The politicians' bluff - about a recovery being around the corner - was called once again this month, when official figures showed that Britain's GDP had declined during the 3rd quarter of this year. But then the politicians' rosy rhetoric was always designed purely for public consumption.
Among the economists of the capitalist class, many have been at great pains to distance themselves from such demagogic nonsense. All the more so because, week after week, new evidence keeps flowing in, showing that the crisis is here to stay. Facts such as, for instance, the IMF's latest estimate of the colossal debt losses still hidden in the banking system, or this month's collapse of the Dutch mortgage lender DSB, leave no space for doubt as to the dire state of the world economy.
The problem is, however, that while these economists may be less hypocritical than politicians, they are just as much at a loss when it comes to predicting the shape of things to come. The irrational nature of the capitalist organisation of the economy makes them just as unable to forecast future developments in today's crisis, as they were unable to predict the occurrence of the crisis itself.
Instead of referring to the 1930s, some experts have been referring increasingly to what they describe as the "Japanese scenario" - as a possible blueprint of what the system may have in store for us. By this they mean the two decades of economic stagnation which started in Japan, in 1990, when speculative bubbles in real estate and the Tokyo stock market finally burst. And although Japan still remained the world's second richest economy over the two decades since these implosions, it has never managed to pull out of its crisis.
No-one can be sure, of course, whether this "Japanese scenario" is an indicator of the direction that the present world crisis will take in the coming months and years. But the simple fact that some of the most prominent experts of the capitalist class consider this scenario as a serious possibility is indicative of how little they believe in the ability of their own system to deliver a viable future of any kind for the world's populations. Because, if anything, as we shall see, this "Japanese scenario" is nothing but a scenario of doom for very large sections of the working class.
The Japanese "model" - built on exploitation and oppression
It is true that, not so long ago, up until the 1980s, Japan had a very different image than that of a stagnating society. One may still remember how the so-called "Japanese model" was universally hailed by European bosses and politicians as an example of economic dynamism and competitiveness. And how its high-tech economy was considered to be way ahead of the rest of the world. In those days, it was even common for very respectable academics to predict that Japanese industry would soon be overtaking US industry on the world market.
It was often under the pretext of the need to keep up with the competition of Japan's high-tech industry, especially in the car industry, that the so-called "just-in-time" and "lean production" methods were introduced - even though these techniques may well have actually originated in the US. However, in this case, what was introduced under the cover of new techniques, were merely ways of squeezing even more good old sweat out of workers. It was all about working faster, with less breathing space and less time to rest.
At the time, underlying the official flow of admiration for Japanese industry, was the idea that workers here should copy the behaviour of their Japanese counterparts, whose contentment at being part of such a successful endeavour was, allegedly, the key to its success. In particular, workers should have a greater sense of "responsibility" towards "business interests". For instance, instead of walking off the job during disputes, they should confine themselves to what the western media described as "Japanese strikes" - i.e. they should wear arm or head bands on which their demands were written, but refrain from affecting production! In general, workers should be more "self-reliant" - meaning they should rely on their savings and families, rather than on the welfare state. Such were the alleged "qualities" of the Japanese working class that British bosses were particularly keen to import into Britain.
As we shall see, leaving aside Japan's high production levels and huge export industries, very little of this description was accurate in the heyday of the Japanese industrial boom in the 1980s, let alone when Japan entered its long period of stagnation, after 1990.
As for every other imperialist power, the success and affluence of the Japanese capitalist class was entirely built on the exploitation of its own working class and, beyond its borders, on the over-exploitation of the working class of the many countries under its direct or indirect domination in South-East Asia. And just as for every other imperialist power, the Japanese capitalist class imposed this exploitation by resorting to ruthless repression of the many working class rebellions that took place in Japan and in its empire.
The rise of a regional imperialism
Retracing the history of Japanese imperialism is beyond the scope of this forum. However, it should be recalled that Japan's imperialist ambitions in Asia date as far back as the end of the 19th century, when its troops first landed in Korea and China. By 1905, in a secret treaty which became known later as the Taft-Katsura Agreement, the US recognised Japan's occupation of Korea, while Japan recognised American domination over the Philippines. Five years later, Taiwan and Korea had been annexed and integrated into Japan's economic machinery.
The regime which turned Japan into a modern industrial power came out of the imperial dynasty of the Meiji restoration, which had taken power in the 1860s, in reaction to Japan's failure to resist the attacks of the British and French colonial fleets against its harbours.
While retaining some of the formal appearance of an absolute monarchy, the imperial regime borrowed many of the methods which had been used by Bismarck's Prussian empire in order to develop a modern industrial Germany. The surplus produced by an over-exploited peasantry was used to build up new industries under the auspices of the state, which formed the basis on which developed huge family-controlled pyramidal conglomerates. These "zaibatsus", as they were nicknamed (or financial cliques), played the role of financial intermediaries for the state, exercised a de facto monopoly over entire industries and thrived off state procurement. The state itself was based on a powerful military and civilian bureaucracy, closely linked both to the landowning class and to the new industrial monopolies.
Until World War I, Japan remained cautiously within the confines of what was acceptable to the then dominant imperialist power - Britain. So, the Anglo-Japanese Alliance, signed in 1902, provided, among other things, that Japan would be subjected to the diktat of the Gold Standard system administered from the City of London, alongside the much weaker economies which were then part of Britain's sphere of influence, like Egypt and Turkey. However, the power vacuum created by World War I and Britain's weakening in its aftermath, fed the ambitions of the Japanese capitalist class. The army establishment took control of the regime, while trade rivalries intensified in the region. The Great Depression signalled the beginning of an expansionist policy in Japan, aimed at making up for the losses they incurred due to the crisis. In 1931, Japanese troops annexed Manchuria and began the invasion of eastern China. The march to World War II had begun.
After WW2: the masses' anger explodes
The postwar occupation of Japan by the US under the auspices of the Supreme Command for the Allied Powers (SCAP), was an attempt to stabilise a Japanese society in which serious social contradictions had been made explosive by defeat in war - and its aim was, in fact to reconstruct, as much as possible, the prewar social order, but, of course, with the economy subordinated to US interests. The US brought out of retirement General Douglas MacArthur, to lead SCAP which was responsible for a large occupying force of 350,000 soldiers by the end of 1945.
