the one-of-a-kind development of capitalism within the country in the decades to come. Furthermore, this information is essential to be taken into context when discussing, comparing and contrasting the before-mentioned features of capitalism, especially those of wage labour and private property.
While this might prove to be self-evident, right after the war, the US had no notable issues in advancing its economy.111 In fact, it was arguably in the best state among the Allied forces112 – European countries were ravaged and in shambles, while some of the only in-land war remnants that the US had to deal with were the damages of Pearl Harbor.
After the war, a huge number of soldiers returned to the country, being hailed as heroes and defenders of freedom and civil rights.113 Soon after, these people turned towards seeking new jobs. One of the most notable occurrences here is that ex-soldiers would soon learn that, while they were
110 Weinberg Meyer, “A Short History of American Capitalism”, AllsHookDown, accessed Amrch 25, 2020, http://www.allshookdown.com/newhistory/CH01.htm. 111 Domitrovic Brian, “Post-WWII Boom: Transition to Consumer Economy – US Economic History 8”, Learn Liberty, 2017, accessed March 25, 2020, https://www.learnliberty.org/videos/us-economic-history-8-post-wwii-boom-transition- to-a-consumer-economy/. 112 “Conclusion: Post-War America”, Lumen: Boundless US History, accessed April 15, 2020, https://courses.lumenlearning.com/boundless-ushistory/chapter/conclusion-post-war-america/. 113 Domitrovic, “Post-WWII Boom”, 2017. 41 fighting the war, women had assumed the then-firm roles of the man – they would shy away from their usual duties of taking care of the household and children, and instead turn to work in factories and other intense labour-based jobs.114 After the war, however, this soon changed, and women were once again “forced” (the term is used in quotation marks as a sign of significant controversy that accompanies it) back into their pre-war roles.115 This point is of major significance, however, since it was the period in time that truly sparked the women’s rights and equality movements.116
What followed this immediate post-war period in the US was a rampant surge of consumer- oriented capitalistic thought.117 During the war, the vast majority of the country’s funds were directed at wartime expenses. Now, suddenly, a huge amount of goods (especially those of recreational nature) became available to the general public. 118 A major factor that played a significant role in this economic resurgence was the fact that the soldiers who had come back from overseas could now invoke the 1944 G. I. bill.119 The bill basically guaranteed that these people would have financial easing in areas such as education, business start-ups and living space acquisition.
This immediate post-war period was not solemnly significant because of how it laid the foundations for consumer-oriented capitalism within the country, though. Another major factor at this time – perhaps not immediately evident as that of an economic nature, but rather of the more political kind – was the situation of African-American people.120 At the immediate post-war period, these people were still subject to a vast amount of racially-charged discrimination and racial profiling. The term “still” is used here in a conscious manner – as noted earlier in the chapter, the returning soldiers were hailed as heroes and defenders of justice and civil rights, having brought an end to Hitler’s racial cleansing-based regime and the holocaust. Observing this, it is clear that the country was still in a state of hypocrisy. This state, however, would go on to spawn the American Civil Rights movement not even a decade later, 121 arguably for which the turning points were made during that aforementioned immediate post-war period of time.
114 “American Women in World War II”, History.com, 2020, accessed March 25, 2020, https://www.history.com/topics/world-war-ii/american-women-in-world-war-ii-1. 115 Ibid; Domitrovic, “Post-WWII Boom”, 2017. 116 Mcdermott Annette, “How World War II Empowered Women”, History.com, 2018, accessed March 25, 2020, https://www.history.com/news/how-world-war-ii-empowered-women. 117 Domitrovic, “Post-WWII Boom”, 2017. 118 Ibid. 119 “G. I. Bill”, History.com, 2019, accessed March 25, 2020, https://www.history.com/topics/world-war-ii/gi-bill. 120 Domitrovic, “Post-WWII Boom”, 2017. 121 Carson Clayborne, “American civil rights movement”, Britannica, 2020, accessed March 25, 2020, https://www.britannica.com/event/American-civil-rights-movement. 42
3.2 The Economic Inconsistencies of the 1950s and 1960s
With the surge of economic prosperity, a huge number of WWII veterans, together with their families, moved up from their pre-war owned farmlands and countryside towards the bigger cities in the country, especially those located in the northern states. This was done with the hopes of acquiring better job positions and, in turn, better wages, while also being closer to places that were now starting to concentrate heavily on pleasing the post-war consumer need.122 As noted in the previous sub- chapter, the G. I. bill was one of the more relevant tools that allowed a huge number of people to do so. In fact, this had become such a widespread phenomenon, that the demand for new housing went on to spawn major residential areas that would then surround the cities. By extension of the satisfaction of the housing needs of the influx of new residents, there came a need for better means of communication – both transportation-wise, and when it came to the infrastructure of the roads that would connect the cities and the residential areas.123 This information is provided here with the purpose to supply sufficient context to the fact that, during the 50s and 60s, the American car industry was one of the main beneficiaries of the newly-emerging consumer-oriented economy – so much so, that this period of time would go on to be referred to as the “golden age of American automobile industry”.124
If one was not to look beneath the surface of the usual referential information provided about the 1950s economic situation in the US, the notion might manifest that it was a relatively slow, yet steady period during which not much change happened. The characteristics of the generation of Baby Boomers125 had already come into play, and it would seem that consumer-oriented capitalism would slowly grow up until the early 1960s, when it would reach yet another significant stage of development. The reality, however, is somewhat different – the beginning of the 1950s signalled the one of the first periods of recession within the country (this is showcased in Graph 5) – one of 4 that can be observed in the period from 1949 till 1960.126
122 Domitrovic, “Post-WWII Boom”, 2017. 123 Ibid. 124 Arbogast Dave, “The Auto Industry After WWII: Remembering Pearl Harbor”, Arbogast, 2012, accessed March 25, 2020, https://www.davearbogast.com/the-auto-industry-after-wwii-remember-pearl-harbor/. 125 Chappelow Jim, “Baby Boomer”, Investopedia, 2020, accessed March 25, 2020, https://www.investopedia.com/terms/b/baby_boomer.asp. 126 Domitrovic, “Post-WWII Boom”, 2017. 43
Graph 5. The growth of US GDP from 1951 to 1955; the shaded area indicates the period of recession
Source: Fred, Real Gross Domestic product, (FRED, 2020)
Same as the rest three periods of recession in the country at that window of time, the 1953 economic recession was caused by a few rather different situations. The popular opinion today is that the main cause for this specific recession was the fact that revenues had dropped significantly (with Korean War being the proposed reasoning), which coincided with the lowering of tax rates.127 A point that needs to be made here is that while this single factor, combined with the expectation of an incoming period of inflation, were the leading causes of this specific recession, something that attributed to all four of them was the vast scale of unemployment in the country, combined with a huge federal income tax.128 All of that being the case, however, the conclusive opinion about these periods of recessions is that they were relatively insignificant as far as the economic development of the country was concerned (except for the recession of 1957-58129).
