Contesting Convergence

Table of Contents

1. Introduction
2. SESSION I: Social Justice: Comparative Systems? Universal Lessions?
3. SUMIKO IWAO
4. TOSHIO YAMAGISHI
5. YOKO HAYASHI
6. SESSION II: US and Japanese Conceptions of Future Power Configurations in East Asia
7. TAKASHI INOGUCHI
8. ROBERT IMMERMAN
9. HIDEO SATO
10. SEIICHIRO TAKAGI
11. SESSION III: Comparative Institutional Analysis: Measuring Convergence or Divergence?
12. EISUKE SAKAKIBARA
13. MAKOTO UTSUMI
14. MASAHIRO OKUNO-FUJIWARA
15. HIDEKI KANDA
16. MASAHIRO KAWAI
17. TAKATOSHI ITO
18. EISUKE SAKAKIBARA
19. GARY SAXONHOUSE
20. Contributors to this Volume

Introduction

Globalization seems to have reflexive properties: it promotes convergence but also exacerbates divergence. As the world shrinks, the separateness and uniqueness that we all recognize and often prize as individuals, groups, and nations bump up against the exigencies of expanding global systems. It is a mistake to consider globalization synonymous with homogenization, when in fact it can render the specific contours of place and time in such stark relief.

The 1995 Abe Fellows' Conference allowed participants to take an extended look at the tensions and confrontation that globalization has wrought. The conference, which took place in Yokohama and Tokyo, Japan during July 23-28, 1995, examined both sides of globalization: the role of the new global setting as a means and mechanism of convergence as well as a catalyst that brings out the dissimilarities, latent or otherwise, that exist between societies. Participants compared advanced industrialized societies and their responses to the forces of globalization, looking in particular at the cases of the United States and Japan. In the process, they re-examined the constructs of universalism and particularism which are frequently and perhaps too casually used to characterize and contrast these two societies.

The main essays in this volume seek to understand the setting and forces that define Japan, even as they consider essentially global questions of social justice, power-sharing, and economic organization. Each of the authors, all of whom are prominent in Japan's academic and policy communities, ask if Japan's uniqueness, as well as its similarities with other nations like the United States, can be understood in the specific contexts of social psychological proclivities, international and regional forces at work, and economic ideology.

Sumiko Iwao of Keio University analyzes the internalized impulses of the Japanese individual and collective understanding about those impulses that drive questions of social policy within Japan. She characterizes Japanese notions of justice, equality, and societal enforcement as distinctively different from those of other nations, while maintaining that universally applied rules for social justice need to be put in place. The comments of Takashi Inoguchi of United Nations University concern Japan's role as a global economic and political power in Asia. He describes the dynamics of post-cold war global change and introduces five possible scenarios of peace and accommodation between the United States, Japan and other East Asian nations. The essay by Eisuke Sakakibara, Director-General of the International Finance Bureau of Japan's Ministry of Finance, highlights variances in the way Japan has organized its economic and political systems in comparison with other industrialized nations. Dr. Sakakibara argues that when analyzing and comparing political and economic systems, it is necessary to emphasize the plurality of those systems and the interactions among them, rather than relying on comparisons drawn from universalistic paradigms such as neoclassical economics.

The dynamic of globalization winds in and out of all these discussions. This volume then, should not be seen as a celebration of difference for difference's sake, but rather as a series of articulations about Japan and its attributes as a society in a global setting. The authors offer conceptualizations of the conditions within and without under which Japan operates, and descriptions of the systems that have arisen as a result of these contingencies. Ultimately, the authors seem to be saying that our global village is actually more like a series of distinct, yet interconnected suburbs. As might be expected, their views are strongly contested by the Japanese and American commentators whose responses are also included in these pages.

Ironically, our awareness of the tensions between universalism and particularism, global and local, similarity and difference, arise as the world faces problems so profound that they can only be addressed by efforts made on a global scale by most if not all national and transnational actors. One wishes to be able to return to the global village and its comforting imagery of unified resources and activity. But the voices describing divergence in the case of Japan remind us of the steps that must be taken before the world can solve its collective problems. We are required to examine the historically and ideologically-contrived assumptions and frameworks that global solutions will be built upon. Although not always easy to listen to, the arguments about similarities and differences begin there.

The Third Abe Fellows' Conference

Analyzing the global dimension of issues facing advanced industrialized societies and the world at large is a core aim of the Abe Fellowship Program. Nineteen ninety-six marks the fifth anniversary of the program, which is run by the Social Science Research Council in cooperation with the American Council of Learned Societies, with funding provided by the Japan Foundation Center for Global Partnership.

Along with support for the Fellows' individual research projects, an important component of the Abe Fellowship Program is the Fellows' Conference, which brings Fellows together to share their findings and experiences through an intense four-day period of research presentations, thematic sessions, and discussion groups. Participants at the July 1995 event in Yokohama and Tokyo included 34 current Abe Fellows, members of the Abe Fellowship Program Committee, representatives and staff members from the three collaborating organizations, as well as many featured guest speakers and commentators.

The three thematic sessions on which the text of this volume is based took place throughout the four-day event. "Social Justice: Comparative Systems? Universal Lessons?" was the title of the session which featured Sumiko Iwao, as well as commentaries by Yoko Hayashi of the law firm Koga & Partners and Toshio Yamagishi of Hokkaido University. Chairing were Abe Fellowship Program Committee member Takatoshi Imada of the Tokyo Institute of Technology and SSRC board member Brackette Williams of the University of Arizona.

The second session, "U. S. and Japanese Conceptions of Future Power Configurations in East Asia" centered on the presentation by Takashi Inoguchi and was followed by comments from Robert Immerman of Columbia University, Hideo Sato of Tsukuba University, and Seiichiro Takagi of Saitama University. Abe Fellowship Program Committee members Merit Janow of Columbia University and Akira Kojima of Nihon Keizai Shimbun served as charis.

Originally titled "Comparative Regulatory Regimes: Convergence or Divergence," the third session featured Eisuke Sakakibara and was jointly chaired by Abe Fellowship Program Committee members Gary Saxonhouse of the University of Michigan and Takatoshi Ito of the International Monetary Fund. Commentary was offered by Hideki Kanda of the University of Tokyo, Masahiro Kawai of the Institute of Social Science at the University of Tokyo, Masahiro Okuno-Fujiwara of the University of Tokyo, and Makoto Utsumi of Keio University.

Participants at the conference also benefited from a series of workshops and discussion groups on specific themes or disciplinary issues, such as aging societies and trends in Japanese politics. A study group on Japanese nongovernmental organizations and the local experience in the Kanagawa region was led by Tetsuro Ogimura of the Kanagawa International Association. A workshop on methodology entitled "Narratives and Numbers" explored innovation in methods and research design stemming from a variety of fields and disciplines. The session was moderated by Brackette Williams.

A highlight of the 1995 meeting was a half-day public symposium in Tokyo attended by an invited audience of over 200 entitled "Fifty Years Since the War: An Overview of U.S.-Japan Relations and the Challenges for Policy-Relevant Studies." Makoto Iokibe of Kobe University gave the keynote address which provided a historical perspective on the development of postwar U. S. Japan relations. The symposium also featured two panels of Abe Fellows discussing the goals of policy-relevant research and their individual endeavors to conduct such research. These panels were chaired respectively by Special Economic Advisor to U. S. Ambassador Walter Mondale, Edward Lincoln, and by Executive Director of the Center for Global Partnership, Nagayo Homma.

Sheri Ranis

The Abe Fellowship Program

New York

April 1996

SESSION I: Social Justice: Comparative Systems? Universal Lessons?

SUMIKO IWAO:

My discussion of the nature of social justice will be from my perspective as a social psychologist. The problem of judging one country by the yardstick of another, which can be illustrated in the case of Japan and the United States with regard to the idea of equality, provides a helpful point of departure for this discussion. Also useful in explaining the Japanese mode of social justice is the police activity that dealt with recent disasters and incidences of crime. I would also like to comment on the nature of social justice in the borderless age as a starting point for further discussion.

Every day we pass judgments on all kinds of actions or results of actions, committed by ourselves and by others. When the rewards, punishments, and acknowledgments or apologies for those actions or results conform with our expectations and predictions, we are satisfied that social justice has been maintained, while if we feel they are excessive or inadequate in some way or another, we experience dissatisfaction or anger because social justice has not been upheld. Sometimes people take direct action to correct what they consider unjust. Our standards of judging between justice and injustice are deeply internalized: if we receive excessive rewards for something, for example, our sense of justice is pressed to resolve the imbalance. Rather than letting ourselves think that it is due to our superior ability, we attribute the reward to luck. Likewise, if we commit some inappropriate - if not illegal - act vis-à-vis another person, we instinctively fear some kind of retribution. These internalized standards for judging between social justice and injustice are well established in most individuals anywhere.

Judging what is just and what is unjust, and determining the value of maintaining social justice is a subjective matter linked to the values of the individual. It is also affected by widely held beliefs and biases that transcend cultures. For example, it is widely believed that good comes to good people and bad comes to bad people, and that there are reasons good things happen to "good people" and ill luck dogs the tracks of "bad people." In social psychology, we call this "belief in a just world." This belief is responsible, for example, for the lingering suspicion that a rape victim may somehow have been at fault even when it is clear she was inexcusably assaulted. The rather universal tendency to try to justify discrimination derives from the same reasoning.