The main problem for the US was to avoid revolution - which certainly appeared to be a distinct possibility at the time - and indeed the devastatingly brutal atomic bombing of Hiroshima and Nagasaki had been the first salvo in this drive against the Japanese masses.
Since the early 1930s, the Japanese working class had been subjected to deprivation and coercive policies. Unions had been banned and an Industrial Patriotic Federation - called Sanpo - set up in all factories, composed of workers appointed by management and management representatives - ostensibly to discuss morale and working conditions, but in fact to spy on the workforce and prevent any disruption to production.
So, after the US civil liberties directive of October 4th conferred elementary rights on workers - allowing them to form trade unions, enfranchising women and releasing political prisoners (including several hundred communist activists, whose party was legalised for the first time) - a window of opportunity for the working class appeared and a huge wave of struggles began.
Within a week of this directive, a communist-inspired march was held to demand food distribution from the hoarded government supplies and also to demand the resignation of the cabinet and the emperor. Demonstrations were held regularly outside the prime minister's residence.
It was the coal mines where the first post-war drive to organise independent unions occurred. Due to the war and the resultant labour shortage, foreigners - Koreans as well as Chinese, including many war prisoners - worked in the coal mines. By the end of July 1945 as many as 140,000 - 35% of the labour force were foreign. They were treated worse than slaves. Many died or starved. Japan's defeat had saved them from almost certain death and they wasted little time in staging a slaves' revolt.
A strike first broke out in Hokkaido. The owners hoped they could fan the flames of racism. But in fact the fight by the Chinese and Korean workers had the effect of inspiring the Japanese miners instead. What the mining companies did was to repatriate the Chinese and Korean workers as fast as possible.
On 26 September SCAP issued a proclamation on the maintenance of order in the mines that sanctioned the firing on and imprisoning of the rebellious Chinese if need be. Koreans struck on the Hokutan Yubari mine. The strike was settled on 9 October. By now the Koreans and Chinese were jointly resisting back-to-work orders. On November 6th, they forced company officials into negotiating on their terms. On 17 November, military vessels provided by SCAP took the remaining Chinese miners back to China. But the Koreans remained and spread their strikes to all the mines within their range. Despite the intervention of the US army, they still refused to dig coal.
In the meantime, Choren, the communist-led league of Koreans in Japan, had been launched, advocating joint action with Japanese workers. A unionisation drive began among Japanese miners, which resulted in a number of struggles and the establishment of several new unions.
Because Japanese capitalists' initial response to the US occupation was to refuse to invest or refuse to keep production going, workers staged work-ins and takeovers. The first example of this was the takeover of the Yomiuri newspaper. It was followed by a takeover at Mitsui's Bibai coal mine, where workers took control, set up a "people's court" and put the management on trial. They cut the working day from 12 to 8 hours and even increased production. At Kitsei Electric Railway Company, workers speeded up repair work by 3½ times and allowed the public to travel free.
When the capitalists gave notice that they were going to impose the old wage and employment system they were met with strikes which lasted throughout the winter of 1945-46. Workers put forward their own wages system, based on need, in opposition to a new bosses' system to pay according to performance and skill. In the electricity industry, for instance, a 54-day strike was organised for a guaranteed minimum wage graded by age and seniority. Workers organised "brown-outs" with power cuts directed primarily at industrial owners.
On May 19th 1946 a huge rally took place in Tokyo demanding adequate food for all - led by communist party leader Tokuda Kyuichi - and workers even invaded the emperor's kitchens.
In the summer of 1946, in an attempt to put a lid on labour unrest, SCAP banned strikes of government employees, enforced arbitration with a 30-day moratorium on strikes of public utility workers, while decreeing that the government could designate anything as a "public utility"!
There were a series of successful struggles in the autumn of 1946 against job cuts: in September, managers at Japan National Railway had to back down from a plan to sack 72,000 workers (out of 540,000) when the union threatened a national strike. At Toshiba the newly formed union carried out a 55-day strike that successfully prevented the company from even announcing the details of a plan to dismiss employees.
Workers demanded the creation of joint labour-management councils - which were founded in 2/3 of all unionised firms by mid-1946. These councils gave workers partial control over the workplace and through this, many petty sectional differences between white and blue collar workers were eliminated; separate facilities for managers and workers were got rid of including separate entrances for managers and distinctive uniforms.
On 14 September 1946, the Japanese Council of Industrial Unions (Sanbetsu)ordered all of its industrial affiliates out on strike and to stay out "until the government collapses". The strike involved, coal, steel, chemicals, printers, machinery workers - totalling 500,000. Another 500,000 railwaymen joined in and 100,000 seamen and dockers as well as up to 330,0000 unionised farm hands.
A joint struggle committee - of which several members were communists, was set up including Sanbetsu's railway, communication workers and teachers - and a general strike was scheduled for 1 February 1947. The US occupation force stepped in to quell union strength. First, the government made minor concessions in an attempt to pre-empt the strike. Then MacArthur decided to issue a ban on all "strikes, walkouts or other work stoppages which are inimical to the objectives of the military occupation."
To some extent the April 1947 elections reflected the workers' militancy with the socialists coming out as the largest party with 143 seats. Two years later, despite the growing clampdown on the union activists, the CP gained 10% of the vote in the general election and 35 seats in the Diet. The number of unions grew between 1946 and 1949 from 1,179 to 34,688 and union membership from 100,000 to 6.7 million!
The restoration of the state under US supervision
After the US had occupied Japan, it took SCAP a full 2 months to dismantle the wartime regime's authoritarian controls - for instance the abolition of the Tokko or Special Police , the Military Police and the political "thought" police. So it was not until 4 October that the famous civil liberties directive composed in Washington came in. The US objective was, above all, to avoid any political vacuum and this respite gave the old political guard enough time to consolidate its position, under US supervision, of course.