The 1960s proved to be completely different than the previous decade for the US. Throughout this specific decade, the country had no periods of recession, and its consumer-oriented capitalistic tendencies grew juxtaposing with the lowering number of unemployment. Experts attribute this to the tax cuts that happened during this time130 – while there was naturally a lot of debate surrounding high taxes being the cause of some stagnation during the previous decade, it was completely evident that
127 “Recession of 1953”, Global Security, accessed March 25, 2020, https://www.globalsecurity.org/military/world/usa/history/recession-of-1953.htm. 128 Domitrovic, “Post-WWII Boom”, 2017. 129 Ibid. 130 Hall Kyle, “The Revenue Act of 1964. Johnson’s Success, Kennedy’s Failure”, The University of North Carolina at Chapel Hill, 2011, accessed April 18, 2020, p. 2-7, https://pdfs.semanticscholar.org/80f1/5754d24780b03aeecc9054f9897fee3c8c9e.pdf. 44 their reduction did, in fact, work as intended, and the country was experiencing a true inner economic resurgence.131
3.3 US Global Economic Reach and Further Development of Western Capitalism
By the 1960s, the US started facing economics hardships. Contrary to possible immediate belief, these hardships were not necessarily because of some internal processes happening within the country, but instead related to external factors.132 As presented and explained earlier in the thesis, at this time, Japan had already emerged as an independent, vast economic power, both locally and on an international, global scale.133 The Japanese industries challenged those of the US, and the fact that Western Germany had also reached a significant point of economic growth at that very time did not help the case, either.134
What followed this was what economists would go on to refer to as “the period of stagflation”.135 The term itself is comprised of two separate terms – stagnation and inflation – and is used to signify not only the period of no economic growth within the US, but also significant increases of prices in the country. As it does not directly relate to the contextual flow of the thesis, elaborate details of how this came to be can be observed via embracing other relevant literature on the topic136. The crucial events that led to this, however, were the US having pulled back two of its post-war monetary policies (one that would provide aid to war-torn countries in Europe, and another that would bind the US dollar to gold), and OPEC (Organization of the Petroleum Exporting Countries) placing restrictions on the country because of its involvement in the Yom Kippur war.137
The next major step that happened within the US, as far as the economic development of the country is concerned, is the steep acceleration of the deindustrialization process.138 With the earlier-
131 Ibid. 132 Domitrovic Brian, “America’s Transition to a Global Economy (19060s-1990s) – US Economic History 9”, Learn Liberty, 2017, accessed March 26, 2020, https://www.learnliberty.org/videos/us-economic-history-9-americas- transition-to-a-global-economy-1960s-1990s/#video-tab-transcript. 133 Werner, “Princess”, 2003. 134 Domitrovic, “America’s Transition”, 2017. 135 Nielsen Barry, “Stagflation in the 1970s”, Investopedia, 2020, accessed March 26, 2020, https://www.investopedia.com/articles/economics/08/1970-stagflation.asp. 136 Ibid. 137 Domitrovic, “America’s Transition”, 2017; Wambold Adam, “Operation Nickel Grass: Turning Point of the Yom Kippur War”, Nixon Foundation, 2014, accessed March 26, 2020, https://www.nixonfoundation.org/2014/10/operation- nickel-grass-turning-point-yom-kippur-war/. 138 Domitrovic, “America’s Transition”, 2017; Lawrence Robert, Z., Edwards Lawrence, “US Employment Deindustrialization: Insights from History and the International Experience”, Peterson Institute for International Economics, 2013, accessed March 26, 2020. https://www.piie.com/sites/default/files/publications/pb/pb13-27.pdf. 45 mentioned process of stagflation coming to an end, industrial-type firms started disappearing from the country’s landscape and turning overseas, to foreign countries.139 This, in fact, should be regarded as one of the major steps of US towards a more solidified “traditional” Western capitalism model. The argument for this lies in the reasoning of why deindustrialization led companies abroad – it was because of a search for cheaper labour power.140
Another point to make here is that deindustrialization actually did the development of consumer- based capitalism justice. Major industrial units were exchanged into service-oriented businesses and consumer-oriented product factories.141 This model hailed supreme, and in a gust of not-yet-evident irony, among other things, the US had started turning towards the Japanese model of work (this can later be observed in the idolization of the Japanese workflow within pop-culture). As explained at an earlier point in the thesis, at that time, Japan had already started turning towards the more-Western model (at least by intent, if not yet by action), with its economic bubble starting to grow.
In the decade of the 1990s, for the most part (except for the 1991 recession that followed the burst of the real-estate bubble of the 1980s), the US would continue experiencing major economic growth.142 This was due to later-proclaimed good monetary policies, steady job creation process and a strong as ever stock market.143 During this time, the country did not only further solidify itself as a national economic leader, but also developed its model of capitalism to an even further, globalism- based extent. It was this decade that would go on to be mentioned as the example of “the Western model”, and it is during this time that the concept of consumer-based, globalist capitalism would become synonymous with the umbrella term of “capitalism”, in general.
Turning towards the 21st century, the US has experienced some rather steep curves both from an economic standpoint, and that of a political nature. The timeframe between 2000 and 2009 is often referred to as the “lost decade” for the US, economy-wise144 (coincidentally, Japan did have a “lost decade”, as well). This is not only due to the fact that there were no significant economic gains made within the country during that period of time, but also because of the 2007-08 global economic crisis.145 The crisis itself had both economic and political implications for the country – economy-
139 Ibid. 140 Markides Constantinos, C., Berg Norman, “Manufacturing Offshore is Bad Business”, Harvard Business Review, 1988, accessed April 18, 2020, https://hbr.org/1988/09/manufacturing-offshore-is-bad-business. 141 Koistinen David, “Business and Regional Economic Decline: The political Economy of Deindustrialization on Twentieth-Century New England”, Business and Economic History On-Line, 2014, accessed March 26, 2020, https://thebhc.org/sites/default/files/koistinen2.pdf. 142 Stiglitz Joseph, “The Roaring Nineties”, The Atlantic, 2002, accessed March 26, 2020, https://www.theatlantic.com/magazine/archive/2002/10/the-roaring-nineties/302604/. 143 Ibid. 144 Burnett Bob, “2000-2009: America’s Lost Decade”, Huffington Post, 2009. 145 Amadeo Kimberly, “2008 Financial Crisis”, The Balance, 2020, accessed March 26, 2020, https://www.thebalance.com/2008-financial-crisis-3305679. 46 wise, government spending lowered, there was a huge increase in debt and the housing sector had taken a huge blow.146 On the political side of things, it is believed that the Great Recession was what gave rise to the popularity of a populist mindset within the country, which was one of the key factor in the 2016 presidential elections after which Donald J. Trump became the president of the US.147
The situation did prove itself to be rather different in the 2010s, however. The 2010s are now often regarded as the period of economic recovery for the country – there can be seen a significant growth in GDP, job acquisition and average hourly wages.148 The decade is also one that cemented the concept of a “debt and demand”149 economy within the country, which only further proved US to be the leading example of Western, consumer-oriented capitalism in the world. That all being the case, it is also important to stress that the political side of the country has experienced significant turmoil, especially in the latter half of the 2010s. There’s significant tension between the Republican and Democrat parties, and this tension can be seen rapidly translating into the societal sector of the nation, too.150
In this chapter, the historical context has been provided for the development and key events of the US economy. The information serves as the cornerstone contextual basis for the research part of the thesis that follows. In the upcoming and final chapter of the thesis, the key differences between Japan’s collective capitalism and US’ Western, consumer-oriented capitalism are analysed and discussed, and possible reasons for those differences provided and commented-on.