There is, nevertheless, some variability in our evaluation of what is socially just and injust. The decision may differ depending on whether the perpetrator of the act is a child or an adult, the self or another, citizens of our own country or of another, and may very depending on the target of the act (e.g., a nation, individual), and how the perpetrator is related to the person passing judgment. For example, many Japanese today feel that their politicians have a different sense of what is fair and just than the ordinary citizen.

What is "just" and "unjust" also varies from one historical period to another and from culture to culture. Any society distinguishes between social justice and injustice. While many societies share common precepts, though, they are by no means universal. The criteria for judging a sense of social justice derive from traditions formed over time and are acquired by individuals in the process of socialization and social learning. They are not absolutes. We should be careful to note, however, that this does not mean that we need not have absolute criteria for social justice.

So what do we do when something unjust occurs? Rather than simply cursing the heavens and lamenting the situation, we devise some means for redress. The ways that injustice is dealt with and justice maintained differ depending on what kind of human relations the people involved think desirable. In a society like Japan that prizes the maintenance of long-term human relations and gives them high priority, correction of injustice avoids confrontational means such as lawsuits that can result in the irrevocable rupture of human relations by categorization as victor or loser. But even in such a society, when dealing not with individuals but with the government, lawsuits are sometimes deliberately filed and unreasonable protests leveled for ulterior motives. ₁

One major difference has to do with our perception of human beings. Whether we see them as individuals who act independently on the basis of free will (as in American society) or as members of a group who habitually think and act within the context of a group (as in Japan), makes a difference in how we deal with injustice. In the former case, individual rights, fulfillment of individual demands, and pecuniary compensation hold precedence, while in the latter, priority is placed less on the satisfaction of individual demands than on finding ways to maintain smoothly running interpersonal relations. In this case, importance is attached to apology and expressions of sincerity and measures for redressing injustice through expulsion from the group are avoided. In Japan's community-centered, rural society, ostracism from the community (murahachibu) was once the harshest of sanctions, and rehabilitation of wrong-doers was, and still is, stressed.

This tradition is behind the vigorous activities of Japan's Center for the Promotion of the Abolishment of Violence (Boryoku Tsuiho Undo Suishin Senta), branches of which were set up in different parts of the country following the enactment in 1992 of the Countermeasures on Organized Crime Law, to help persons who want to leave underworld groups to find jobs and return to normal lives in society. It is also behind the involvement in extreme bullying incidents by children who instinctively know it is wrong: their fear of being ostracized by friends if they do not participate overwhelms the pangs of conscience they feel about the acts being perpetrated against the victim.

another difference can be seen with regard to the assumption of responsibility. In the individualcentered society of the type described above, individuals have to take personal responsibility for the consequences of their own actions. However in the group-centered society, if something goes wrong, it is not so much individuals as the conditions surrounding them that are considered responsible for the development. Since responsibility is not strictly placed on individuals, people tend to expect the state, the government, or other organizations to compensate them, rather than taking responsibility individually.

This is the reason consumer groups, usually eager for lower-priced products, came out in opposition to the opening of Japan's rice market. The possibility that the government might cease to guarantee the health safety of imported rice caused them to oppose the opening even if it meant paying more for rice. Holders of stocks in NTT, the state-run telecommunications corporation privatized in 1985, likewise, filed lawsuits against the government when the value of their holdings plunged, insisting that this was a matter for which the government ought to take responsibility even though NTT was in the private domain. In general, therefore, Japanese believe the best approach is to leave matters up to the government as much as possible: it may not necessarily be advantageous, but at least it avoids egregiously unjust treatment.

In the individual-centered society, moreover, since human beings are viewed as entities that act on the basis of free will, individual intentions are stressed when judging acts as just or unjust. In the group-centered society the conditions surrounding the individual are subject to careful scrutiny. Rewards and punishments, therefore, often extend beyond the individual to families or relatives. A case very fresh in our memories is the vindictive exposure of the families and relatives of Shoko Asahara and other leaders of the Aum Shinrikyo cult to a media frenzy. Many Japanese consider that kind of treatment of family members to be perfectly appropriate. The handling of injustice, as this case shows, is seen differently depending on the society and its view of the individual.

II

Equality is an issue of social justice we encounter on a daily basis. An example is the question of equality between men and women. Gender equality is an issue that remains unresolved, despite many ambitious measures adopted in both Japan and the United States. In both countries it still cannot be said that real equality between the sexes has been achieved. Surveys I have conducted in the United States show that Americans tend to think of Japanese society as one with pronounced gender inequality, and there is a strong tendency, based on American standards, to consider that Japan "lags behind" in this regard.

Equality of men and women is spelled out only in the Japanese constitution, though without clear stipulations as to what forms equality should take or provision of any guarantees. It is unjust to simply compare legal systems. In fact, however, equality can take diverse forms. Responsibilities and posts may be allocated to men and women on the basis of numerical ratios, power and other rewards may be distributed in proportion to the level of contribution regardless of sex or in conformity with specific needs.

In reality, however, male-female equality is far more complex and multi-dimensional, and can only be correctly gauged by taking into account relations within the household and family that are usually difficult to judge from outside and by objective standards. Women may not be high income-earners on their own, but in most families they maintain economic power and responsibility through control of the family purse strings. Seventy percent of Japanese women have a very detailed knowledge of their husband's income and a further 25 percent have a fairly good idea, but less than 20 percent of husbands of women who work outside the home know anything about their wife's income. Americans often call Japan "behind" because of the low numbers of women in management positions and career professions, salary disparities, etc. While these may be yardsticks acceptable for judging equality in the United States, it is simplistic to conclude that Japanese women are therefore being treated unjustly. Is it not unjust to pass judgments about conditions in another country on the basis of the standards of one's own?

This requires an explanation of how Japanese see equality between men and women, which differs from the American view. In the United States the goal and standard seems to be male; that is, achieving the same status (or influence, salary, etc.) as men is the aim of women. Policies such as affirmative action have been actively adopted to intervene in the natural process of equalization. This confrontational method of achieving redress of social injustice, aimed toward men who have exercised dominant power heretofore, can elicit a backlash on the part of men. The badges of equality in the United States appear to be rather superficial, visible factors like status and wage levels.

In Japan, by contrast, the drive by women to gain equality is not defined by the same criteria applied to men. First of all, women do not envy or covet the situation of men. Rather than looking only at power and status when comparing themselves to men, they take into consideration other factors such as degree of stress and responsibility, availability of leisure time, and life-style options. Also, whereas American women have been found to judge equality on the basis of the here and now, Japanese women take a long-term view, embracing their lives all the way into their post-retirement years. As a result, it is not possible for them to quickly or simply conclude whether their situation is just or unjust, nor to attain an immediate redress for what injustices they suffer. In addition, as mentioned earlier in this essay, consideration for the wider context embracing the whole web of human relations is considered more important than individual rights and fulfillment of immediate demands. For this reason considering how others like themselves are treated has great influence on the Japanese people's views of equality.

III

Japanese sense of social justice can also be readily observed in the way the police ₂ dealt with incidents that have occurred in Japan during 1995, including the Great Hanshin Earthquake, the revelations of subversive activity by the Aum Shinrikyo cult, and an attempted airline hijacking in Hokkaido.

After the Los Angeles earthquake in 1994, we learned of the power of the police and other security groups that promptly responded to the emergency, maintaining public order by closing off disaster areas. At the time of the powerful earthquake that shook the Kobe-Osaka area in January 1995, the Japanese police steadfastly adhered to their rule of acting solely on the basis of cooperation with and at the request of local citizens. The result was that "emergency" vehicles clogged the few undamaged transportation arteries causing mind-boggling traffic tie-ups. But as the police gently explained, "each driver has an emergency reason for being on the road." The disaster area was not cordoned off so people who had been driven from their homes by the quake felt obliged to go check on their property and valuables in half-collapsed houses in spite of the risks. Instead of police acting as barriers, there was a patrol team of policewomen who made the rounds of emergency shelters checking on the condition of victims and listening to complaints and problems. The citizens were grateful for this kind of police activity and did not seem to feel it inappropriate. In mobilizing what limited police resources were available, it was ultimately decided that priority should go to the rescue and location of missing persons rather than to securing the disaster zone, so even after days had passed and survivors seemed unlikely to be found the search continued because of the conclusion reached that "the public won't be satisfied until we find the last missing person."

The harsh gaze of the public is the reason as well that in June 1995 it took fifteen and a half hours before a 50-man police team launched an assault on a domestic airplane commandeered by a would-be hijacker. If shots had unavoidably been fired to prevent the hijacker from trying to escape or resist arrest, public censure led by the media would have been overwhelming. The situation was handled with extreme care because of the knowledge of how feelings of social injustice would have been aroused should even one passenger have been caught in the cross-fire, and of the heavy burden of responsibilities that would have been involved.

As these cases show, the maintenance of human relations based on emotional solidarity is an important criteria for judgment on matters of social justice. The fundamental premise for judgment of what is just and unjust is the continuity of harmonious human relationships, as found in the quake-hit area where both victims and police acted and cooperated in the expectation that they would continue to be part of the same community. This led to the decision to utilize limited police resources for activities designed less for effectiveness as for strengthening emotive bonds. Citizens relied on the police to protect them and made no attempt to protect themselves. A relationship of mutual trust and interdependence exists between them.