Nevertheless, the reaction of the cabinet was utter dismay that the social controls they had painstakingly erected over some 50 years were being wiped away. It chose to resign in principle against SCAP's directives. That said, when the government heard that SCAP was going to issue a purge directive in the early October of 1945, aimed at key officials and agencies like the Police and Sanpo, it transferred officials to external posts, temporarily, and as a result many of these same individuals associated with the former repressive apparatus soon reappeared in important posts in the Ministries of Education, Commerce and Industry, as chief of the Labour Division in the Welfare Ministry and even in the Home Ministry.
SCAP was able to utilise the highly centralised government structure which reached down to the neighbourhood associations and pulled together in one chain of command the various strands of authority including the surveillance of almost every household in the land, by a vast network of neighbourhood associations. The power of the neighbourhood associations derived of course, from their role as distributers of rationed goods during the war and then during the occupation, as families depended on rations for survival. But when the anti-working class offensive and then the anti-communist purges were launched, these were very useful.
The anti-red witch hunt against the working class
In 1949, the US launched its anticommunist drive in Japan - a bit later than elsewhere, due to the explosion of unrest. This "red purge" was the first act of the Cold War in Japan and took place in the run-up to the Korean war. It took the form of an offensive against the working class, because that is where most "Reds" actually were to be found.
In August 1949 the Communist Party was formally banned. Then 10,000 alleged communist worker activists who were sacked. All Communist teachers were excluded from universities, all student strikes were banned and all left-wing groups were obliged to register with the regime.
An anticommunist union federation, Sohyo, was set up and at the same time hundreds of thousands of workers were dismissed from their jobs - 435,000 in 1949 and another 700,000 in 1950.
Union membership fell by 880,000. Showpiece confrontations against the working class were staged at Toshiba and Japan National Railway. Toshiba bosses were able to sack 1/5 of the 22,000 workforce after a 5-month dispute in late 1949. The company refused to bargain with the existing workers' independent union and initiated the setting up of a second, company union with the help of strike breakers. This second union accepted the job cuts and wage restraints the bosses wanted. JNR was able to dismiss 100,000 workers through using a similar device in 1949 and 1950.
Strikes continued nevertheless. In 1952, there was a 63-day strike in the coal mines and another electrical workers' strike lasting 86 days. In Nissan, a strike broke out in 1953, which lasted 5 months. The workers were demanding control of wages and promotions, the pace of work, and job assignments. In other words, they were fighting over who was to control the shopfloor. The Nissan union was not regarded as particularly militant - it had accepted the dismissal of 1,800 workers in 1949 which was then 20% of the workforce. One activist, Masuda Tetsuo, organised shopfloor committees throughout the factory, consisting of one member per every 10 workers which then would control overtime work assignments and transfers of workers. Nissan bosses found this intolerable . When the union went on strike over wages and further control of the shopfloor, Nissan bosses took special loans from the government's bank and the Fuji private bank, withstood the strike, set up a company union and thus broke the workers' union.
In the Mitsui Corporation's Miike Coal mine, one of the biggest show-downs of all occurred. Workers struck over wages in 1952 for 2 months and made some gains, after which they were on strike for a further 113 days, and forced the bosses to withdraw a plan to sack 1,815 miners. In the process they devised a plan for union power: shop floor control, study groups, community organising of wives and local residents, and control over safety procedures. However, in 1960, after 282 day lock-out, the union was destroyed.
A regional pillar of imperialism
US imperialism never intended to suppress Japan as an imperialist power, since Japan had an obvious role to play in the region for the benefit of the imperialist world order.
But the requirements resulting from the Korean war and then afterwards, the war in Vietnam, gave Japan a particular importance in US regional strategy, which required, if not Japan's military involvement, at least its development as a major industrial power to back up the USA's military ventures in the region.
In July 1950, the US had begun a special procurements programme, for machinery, metals, armaments and chemicals. Japan was to be transformed into the "Far Eastern Arsenal of the Free World" and its economy was speedily remilitarised. The Korean war was an excellent excuse for the US to re-arm Japan and insert its own military bases onto its territory.
By mid-1950 a so-called National Police Reserve of 75,000 soldiers was set up to be the nucleus of a new army - later to be known as the Self Defence Force.
Within months the US foreign policy advisor, John Foster Dulles (his aide was Dean Rusk - who was to be Secretary of State to both Kennedy and Johnson), had got premier Yoshida to increase this to 350,000. In fact the Japanese army was not meant to have been used in Korea - but it was used as crews and specialist personnel for logistics and surveillance - after all, the Japanese knew the territory well. What's more Japanese ships were actually used in combat operations off Korea's coast. Officers from the former imperial army, who just 5 years previously were "the enemy" were rehabilitated and integrated in the US operations against Korea. This was actually contrary to the postwar treaties. But that cut no ice with the US and its now leading role in a "new world order" whose chief task was to "contain" communism - that is, in essence, the potential threat of the international proletariat.
A peace conference held in San Francisco restored Japanese independence on 8 September 1951. It was told to recognise the exiled Chinese Kuomingtang government of Chiang Kai Shek - now established on Taiwan. The USSR, which was by now the target of the Cold War refused to sign this treaty, as it endorsed US control of the Ryukyu islands and other smaller islands, failing to endorse the USSR's claim over the Sakhalin peninsula and the North Kuril islands.
The reshaping of the economy
If Japan was to be a regional pillar for imperialism, as the US leaders wanted, it had to retain an economic capacity adapted to this role. Apparently Japanese capitalists must have been aware that this would be the US aim, since one business leader recalled that "many industrialists (..) uncorked their champagne bottles and toasted the coming of a new 'industrialists' era' upon hearing that the occupying power would be the US".
Initially, however, SCAP proceeded to dismantle the old pre-war family-controlled "zaibatsus", whose economic ambitions had been far too tightly intertwined with the expansionist policies of the Japanese military. So, the "zaibatsus" had to part from the hundreds of companies they controlled, either by selling them to the state or by selling their shares on the stock market. For a while, the past heavy cartelisation of the Japanese economy disappeared. But not for long.