146 Bernanke Ben, S., “The Economic Recovery and Economic Policy”, Federal Reserve, 2012, accessed March 26, 2020, https://www.federalreserve.gov/newsevents/speech/bernanke20121120a.htm. 147 Graham Carol, Pinto Sergio, “The Trump “unhappiness” effect nears the Great Recession for many”, Brookings, 2017, accessed March 26, 2020, https://www.brookings.edu/blog/up-front/2017/02/02/the-trump-unhappiness-effect- nears-the-great-recession-for-many/. 148 Kiersz Andy, “10 Simple charts that show the wild ways America has changed since 2010”, Business Insider, 2019, accessed March 26, 2020, https://www.businessinsider.com/charts-show-how-americas-economy-and-population- changed-since-2010. 149 Amadeo Kimberly, “How Does the US Economy Work?”, The Balance, 2019, accessed April 14, 2020, https://www.thebalance.com/how-does-the-u-s-economy-work-4056835. 150 Hulse Carl, “Battle for Control of Senate Takes Shape as Both Parties Seek Firewall”, The New York Times, 2020, accessed March 26, 2020, https://www.nytimes.com/2020/03/01/us/senate-control-democrats-republicans.html. 47
4. Western Capitalism VS Japanese Capitalism: Key Differences and Takeaways
In this fourth and final chapter of the thesis, a comparative analysis is performed between the two forms of capitalism – that of Japan’s collective model, and of US’ Western, consumer-oriented one. The analysis is performed in accordance to the core, essential features of capitalism that were protruded, distinguished and argued in the final sub-chapter of the first chapter of the thesis. Furthermore, in the process of juxtaposing the two aforementioned forms of capitalism, there is an effort to compose the core factors that influenced these differences, and how they lead to Japan’s current political and economic positions.
Judging by the information provided up to this point in the thesis, both that which contextualises the two forms of capitalism and that which provides historic context of the development of respective forms of capitalism in Japan and the US, it is rather evident that there are many factors that played (and still do) a role in shaping the processes of the development of those same two forms of capitalism in their respective countries. If one was savvy in the fields of East Asian and North American cultural, political and anthropological studies, there could even be an argument made that all of the core differences between the Japanese and US models of capitalism fall down to mere cultural intricacies. As noted in the introductory part of the thesis, however, such assumptions have proven to be lacklustre in the past, for while they may as well be the cornerstones of the aforementioned differences, they are certainly not alone in this regard. This is why a belief is then presented that only by comparing the two types of the same economic system in accordance to how they fair from their essential feature standpoints, the true – rather, wholesome – nature of their said differences can emerge and present itself. An emphasis then is also made here on the term “wholesome” – with the rationale-driven and historical context-backed assumption that a singular aspect could not define the true nature of the aforementioned differences between the two forms of capitalism, further variables are then searched for, presented, analysed and commentated on, in accordance to the flow of the comparative analysis.
Herein then, in the upcoming pages of the thesis, the two forms of capitalism are compared and contrasted, with the before-described features acting as the guiding and vantage points, in their respective manners. A note should be made here that the features are not, in fact, described or chosen in any specific order, except where it is stressed and mentioned to be otherwise – this decision was of a conscious nature, taking into account the observation that all of the five features are indisputably intertwined, and thus pose little-to-no issue being presented in a somewhat randomised manner, or at least that of a non-particular kind. 48
4.1 The Concept of a “Free Market” in Japan and the US
As noted and observed in the previous chapters of the thesis, the concept of a “free market” is one that is at the core of any capitalist society, be it that of the traditional kind, or of a more collective nature. Without a free market, no other features of modern-day capitalism may prosper, and thus no form of capitalism may develop and grow in such circumstances. That being the case, however, the free market is also heavily reliant on capitalism in order to prosper – it is fuelled by the concept of “supply and demand”151, that which is almost synonymous to modern-day Western, consumer-driven capitalism.
As it concerns the US, the outlook of the country’s economic system does actually depend on the eye of the beholder. Speaking in a completely strict sense of the term, the US is a mixed economy – one that combines the free market, command and traditional economic models. 152 This can be observed by the simple factors of the country having welfare plans, strong national defence forces, Congress expenditure, and so on.153 The US actually combines capitalist and socialist ideals, thus balancing out the individual pros and cons of each.154
A natural question that may arise here likely has to do with the public image that the US has when it comes to the topic of a “free market” – by popular belief, it is seen as the leading free market economy in the world. Speaking in simple terms, the country’s image is not a faulty one – instead, the “mixed economy” part can actually mostly be seen in topics that do not concern the working class in this group’s everyday lives (i.e. the before-mentioned expenditures on national defence). On a more cultural-basis of the term, the concept of US being a strictly free economy has been popularized by another concept known as the “American dream” – the idea that this country provides complete and utter equality of opportunity for all members of the society.155 By sheer definition, such as concept could only be possible within a capitalist society that entrusts the free market to be the leading force of its economy, but that does not mean that other, more socialist tendencies cannot be exerted in order to ensure that some specific guidelines are being followed, and that essential criteria that create the
151 Chappelow Jim, “Law of Supply and Demand”, Investopedia, 2019, accessed April 1, 2020, https://www.investopedia.com/terms/l/law-of-supply-demand.asp. 152 Amadeo Kimberly, “America is Not Really a Free Market Economy”, The Balance, 2020, accessed April 1, 2020, https://www.thebalance.com/america-is-not-really-a-free-market-economy-3980689. 153 Ibid. 154 Ross Sean, “Is the United States a Market Economy or a Mixed Economy?” Investopedia, 2019, accessed April 1, 2020, https://www.investopedia.com/ask/answers/031815/united-states-considered-market-economy-or-mixed- economy.asp. 155 Barone Adam, “American Dream”, Investopedia, 2020, accessed April 1, 2020, https://www.investopedia.com/terms/a/american-dream.asp. 49 concept of an “American dream” are met (i.e. the before-mentioned welfare systems that are in place within the US). Such non-capitalistic measures can, in fact, be used to steer the nation’s public into becoming participants in a capitalist system. This is evident by notions that describe how the welfare reforms aimed at financing individuals with short sums of money in order to bring them to the employment sector as quickly as possible.156
In retrospect of the previous paragraph, a conclusive statement may be made that while the US is, in fact, a mixed type of an economy, it also does, in essence, lean mostly on the free market, with other economic measures being taken out of social, political or national defence-oriented means. In this regard, Japan is somewhat different. Naturally, it is also a free market economy that is focused essentially on industrial power and production of industrial goods.157 The not-immediately-evident uniqueness of the Japanese form of a “free market” is that it’s not exactly “free”, at least when it comes to international matters.