Extremely wary of anything that might threaten their relationship with citizens, therefore, the police adopted the approach of acting only on the needs of citizens. The citizens, moreover, support this stance. One of the consequences of this passive approach, however, is that the police stay out of spheres such as the home, schools, and religious organizations where their intervention might threaten the confidence citizens have in the police. This is part of the reason that domestic violence, acute bullying and the various crimes of a cult like Aum Shinrikyo have gone unchecked.

There are many reasons this passive police force has been able to maintain a high level of public safety up until including the fact that public safety was not left up to individual efforts. An important reason is the society that Japanese have built that places a high priority on long-term human relationships. In our highly fluid fin de siecle society, however, individual-centered behavior has grown stronge,r presenting law enforcement with many new challenges. People will change employers more frequently, there will be more divorces, and a larger population of nonpermanent residents. These factors inevitably mean difficulty in maintaining social justice and obtaining redress of injustice based on a long-term continuum of human relationships. People's values and experience are much more diverse today, and considering the much-in-creased movement across national boundaries, our criteria for judging social justices needs to be more transparent. We need rules that are more objective and clearly defined.

In order for the diverse peoples of the world to live in peace in our increasingly diversified, globalized age, perhaps we need to define rules for social justice and redress of injustice that can be maintained and applied universally. Consensus-building toward this goal should be sought and ways considered of educating people in that direction.

TOSHIO YAMAGISHI:

I would like to make two comments on Professor Iwao's stimualting essay. The first concerns the cultural relativism represented in it. As I understand it, the main point of Professor Iwao's comments is that it is not fair to judge the fairness of a social practice using a standard of fairness imposed from outside, i.e., from another culture.

I am generally sympathetic to this view. However, we should pay attention to some of the logical implications of cultural relativism. One possible implication, although Professor Iwao was careful not to fall into this trap, is that justice or fairness is in the eyes of the beholder - what is just is what people think is just. If we adopted this completely subjective notion of justice and fairness, the killing of an entire ethnic group, such as in the case of the Nazis or the Khmer Rouge, could be considered a just deed simply because the people involved thought it was just. The intellectual challenge we face is how to avoid this implication while advocating cultural relativism.

The second comment is on the interpretation of the "collectivist" nature, or group-orientation, of Japanese culture. As background, let me briefly mention the results of an experiment I conducted on the mechanisms behind in-group favoritism.

In the early 1 970s a European social psychologist named Henri Tajfel conducted a series of experiments that had a large impact on research about in-group favoritism and discrimination against out-group members and social psychology theory more generally. In these experiments participants were separated into two groups based on a trivial criteria, such as their preference for the paintings of Paul Klee as opposed to Vasily Kandinsky. They were then asked to allocate money between one in-group member and one out-group member. Surprisingly, at least to Tajfel and others, participants gave more money to in-group members rather than out-group members even though group membership was based on artificially contrived and inconsequential preferences. This finding, and later findings replicating this result, have been taken as evidence that in-group favoritism or preferential treatment is basically a psychological phenomenon. People favor in-group members because they like to do so.

The idea of cultural collectivism is based on a similar logic. The basic characteristics of a collectivist culture, the maintenance of harmony among group members and voluntary cooperation toward groups goals, are thought to be basically psychological in nature. Members of a collectivist culture like to maintain harmony and cooperate toward group goals. Therefore, culture is conceived as a fundamentally psychological or subjective matter. This is a view that I want to challenge.

I conducted an experiment similar to Tajfel's, with participants separated into two groups based on some trivial premise. The participants then played "Prisoner's Dilemma" games in which they could choose either to cooperate with a partner or act egotistically. Participants played the game with an in-group member and an out-group member. According to the theory developed by Tajfel as well as our intuitive expectation, one would predict that participants would act more cooperatively with an in-group member than with an out-group member.

However, this was not what we wanted to demonstrate. We wanted to show that this kind of in-group favoritism does not always occur. The simple fact that the partner is an in-group member or an out-group member is not enough to make participants act cooperatively or egotistically. We demonstrated that participants acted cooperatively toward an in-group member only when they knew that the partner knew that the participant was an in-group member. Group membership itself did not make any difference; what was critical was the fact that the partner recognized the participant as one of the same group.

The implication of this experiment is that in-group favoritism is fundamentally not a matter of personal preference. If it was, the participants would have favored in-group members regardless of how they were viewed by their partner. What was critical was the participant's expectation about the reciprocity of in-group favoritism; the idea that the favor given would later be returned in some fashion, although not necessarily from the same person but perhaps from another in-group member. Results from a series of six experiments support this interpretation.

I believe and currently continue to conduct research to support the view, that cultural collectivism is characterized by this shared expectation of the reciprocity of in-group favoritism. The presence of a collectivist or group-oriented culture in Japan suggests that people in Japan generally expect in-group favoritism. Thus, in a sense, a collectivist society is a fundamentally unfair society, in that preferential treatment for in-group members is expected not only as a social fact but as a moral imperative. It is not only expected, but considered morally just to give preferential treatment to in-group members.

As Professor Iwao pointed out, this does not mean that Japanese society is unjust. It may even be considered a fair society in the sense that everybody is permitted to act in an unfair manner. In this situation, an individual acting in a universalistic manner by not giving preferential treatment to in-group members may be disadvantaged. A good example of this is the recruitment of university faculty from in-house graduate students, a practice widely accepted in Japanese academia. If you hire a graduate from another university while all the other department are recruiting among their own graduates, your students will not be able to find a job. In a sense, you are "forced" to act in an unfair manner in self-defense. We have some experimental evidence that participants give preferential treatment to in-group members in order to neutralize the unfair treatment expected from out-group members.

Japanese culture therefore should be considered a culture of particularism - the expectation of in-group favoritism - not of collectivism. The collectivism-individualism comparison drawn up between Japan and other nations is therefore misleading; the comparison should be particularism- universalism.

The particularistic society based on the principle of in-group favoritism is a fundamentally unfair society. In-group favoritism implies a double standard which is of itself almost a definition of unfairness. But blaming a society for its unfair attributes is a non-starter. As Professor Iwao has stated, the application of universal not particularistic standards should be the basis for achieving social justice.

Moreover, I believe that the socio-economic conditions that have been favorable to Japan's particularistic social system are now disappearing. The strategy for avoiding social uncertainty and risks through commitment formation now entails opportunity costs. That is, maintaining a stable relationship requires partners to give up opportunities for getting better deals outside their current relationships. Using the terminology of economists, commitment formation is an efficient means to curtail transaction costs, but it incurs opportunity costs. Thus, insofar as the general level of opportunity costs remains low, the social system based on long-lasting commitments and relationships works fine. That kind of society may be unfair to outsiders, but as far as insiders are concerned, it is a comfortable place to be.

However, once opportunity costs increase beyond a certain level, the particularistic social system becomes a liability for society, especially if the social system becomes an obstacle to economic efficiency. As outside opportunities increase as they are in and around Japan, the maintenance of commitment relationships become too costly. Finally, as Professor Iwao has pointed out, the stability of social and personal relationships will become less characteristic of Japanese society.

Once this change occurs, and I believe that change will occur fairly quickly, Japanese society will be left with less stable social and personal relationships and also with moral foundations that fit the new social environment.

This brings us back to the issue of cultural relativism, which originates from the celebration of cultural differences and how those differences lead people toward varying definitions of concepts like justice and fairness. The point I am trying to make is that culture and the way people define justice and fairness has to change to meet the challenge of a new socio-economic environment. Professor Iwao seemed to come to the same conclusion in her essay. We have to somehow transform the particularistic nature of our moral grounding into more universalistic conceptions of justice and fairness. We have to acknowledge that the application of the same standards to everyone regardless of group membership status is at the core of universalistic moral principles. In short, we need to make Japan a more fairness-oriented society. Discovering how to facilitate this change is a great challenge for social scientists working in and on Japan.

YOKO HAYASHI:

Professor Iwao has described "social justice" from her perspective as a social psychologist. Her discussion was stimulating as well as provocative. Now I would like to respond from my perspective as a feminist lawyer practicing in Japan.

Professor Iwao referred to the concept of equality as a principle that Americans tend to judge using their own conceptions and standards. She further noted that "the badges of equality in the US appear to be rather visible factors like status and wage levels." My first comment is that equality in the workplace between men and women, including status and wages, is the universal primary concern among women not only in western countries but in others as well.

Let me introduce a few examples. Earlier in 1995 the United Nations Committee for the Elimination of Discrimination against Women (CEDAW) adopted a recommendation on the status of Japanese women, which included the following remarks:

The Committee observed that despite the introduction of an Equal Employment Opportunity Law, the practice of individual discrimination through indirect violation of the law continues, which must be severely sanctioned. More pressure should be created on the private sector to comply with the law since the levels of jobs offered to women as opposed to male graduates has dropped considerably with economic reforms. ₃

As the United States has not yet ratified the UN Women's Convention under which CEDAW was formed, it was not Americans who initiated this recommendation. In fact, I attended the hearing conducted by CEDAW prior to the adoption of the recommendation in 1994 as a nongovernmental organization observer. I witnessed committee members from around the world raising various critical questions about the Japan report.

Another example is drawn from the statistics in the "UNDP Human Development Report 1994" published by the United Nations Development Programme. According to that report, although Japan ranks third in the world in terms of overall human resource development, Japan ranks 19th when looking at the socio-economic status of Japanese women, in particular wage disparities. CEDAW and UNDP involve people from many backgrounds and countries of origin, making it difficult to argue that their expressed views and data are that of the "West."