As soon as they had the opportunity, from the early 1950s onwards, the ex-zaibatsus reformed - but, this time, according to a different structure, known as a "keiretsu" (or grouping of enterprises). Instead of operating, like the old "zaibatsus", as pyramidal conglomerates dominated by a family-owned entity, they turned themselves into large networks of interlinked companies, where each company retained a small stake in all the other companies in the network. This way most of the shares of each network member were in the hands of the other network members, thereby making it impossible for outsiders to acquire a sizeable stake in the network without being invited. At the same time, this cross-shareholding ensured that each network member had an advantage in protecting the interests of the other network members. To complete this financial web, each keiretsu was organised around at least one major bank which provided funding to all member companies.
It was in this form that some of the biggest "zaibatsus" re-emerged in the early 1950s, without even bothering to change their names. Such was the case, in particular, of Mitsui, Mitsubishi and Sumitomo. Others, however, like Toshiba or Hitachi, even retained their original "zaibatsu" structure. And there were intermediary cases, like that of Toyota, which adopted the keiretsu format, but remained controlled by the Toyoda family, while being at the same time an integral component of the Mitsui keiretsu.
By the early 1960s, the pre-war stranglehold of the monopolies over the Japanese economy was restored - admittedly to a level which was certainly not dissimilar to that in the US or Britain. The scene was set for the coming expansion.
The other side of the Japanese "miracle"
By the 1970s, as Toyota cars and Datsuns were selling like cheap hot cakes, it was claimed here in Britain, that worker-management cooperation was the key to Japanese success - with factories organised as one big, happy, egalitarian family.
The truth, however, was that the so-called Japanese "miracle" was achieved by the severe regimentation of a core of permanent workers employed in the big factories, while over-exploiting a majority of workers who, for various reasons, had little or no rights or protection. And this so-called "miracle" concealed the dire poverty of the working masses. There were no state welfare provisions to speak of. By 1964 it was estimated that the outlay of the state for social services was equivalent to that of Tunisia or Sri Lanka! Workers had to work until they literally dropped, while relying on company facilities for all their needs, be it housing, health or education. And the state of local services was no better. For instance, in 1969, only 9.2% of the population had flush toilets. In that same year, 20% of the population was living below the poverty line!
What was it like to work in the sanctuaries of the Japanese "miracle", such as the Toyota car plants? In 1973, a young Japanese journalist, called Satoshi Kamata wrote a book called "Japan in the Passing Lane" based on his 6-month experience working as a seasonal worker in Toyota.
The most striking problem faced by these workers was the sheer exhaustion they suffered from the pace of work. Tied to a conveyor belt which assembled gearboxes, Kamata had to perform so many operations in a matter of seconds that he could never keep up. After an 8-hour shift the workers were expected to make up the targets they had missed by working compulsory overtime - sometimes for 2 hours or more. Kamata describes how he and his fellow workers got thinner and paler by the day - all they could do was sleep and work - often too tired to eat. He describes the accidents which happened every day - fingers cut off and crushed being the most common - and how these were not even recorded. This, despite the "safety first" armbands and slogans which they have to chant every day at safety meetings - in the obligatory 15 minutes before work which was unpaid. In reality there was no safety.
Out of the 37 seasonal temps who were hired with Kamata, only one other worker besides himself managed to complete the six month contract.
Kamata sums up the "Toyota way" in the last pages of his book: "the rationalisation by Toyota is not so much to eliminate work as more directly, to eliminate workers. For example if 33% of "wasted motion" is eliminated from 3 workers, 1 worker becomes unnecessary. The history of Toyota rationalisation is a history of the reduction of workers and that's the secret of how Toyota shows no increase of employees while achieving startling increases in production. All free time during working hours has been taken away from assembly line workers as wasteful. All their time to the last second is devoted to production. Subcontractors deliver parts to the conveyor belts. The "kanban" method which has been widely heralded in the mass media is meant to compel the subcontractors to deliver parts exactly on time which is just another sign of the increasing "synchronisation" in the industry. Even the streets between the subcontractors and Toyota's plants are regarded as conveyor belts connecting the actual conveyor belts within the plants. The Toyota method of production appears to the outside world as the systematisation of "the relationship of a community bound together by a common fate". But truthfully, it's nothing more than the absolute determination to make all the movement of goods and people in and out of these plants subordinate to Toyota's will."
He might well have added "and subordinate to Toyota's profit". In 1979, the company admitted 267 serious injuries and deaths in their factories - the tip of the iceberg and the majority of these were amongst new hires. Kamata says that "whenever I come to Toyota City and talk to the workers I feel as if I have strayed into some fantasy land. But this is a nightmare I have lived and the anger will not go away."
Railway workers under the axe
After the return of the world crisis, in the early 1970s, the capitalist classes of the rich countries turned to their states for help. This implied cutting tax for the wealthy, curtailing the social expenditure and welfare commitments of the previous decades and opening up the state-controlled sectors of the economy to private profiteering.
However, in the case of Japan, there was fierce resistance against privatisation from the state's top bureaucrats. As a result, while dozens of state companies were being privatised in western Europe, only three significant privatisations took place in Japan during that decade.
Of these three privatisations, the most important by very far was that of the railways. But its objective was far less economic than political - in fact, it was more like the outcome of a Japanese version of Thatcher's offensive against the working class. This offensive had actually begun in 1975, when the government decided to enforce the legal ban on public sector strikes which was largely ignored by railway workers. The National Railways Workers' Union, which organised 70% of the 420,000 railway workers, responded by calling a national strike to demand that the right to strike be recognised in the railways. But after 8 days of a solid national strike, faced with the threat of heavy fines and possible prison sentences, union leaders called off the strike without any gains.
This was a defeat and it paved the way for the most massive programme of job cuts ever seen. Between 1980 and 1985, when the first stage of the privatisation plan was introduced, 137,000 jobs were cut across the railways, through a mixture of so-called "voluntary" retirements and forced resignations. Even then, more job cuts were to follow. Over the next two years, another 93,000 workers were transferred into a holding company before being offered jobs in other public corporations, usually on much worse terms. In the process, however, in a punitive drive against workers' resistance, over 1,000 workers, who had refused to agree to make themselves redundant, many of them union activists, were summarily sacked.