Japan is a country that does not have many natural resources. This means that it has to bring in these resources from abroad – such procedures are not what causes the confusion regarding the country’s free market situation. Instead, one may be able to observe the uniqueness of the Japanese system when it comes to importing certain products into the country and wanting to sell them via foreign brands. A specific example of this would include the South Korean car company Hyundai trying to enter the Japanese market, with no avail.158 The company cites that not only is there no competitive pricing because of the oversaturation of the market within the country itself, but there are also impenetrable roadblocks when it comes to the structure by which the Japanese car markets function. Namely, this would refer to the phenomenon of car manufacturers controlling the dealerships within Japan, thus automatically successfully eliminating any potential foreign competition.159
To simplify the above-presented information, some foreign industries experience issues trying to enter the Japanese markets because of already-existing lack of demand (in a combination with great supply – i.e. citizens of Japan not buying enough cars to create a need for foreign car demand) and the fact that multiple Japanese companies are closely intertwined with one another, thus eliminating a possibility if interference before an attempt is even made. This, in turn, renders the Japanese economy to be a free market in the theoretical sense of the term (there are no political or economic
156 The Washington Post, “Welfare Rolls See First Climb in Years”, The Washington Post, 2008, accessed April 1, 2020, http://mobile.washingtonpost.com/detail.jsp?key=328930&rc=&p=1&all=1. 157 “Japan – Economy”, Global Security, accessed April 1, 2020, https://www.globalsecurity.org/military/world/japan/economy.htm. 158 Prestowitz Clyde, “Truth behind Japan’s free and open market”, FT, 2012, accessed April 1, 2020, https://www.ft.com/content/f848b2a6-9f65-11e1-a255-00144feabdc0. 159 Ibid. 50 obstructions for foreign brands to enter the market), while also preventing certain actors by cultural and structural means. Domestically, though, the Japanese model is similar to that if the US – it’s a mixed economy, with the governmental powers controlling some of the means of production.160
Judging by the information presented above, and by the historical and contextual data provided in the previous chapters, an observation is then made that both the Japanese and US forms of capitalism are quite similar with their outlook towards the concept of a free market. There are, however, some differences, among which the most essential one would prove to be Japan’s reluctance to allow foreign corporations to enter the country’s market. Here, the US does appear to exercise more liberal measures, but it should be mentioned that the scale and sheer number of US brands and their aggressive export powers may skew the perception by a margin. The conclusion may be made here that Japan is a bit more reserved to exercise and proclaim its free market features – a concept that is strongly aided and strengthened both by the definition of collective capitalism, and the cultural background of the country in question.
4.2 The Outlook on Wage Labour in the US and Japan
As noted in the first chapter of the thesis, the concept of wage labour is one of the more controversial features of capitalism. While it is seen as a trade of labour for a set amount of currency payment in a capitalist society, Marxist thinkers deem it to be the exploitation of the working class, with gain for high-ranking corporate officials in mind. While the ideological aspects of the morality of wage labour may be debated upon, this would not prove to be useful to the aim of the thesis at this time – instead, one should look towards the intricacies surrounding wage labour in both of the countries in question.
Upon inspecting the outlook that the US has on the concept of wage labour, it is almost immediately self-evident that this concept is seen and utilized within the country via a lens of a mixture of socialist and capitalist notions. This observation is made with the knowledge of US working class citizens not only not fearing job change, but also even embracing it.161 While an opposing argument may be made for some older generation folk and those of a lower social status, the majority of young, working class citizens in the US are not hesitant to flip job offers and transition
160 Duggins Cara, “Mixed Economy: an economic system combining private and publ”, Prezi, 2013, accessed April 1, 2020, https://prezi.com/zfdaozir_ol-/mixed-economy-an-economic-system-combining-private-and-publ/. 161 Adkins Amy, “Millenials: The Job-Hopping Generation”, Gallup, 2016, accessed April 2, 2020, https://www.gallup.com/workplace/236474/millennials-job-hopping-generation.aspx. 51 from one career path to the next, with the intent to maintain a higher income and better social guarantees.162
In part, this can be explained by the fact that the US has a strong left-leaning political spectrum.163 While the current president of the country represents the conservative side of the argument, liberal ideology is still seen as that which dominates the mediums of social and mainstream media (this can be noticed by observing research data collected in 2014, and presented in Image 2).164
Image 2: The ideological placement of each of the below-presented media source’s audience
Source: Pew Research Center, Ideological Placement of Each Source’s Audience (Pew Research Center, 2014)
Left-leaning and progressive political ideals represent a strong presence of a free and open market (both as it relates to matters concerning internal affairs in the country, and to those of international trade), and an individualistic outlook on matters such as one’s social status, and those of professional aspirations. Consequently, it is more a matter of the political and educational kinds, than that of an economic one. In essence, the liberal, individualism-oriented mind-set that many young, modern-day US citizens uphold leads them to proactively search for better job conditions, perhaps sometimes not necessarily accounting for the financial and social repercussions that such spontaneous venture might bring.
162 Ibid. 163 “1. Trends in party affiliation among demographic groups”, Pew Research Center, 2018, accessed April 2, 2020, https://www.people-press.org/2018/03/20/1-trends-in-party-affiliation-among-demographic-groups/. 164 “Fake News,”, Lies and Propaganda: How to Sort Fact from Fiction”, M|Library, 2020, accessed April 2, 2020, https://guides.lib.umich.edu/c.php?g=637508&p=4462444. 52
In this sense, Japan is quite evidently on the opposing side of the spectrum. The country has been under the influence of the LDP (which is, in fact, neither liberal, nor democratic, instead representing the conservative side of the political spectrum165) for a significant amount of time now – while this may be attributed to such phenomena as bureaucratic power shifts and a generation-based claims to power, the actual cultural context of the country does also play a significant role in the matter. Japanese workers, opposite so from those in the US, display an inept sense of loyalty towards their employers – as noted in the previous chapters of the thesis, the Japanese employees trade their unquestionable labour and overtime work for stable social guarantees, steady payment inflations and a spotless track record (reputation).166
Such an opposing outlook towards labour does not, in fact, go unnoticed in the West. The reaction is usually two-fold – either an example is made out of Japanese corporate employees and presented in front of Western working class citizens as something to strive for (especially from a discipline-side of things), 167 or the Japanese “overworking” model is criticized and shunned. 168 The reactions themselves do seem to depend on the position of the beholder – their cultural, social and political backgrounds.
A claim can also be made here that, when it comes to the more negative Westerner reactions toward the Japanese model of labour, it comes not from a personal goal-oriented perspective, but rather that of historical background. As was explained in the earlier chapters of the thesis, Western capitalism- oriented economists (those of the US) had actually admired Japan’s outlook on labour work and the observable dedication that the country’s working class citizens have towards their work, and placed them as examples to be followed by Western firms and corporations. This, however, echoes the sentiments of the 80s – this was the period before the Japanese economic bubble had burst, and before it was yet to become publicly evident that Japanese capitalists had, in fact, strived to ensure Western living standards for the citizens of the country.169
That being the case, however, a counter-argument should be made here that opposes this theory, with Japan’s cultural background and current position of the concept of wage labour being the backing statements. Even after the initial burst of the economic bubble, Japan did not lose the reputation of having dedicated that work-focused corporate employees. This is further-proven when one considers the arguments made in the previous sub-chapter – those which referenced the bond that Japanese car
165 Park Cheol-Hee, “The LDP’s conservative shift”, Tandfonline, 2010, accessed April 2. 2020. https://www.tandfonline.com/doi/abs/10.1080/713650827?journalCode=capr20. 166 Weller, “Japan”, 2017. 167 Tetsuji, “Lessons”, 2015. 168 Weller Chris, 2017. 169 Werner, “Princess”, 2003. 53 manufacturers have with retailers (acknowledging the fact that this is but a singular example). The outlook towards labour does appear to be engrained in the culture of Japan, namely – the more conservative, traditional side of the country. While this would pose to be a straw man argument without possessing the historical and contextual background of the previous chapters, it’s worth mentioning that the above-discussed phenomenon can also be observed in the purely-political side of the country – while the LDP lost its power after the burst of the economic bubble, and while this was in part due to the citizens in Japan losing trust towards the party, it did still eventually come back to become the leading political power in Japan in 1994, and became an opposing power for the second time in the time period between 2009-2012.170
Considering the above-presented information, it is safe to assume that the outlook towards the concept of wage labour is one of the fundamental differences that can be observed by analysing Western, consumer-oriented style of capitalism and the Japanese collective capitalism. While the core value remains the same – that being the working class providing labour power to the employing corporate entity, and thus receiving various benefits in return –, the outlook on the matter is noticeably different, and that difference lies mostly on cultural background and dominant political ideologies. With some left-leaning socialist tendencies, the US does appear to pose certain criticisms towards the concept of wage labour, while this is not yet evident when analysing Japan and its model of collective capitalism.