My second comment is that I agree with Professor Iwao's view that Japanese women do not envy or covet the position of Japanese men in society. However, this does not necessarily mean that Japanese women are willing to waive their rights to being treated equally. It is true that Japanese women value the household and family, but they still speak out about being treated fairly in the workplace and in the community. I do not see any difference between Japanese and American women in this desire for basic fairness.

Professor Iwao suggested that rather than focusing only on power and status, Japanese women take into consideration stress and responsibility, the availability of leisure time and life-style options, when comparing themselves with men. The difference of opinion between Professor Iwao and myself about this stems from different understandings about why Japanese women hold low-paid and less responsible jobs. Professor Iwao maintains that they choose to do so. My perception is that Japanese women do not actually choose, but are forced to stay in those positions.

I am fairly optimistic, however, about the prospect for change concerning the status of women in Japan. During the past few years the Japanese judicial court has made several important rulings on gender discrimination in the workplace which have dealt with the issues of equal pay, sexual harassment and indirect discrimination. I often feel fortunate that through may practice I am able to see these endeavors to construct a more fair and just society in Japan.

I share Professor Iwao's view that our criteria for judging social justice needs to be more transparent. We need more rules that are objective and clearly defined. As she has concluded, people who live in a diversified globalized age need to define rules for social justice that can be maintained and applied universally. I believe that Japan and the United States will be able to contribute to the drafting of these new rules of universal social justice by exchanging information about our own societal experiences.

SESSION II: US and Japanese Conceptions of Future Power Configurations in East Asia

TAKASHI INOGUCHI:

The relationship between Japan and the United States should be located in the broader context of global change. Although both countries are a large part of that global change, it is my impression that US-Japan relations have tended to be treated more or less bilaterally and as a somewhat narrow question. In may comments I shall try to place the relationship in this broader global context.

In my view, the last ten years have produced many important changes. I identify three in different areas; international security, the world economy, and governance. Global change in the international security configuration symbolically started in 1991 with the disintegration of the Soviet Union and the end of the cold war. The second global change, in the world economy, started with the Plaza Accords forged in New York in 1985. That event has been termed the "end of geography;" that is to say, the disappearance of significant borders in terms of global financial and economic activities. The third global change took place in 1989 in Berlin, with the collapse of communism there. This has been called by Francis Fukuyama "the end of history." As these three major changes have taken place during the last decade I think it is very important for us in 1995 to define the meaning of these three global changes in a way that would allow us to better understand the nature of US- Japan relations in the global context.

I

The end of the cold war was probably first proclaimed by President George Bush, and he meant by that victory for the United States. But I view this "end" differently. The end of geography was first phrased by Richard O'Brien, a financial consultant working in London, in his book entitled, Financial Integration - The End of Geography. He meant to illustrate the disappearance of borders and the victory of financial capitalism. But I also define this "end" in a slightly different way from Richard O'Brien. The end of history was coined by Francis Fukuyama. By this he meant the victory of capitalist democracy. But I also define this "end" in a slightly different way than Fukuyama.

How do I define these three "ends"? First, the end of the cold war is not the victory of the United States, but the disappearance of the supremacy of US military forces and the forces that tended to undermine the strengths of the United States. Those strengths were technology, finance, and a strong social, economic and political base which sustained US military supremacy. By the end of geography I mean the steady globalization and liberalization of economic activities and the counterforces of protectionism and regionalism. By the end of history I mean not the victory of capitalist democracy, but by the appearance of the very widespread process of democratization and the difficulties associated with insuring a stable course within that framework. There is apprehension about destabilizing momentum building up in such a framework.

I am proffering somewhat dialectical definitions, because I want to stress that these changes cannot simply be seen as the victory of the United States, as the victory of financial capitalism, as the victory of capitalist democracy.

All these ends originate from progress in technology. In the case of the end of the cold war, weapons technology has done a great deal in terms of helping the Soviet Union destroy itself. Technological innovation in nuclear forces was an important factor leading to the end of the cold war. In the Soviet Union technological innovation had reached a stalemate, but the threats coming from the United States in the form of more and more advanced systems led the Soviet Union to divert its economic resources to be able to attempt to push its technological frontiers. This effort ended in total failure under Gorbachev in the late 1980's.

Progress in technologies of communication and transportation brought about the end of geography. We see instantaneous economic transactions, especially in the form of financial trading, has been doing the enormously important job of ending geography.

In 1985 the Plaza Accord was concluded and by the end of 1986 the volume of currency trading surpassed the volume of trade in goods and services. Previously, the value of conventional trade in goods and services had been far greater than the value of currency trading. But within one year of these agreements, that ratio was totally reversed, and the trend has been accelerating since then. This is the end of geography in the Richard O'Brien sense. It is a victory for financial capitalism, and it is the casinoization of capitalism according to Susan Strange. But the counterforces are strong as I have repeatedly been saying.

Regarding the third change, progress in technology is a major causal factor, especially telecommunication and related technologies. We remember that in the early 1970's and 1980's in the Soviet Union, mass communication was at least reported to work in a certain sense to encourage the dissident movement in the Soviet Union. By 1989 the facsimile proved a great and useful technological advance both prior to and in the aftermath of the Tiananmen massacre. CNN played a large role in reporting the Gulf War, and there are numerous other examples of the impact and influence that this kind of electronic, instantaneous coverage brings during moments of upheaval.

This is but a very brief sketch of global changes over the last decade, and these changes will continue to take place and even accelerate in the coming decade and beyond.

II

Japan relations should be located within these three-fold global changes. First, in the international security area, a weak sense of urgency is very clear. There is an intense feeling, especially on the part of the United States, but increasingly on the Japanese side as well, that despite a very ill functioning economy, that there are no common major threats. Following the collapse of the Soviet Union, alliances seem to suffer from a weak sense of urgency, as the recent Joseph Nye- Chalmers Johnson debate illustrates.

In the second area of world economy, the globalization and liberalization of economic activities is being painfully adapted to by both countries. This is natural since both the US and Japan are the largest and most relatively dynamic economies. Although Japan's economy is not currently dynamic, it is relatively dynamic in the longer term. These forces are balanced by two major trends in the form of protectionism and regionalism. Meanwhile, our bilateral economic relationship has been dominated by the question of a balance of trade in goods and services. And here we have so many stories - US-Japan automobile talks, air route disputes, and many others. The whole picture is very indicative of the whole syndrome of the end of geography.

Governments and international regimes seem ineffectual in this regard. And market forces are weird in the sense that nobody seems to have a handle on them. Even the IMF does not seem to have much control over the way that international financial market forces evolve. Apparently the IMF controls only about 2% of international financial markets. In the case of international trade, only 10% of international economic activities are covered under the framework of the World Trade Organization.

Somehow market forces have become very strong, but at the same time, they are very difficult, if not impossible to constrain, no matter whether it is national governments or international economic institutions attempting to do so. Drastic exchange rate movements have taken place in this environment, and these were also very difficult for national governments and international institutions to have to deal with. In short, things became messy, and US-Japan relations exemplified this messiness.

Again, in the area of governance, the US and Japan are symptomatic of a larger trend of many political systems - ineffective government, an alienated and disenchanted public, a dominant business sector, a fragmentation of discernible social preferences. Kevin Phillips' volume is very enlightening on this aspect of US-Japan relations.

There is widespread disenchantment among the American public about the doings in Washington. What has caused this spread of distrust in American style democracy, so praised by Alexis de Tocqueville? According to Vladimir Lenin, American democracy occasionally manifested itself in huge turmoil almost verging on civil war. According to Kevin Phillips, the civil war is taking place in the form of an American style revolution. But maybe revolution is too strong a word, but Kevin Phillips, being a known revolutionary, uses his own definition of the word. And de Tocqueville, Lenin and Phillips would probably concur on the state of politics in American democracy.

A similar thing can be said about Japanese democracy. When the Murayama government was established I called it a "karaoke democracy" - a hollow government reflecting the increasing marginalization or proliferation of the sphere of politics in Japanese society. So both in the United States and in Japan, there is more or less the same, ineffective government, alienated public and strange goings on.

III

Locating US -Japan relations within the three fold global changes is relatively easy compared with delineating US and Japanese conceptions of future power configurations in East Asia. A shorter term perspective would require considering US-Japan relations for the next half a century, because these days one decade is just as meaningful as one day.

In 1994, the US-North Korean accord on nuclear non-proliferation was concluded. According to the text of that agreement, if executed faithfully by both sides, in ten years the major participating nations will have prevented North Korea from acquiring nuclear weapons. This is supposed to be accomplished by year twenty-four, with aid to North Korea for oil production, and alternate energy supplies like light water nuclear reactors. Even if both sides faithfully and rapidly implement everything agreed on in the code it would take at least ten years to accomplish this task.

With respect to Hong Kong in 1997, it is almost yesterday. Thus, in order to see the future, we have to look at the future in a wider, longer term time span like half a century. That makes commentators feel very safe. Because if you talk about tomorrow, you can easily become a target for criticism, but fifty years from now, who will be around to criticize whom?

In order to say something meaningful, I introduce a Kantian perspective to see the logic involved in delineating five scenarios of the US-Japan and US and Japan and East Asia fifty years from now.