Finally, by 1987, the nationalised railways were broken up into seven so-called "private" companies employing just over 40% of the 1980 workforce, while the state took over most of the $286 billion outstanding debt of the national railways. However, even then, the shares of these "private" companies remained in the hands of the state and it took nearly a decade before a majority of these shares were finally sold off to private shareholders. Even today, the state retains a significant stake in each one of these "private" companies.
Pilfering with FILP
Despite the huge cuts in public spending and in jobs that took place between the dollar crisis and 1985, real government expenditure actually increased massively - only, the vast majority of the population never had a chance to see the benefits of this state-funded largesse, nor did they have the opportunity even to measure its extent, nor to know at whom it was targeted.
The vehicle used for this largesse was a strange device called FILP or "fiscal investment and loan programme". Behind this grandiose phrase was, in fact, a mere accounting trick which had been used by all Japanese leaders since the 1950s, in order to get around their legal obligation to balance the government's budget.
This trick involved replacing savings from pension savings accounts and, above all, from the population's post office savings accounts, with IOUs and lending this cash to companies at very low interest rates, under the cover of all sorts of investment schemes. The beauty of this technique was two-fold. None of these handouts ever appeared in the government's budget, so that this method could easily be used to conceal a fantastic rise in the state's funding of capitalist profits behind drastic austerity measures affecting the majority of the population. In addition, this method made it possible to get the least wealthy layers of the population to finance the rise in company profits without ever knowing it and without the government having to resort to measures as unpopular as tax increases.
Of course, the very opacity of the system meant that there was nothing to stop the keiretsus from demanding more FILP money and nothing to stop politicians from giving in to their demands.
From the point of view of Japan's public finances, FILP allowed governments to help the capitalist class to overcome the long string of small and big crises which shook Japan, from the dollar crisis of 1974 until the end of the century. Using FILP enabled these governments to avoid making spectacular injections of funds into the Japanese economy, which could have spelt havoc for the Japanese yen and the trade-oriented industry which depended so much on it. But, by the same token, these tricks only postponed the underlying problems by concealing them deeper within the system - thereby stoking up more explosive material for the next crisis.
The US-Japan trade war
The crisis of the early 1970s had other consequences which were specific to Japan alone. The highly successful reconstruction of Japanese industry after WWII enabled Japanese companies to flood south east Asia with cheap consumer products. Above all, thanks to the low cost of labour in Japan compared to America, the US giants had got into the habit of using Japan as a subcontracting platform in a whole range of industries.
The logical next step had been for Japanese companies to overcome the small size of their regional market, by trying to sell their finished products on the huge American market, thanks to an extensive network of commercial facilities across the US.
Then came the dollar crisis of 1971 and with it, the competition between US and Japanese capital resumed with a vengeance. In the US, a new set of import taxes were introduced, some of which were specifically targeted at Japanese goods. For good measure, the administration of then US president Nixon, launched a vocal campaign against what it called Japan's "abuse of free trade". Meanwhile, US workers were told they had to tighten their belts to boost productivity in order to face up to the "threat" of Japanese competition.
This was just a hypocritical nationalist game, of course, especially as the majority of US imports from Japan were made up, not of finished products, but of parts subcontracted by US giants to boost their own profits. But it was a bad blow for the Japanese giants, which was compounded within the next few years by the brutal rise in oil prices.
In response, Japanese conglomerates used a 3-fold strategy. First, they allowed their big US rivals to acquire a stake in their own operations. So, in the early 1970s, Chrysler was invited to take a minority stake in Mitsubishi Motors. Ford took a 25% share of what was to become Mazda, thereby becoming a de facto stakeholder in the powerful Sumitomo keiretsu. And General Motors became a partner of Da-Ichi Kangyo, Japan's largest keiretsu, by taking a controlling stake in the smaller Isuzu and Suzuki manufacturers.
The second prong of the Japanese conglomerates' counter-attack was to resort to the same subcontracting strategy which their US rivals had used so effectively. In the course of a decade, many of the major industrial groups reorganised their entire production process at the scale of the whole south east Asian region, operating as if it was a single economic entity. This came at a huge cost for the Japanese working class, especially in heavy industries. For instance, over the decade starting in 1975, around 80% of all shipbuilding jobs disappeared in Japan and a similar job massacre took place in the steel and aluminium industries.
In countries which already had significant industrial infrastructure, this process took the form of tie-ups with local companies. In Korea, for instance, Mitsubishi allied itself with Hyundai Motor, Mazda with Kia Motors, etc.. In the least industrialised countries, on the other hand, purpose-built "local" companies were set up. For instance, this was the origin of Proton, the largest Malaysian car company, which was initially set up as a joint venture between the Malaysian government and Mitsubishi Motors.
Not only did this strategy help Japanese companies to reduce their prices on the world market by exploiting the lower cost of labour in these poor Asian countries, but it helped them, to a certain extent at least, to by-pass the import quota system that was being enforced in the USA against imports originating from Japan.
As these first two methods were not quite effective enough to allow Japanese manufacturers really to increase their foothold in the US market, they resorted to a third method. From the early 1980s onwards, Mazda, Toyota, Nissan, Honda and a few others, built their own factories in the US. Initially, these were mostly joint-ventures with one or another of the US car giants, which gave the latter a certain degree of control over the volume produced as well as over market prices. But these plants gave the Japanese manufacturers a guaranteed share of the US market and a junior position in the automotive cartel run by the Big Three US car giants.
Under the US monetary hammer
The trade war between the US and Japan did not stop there, however. The recession of the early 1980s dealt a blow to the profits of US and Western European companies, thereby fanning the flames of the rivalries between the industrial powers. With its low-wage based, relatively modern industry, Japan was better equipped to face this recession and its share of the world market increased.
To be sure, this increase was not as spectacular as was made out at the time. In fact, Japan's exports still remained in 3rd position, behind those of the USA and Germany. And this was without taking into account the production of US companies outside the US, which was far larger than that of Japanese companies outside Japan.