4.3 The Outlook on Accumulation of Wealth in US and Japan
While wealth accumulation may sometimes be regarded as a bi-product of capitalism (or, rather – its end result), the reality is actually quite different. As discussed in the first chapter of the thesis, for many capitalists the prospect of accumulation of wealth is but a mean that provides the ability to further finance their ongoing (or not yet started) financial ventures.
That being the case, however, accumulation of wealth is yet another prospect of capitalism in which the political side of a nation acts as one of the leading waypoints. In other words, the actual process of accumulating wealth within a nation may be viewed in one of two ways – either as a necessary mean of further developing capitalism, or as something that should be limited and reinvented with an opposing notion – equal wealth distribution – being the core argument.
170 Christensen, “Liberal-Democratic”, 2015; again, an acknowledgement is made here that there were other factors – those of both political and social natures – involved, yet the connection with the economic side of the country’s cultural background is undeniable. 54
If one was to observe the semi-recent, recent and current political landscape of the US, it is almost indisputable that the country is leaning towards the latter. In the same manner as described whilst discussing the outlook that US has on the concept of wage labour, the Democrat-leaning part of the nation has challenged the status quo that was set after WWII, and is trying to sway the country into some more wealth equality-centred ways of thought and action.171 In its most self-evident form, this can be observed by analysing the presidential debates that have been taking part in the country in recent period of time.
One of the most popular candidates of the Democratic party – Bernie Sanders – is a devout critic of the current health care system and wealth distribution imbalance in the country.172 Practicing thinking akin to that of economic socialism (yet not entirely the same), Sanders preaches that, among other things, he stands for making universal healthcare free, and taxing the richest people in the country, instead of increasing the loads of taxes of the working class citizens of the US.173 Sanders’ popularity is most noticeable among the younger voters, otherwise known as the Millennial generation – it would seem that this left-from-centre economy- and social issue-wise leaning trend of thought does extend further onto even the younger generation, too. That being said, it is also important to note that the recent voter turnouts were, in fact, rather disappointing for Sanders’ campaign.174
From the information presented above, and keeping the contextual and historic data in mind, it would seem that while the US had experienced years of economic prosperity via the lens of capitalism, with the generational changes does also come a change in the way that the citizens in the country view the economy, too. Wealth accumulation, for the longest time seen not only as the status quo, but also as means of further extending one’s economic prowess and reputational gain, is now being reconsidered, with notions of a more socialist-like ideology growing up to oppose it (the most prominent example being a more equal wealth distribution by means of taxing the 1%). While the sentiments expressed above have been present for some time now, for full transparency’s sake, it is also worth acknowledging the fact that this is still an ongoing issue in the US, and one that is not only important, but also ever-changing – these changes may even be influenced due to the current COVID- 19 pandemic plaguing the nation.175
171 Foroohar Rana, “The age of wealth accumulation is over”, FT, 2019, accessed April 2, 2020, https://www.ft.com/content/fd13020e-b502-11e9-bec9-fdcab53d6959. 172 “Bernie Sanders on Economic Inequality”, Feel the Bern, 2020, accessed April 2, 2020, https://feelthebern.org/bernie-sanders-on-economic-inequality/. 173 “Bernie Sanders on the issues”, Bernie, 2020, accessed April 2, 2020, https://berniesanders.com/issues/. 174 Vinopal Courtney, “Sanders banked on young voters. Here’s how the numbers have played out”, PBS, 2020, accessed April 2, 2020, https://www.pbs.org/newshour/politics/sanders-banked-on-young-voters-heres-how-the- numbers-have-played-out. 175 Douthat Ross, “Joe Biden Beat Bernie Sanders. But So Did the Pandemic”, The New York Times, 2020, accessed April 2, 2020, https://www.nytimes.com/2020/03/11/opinion/biden-sanders-michigan-coronavirus.html. 55
Turning towards Japan, in the same manner as was expressed whilst discussing the outlook that both nations have towards wage labour, the country seems to display some very different points of view on the prospect of accumulation of wealth, also. While this is an ongoing point of discussion in the US, Japanese laws and regulations are made such that it is almost impossible to accumulate large amounts of wealth both for individuals, and also when it comes to generational inheritance. Japan possesses a high income tax for the wealthy people of the country, and some even higher taxes of wealth inheritance.176 With the help of this model, the country has managed to maintain a status of being one of the least wealth inequality-displaying countries in the world.177
While the laws regarding the accumulation of wealth in the country are truly favourable towards the middle class, it is yet again worth stressing the fact that it is not only a political or economic matter, but rather that of societal culture as well. Protruding the collective-like mentality that is present in Japan, the nation’s high-ranking CEOs and other corporate officials are not keen on openly and publicly displaying their wealth – in fact, this may often be seen as a shame-worthy act.178
Judging by the information provided up to this point in the chapter, and from the historical context presented earlier on in the thesis, it is rather evident that both of the countries in question present themselves to be in some very different situations as far as the concept of accumulation of wealth is concerned. In the US, there is a noticeable shift happening from a fully-capitalistic state of mentality that could be observed after the war towards some socialist tendency-displaying options (from accumulation of wealth towards more fair and equal wealth distribution via increased taxes for the rich). In Japan, however, this is often considered to be a non-issue – this is true both from an economic standpoint, and that of a more societal culture background.
4.4 Market Competitiveness in the US and Japan
As was noted in the first chapter of the thesis, market competitiveness is to be viewed as the fuel that pushes capitalist societies to avoid stagnation, and by doing so, it thus reinvigorates the free market and creates paths not only for new capitalistic endeavours, but also various technological and societal advancements. That being the case, however, it would seem that the prospect of market
176 Sam, “Japan Tax Changes Affect Foreign Residents”, BCC Japan, 2018, accessed April 3, 2020, https://bccjapan.com/event-round-ups/japan-tax-changes-affect-foreign-residents/; “Section 3. Taxes in Japan 3.7 Overview of individual tax system”, Jetro, 2020, accessed April 3, 2020, https://www.jetro.go.jp/en/invest/setting_up/section3/page7.html. 177 Koike Yuriko, “Why inequality is different in Japan”, WeForum, 2015, accessed April 3, 2020, https://www.weforum.org/agenda/2015/03/why-inequality-is-different-in-japan/. 178 Ibid. 56 competitiveness is also one that is surrounded by the most amount of over time change out of the five features mentioned in this thesis. This is mostly true as it relates to Japan – depending on the date and source of information, it would seem that the country has managed to reinvigorate its market competitiveness significantly enough.179 This, however, shall be discussed later on in the sub-chapter.