Kant's perspective was basically very simple. He published a book called The Perpetual Peace in 1795. This is a very slim book, but with arguments which are still, I think, largely valid in many ways. The main argument goes that in order to achieve perpetual peace, three major measures, or three major lines of thought, are important. One is the legal piece. This is a Grotian kind of peace that features the enhanced institutionalization of codes and rules and norms among sovereign states that make it harder for sovereign states to resort to war.

The second is liberal peace. This is the title of a forthcoming article by Bruce Russett of Yale University and others in the Journal of Peace Research which basically confirms the 19th Century British view that peace dovetails with free trade. Of course some people argue that Britain did the opposite. Liberal peace is economic interdependence across boundaries under a liberal international economic order that creates shared economic interests which are conducive to creating hopefully perpetual peace.

Russett and his co-authors empirically test and confirm the hypothesis of liberal peace. Of course, since it is a quantitative study, many would argue with its conclusions, but it is significant that the Kantian insight on liberal peace has been empirically and historically tested so recently.

Thirdly, there is democratic peace. Again, Russett has published a book that seeks to validate the proposition of Kant that democracies rarely fight each other. In the original version of this model, republican parties do not fight each other because of the necessity of the government to satisfy the public's demand for accountability and transparency. Russett has tested the basic validity of this insight drawing on Ancient Greek experiences as well as 20th Century experiences.

There are two other perspectives of the non-Kantian variety which I use to illustrate my thinking on the US and Japanese conception of future power configurations. One is balance of power realism which is, I think, popular in many parts of the world. The second is realist bandwagoning.

Realist bandwagoning is not really balancing power, especially in the East Asian context. It is a situation where the weaker powers join the stronger power by bandwagoning, and by so doing trying to attain peace. This is a version of an observation recently made by Henry Kissinger in relation to the rise of China. He sees the prospect of non-Chinese East Asian powers aligning themselves closer to the position of China in a softer, hegemonic arrangement.

IV

Five scenarios of the US, Japan and East Asia, can be proposed: legal peace, liberal peace, democratic peace, a contested peace, and hegemonic peace. If you don't like the term peace, you can just as easily say legal war, liberal war, democratic war, contested war, and hegemonic war. It doesn't really matter. Peace and war are basically inseparable in many ways - a realist perspective tells you that peace and war are the same since peace is attained by war. The confusion is deliberate, not arbitrary. If you do not adopt the realist perspective, you have got to use the word peace, however.

Legal Peace

The two things that tie the US and Japan together are the non-proliferation treaty and the US-Japan security pact, according to this thinking. The non- proliferation treaty was recently indefinitely continued by signatory countries, but immediately afterward, China and France declared that they would resume nuclear testing.

The US-Japan Security Treaty is again under intense discussion, as the Nye- Johnson debate illustrates. Here the problems are very difficult to resolve, because if the US and North Korean accord actually comes about by the year 2004, what kind of nuclear peace is present in the region? The United States government is helping the DPRK restore its whitewater reactors which are regarded by some experts as capable of creating nuclear weapons. Even the US government itself had made the argument prior to the accord that whitewater reactors could be used to help develop nuclear weapons. If this is the case, the near term prospect for nuclear proliferation will become even greater.

The US government's main aim seems to be to place North Korea under the monitoring force of both the International Atomic Energy Agency and the United States government. Nonproliferation can be better guaranteed if you are able monitor developments closely. That is why this accord was concluded by the US government and that is the strategy of the United States government has used to attain legal peace, especially in the nuclear area.

I should also mention under this heading that suddenly this year the Japanese government has begun to serve as a nuclear abolitionist of a sort. When China resumed nuclear testing Japan protested and invoked political conditionality (at least so it was perceived by China) by threatening to reduce official development assistance to China unless the testing was halted. When France declared the resumption of nuclear testing the Japanese government joined the boycott of French products promoted by social groups and individuals. That boycott gained attention in the European Union, Oceania and the South Pacific.

Concerning issues of energy supply and demand and legally imposed peace regimes, think of the case of Indonesia. This country is an energy exporting country with petroleum and natural gas as the mainstays of government revenue. This revenue source has been dwindling fast because energy needs for domestic industries and households have been increasing at astonishing rates of speed. The Indonesian government will have to start buying energy sources from abroad despite its enormous natural resources.

For other East Asian actors who are not resource rich the picture is bleaker still. We have to do something on our own to guarantee energy supplies, unless the United States is able to assure everyone access to the energy supply market. Frankly, this is not something that we can expect the US government to be capable of doing.

If something happens in North Korea, China, Indonesia, Pakistan or Japan, the prospects for peace could quickly become precarious. We never know what is taking place between Russian military, social, or political groups, not to mention their counterparts in all of the countries of East Asia.

Liberal Peace

Under the liberal peace framework, free trade is seen as encouraging peace. But the other counterforces mentioned - protectionism and regionalism as well as anti-foreignism - are functioning very vigorously, so we cannot be assured that liberal peace is either attainable or sustainable.

Japanese and US accords on automobile and parts were gained through liberal peace. The auto accord is a loose, almost empty agreement by the two governments, which leaves outcomes basically up to the forces of global markets. More disputes like this are likely to take place, but this is not a situation that suggests that the US and Japan will start to fight a real war in any sense. This is a liberal, very loose and hollow ordering of interests and conflict. Governments somehow seem very marginalized in this set-up.

Democratic Peace

The US and Japan promote the fact that they are both democracies. But, as Kevin Phillips and I have been saying about these respective political systems, they are hollow ones. Jean-Marie Guehenno, formerly of the French Foreign Ministry, has written a book entitled in the United States The End of the Nation-State which suggests that the hollowing of democracies is universally observed in industrialized countries.

Even if democratic peace is attained, we cannot exclude the possibility of war between non-democracies and between non-democracies and democracies. We have to see the prospect of Chinese democracy and North Korean democracy and their difficult transition to democracies during which something might happen. Democracies could start attacking non-democracies in a difficult transition or vice versa.

We cannot really rest assured that democratic peace prevails in the future in East Asia. Unfortunately, the US and Japan's preparedness for such emergencies or exigencies is not very clear.

Contested Peace

This is a realist balance of power perspective which basically describes scenarios of contested peace. Each power tries to make nationalistic claims in one or another version. If you look at an Indonesian geography book one realizes that the map basically (although not officially) claims an area encompassing east of Madagascar to west of Peru as greater Indonesia. A former prime minister of Thailand once characterized as "greater Thailand" a region that would include Laos, Cambodia, as well as Yunnan and Guizhou, and some of Burma. One of the academic periodicals for Chinese foreign students studying in Japan is called "The Bubbles in the Eastern Sea." That is an ancient Chinese name for Japan which evokes a clear picture of China's imaginary map of influence.

Without putting any credence in the specific claims of Indonesia or Thailand or China, my point is that basically these imaginary maps contest each other. The South China Sea is an example of the collisions presented by such imaginary landscapes. No single country dominates the struggle. Basically the whole scenario rests on the rise of these possibly aspiring hegemons.

Cooperation and conflict between the nation-states will continue as the United States will probably continue to claim hegemonic status, China may claim new hegemonic status, and Japan, Indonesia, Vietnam or even India, stand in the wings as other potential candidates.

Hegemonic Peace

In the case of East Asia, hegemonic peace under the United States has been the rule for the last half a century. During the cold war period US hegemony brought about peace except during the two major wars, the Korean War and the Vietnam War, but even during those conflicts hegemony played a very large role.

The future suggests that the role of hegemon could continue to be played by the US, or it could be China's, or even Japan's. These are dramatic scenarios, but they say something about the future configuration of power in East Asia, and continue to involve both the United States and Japan as major actors in each scenario. My conclusion is very simple. The future power configuration, or at least the thinking about the future power configuration, is more strongly, more fundamentally determined by where one sits, and from what angle one looks at, then some peculiar historical, cultural, economic or domestic factors between the two powers, or among the major powers.

We have to pay more attention to the at least partially validated logic involving war and peace in order to predict and reflect on the future power configurations in East Asia. How the United States and Japan conceive of and define the five kinds of peace described, obviously, is a very important subject for future study.

ROBERT IMMERMAN:

It was very refreshing and somewhat of a treat to have Professor Inoguchi place the day to day concerns of diplomacy and political action in this philosophical context.

One thing does worry me, however. I do hope that along with the end of history and the end of geography we do not encounter the end of philosophy. I do hope that distinguished scholars will think big thoughts and try to place what diplomats and researchers engage in day to day into a larger conceptual framework. But if the successors to Kant and Hegel are Kevin Phillips and Francis Fukuyama, we are in big trouble.

I would like to take some issue with some of the phrases that are now bandied about, such as the end of geography, the end of history and possibly even the end of conference making as we know it here.

The end of geography is a concept that has not reached Croatia, Bosnia, Macedonia, Burundi or Rwanda quite yet. And, if anything, as the end of the great power cold war clash between the Soviet Union and the United States has demonstrated, many of the geographic issues of the 19^th Century and earlier are still alive and kicking, much to the chagrin of all of us.

Secondly, the end of history. I have always interpreted that phrase as Francis Fukuyama's somewhat too clever effort to say that Marxist analysis has come to a dead end with the collapse of the power base of Marxism. History, as we all know, is rewritten by all of you, each generation, to justify the current interpretation of what has passed. So, the Marxist concept of history as an automatic, objective phenomenon that explains all things at all times may be dead. Historical interpretation, however, passes from generation to generation through many, many different changes.