Nevertheless, behind all this demagogic agitation, US and Western European companies were busy looking for ways to reclaim some of the ground lost to their Japanese rivals. And since ordinary protectionist measures did not seem to provide better protection to these companies - and could even have backfired on them - the Reagan administration chose to resort, instead, to punitive monetary methods. It got its western-European partners to agree on the need for a worldwide currency re-alignment, designed to create what they described as a "level playing field" between Japan and the rest of the world. This was intended to effect a dollar devaluation.
Ironically, the over-valuation of the dollar at the time was, to a significant extent, fed by the fact that much of international trade was still carried out in dollars - which was, if anything, a major advantage for US big business. Moreover, it was the recession which had sent the dollar through the roof, as speculators chose to put their bets on what they considered to be the world's strongest currency in an uncertain context.
Nevertheless, the Reagan administration got its way. On 22 September 1985, a 5-country summit was held in New York's Plaza Hotel, involving the US, Germany, Britain, France and Japan. Japan was read the riot act and, in the resulting "Plaza agreement", the participants undertook to get their central banks to resort to monetary manipulations in order to reduce the exchange rate of the dollar against other currencies. But as the general view was that the Japanese yen was more undervalued than any other currency, the "punishment" which Japan had to agree to was far more drastic. As a result, the exchange rate of the yen against the dollar doubled over the next 12 months.
The result - and purpose - of the "Plaza agreement" was, of course, to bolster considerably the position, and profits, of US exporters on the world market, while weakening significantly the position of Japanese exporters. In that sense it was just another episode in the cut-throat rivalries between the capitalist classes of the richest countries. The fact that Japan felt it had no option but to sign up to it, was a revealing example of the real balance of forces between the various imperialisms. For all its industrial dynamism, Japanese capital was no more than a junior player in front of the colossal resources of its American rival.
The resulting speculative bubble
The consequences of the "Plaza agreement" were to prove devastating for Japan. Under capitalism, tinkering with the mechanisms of the system in order to correct an imbalance, usually results in the stoking up of the ingredients for another, more powerful imbalance elsewhere. This was exactly what happened in this case.
To avoid the risk of a recession, the Japanese government took a number of measures, including a vast programme of state-funded public works. It reduced interest rates to a low 2.5% and introduced tax cuts for middle and high-income earners. These measures resulted in a sharp boost to the entire economy, thanks to increased domestic demand and cheap credit. But they also created conditions which were soon to produce a huge financial bubble.
Land and real estate became the target of massive speculation. In a way, there was some irony in this. Because, due to regulations against land speculation, the property market was very sluggish and prices were kept high by a short supply of properties available for sale.
By increasing enormously the demand for land and loosening some of the existing rules, the public works programme triggered a huge rise in real estate prices. Meanwhile, given the much reduced interest rates they could earn on loans, finance businesses shifted their sights to the bigger profits they could make out of real estate and stock market speculation. The availability of cheap money encouraged speculators to gamble for increasingly high stakes. Japanese banks got involved in direct speculation, while still lending enormous sums on a short-term basis to speculators and real estate developers in Japan, but also abroad, particularly prestige business developments in California and London.
By the end of 1989, share prices on the Tokyo stock market reached a historical peak. Meanwhile real estate prices were reaching ridiculous levels: in 1989, it was calculated that the total paper value of Tokyo's housing and business properties had reached the equivalent of four times that of the entire stock of the USA! Another example of this crazy bubble was the explosion of golf club membership rates. Given Japan's scarcity of land, golf has always been a luxury for the richest few. Golf club membership was limited and could only be acquired by buying a card from an existing member. With the explosion of land prices, these cards became the object of financial speculation and an index was even published daily to reflect the price fluctuations of golf cards. At the peak of the bubble, it was estimated that the total market value of golf club membership cards was about $200 billion!
1990: the chickens come home to roost
Eventually, the speculative bubble burst. The Tokyo stock exchange crashed on 2nd April 1990 and, over the next fourteen months, share prices fell by 65% before returning slowly to half of their pre-crash level, where they remained. The real estate bubble burst simultaneously. Property prices went on falling for over four years, and were more or less halved by the end of that period. The Japanese economy began to slide into recession, due to a brutal fall in consumption, lending and investment. But this was not the end of it. Several years after the crash, the banking system as a whole was to enter a major crisis from which it has never recovered - a crisis which, in many respects, looks very much like what we have seen since the collapse of Lehman Brothers, in September 2008.
The crash had left Japanese banks with a huge amount of irrecoverable debts, due to the combination of property developers going bust at home and abroad and stock market speculators defaulting on their debts. So, by 1992, Japan's two most prestigious international banks, the Industrial Bank of Japan and the Long-Term Credit Bank each had three to four billion dollars of property loans on which no interest was being paid.
Eventually, in 1995, the huge losses kept hidden by the banks began to threaten some of them with bankruptcy. The first victims were the Jusen - mortgage lenders which borrowed the money they lent from the banks and the money market. At the peak of the bubble their outstanding loans had reached a total of over $650 billion - based on vastly over-valued properties. When they threatened to go bust, in 1995, they were bailed out by an emergency fund set up jointly by the government and the country's largest banks. But even after this bail-out and the introduction of a number of other measures aimed at reducing the Japanese banks' debt burden, a conservative estimate of the Japanese banks' hidden "bad debts" produced at the end of the following year still put the figure somewhere between $350bn and $900bn.
One of the measures taken by the Japanese government in order to avoid a complete meltdown of the economy, especially after the banking crisis broke out in earnest, was to cut interest rates further, to below 1%. It was hoped that this would encourage both the public and companies to borrow, thereby boosting consumption and investment. At the same time, the state resorted to a mechanism of so-called "quantitative easing" very similar to that used over the past year by Darling, designed to inject fresh cash into the financial system, in the hope that this would help to boost the banks' willingness to lend.
Whether these measures have worked or not, is still a matter of endless dispute between economic experts. But the fact is, that even before the present world crisis broke out in 2008, the Japanese economy had still not recovered - not by any measure.