While there are sources that claim the Japanese markets being the world leaders in their competitiveness, data shows that the US markets are actually quite ahead of Japan, in regards of their overall competitiveness score. This can be observed by looking at the rankings presented in Image 3.
Image 3: The competitiveness index of the US in 2019, point-based
Source: WeForum, The Global Competitiveness Index 4.0 2019 Rankings, (WeForum, 2019)
Interestingly enough, one of the core strengths that protrude when discussing the US market competitiveness is the country’s labour market. Further strengths would include the fact that US has a very dynamic business sector, and that the country is does also possess a strong and very developed economic system.180 That being said, it would also appear that US has a somewhat weak IT sector, which is also one of the main shortcomings as far as the country’s market competitiveness is concerned.181
All things considered, it would appear that it is safe to assume that even with the current political and social issues that the country faces, it has managed to maintain a position of being an economic leader. In order to remain transparent, and because it is still an evolving topic, it should be noted that the situation regarding the COVID-19 pandemic is not taken into account neither when it comes to the US, nor Japan, number-wise.
179 Koll Jesper, “Japan’s problem? Too much competition”, Japan Times, 2020, accessed April 3, 2020, https://www.japantimes.co.jp/opinion/2020/02/06/commentary/japan-commentary/japans-problem-much- competition/#.XodnknL7T3h; “Japan’s competitiveness”, Japan Times, 2013, accessed April 3, 2020, https://www.japantimes.co.jp/opinion/2013/02/03/commentary/japan-commentary/japans- competitiveness/#.XodnkHL7T3h. 180 Taylor Chloe, “US named the world’s most competitive economy”, CNBC, 2018, accessed April 3, 2020, https://www.cnbc.com/2018/10/17/us-named-the-worlds-most-competitive-economy.html. 181 Ibid. 57
Concerning Japan, a point has been made earlier in the sub-chapter that the country’s market competitiveness is in a somewhat interesting position. Some sources mention that the Japanese competitiveness was fading away significantly in 2013,182 especially in the area of macroeconomics. The fault here is usually mainly placed on the staggering amount of national debt that Japan has accumulated 183 – something that is one of the core issues that were and are being tackled by Abenomics, albeit with questionable effectiveness.184 Other sources, however, state that the Japanese markets are actually currently too competitive185 – in other words, Japan faces a problem of too much revenue being stacked by large corporate entities in various industries around the country, and too many companies competing in the same, core industries.186
Image 4: The competitiveness index of Japan in 2019, point-based
Source: WeForum, The Global Competitiveness Index 4.0 2019 Rankings, (WeForum, 2019)
Judging by the same data models as were used whilst discussing the market competitiveness in the US, it would appear that Japan’s rank is, in fact, improving over time (at least until 2019). The country has a lower overall market competitiveness score than that of the US – this can be observed by analysing Image 4.
In the year 2013, the worst-performing factors of the Japanese market competitiveness were claimed to be the country’s bureaucratic efficiency, tax rates and the stability of governmental policies.187 An observation is also made that while the LDP has placed a lot of attention of funding projects of the public sector with the intent to reinvigorate Japan’s economy, this approach is often deemed to be a faulty one, mostly because it is believed that the same financial powers could be redirected elsewhere, namely – the above-mentioned factors that weaken the country’s market competitiveness.188 That said, it is evident that some of the LDP’s policies were effective, to an extent
182 “Japan’s competitiveness”, 2013. 183 Trading Economics, “Japan General Government Gross Debt to GDP”, Trading Economics, 2020, accessed April 3, 2020, https://tradingeconomics.com/japan/government-debt-to-gdp. 184 Bajpai Prableen, “Japan’s Economy Continues To Challenge Abenomics”, Investopedia, 2019, accessed April 3, 2020, https://www.investopedia.com/articles/investing/021616/japans-economy-continues-challenge-abenomics.asp. 185 Koll, “Japan’s”, 2020. 186 Ibid. 187 “Japan’s competitiveness”, 2013. 188 Ibid. 58
– while Japan has not displayed any staggering numbers of growing market competitiveness scores, the situation has, indeed, improved over time.189
From the data presented above (both that which concerns the US, and that which references Japan), it would seem that while the US is able to maintain its economic status as being the global leader when it comes to market competitiveness, Japan, having suffered some issues a little under a decade ago, has been able to slowly improve its market competitiveness ratings. While there are seemingly many factors that have contributed to this, an argument can be made that one of the leading of those factors would be Abenomics. Prior research showcases the positive effects that the economic plan has had on the Japanese macroeconomics throughout the before-mentioned period of time, and how it positively influenced Japanese citizen living standards, developed agricultural plans and boosted industry rating via a combination of short-term financial stimulus and long-term plans towards developing the industrial power of the country.190
4.5 The Outlook on Possession of Private Property in the US and Japan
Finally, as it concerns to the discussion about the possession of private property in both countries, this concept does prove to be one that is rather difficult to measure. What this means is that there seems to be a split in the notion of what exactly this concept refers to – from a consumer standpoint, the concept is understood as that of the difficulty of acquiring and maintaining private property, tax- wise, while this invokes a different understanding from a business perspective – namely, that of the utilization of private property for means of further financial gain. It is also worth pointing out that, as it relates to this thesis, the concept of private property is defined as being that of real estate – while less significant private property may be taken into account, too, it makes up but a small portion of the debate, as is thus deemed to be too randomized in nature for the discussion of the thesis.
While the above-noted predicament was considered as that worth being addressed, it is also important to emphasize that, from a purely capitalistic sense, the concept or private property does actually refer to a person’s right to not only possess property, but also do with it as they see fit – be it in the sense of trading, loaning or even gambling it away.191 This phenomenon, in a capitalist sense, is referred to as “private property rights”, and is deemed to be one of the core features of any capitalist
189 “Japan Competitiveness Index”, Trading Economics, 2020, accessed April 3, 2020, https://tradingeconomics.com/japan/competitiveness-index. 190 Grabowiecki Jerzy, Dabrowski Mariusz, Abenomics and Its Impact on The Economy of Japan, (Research Gate, 2017), p. 33. 191 Ross Sean, “How Are Capitalism and Private Property Related?”, Investopedia, 2019, accessed April 4, 2020, https://www.investopedia.com/ask/answers/040615/how-are-capitalism-and-private-property-related.asp. 59 society mostly because it enables property holders to participate in capitalistic ventures, and eliminates the possibility of some major interference from third parties192 (naturally, this does not include warranted interference, such as that of governmental tax collection, seizure with the cause of fraud, etc.).