That is perhaps a too cynical introduction to what appears to be the main theme here which is that the US and Japan are having difficulty functioning in this new period that we still cannot quite define and, for lack of a better term, we still call the post cold war period. How will these two actors continue to engage on the stage that we call East Asia and the Pacific?

I think Professor Inoguchi has provided a very interesting classification of the policy options for both actors. First of all, however, I am not convinced that these are the only two major actors. For example, I think that China is the one power in East Asia which is not necessarily content with the status quo and not necessarily content with the peace imposed by war that Professor Inoguchi has mentioned.

To the extent that China attempts to modify in some way or another this status quo, either by reasserting in a military sense its sovereignty over Taiwan or by attempting to exert greater control over the resources in the South China Sea, or by appealing to overseas Chinese populations in the post-Suharto, post- Mahathir, post- Lee Kuan Yew South East Asia - the status quo in East Asia will be seriously disrutped.

Secondly, it is not at all clear to me that the cold war has completely ended in East Asia. Certainly the phenomenon of the state of North Korea has to be explained in part by the preservation there of the philosophy of communism through one family: the idea of a totalitarian state where every form of repression is used to compel citizens to serve the state for a larger ideal which is still defined in Marxist terms.

While the specifics of the difficulties on the Korean peninsula may lie deep in Korean history, the challenge there is still the success of a state evolving rapidly into democratic capitalism and having succeeded largely in its efforts at modernization, as opposed to the failure of a state whose whole justification is that it preserves Marxist wisdom. The DPRK has no justification for being other than as a vehicle for Marxism. It does not represent the unique repository of Korean culture, it does not represent a particular ethnic group as opposed to another ethnic group. There is no particular religious or other reason for the maintenance of the state of North Korea as a state, other than that it has inherited a certain form of ideology and wishes to preserve and presumably universalize it. In that sense, it seems to me, the cold war still exists in East Asia.

Because of these factors that I just mentioned - the strong probability that China is not necessarily satisfied with the status quo and that it may resort to other than peaceful means to change it, and the efforts of North Korea to carry out its mission of universalizing its peculiar regime - the US- Japan security relationship still maintains a considerable amount of its cold war validity.

The question then is, whether the external political threat in East Asia is sufficient to maintain this bilateral alliance relationship in a new period when both Japan and the United States are turning inward? Here, I think, we have to analyze the domestic political situation in both nations, and we have to look at the political forces shaping these two imperfect democracies.

I think that Professor Inoguchi made a very valid point when he warned against looking at the US-Japan relationship in a vacuum; this bilateral relationship should be seen in a much larger perspective. Those who focus on auto parts or air routes, at either end of the Pacific, as the end-all and be-all of the US-Japan relationship are obviously falling into the trap of looking at US and Japan relations as simply the adding up of balance sheets in the two countries, rather than looking at the roles these two democracies have to play in this future power configuration in East Asia.

I would like to carry this discussion one step further. Without any empirical evidence, I like to think of the world's major current problems as largely stemming from the way in which nation-states are reacting to the still unresolved issue of how to successfully modernize traditional societies that resulted from the efforts of the Western industrialized nations to dominate the rest of the world during the 19th and early 20th centuries. You could even say that the cold war was one aspect of this modernization struggle. The forces at work in Russia, and then in Eastern Europe, relied on a defective Western ideology - Marxism - to achieve their economic and social development. And that route proved not to be a very successful one.

What we see now is another effort to come to grips with modernization. How do we bring into this so-called borderless world or internationalized economy those countries that still have not established national unity, those countries that have still not established workable economic systems, countries that still suffer from all sorts of social upheaval caused by the migration from countryside to city, displacement in the agricultural sector, and unresolved religious, social, and ethnic conflicts?

It is in this area that the US and Japan are going to have to reach some kind of burden sharing arrangement. It is impossible to imagine that 50, 60, 70 years from now, the United States, Canada, Japan, Australia, New Zealand and a small group of countries in Western and Northern Europe can be oases of prosperity, while the rest of the world is still in major turmoil. The lack of concern about this issue both in the United States and in Japan, not to mention what is going on in Western Europe these days, is the fundamental problem. We must work together to adjust the process of modernization along lines that lead to relatively peaceful solutions. We must respond to burgeoning ethnic and religious social clashes, as well as to a new global agenda of problems: environmental issues, the population explosion, refugee flows that are uncontrolled, narcotics and crime, and new threats to public health. All of these issues are occurring on a scale hitherto unseen, but are now brought to our attention because of a new world economy and the rise of technology. All of these are issues that the two nations are going to have to face jointly. But so far it does not seem that they are doing so.

Preoccupation with what I consider cold war ideas or domestic political pressures still prevents the two nations from acting. In the United States, we are bent on proving that we are tough on Japan. In Japan there is an attempt to prove once again that Japan is always the victim, that Japan has no real international responsibility, but that it simply responds to pressures from the outside from potential aggressors, from hegemons, from forces that are trying to determine how Japan shall behave. I think in both countries there has to be an end to this. If we can claim an end of something, it should be an end of cliches in talking about each other. We should be trying to come to grips with some of the issues on the post cold war agenda.

I welcome Professor Inoguchi's comments about the need for the United States and Japan to continue to act in concert in East Asia and to continue to address these major issues that are starting to face us now that the Soviet threat, at least, has disappeared.

HIDEO SATO:

I agree that we should think of US -Japan relations in a global perspective. We are too much preoccupied with what is immediately around us, such as bilateral trade issues. So, I think it is very important for us to use a global perspective.

I also think we need to think of US-Japan relations in a longer perspective, which is very difficult. We tend to think in the short term because in the long run we are all dead.

In his published work, Professor Inoguchi has presented four scenarios for analyzing US-Japan relations in a global perspective: Pax Americana Phase II; Pax Consortis, (a kind of plural joint leadership for the world); Pax Nipponica, an international order led by Japan, which is quite unlikely and not so desirable; and "Bi-gemony" between Japan and the United States. In my own work I have also presented four scenarios: Restoration of Pax Americana; joint leadership (a kind of Pax Consortis); Pax Nipponica; and competing blocks, which implies a world of regionalism.

I happen to think that the idea of joint leadership, with Japan, the United States, Europe and other major powers sharing information, consulting, and making joint decisions would be a viable kind of option for the future, although not quite possible in the short run. And I also tend to think that the kind of regionalism, which is often defined as open regionalism, can be compatible with plural joint leadership, or Pax Consortis.

Having said that, it is very difficult for both Japan and the United States to move in that direction. As Robert Immerman said, we are overwhelmingly concerned about domestic affairs. Despite the relative economic decline of the United States, the United States still wants to assert hegemonic leadership, and still wants to maintain its power and influence and expect others to follow US decisions. What about Japan? Despite its relatively enhanced position in the world, it is still very inward-looking and very reluctant to bear international responsibilities, that is, bear the cost of contributing to the collective goods of the world.

With a global perspective we need to overcome this power transition problem by moving in different directions: the United States in the direction of sharing power, and Japan in the direction of sharing greater responsibilities.

Professor Inoguchi talked about the end of geography, which is a very interesting expression. It still takes twelve or thirteen hours to fly from Washington to Tokyo, and you still get jet lag. Also, as he pointed out, in textbooks, at least, geography has not ended.

In other words, despite growing interdependence, particularly economic interdependence, characterized by such expressions as "the borderless economy", the interference of the state has not ended. The state is very much alive and kicking. This conflict between the continuing dominance of the state and growing interdependence is difficult to manage, as reflected in the recent US-Japan trade negotiations, including the auto trade talks. Most of the formal barriers to trade have been reduced or eliminated in both Japan and the United States and now we are talking about keiretsu or informal business practices or structural barriers, which have not been defined by the GATT and which WTO rules do not cover.

In other words, the two states, Japan and the United States, are now trying to resolve these issues through intergovernmental, interstate negotiations at the very time when the governments have less and less control over them. Now, it is very difficult for the Japanese government to give effective administrative guidance to Japanese auto makers so that they purchase more American parts, or to persuade Japanese consumers to buy more American autos. At the same time, the US side is getting more results-oriented, and expecting to resolve these issues through intergovernmental negotiations. This is quite understandable in view of the nature of the domestic politics involving the Clinton administration.

We have to think of ways to resolve these private sector issues by involving more actors in the private sector in the process of conflict resolution. Some private industry associations have been saying that private sector issues should be resolved by the private sector alone. But, of course, things are not so easy. If you leave everything to the private sector, corporate interests may still get emphasized at the expense of consumers. Governments should still be involved in antitrust and other efforts to enforce competition in the marketplace.

I think understanding this contradiction between the dominance of the state and the growing interdependence of the public and private sectors will put us in a creative position to think about US-Japan relations in the Asian Pacific region. We should try not to think too much in terms of interstate relations. Multinational corporations, NGOs and other nongovernmental actors can be cooperatively involved in the Asia Pacific Region. Even among corporations, transnational industrial collaboration is going on, particularly among Japanese and American corporations, and even among Japanese and European corporations, in the Pacific Region. If you only use the context of state, Japan and the United States are seen as struggling in a zero-sum fashion to get the greatest share of the pie in the very dynamic economy of Asia. But if you take the position of corporations and other private actors, there may be a different kind of context in which to look at US- Japan relations.

