WHAT MAKES JAPAN TICK: SOME LESSONS FOR INDIA

By Minoo R. Shroff

Summary

Minoo R. Shroff’s booklet, based on a lecture he delivered at the Forum of Free Enterprise in Bombay on 2 August 1988, sets out to explain Japan’s post-war economic ascendancy and to draw practical lessons for India. Shroff begins with a brisk historical sketch — Japan as one of the oldest continuously organised states, sealed off from the world until the Meiji Restoration of 1868 modernised it by restoring rather than overthrowing the throne — and then turns to the physical and political constraints under which the country has had to work: a long, earthquake-prone archipelago with negligible natural resources, almost wholly dependent on imports for energy, raw materials and a third of its food. He treats the Allied occupation under MacArthur as the second great hinge, dismantling the Zaibatsus, instituting heavy taxation and land reform, and setting in train the lifetime-employment culture and harmonious industrial relations that would later be celebrated abroad.

The bulk of the booklet is a thematic anatomy of the Japanese economic model. Shroff highlights the distinctive attitude to work and seniority, the federated enterprise-level unions co-ordinated through joint bodies, and the close partnership between Liberal Democratic governments, the Keidanren employers’ federation and the bureaucracy. He marshals figures on savings (over 30% of GNP on average, peaking at 35%), market capitalisation (over $3.5 trillion by 1987, 41% of world capitalisation), defence spending kept at roughly 0.8% of GNP, and productivity growth of 10–11% a year between 1960 and 1980. Japan’s technological prowess, he argues, lies less in pure invention than in absorption, adaptation and ruthless quality control — Americans now travel to Japan to learn QC techniques the US itself developed. He also flags the country’s structural strains: yen appreciation, NIC competition, an ageing population, acute housing shortages and stress-related illness.

The closing section, “Lessons for India”, uses Japan as a mirror. Shroff argues that India and Japan share high savings rates and human capital but diverge sharply on the discipline of time, the pride taken in work, the relentless pursuit of productivity, cost-consciousness in the use of scarce resources, the quality of industrial relations (Japan loses under half a million manhours annually to disputes, India between 30 and 40 million), and the urge to excel. He concludes optimistically that Japan’s innate capacity to adapt and innovate will sustain its progress, and that India’s craftsmanship pride — once equally proverbial — needs to be rekindled if it is to compete.

Key points

• The Meiji Restoration of 1868 modernised Japan by restoring rather than overthrowing the traditional monarchy, abolishing feudal ranks and making elementary education compulsory.

• The Allied occupation under MacArthur dismantled the Zaibatsus, imposed land reform and heavy taxation, and entrenched lifetime employment and organised labour as part of a deliberate egalitarian settlement.

• Union–management relations are conducted at enterprise level under industry federations, with workers putting in 10–20% more hours than US or European counterparts and unemployment held to 2.2–2.9%.

• Government, business and bureaucracy operate as integral partners; the Liberal Democratic Party has governed since 1955, and the Keidanren projects a unified business voice in close rapport with the state.

• Japan’s saving rate has averaged over 30% of GNP, with personal savings exceeding $500 billion a year and market capitalisation reaching over $3.5 trillion (41% of world capitalisation) by 1987.

• Productivity grew 10–11% annually between 1960 and 1980; corporations renew facilities every six years (versus 10–12 in the US and Europe) and have pioneered industrial robotisation and uniquely Japanese QC systems.

• Constitutional limits keep defence spending around 0.8% of GNP, freeing savings for economic development; structural strains include yen appreciation, NIC competition, acute housing shortages and an ageing population.

• Lessons for India: respect for time, pride in work, relentless productivity focus, cost-consciousness, conscious investment in industrial peace, and the rekindling of an Indian “urge to excel” rooted in older craftsmanship traditions.

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