In the US, private property laws have been subject to debate and vast amounts of controversy for a significant amount of time.193 In essence, such rights are protected by the US constitution, namely – the Fifth Amendment.194 Among other things, the Fifth Amendment states that people will not “<…> be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.”195 It would appear that, up until the 20th century, there were no significant controversies that would pertain to this specific part of the Fifth Amendment. That said, with the processes of urbanization and industrialization becoming more noticeable in the country, individual states began challenging the Fifth Amendment – rather, looking for various ways of how it could be interpreted in order to shift further public projects and property in place of that which would otherwise be private. This does also appear to be an issue that is prevalent in modern- day US, with designated private property law experts participating in court cases that directly touch on the subject of ownership of private property.196
As it pertains to Japan, data shows that its position towards an individual’s private property rights has been almost completely steadily improving over the past decade.197 The same data compares presents that, in the year 2019, Japan had a slightly better IPRI (International Property Rights Index) than the US.
Graph 6 illustrates how Japan has some higher ratings as it pertains to political stability, control of corruption, judicial independence and property rights protection. By that accord, the US has a higher score when it comes to ease of loan issuing, rule of law and patent protection. Both of the countries rank very similarly on topics such as perception of IP protection, copyright piracy and property registration.
192 Ibid. 193 Jacobs Harvey, M., “U.S. Private Property Rights in International Perspective”, Lincoln Institute, 2010, accessed April 4, 2020, https://www.lincolninst.edu/publications/conference-papers/us-private-property-rights-international- perspective. 194 “Fifth Amendment”, Cornell Law School, accessed April 4, 2020, https://www.law.cornell.edu/constitution/fifth_amendment. 195 Ibid. 196 Jacobs Harvey, M., 2010. 197 “Comparing Unites States of America and Japan”, IPRI, 2019, accessed April 4, 2020, https://www.internationalpropertyrightsindex.org/compare/country?id=113,80. 60
Graph 6: Comparison between the IPRI of the US and Japan, 2019. The colour blue represents the US, while the colour green represents Japan
Source: Property Rights Alliance, Comparing Unites States of America and Japan, (IPRI, 2019
Indeed, if one was to observe journalistic articles dating all the way back to the beginning of the 21st century, it would seem that Japan has improved its standing with private property protection laws significantly.198 While the country would concentrate on public property at the beginning of the century, the above-presented graph illustrates that the current laws are much better when it comes to taking individual rights into consideration.
Judging by the information presented in this sub-chapter, it does appear that Japan is slightly better in handling private property-related matters than the US. If one was to give credit to the country, it would mostly be aimed at its better control of corruption and better overall political stability. If one was to critique the US, however, it would seem that the public interest is in constant odds with the interests of private property owners, and private property rights protection.
198 Hesse Sthephen, “New land law still ignores public voice”, Japan Times, 2001, accesed April 4, https://www.japantimes.co.jp/life/2001/04/26/environment/new-land-law-still-ignores-public-voice/#.XohLsnL7T3h. 61
4.6 The Main Reasons for the Differences between US’ Western and Japanese Collective Forms of Capitalism
The core results that follow from the previous sub-chapters of this chapter showcase that there are, in fact, differences between the US’ form of capitalism, and that of the Japanese model of the same economic system. This is evident by comparing and contrasting the two nations’ economies that their outlooks on the same, fundamental principles of capitalism, as a whole. While many of the before- mentioned differences are somewhat subtle, they still do manifest themselves to be important in both countries’ economic, social, political, and – by extent – cultural development.
While the previous sub-chapters showcase the fact that both of the countries possess some unique approaches towards the same capitalistic principles, they do not, in fact, answer the question as to why that’s the case. With the knowledge of traditional capitalism being conceived in the West, and that the modern-day US consumer-oriented capitalism has become synonymous with Western capitalism, by default, the choice is then made to focus on the Japanese model, and how it came to develop its uniqueness and some different approaches than those often observed in the West.
The very first and, arguably, fundamental point that should be mentioned here is the fact that Japan did, in fact, receive its capitalistic tendencies from the US.199 In the beginning of the thesis, a point has been made that the Japan had actually started developing its own approach towards capitalism before the end of WWII, but this same point is then counter-argued by the observation that the country’s journey towards a more developed model of capitalism did not take place up until the adoption of the post-war constitution.200 While one may assume that that this would have been simply a natural flow of events (considering the influence that the US had on Japan at that time), this would not prove to be self-evident upon further inspection, since Japan had only started to consciously turn towards a US-style economy before the inception of the financial bubble of the 1980s – long after the country had already established its own bureaucratic, wartime-like economic and political measures.201
A natural objection that may arise from the above-presented arguments is that, observing the before-discussed differences between the two countries’ economic systems, it is evident that while Japan might have taken on the core principles of capitalism, it did adapt them towards its own benefits – this is also what resulted in the inception of the term “collective capitalism”. This, in fact, is where the aspects of Japan’s uniqueness step in. From the entirety of the information gathered, presented
199 Werner, “Princess”, 2003. 200 Ibid. 201 Ibid. 62 and analysed in the thesis up to this point in time, four major factors follow as the rational explanations and arguments for collective capitalism – the often-mentioned uniqueness of Japan’s culture (by extent – historical context, too), the country’s reliance on industrial machinery and automotive part export from an economic standpoint, a rapidly aging population, and Japan’s internal political struggles as they relate to the current post-war constitution of Japan.
As it pertains to the uniqueness point, Japan has long maintained and nurtured a very community- oriented, collective-by-nature type of culture.202 This is true both when it comes to some simple social peer interactions, and also on a bigger scale – for example, that of complex corporate and political structures. Combined with a long–lasting Karōshi-like203 approach towards work,204 this begs to become a core component in the “collective” part of the full term of “collective capitalism”.
Japan’s reliance on a heavily export-oriented economic model205 has aided the development of a unique form of capitalism, too. Being somewhat exclusively-oriented towards some industrial market niches,206 the country has created a situation in which large corporate entities in those specific industrial sectors share the majority of the sector market share, while the lower-ranking and less- established firm and businesses are forced to compete (by some accounts – over-compete) for steady profits.207 Observing this, foreign brands are less inclined to bring in their products into Japan, thus creating an increased model of the country’s internal reliance on local businesses208 – as a completion of a full-circle type of situation, this leads to some more closely-aligned corporate “alliances” within the country. This, and the fact that Japanese businesses participate in a culture of investing into one another’s market shares with hopes of profiting both in some traditional manners, and those that rely on their competition’s success, leads to a more collective-like economic overlay in the country.209
Japan does also face a major issue of a rapidly aging society.210 This only leads to increased spending on welfare,211 which then results in the country’s national debt increasing even more than it
202 Cherry Kendra, “Understanding Collectivist Cultures”, Very Well Mind, 2020, accessed April 4, 2020, https://www.verywellmind.com/what-are-collectivistic-cultures-2794962. 203 “karoshi”, Lexico, Oxford, accessed April 4, 2020, https://www.lexico.com/definition/karoshi; “overwork death”; death because of a stroke or a heart attack, mostly caused by a poor diet and vast amounts of stress, both which manifest due to excessive amounts of work. 204 Weller, “Japan”, 2017. 205 “Japan”, OEC, 2020, accessed April 4, 2020, https://oec.world/en/profile/country/jpn/. 206 Ibid. 207 Koll, “Japan’s”, 2020. 208 Prestowitz, “Truth”, 2012. 209 Gopal, “Collective”, 2017. 210 Walia Simran, “How Does Japan’s Aging Society Affect Its Economy?”, The Diplomat, 2019, accessed April 4, 2020, https://thediplomat.com/2019/11/how-does-japans-aging-society-affect-its-economy/. 211 Nakamura Shuichi, “Japan’s Welfare System for the Elderly”, Static 1, 2020, accessed April 4, 2020, https://static1.squarespace.com/static/5b0d704da2772c9fc1eba037/t/5c3436430e2e721148d1caee/1546925636690/Japa ns+Welfare+for+the+Elderly+Past+Present+and+Future.pdf. 63 currently is. It’s also one of the core issues that are being tackled by Abenomics – with some structural reforms, monetary policies and fiscal consolidations, Abenomics was created for the purpose of not only reinvigorating Japan’s economy, but also tackling such issues as national debt and the load that an aging population brings on the country’s overall economy.212 According to most sources, while the economic plan was not successful to its fullest extent, it has, in fact, had a positive outcome.213
Finally, the post-war political struggles for power are not to be discarded, either. Prior research done on the topic notes the “Iron Triangle” – a joint coalition between the governmental powers, bureaucrats and industrial corporations214 – as being one of the core actors in driving Japan to the current financial public debt crisis. Since this has been analysed and showcased before, it is deemed to be sufficient to protrude support for this notion. What should also be noted, however, is the classical realism-like approach that the government of Japan – more specifically, the Prime Minister Abe – upholds and aims to foster.215 This becomes especially evident when one considers Abe’s struggles and determination to alter the current “pacifist constitution” of Japan, with some more political realism-oriented intentions. This, in turn, results in vast internal political struggles – public disapproval, split party interests,216 difficult revision processes, and so on. All of these features have a direct or indirect influence on how the economic model in Japan functions at any given point in time – how much attention economic reforms receive, how well Abenomics are implemented, etc.