In any case, US and Japan relationships in the Asian Pacific region should not be a zero-sum game. They could be a plus-sum game, and the five scenarios of US-Japan relations that Professor Inoguchi presented are quite relevant. Of course, it is important for us to think using both liberal and realist perspectives, but I think we should try to examine under what specific circumstances legal peace, liberal institutionalism, economic liberalism, or democratic peace can become more relevant and realistic.

Japan and the United States can try to cooperate in increasing prosperity in Asia, which I think will lead to greater stability and peace in the region, as Professor Inoguchi has suggested. Economic growth leading to prosperity may lead to greater pluralization or democratization, as we have seen in the cases of Taiwan and South Korea. If countries in the region can become more prosperous through US- Japanese cooperation in trade and investment, then they will become "have-nations" advocating the avoidance of disturbance of the precious status quo that has brough prosperity to them.

We must have a sense of direction. That is, we may be able to cooperate in a direction creating what Karl Deutsch has termed a "security community" in the Asia Pacific region; a community in which conflicts of national interest can be resolved by non-military means. I think we have a security community in Western Europe, between the United States and Western Europe, and, I believe, among OECD countries. What are the factors which characterize the security community among OECD nations? A high level of economic growth and prosperity and a relatively high level of democracy. Of course, we have slightly different conceptions of democracy among ourselves. But at least we have reached certain common levels of democratization.

Democracy and high economic growth could indeed be among the factors which tend to create a security community, according to a study conducted by Bruce Russett of Yale and others. I agree with this particular point that a high level of democratization, along with a high level of economic growth and prosperity, could lead to a security community.

We see, of course, very serious potential security threats with regard to the Korean Peninsula and the uncertainties in China during their prolonged transition of leadership. But luckily, I think, the United States and Japan do not have a serious conflict of interest with regard to these matters, although we have slightly different approaches with regard to China.

I think Japan's approach to China, aimed at helping to modernize that nation, may be a way to make China potentially more pluralistic and democratic in the future, and thus less threatening. Of course, the US is concerned that military modernization may make China a greater threat. But, in any case, we do not disagree too much with regard to these potential threats.

The rationale for maintaining the US-Japan Security Treaty may weaken in the future, not so much because the end of the cold war has made the US military presence in Japan less important, but due to the budget deficit problem in the United States. Of course, within Japan, there are some people who view the US-Japan Security Treaty as unnecessary, but other Asian countries need the US- Japan security arrangement for their own reason. Japan needs the treaty so that we do not have to face the difficult choice between greater rearmament or unarmed neutrality, neither of which is realistic.

There are regional fore for consultations. We have APEC in which the US and Japan can coordinate their views on economic development, free trade and so forth. There is disagreement between Japan and the United States as to how the region should move toward free trade. The United States is more interested in across the board free trade based on intergovernmental agreements. Japan advocates unilateral actions that reflect and respect the different degrees of economic development in the Asia Pacific region. But, in essence, these are not serious differences, and I think the US and Japan can cooperate. In the area of security, we have the Asian Regional Forum in which we can try to coordinate views on military threats, and potential security cooperation in the region.

SEIICHIRO TAKAGI:

Having heard two excellent and extended comments I have only a few more points to add. One of the comments I thought of making has to do with the one end which is often talked about, but was peculiarly missing from Professor Inoguchi's presentation; that is, the end of state power, or the end of the nation-state. This does not suggest the complete disappearance of the state, but the end of its role as the sole mover and shaker of world affairs. When I heard Professor Inoguchi talk about the growing disillusionment about the state, both within Japan and the United States, feelings about ineffective government and alienated publics in both countries, I was wondering, in the long run, fifty years from now, whether or not Professor Inoguchi is predicting the end of the state.

The interesting thing about this question was touched on by Robert Immerman when he described the uneven development of change in the world. He reminded us that the end of geography has not reached Bosnia or Burundi. Even if you predict the end of the state, this phenomenon will not take place uniformly throughout the world. Among the West European states, you can point to many phenomena which might be considered symbols of declining power of the state.

Some aspects of the US- Japan relationship, as Professor Sato pointed out, represent the decline of state power. But if you turn your attention to the rest of the world, many countries, particularly in East Asia, are still involved in nation-building and strengthening state power. There is clearly a very complex dynamic in the world with almost contradictory developments taking place simultaneously. This might be another aspect of the dialectics which Professor Inoguchi is fond of talking about.

The different place each nation and region finds itself suggests the third point I would like to make. Different articulations of the scenarios which Professor Inoguchi presented are produced in different parts of the world. Different regions are going through different scenarios of this future order. In Europe, for example, a legal peace or liberal peace or democratic peace scenario may have already been realized. In East Asia or the Asia Pacific maybe a less Kantian version of peace is being realized in the form of a balance of power arrangement.

Of course, I am not unaware of such developments as APEC and the Asian Regional Forum, which Professor Sato mentioned, but the predominant dynamics in the region now are more toward the dynamics of balance of power, which, by the way, is the kind of order which China seems to be particularly comfortable with. China predicts the future world to be a multi-polar one. Some of their scholars argue that this relatively irrational, peaceful, multi-polar order has been already realized within the Asia Pacific. These scholars argue that future world order will first be established at the regional level, leading gradually to the formation of a world order.

Faced with different articulations of order in different regions, US -Japan cooperation has the very confusing and difficult task of figuring out how we should share the burden. Yet, as Professor Sato argued, we are moving from the stage of burden sharing into power sharing, which was made necessary by the power transition phenomenon.

My sense is that we are gradually moving into a third stage, which I would call purpose sharing. I think our burden sharing and power sharing presupposes that we have a common purpose. But this position is being increasingly put into question. As has often been pointed out, there is a kind of realization or growing criticism of the imperfection of American democracy or a disillusionment about the overly permissive state of US public order. There is also a growing realization and sympathy with Asian criticism of American democracy which has been spearheaded by Southeast Asians such as Lee Kuan Yew of Singapore and Mohamad Mahathir of Malaysia. I think we do share a common purpose and common values, but this commonality needs to be constantly reaffirmed, as does the pursuit of the goals themselves.

SESSION III: Comparative Institutional Analysis: Measuring Convergence or Divergence?

EISUKE SAKAKIBARA:

My topic of discussion is comparative institutional analysis: measuring convergence or divergence. Under this somewhat abstract heading I would like to describe two trends which may be in conflict with each other: the trend toward globalization on the one hand, and the end of ideology and the increasing consciousness of civilization or cultural identity/national identity of the countries in question on the other.

I

With the demise of socialism, many formerly socialist countries in the world are now in transition to becoming market economies. Russia, Eastern Europe, China, Vietnam, Myanmar and India, are now in transition. A vast amount of the world, including these countries, are now open to multinational corporations of various countries. This is the main trend of globalization which is proceeding at a very rapid pace. The opening of markets, particularly in Asia, is not only very rapid, but very substantial. This provides a stage of action for the various countries in question.

Francis Fukuyama wrote a very famous article entitled "The End of History" in which he claimed that history has ended, (or capitalism has finally won), and that a pluralistic, parliamentary democracy and market capitalism has finally dominated the world. However, what we have experienced since the "end of history" is not necessarily consistent with the proclamation of the victory of capitalism over socialism made by Fukuyama and other intellectuals. The Russian experience in transition to a market economy has not been a major success. Eastern European experiences, at the very least, could be described in terms of a zigzag process translating to a market economy. Even those developed nations of the world, the United States, Europe and Japan, have structural problems. Many of these structural problems are probably related to the neoclassical market system these nations adopted.

In a book which was published recently in the United States and became a best seller, Robert Heilbroner discussed the nature of capitalism in the 21st Century. He argued that the major problems for 21st century capitalism were essentially two: globalization and environmental problems. Globalization is a problem for capitalism in the sense that it undermines many of the premises of neoclassical economic theory. Economies of scale or economies of scope in particular seem to exist in this global market. Factors of production now seem to move across national borders, so that comparative advantage may not exist in this globalized economic world.

Without going into details about environmental problems, let me mention that about twenty-five years has passed since the Club of Rome promoted the concept of the limits of the earth. Those limits have been reached and the problem now is that we have gone substantially beyond them. This explosion of population and rapid growth seem to have hit some kind of limit in terms of the capacity of the resources of the earth. Obviously, something dramatic has to be done to try to sort out and restructure the socioeconomic system of the world.

Another trend which I have identified is civilization consciousness or cultural/ national identity which has been keenly perceived in many countries in the world. This trend was pointed out by Samuel Huntington in his 1993 Foreign Affairs article entitled "The Clash of Civilizations." Although I do not agree with all of what Huntington has said, I do agree that the cold war was nothing but a civil war within western civilization. This view is consistent, I think, with the view which was espoused by historians and intellectuals of the interwar years of the 1930's and 1940's like Arnold Toynbee and Oswald Spengler. The assertion is that since the cold war is over, the period of ideological confrontation is over. Huntington is claiming that civilization consciousness has come back to the people in the world. The years to come could be years of confrontation or interaction amongst civilizations, rather than a fight between extreme ideologies such as socialism, communism or neoclassical capitalism.

What has characterized our age in terms of ideology, particularly in terms of the economic theory or economic ideologies during the cold war period, was the confrontation between Marxism/Socialism and neoclassical capitalism. I am not necessarily arguing against capitalism, but I maintain that neoclassical capitalism is an extreme version of what might be called progressivism. These are the two conflicting views of the current state of the world economy at this moment.

