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Asia: Big One-Way Economics

AMERICA'S UPS AND DOWNS: This is author Robert Conot's second article in a series on the new world economy. His next subject: the American condition.

November 15, 1987|Robert Conot

Japan's annual motor vehicle production now exceeds the United States' by more than half a million; its stock market capitalization is 60% of the world total and the nominal value of its 146,000 square miles of land is twice America's 3.6 million square miles.

South Korea operates the world's most modern steel mill and exports technology to the United States. The Taiwan central bank reserve of nearly $70 billion is the biggest in the world, a sum of historic precedent.

In the mid-1960s, French author Jean-Jacques Servan-Schreiber warned in "The American Challenge" that U.S. multinational firms were taking control of Europe's economies. Twenty years later, the Asian challenge confronts the United States with a vengeance.

The U.S. assault on Europe proved transitory. The Asian tide rising at American shores almost surely represents the wave of the future. While Reagan Administration policies are cited by a majority of economists as the precipitating factor in unbalancing the U.S. current accounts, those policies merely accelerated and exacerbated an inevitable trend. The unresponsiveness of our trade deficit to dollar depreciation against the currencies of established industrial powers is indicative of the new world patterns. Since the four newly industrialized countries--"nics"--of South Korea, Taiwan, Singapore and Hong Kong tie their currencies to the dollar instead of letting them float against it, depreciation has boosted their competitiveness further.

While these nations' combined exports are only about two-thirds of Japan's, it is tempting to argue, says MIT economics Prof. Rudiger Dornbusch, "that the share of the nics in world trade is small and that even at high growth rates they present no near-term problem. But that would be as much of a mistake as to misunderstand the inevitable rise of Japan over the past 20 years."

Together with Japan, the nics now make Southeast Asia the world's third major industrial region, in competition with North America and Western Europe. They confront all mature industrial economies, but especially the United States and Japan, with a new reality.

We are in a sense victims of our own success. Ever since the Korean and Vietnamese wars, American policy has been to provide a bulwark against communism by strengthening the economies of its Asian allies. As part of this policy, we have provided not only military and economic aid, but facilitated Asian penetration of American markets.

While there are differences in the economic development of each of the nations, the similarities are far more striking. Japan, South Korea and Taiwan have relatively high population densities and few natural resources, so they depend on importing and processing commodities, then exporting the manufactured products. To develop skilled work forces, these Asian nations have given high priority to education. Their societies, homogenous and egalitarian, give them national purpose. Essentially, they are meritocracies based on educational achievement--hence the fierce competition among young people so evident in Japan. They have a work ethic that emulates the Puritan and perhaps puts it to shame. And they have made a success of the kind of central economic planning that causes advocates of pure laissez faire to wince.

Clearly, Japan has provided both the impetus and the model. The nation's role as a staging platform for the U.S. military during the Korean War provided the stimulus for economic reconstruction. A large pool of unemployed and underemployed labor, paid less than a sixth of American workers' wages (and at the time less than a third as productive), provided the foundation. By the late 1950s, U.S. entrepreneurs were discovering the economic advantages of Japanese production in such new fields as electronics.

Beginning with the first macro-economic plan in 1955, the Ministry of International Trade and Industry (MITI) and the Ministry of Finance identified opportunities, delineated goals and outlined the path for industry. These ministries, with major influence on both the political and commercial structures of Japan, have no counterparts in the United States. Culturally, on their crowded islands, Japanese early learn to suppress individualism and find satisfaction as members of a group. Production, consequently, takes on the nature of a patriotic movement with national goals. Unlike the adversarial relationship that frequently exists between business, labor and government in the United States, the various segments of Japanese society have a common aim. Semiannual profit-sharing bonuses for workers reinforce the perception that individual success translates into the success of the enterprise and vice versa.

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