THE JAPANESE SCAPEGOAT
Europe is unjust to blame its problems on fiendish Orientals. By Michael Fry
'LAST year Japan had a balance of pay- ments deficit of $20 billion.' That is not a quotation from some ancient economic report, or echo of a wishful thought in President Reagan's brain. It is the sentence which ought to stand at the head of every article or speech about the one-way trade traffic with fiendish Orientals, the im- penetrable barriers behind impenetrable smiles, and so on, and so on. It just happens, after all, to be true.
In our views of trade with Japan we Westerners have been infected with what might be called Wilson's disease: an often fatal tendency to confuse striking statistics with the facts of the matter. A monthly visible trade surplus was one of Harold Wilson's virility symbols. He would have done better to show off what remained invisible. For right through the 1960s, with the chronic and in the end crushing sterling crisis, Britain's current account deficits were offset by a capital inflow which usually matched and sometimes exceeded them.
The reverse is now happening in Japan. Attention has been riveted on her huge visible trade surplus, which grew by 40 per cent to 44 billion dollars in 1984— and, as exports still outstrip imports, shows few signs of shrinking. Yet nothing has acceler- ated like the movement of Japanese capital out of its own country. That has shot up fourfold during the last couple of years, neatly wiping out the higher profits from trade.
On the figures alone, there was some- thing decidedly misplaced about the abuse heaped at the Bonn summit earlier this year on the hapless Mr Nakasone, who by Japan's unexacting standards seems quite an amiable sort of Prime Minister. In truth 'Who let those woodworm aboard?' he is presiding over a good, efficient example of the international division of labour and capital that free-market eco- nomists are always recommending to us.
Above all in cars, steel and electronic goods, the Japanese can make most of what the world wants at a price it is willing to pay. The proceeds are not frittered away, like the Arabs' oil revenues, on conspicuous consumption—in fact Japan's average standard of living remains lower than Britain's, despite her vastly greater wealth. Nor are they all applied with devilish ingenuity to finding the means of doing down the West — the thrift of the Japanese themselves, who save about twice as much of their incomes as the British, is sufficient to meet their own investment needs.
Instead they send most of their surplus to Wall Street, where it fuels all that lovely growth the Americans have had, keeping the dollar strong and the Stars and Stripes high. Some of it they also send to Europe, to build factories in depressed areas, for example, so that eventually we — if we ever again get our act together — can have some growth too.
Altogether then, the trade-generated inflow of our money to Japan is balanced, more than balanced, by an investment- generated outflow of their money to the West. So far from posing a monstrous threat to the world economic order, the Japanese seem to be establishing a happy equilibrium.
Why on earth, in these circumstances, should Mrs Thatcher and friends make such a fuss? It is, of course, always vexatious to be outdone by your rivals — and especially to be outdone, as in the case of the Bosphorus bridge, in the absurdity of the terms you have been fool enough to offer. Our own consistent skill at thrashing foreigners did not exactly endear us to them during the times when we, in like fashion, acted as both workshop and bank- er to less capable countries.
We were, to be sure, in some respects more gentlemanly. From 1846 to 1931 we maintained free trade almost intact in the face of upstart competition, whereas the Japanese will be as protectionist as the next man — or almost so, since contrary to the general assumption they have fewer tariffs and quotas than any other big industrial power, and have been reducing them faster. Only in the protection of their farmers are they really outrageous. But it is hardly for us in the EEC to complain there.
The maddening thing is that this relative- ly liberal regime of trade regulation appears to have improved not one jot our ability to penetrate the market. There are indeed wicked little rules by which Amer- ican baseball bats, Dutch tulip bulbs or British bowler hats can somehow be judged unfit for the Japanese. Yet even after surmounting the barriers Western goods do not sell well. Partly it is because they are so dear, having been sent a long way to a country with an undervalued currency. Partly it is because the distribu- tion networks are so unfamiliar and hard to break into. For example, cars in Japan are flogged door to door, by 20,000 eager Young salesman for Nissan, by 30,000 for Toyota. Ford and Fiat are just not in the same league, and never will be. A little more effort would all the same not go amiss: there are a mere 2,000 European businessmen in Japan, compared with 50,000 Japanese businessmen in Europe.
Still, customs procedures and sales tech- niques are tractable matters. The really nagging thought is that Japan's evident economic superiority, at least over Europe, is owed to much deeper causes which politicians cannot easily deal with. I have already mentioned, for instance, the fact that the Japanese save much more.
Secondly, they have their drilled work- force, cosseted from cradle to grave and only too happy to take pay cuts for the sake of the company. That frame of mind has long made British blood run cold: Thomas Be Quinc,ey thought he would go mad if compelled to live in the Orient — 'Man is a weed in those regions.' Yet in hard times the seductions of security may already have started softening our own sturdy, surly, proletarian traditions. At Washington in County Durham, where Nissan have set up a factory on the Japanese model, they are expecting 25,000 applications for 450 jobs. It is a fair bet that in the next few decades the example of Japanese practice will exert an ever greater influence on Western labour markets, so that what looks weedy today may come to seem sensible and sound in the end.
A third big difference is that the Japanese have never set much store by fiscal and monetary austerity. Perhaps Messrs Heath, Pym and Gilmour, instead of dissipating their efforts in occasional carping, could find the coherence and conviction they lack in a full-blown Japanese programme, under which rugged individualism would be decisively repudi- ated in favour of docility and discipline. If it worked as it does in Japan, it would also allow them all the higher public spending they want. With that they could really get up Mrs Thatcher's nose, just as Mr Naka- sone has done already.