From Japan to south-east Asia...
In fact, one of the consequences of the measures taken by the Japanese government was to feed another crisis, almost immediately, although not in Japan, this time, but across the rest of south-east Asia.
Indeed, after the 1990 crash, speculative capital withdrew massively from the Tokyo stock market, seeking new horizons. But a significant part remained within the Japanese sphere of influence, in south east Asia. It was this massive flow of floating capital, from 1990 onwards, which kick-started the growth of a new financial bubble across this region, generating the media's fairy tale of Asia's so-called "emerging markets". What was really behind it was a repetition in countries like Korea, Thailand, Malaysia, Taiwan, Indonesia, etc.., of the frantic wave of real estate and financial speculation seen in Japan, in the run-up to the 1990 crash.
A significant factor in the development of this bubble was actually the lowering of interest rates introduced in Japan. A whole industry developed around what came to be known as the "carry trade". This involved financial institutions borrowing large amounts of Japanese yen, taking advantage of the very low interest rates there, then exchanging these yen for dollars and finally lending these dollars on a short-term basis at a much higher interest rates, to banks, real estate companies or stock market speculators, in south east Asia. At the time, every major international bank proceeded to set up a special division to handle this very profitable "carry trade" and countless speculative funds were created for the sole purpose of taking advantage of it.
Finally, on 2nd July 1997, a speculative run on its currency forced the Thai government to devalue, causing the whole speculative bubble to burst. Suddenly, the south east Asian monetary system began to collapse like a house of cards, engulfed in a wave of speculative sales. Every currency was affected. One after the other, each country was forced to surrender and watch the value of its money tumble down. The weakest gave way first, the others followed soon after. Even South Korea, the only country in this region to be classified by international agencies as an industrialised economy, was forced to give in - although long after the others, in November. Instead of "emerging" into a future of prosperity and affluence, as the experts had predicted, south east Asia had been whipped back into a poverty trap by the tail of Japan's 1990 financial crash.
In October 1997, this monetary crisis mutated into a wholesale stock market crisis. Hong Kong, the flagship of imperialist financial penetration into Asia, was first in the firing line. On 22 October, the territory's share market plunged suddenly by over 10%. Within five days, Wall Street followed, taking in its trail almost every single stock market worldwide. Then there was an apparent pause. The world's largest stock markets outside Asia recovered slowly, limiting their damage to a total drop of less than 3%. But in south east Asia, and in fact throughout the Third World as well, the fall went on inexorably, as floating capitals were being divested and transferred to safer areas.
And of course, it was not just the financial sector which was affected. From Thailand and Indonesia to Malaysia and Korea, manufacturing companies were severely hit. They were hit first, by the sudden shortage of funding they were facing and then, by the brutal reduction in orders, particularly from the construction industry which collapsed immediately after the speculative bubble burst, but also from their main customer, Japan.
... and back to Japan
The implosion of the south east Asian speculative bubble immediately sent another destructive wave which hit the Japanese economy and, more specifically, its banking sector. As it turned out, the 1995 Jusen crisis was only the beginning. In November 1997, some of Japan's largest banks got into serious trouble. Sanyo Securities, the country's 7th largest brokerage bank, defaulted on the repayment of its loans. This caused a panic on the money market which, in turn, forced Hokkaido-Takushoku Bank, one of the big commercial banks, into bankruptcy. Then Japan's 4th largest brokerage bank, Yamaichi Securities, went out of business, with $25bn of bad debt. Between them, these three bankruptcies alone left nearly 16,000 workers without a job.
Within a few months, much larger banks followed. But, this time, they were dealt with in a way quite similar to Gordon Brown's allegedly "innovative" method in the bailout of Northern Rock, RBS, Lloyds and HBOS. When Long Term Credit Bank of Japan, then the world's 9nth largest bank in terms of assets, went bust, it was nationalised, at an estimated cost of $27bn. Two years later, it was to be sold to a US private equity firm for a fourth of this amount. Nippon Credit Bank, on the other hand, was immediately bought by a Japanese consortium, in return for a publicly funded sweetener whose amount was never disclosed.
In the meantime, the Japanese economy had descended further into recession. In December 1997, car sales had already fallen to their lowest level since 1973 while the country's GDP had been falling every month since July of that year.
Since the south-east Asian crisis, two other crises have hit Japan - first the so-called "dot com" stock market crash of 2000 and then the present crisis. During this period, if its export industry has maintained itself better than the rest of its economy - or rather, less badly! - it is primarily due to the increase in demand for consumer goods and industrial machinery from China. But its domestic demand has continued to stagnate and so have its exports to the US and Europe. And yet, countless injections of public funds into the economy, whether in the form of tax measures or public works, have been made by successive governments, while the "quantitative easing" introduced to deal with the banking crisis continued. But at no point during all these years has Japan ever returned to rates of economic growth comparable to those of the 1970s or 1990s. To all intents and purposes, the only result of governments' attempts to turn the economy around seems to have been to keep it barely afloat.
The working class in the crisis
Of course, there have been various ups and downs in the Japanese economy during these two decades. The period 2002-2007 was even hailed as a period of affluence, under the pretext that Japan's GDP seemed to be picking up. And it is true that during that period company profits more than doubled, but this was on the basis of stagnating production. In 2004, for instance, manufacturing profits increased by 27% but, production increased by only 1.2%. In any case, none of this alleged affluence ever filtered down to the working population, whose conditions went on deteriorating.
The truth is, that all along, over these two decades, jobs have been relentlessly cut. Before the present crisis, it was estimated that over 6 million jobs had already disappeared in manufacturing alone. For instance, in 2008 alone, Toyota, now the world's largest manufacturing giant since General Motors got into trouble, cut over 10,000 jobs in Japan, despite having made £7bn profit in the previous year! In the first five months of the crisis, after the collapse of Lehman Brothers, another 500,000 jobs went across the economy. And many more are likely to go judging from the large redundancy plans announced by most big companies.