While there are bound to be multiple different aspects that pertain to Japan’s unique approach towards capitalism that are left unmentioned, the four discussed in this chapter do appear to be some of the leading ones, as far as the shaping of the concept of “collective capitalism” goes.
In this chapter of the thesis, the core features of capitalism – ones that were extracted and discussed in the final sub-chapter of the first chapter of the thesis – were used to juxtapose, compare and contrast the Western, US’ consumer-oriented form of capitalism with that of Japan’s collective capitalism. The comparison showcased some subtle, and some significant differences that could be observed between the two forms of capitalism found in their respective countries. Furthermore, some core,
212 Yoshino Naoyuki, Taghizadeh-Hesary Farhad, “An Explanation of Abenomics and the current state of the Japanese economy, with remedies for Japan’s long-term deflation”, ADB, 2014, accessed April 4, 2020, https://www.adb.org/publications/three-arrows-abenomics-and-structural-reform-japan-inflation-targeting-policy- central. 213 Merler, “Abenomics”, 2018. 214 Rahmanko Alena, “The Changing Nature of the “Iron Triangle” Phenomenon: A Case Study of the “Iron Triangle” in the Postal Industry and Postal Reforms in Japan”, Portal, 2014, accessed April 4, 2020, https://portal.research.lu.se/portal/files/3852967/5050910.pdf. 215 Auslin Michael, “Japan’s New Realism”, Foreign Affairs, 2016, accessed April 4, 2020, https://www.foreignaffairs.com/articles/japan/2016-02-16/japans-new-realism. 216 Johnston Eric, “Ahead of Upper House vote, Komeito and Abe remain apart on revision of pacifist constitution”, Japan Times, 2019, accessed April 4, 2020, https://www.japantimes.co.jp/news/2019/07/17/national/politics- diplomacy/ahead-upper-house-vote-komeito-abe-remain-apart-revision-pacifist-constitution/#.XoiISXL7T3g. 64 fundamental reasons for the differences from Japan’s perspective were presented, established and discussed in the final subchapter.
65
Conclusions
1. While there are some arguments about the actual inception of capitalism, the core theories revolve around it being first conceived in Europe. Some of the more popular of these theories include Weber’s idea of capitalism being born out of the Protestant (namely, Calvinist) way of living, and an idea that the economic system was actually born much earlier, in the 14th-15th century, in Italy. While the actual, precise point of the inception of capitalism might be up for debate, the fundamental, core values of the system are usually agreed-upon. A successful capitalist society displays many correlating features, among which the most essential ones appear to be a free market system, a successful wage labour system, the prospect of accumulation of wealth, market competitiveness and the rights to possess private property. While each of these features present themselves in differing manners in some capitalist societies worldwide, they are all still present in those same societies, nonetheless.
2. The economic development of post-war Japan was not linear – it faced a lot of issues, among which the most prevalent ones would come out to be a no-longer-sufficient wartime bureaucratic system, political corruption, lack of communication between the MoF and the central bank, and the inception and development of the economic bubble, which unavoidably resulted in a recession. That being said, Japan had managed to foster its economic outlooks as soon as the war ended and the new constitution was set in place, and while it wasn’t yet evident at the time, there soon came notions of a turn towards a more westernized form of management of economy and the country’s political landscape (this wasn’t evident at that time mainly because the citizens of Japan did already think that the country was acting in accordance with a Western model).
After the war had ended, the US had already started building a reputation of being an economic leader in the world. While there were some economic inconsistencies in the period of the 1950s and 60s (this was also the timeframe during which the country had multiple period of recession), the deindustrialization process and a significant shift towards some more consumer-oriented capitalistic ventures not only extended US’ economic reach globally, but also further cemented the country’s position as that of an example of a successful capitalistic society, both from an economic standpoint, and a social one.
3. While both Japan and the US possess and exercise all of the core features that can be found in capitalist societies, there are both subtle and significant differences between the two. As it pertains to a free market economy, Japan displays itself to be a bit more reserved when it comes to
66 international trade and allowing foreign companies to participate in the country’s inner economic ventures. The concept of wage labour is one that showcases some of the most significant differences between the two countries in question – while there’s an established individualism-oriented mindset in the US, Japan protrudes its collectivism-like features. Young working-class citizens in the US are not reluctant to change jobs with the prospect of earning more money and securing a better social status, while Japanese workers remain extremely loyal to their employers in exchange for a stable career path and all of the social guarantees. As it pertains to accumulation of wealth, the current laws that are in place in Japan are often thought to be some of the best examples of how a country can at least partially eliminate wealth inequality. When it comes to the US, however, there is also a shift that is thought to be happening in the country – younger individuals are turning for a traditional capitalism-like way of thinking towards a more socialist approach; this can be observed by analysing the democratic candidate elections that are currently taking place in the country. As it pertains to market competitiveness, both countries are somewhat in-line in this regard – while the US is one of the leading countries in the world when it comes to market competitiveness, Japan has also improved its outlook here, and it is often thought that the major factor that led to this was the a least partially- successful implementation of the Abenomics economic resurgence plan. Finally, when it comes to private property possession rights, both countries also display similar characteristics, with Japan being a bit more favourable in this regard.
While there are – naturally – many individual factors that influenced Japan’s unique approach to capitalism, judging by the information gathered and presented in the thesis, there could be seen four essential factors that led to this – the perceived uniqueness of the Japanese culture, the country’s reliance on its export-based economic model, a rapidly-aging society and some significant political struggles. While each of these factors did have an effect on how capitalism developed in the country in an individual manner, they should all be viewed as a collection of factors that led to Japan’s development of collective capitalism, instead as individual actors.
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