However, these job cuts do not necessarily show up in the official unemployment figures. At 3.5m or 5.4% of the workforce, unemployment is not much higher than in most industrialised countries. This is partly due to the fact that many unemployed have no unemployment insurance (even among the registered unemployed only 23% get any benefit at all!). But it is also due to a specific Japanese feature whereby big companies retain redundant workers on their books, without paying them any wages, in case there is work for them at some later point. A recent estimate puts the number of such "hidden jobless" at around 4.7m, meaning that the real unemployment rate would actually be closer to 12%.
But even this high level of unemployment is only the tip of a far bigger and nastier iceberg. The Japanese working class never enjoyed much legal protection against exploitation. In particular, the 70% majority of workers employed by small companies always had only limited means to resist exploitation. But in the big companies, there was at least a degree of protection for permanent workers.
However, one of the main changes over the last two decades has been the fast rise of non-regular employment, in which bosses hire workers, either directly or indirectly - through a subcontracting company or an agency - on terms which are significantly worse than those of permanent workers. These non-regular workers enjoy none of the legal and contractual rights that permanent workers have. Most of them have no health, unemployment nor pension cover. They are paid around half as much as permanent workers doing similar jobs. When they work overtime they get no premium, when they get paid at all. Many do not even have guaranteed hours or are allocated part-time jobs designed to fill gaps, so that their wages are even lower.
The case of certain categories of temporary workers is particularly scandalous. An official survey carried out in 2008 showed that 78% of production temps were hired on one-day contracts only. Those on longer contracts were usually provided with accommodation in dormitories by the company. But as this was often their only roof, they were easily blackmailed into toeing the bosses' line for fear of making themselves homeless. These temps worked an average 14 hours per day, earning an average £800 per month - assuming they worked every day.
Non-regular workers already made up between around 17% of the working class in the run-up to the 1990 crash. In part because of the crisis itself and in part because the legal restrictions on the employment of temporary workers were relaxed, under the pretext of "helping the jobless back into work", this figure has soared dramatically, reaching 24% in 1999, 29% in 2007 and 34% in September last year - the latest available official figure. This means that in a growing number of factories belonging to manufacturing giants, a majority of production workers are now non-regular.
One of the by-products of the rise of non-regular employment has been the rise of the so-called "working poor", that is people who are classified as being in employment but who live on an income lower than the poverty line. In particular, an estimated 80% of the 16 million or so non-regular workers are in this situation today. The low wages earned by these workers explain some of the scandals which have shocked Japanese public opinion over the past period. In 2008, for instance, a report released by the Health Ministry disclosed that its inspectors had discovered that 3,000 young non-regular workers and 2,400 jobless slept every night in the cubicles that can be rented for around £14 per night, in the cyber-cafés of the main towns. Being unable to afford a rent, this was the only way they had found to avoid sleeping rough.
Another scandal which grabbed the headlines of the popular press highlighted the working conditions of non-regular workers. This was about a phenomenon called "karoshi" in Japanese, or "death due to work", whereby workers commit suicide as a result of stress and depression caused by overwork. This may not be a new phenomenon in the history of the Japanese working class, but it is certainly one which has spread significantly since 1990. For 2007, the Health Ministry admitted officially that 142 suicides had been caused by karoshi. However, an occupational health specialist estimated that, in that same year, the number of suicides directly caused by intolerable working conditions was probably closer to 2,000.
In any case, up to recently, karoshi had always been considered as a fatality that could not possibly be blamed on the employers. This changed in July this year, bringing karoshi under the news spotlight, when the High Court ruled in favour of a law suit filed against the electronics giant Sony, by the mother of one of the companies former non-regular production inspectors. Her son, who worked 11-hour rotating day and night shifts, for a total of 250 hours per month, had committed suicide after being made to work 15 shifts in a row without any break. The Court ruled that Sony was liable to pay compensation to his mother for imposing unbearable working conditions on her son.
A blueprint for things to come?
As we said in the introduction of this forum, numerous experts have been toying with the idea that the outcome of the current attempts at putting the financial system back on its feet, may well turn out to look like the "Japanese scenario" that we just described.
In a way, this is already the case. Since the dot com stock market crash, in 2000, what we have seen in Britain, and in fact throughout western Europe, is capitalist profit feeding on the rise of casualisation and real unemployment. Of course, this was partly concealed by the massaging of figures and the fact that large numbers of unemployed were pushed into hiding by the introduction of punitive rules. But the resulting on-going fall in the standard of living of the working class could hardly be concealed, especially in those parts of Britain where factory closures had decimated jobs. The fact that household poverty has increased since the turn of the century is significant enough.
However, the present crisis has brought about another dimension. The bosses' attacks against workers' conditions and standard of living has now taken the form of an all-out offensive aimed at a drastic reallocation of the wealth produced in society, at the expense of the working class. The bosses' offensive is not just designed to make the working class majority of the population foot the bill for the bosses' crisis in the short term. It is also designed to allow the bosses to maintain and increase their profits in the longer term, on the basis of a crippled market and a reduced production - and, therefore, on the basis of an increased exploitation of the working class. In the meantime, the role of the state is to pump enough cash into the system to keep its financial bloodstream in operation and, by the same token, to provide the profit parasites with the means to resume their speculative activity.
In that sense, what has been happening across the world over the past years, and even more so during the course of this year, is already something similar to the "Japanese scenario". And if the impact of this process, although bad enough already, is not quite as drastic as it is in Japan, it is largely because it has not lasted quite as long.
But this certainly shows, without the slightest doubt, that the working class should expect nothing whatsoever from what capitalist class and its system are cooking up for us, not in the short term and even less in the long term. Due to its long historical decay, the capitalist system has long ceased to be capable of offering any kind of progress to society as a whole. The only "progress" it can offer is in the form of the increasing parasitism of a shrinking minority of profit sharks. If anything, this is what the example of Japan should tell us.
No, there is nothing worth retaining from this system, there is nothing to mend or patch up in it, and nothing to expect from it. The only future for mankind, and its only way out of these on-going crises and devastations, is to overthrow capitalism and to build a new society, free of any private profiteering. That is our aim and that is why we call ourselves revolutionary communists.