II

Despite this recent emergence of a civilization-centered view of world history, the still dominant ideology of major governments in the developed world and of international organizations is that there is only one universal model that all the countries in the world should embrace. This universal model consists of pluralistic congressional or parliamentary democracy on the political side and the capitalistic market economy on the economic side.

This universalism originated in Europe, with the United States providing the finishing ideological touches after World War II. At the center of this universalism lies neoclassical economics. The basic message of this doctrine is very simple. If you unleash the market from the yoke of governmental regulations, and if macro economic policies are conducted properly by the authorities, the economy grows steadily reflecting the universal power of the market.

The market here is the magic word. In the abstract model of Walrasian general equilibrium, the market is defined as the place where numerous economic agents gather and transact with each other under the centralized command of the auctioneer. The auctioneer represents, in the abstract, all the necessarily public infrastructure to realize numerous economic transactions in the market in a smooth and legitimate manner. The problems of asymmetric information, monopoly, deception or fraud do not exist because the auctioneer is assumed to be omnipotent in managing the market.

In reality, such a market does not exist and markets can only be defined as networks of transactions between economic agents, mediated by traders, dealers, financiers or by merchants, and supported by the legal and administrative infrastructure of the authorities. In other words, markets are networks where economic agents, mediators, merchants and authorities interact, with the patterns of interaction differing depending upon the particular historical and institutional environment they happen to be in. One key element in the structure of these markets is the pattern of interaction between mediators-merchants and the authorities. This, among other elements, leads to the formation of different types of market economies.

Another caveat needs to be mentioned about the Walrasian notion of the auctioneer-dominated universal market. What is being implicitly assumed is that the object of transactions between economic agents is physical goods. Transactions of stocks such as land and human capital do not seem to fit this framework so smoothly. Especially in these cases, it seems only natural that the role of the market and the auctioneer is somewhat limited relative to the role played by political or legal infrastructure.

Despite these problems with the Walrasian model of the market, most neoclassical economists tend to apply this universal model unilaterally to all countries, neglecting the historical and cultural backgrounds of the countries in question. Certain international organizations seem to adhere to this principle as well. The Walrasian market is often interpreted as what might be called an "Anglo-American" model in which the primary role of the public sector is the management of macro-economic policies.

Two specific policies recommended on the basis of this doctrine have been deregulation and privatization. The earliest possible deregulation on price controls and controls of financial transactions including foreign exchange have been urged and made one of the primary conditions for the provision of assistance from certain countries and international organizations. State and public corporations have also been urged to privatize. Due to such privatization stock market capitalization has increased dramatically from less than $400 billion in the late 1980's to $2.1 trillion in 1994.

Quite often investment funds have been established after privatization to control corporate insiders and to attract sufficient funds for restructuring. In view of the increasing amount of funds available for global investment by mutual funds and pension funds at a time when developed economies are relatively stagnant, a need certainly exists from the supply side. However, these funds move across national borders seeking primarily high short term returns but not necessarily meeting the long term needs of emerging or developing countries.

Deregulation and privatization accelerated the flow of private funds to Latin America and Asia during the 1990's and also aided dynamic growth in the newly privatized sectors of these economies. The question, however, is the sustainability of such dynamic growth supported by a foreign portfolio investment which cannot normally be expected to tolerate long incubation periods. Sudden large scale capital flight is always possible if local developments are perceived by the market to be slowing down. In the case of Mexico, for example, political instability was a trigger which suddenly highlighted the prolonged current account deficits and real appreciation of the currency despite those deficits. Indeed, the macroeconomic performance of the Mexican economy had not been satisfactory and experts were well aware of it. However, fund managers and traders in the market did not perceive those indicators to be crucial and kept investing until the trigger was pulled. The neoclassical approach to privatization coupled with established investment funds, means relying heavily on foreign capital that could be a fragile mechanism without the support of various authorities and international organizations.

An increasing number of economists have begun to doubt the universal validity of the Walrasian general equilibrium model in view of economies of scale, bounded rationality, asymmetric information and other types of market imperfections. Among them, a group of economists at Stanford University have been engaged in what they term comparative institutional analysis (CIA). I quote Masahiko Aoki, an intellectual leader of this group:

There is no timeless and universal economic system with normative values. The mechanical application of the implications of the Walrasian general equilibrium model, which is nothing but the product of metaphysical thinking, is not effective in analyzing the U.S.-Japan economic relationship or the institutional reforms of economies in transition from socialism to market economies. Rather we should honestly recognize the existence of plural economic systems and analyze their origins, evolution (historical development), comparative merits and demerits and the possibility of economic gains from diversity. Analysis should not only be focused on the market systems in question, but extended to better understand the interdependence of complicated networks of various systems.

Masahiko Aoki "Keizai Shisutemu no Shinka to Tagensei" ("Evolution and Plurality of Economic Systems"), Toyo Keizai, April, 1995.

Comparative institutional analysis parallels the thinking of Toynbee and Huntington in that all these analytic frameworks recognize the plurality of economic systems or civilizations, and emphasize the interaction among them. This contrast between neoclassical economics and comparative economic analysis is the economic theory version of Fukuyama versus Toynbee and Huntington in terms of the interpretation of history and civilizations. The key issue involved here is universality versus diversity and the gains from diversity versus the gains from applications of universality.

III

There are two main views about the current situation in Japan and the process of reform within Japan that reflect these two intellectual stances. Those who ascribe to neoclassical economics and follow Fukuyama's version of the interpretation of the history are the majority of the intellectuals in this country at this moment. I might get criticized for this statement, but I classify most of them as revisionists because they think that Japan and the current state of the Japanese economy is somewhat different, somewhat abnormal. They think of Japan as an outlier, and they worry about ways to change Japan into a normal country which fits the prescriptions of the neoclassical model. They key words here are globalization and internationalization. The other group, which is a minority within which I place myself, claims that Japan is not different or Japan is as different from the United States as France is different from the United States. All countries are different with their own histories and cultures. Japan naturally is different from the United States and from France. But if you take this position, there is no universal model to aspire to. These differences are taken as a very normal phenomena that do not place Japan as an outlier vis a vis the United States or vis a vis the so-called West.

In order to really verify comparative institutional differences, the research institute that I formerly headed ( the Ministry of Finance's Institute of Fiscal and Monetary Policy) has done an empirical study of Japan, Europe and the United State. I will give you some examples of the comparisons that we have made in that study. ₄

First, being a bureaucrat, I have to emphasize that it is claimed in this country and probably in the United States as well, that the Japanese policy making system is really abnormal in the sense that bureaucrats dominate policy making. According to our study, that is not so. If you objectively compare the policy making mechanisms of the G-5 countries, Japan, the United States, Germany, France and the United Kingdom, what characterizes Japan is a very strong presence of the party in policy making processes.

Party officials in Japan, particularly during the last twenty to thirty years have been extremely powerful in influencing the details of policy making in this country. In particular, the Policy Coordination Committee of the Liberal Democratic Party has been extremely powerful. This is not comparable to any of the other four countries. Political parties do not hold such a significant position in policy making either in the United States or in Germany. France and the United Kingdom do have party involvement, but the power of the party in policy making is relatively limited.

The Japanese policy making system can be characterized by the very strong presence and strong power of the party in power. Right now the policy officers of the three coalition parties, the LDP, Socialist Party and Sakigake are wielding substantial power in policy making. The Japanese political policy making process can be characterized as falling somewhere in between the United States and Europe.

In terms of the overall political system, the United States system could be characterized as a typical mass democratic system and the European system, in a very simple generalization, probably is best characterized as a parliamentary democracy, retaining some elements of elitist rule by the elites. The Japanese system is closer to the European countries in terms of parliamentary processes. But in terms of mass democratization, the Japanese system is closer to that of the United States.

The role of the bureaucrats is probably much stronger in France or in the United Kingdom than in Japan. In particular, in the United Kingdom, interaction between politicians and bureaucrats is limited. When drafting bills the budget bureaucrats - when I say bureaucrats, I include the ministers and vice ministers as well - are not supposed to consult or even communicate with the politicians in the party. In that sense, the UK bureaucracy is very neutral and independent from politics. The Japanese system is closer to the UK, but as I said, the power of the party is very strong and the bureaucracy always interacts regularly, in fact almost every day, with the party, in terms of policy formation. In that sense, the Japanese system is quite different from that of the UK or even other continental European countries.

In employment/ corporate structure, the Japanese system is also closer to that of continental European countries. I will give you one example in terms of the ownership structure of corporations, specifically, equity holdings. In the United States, 54% of shares are held by individuals and 27% by pension funds. If you combine the individuals and pension funds, more than 80% of shares are held by individuals, and pension and mutual funds.

In Japan, individuals hold only 23% of shares. But this 23% is larger than in Germany, where individuals only hold about 17% of shares. In Japan, if you combine financial and non-financial corporations together, about 66% of shares are held by big corporations, financial and non-financial. This is comparable to Germany. In Germany, financial and non-financial corporations hold about 64% of the total shares of corporations. In France about 44% of shares are held by financial and non-financial institutions. In terms of equity holdings, Japan, Germany and France are very similar.

The other example is employment practices. Japan is said to have a life long employment system which is particular to Japan. But if you compare the G-5 countries, Japan is not by any means peculiar. The average length of employment in one company in Japan is 10.9 years because of part-time workers and the movement of relatively younger workers in and out of corporations, despite so-called life long employment. Against this 10.9, the German figure is 10.4 and the French figure is 10.1. The lowest lengths of employment in one company is recorded by the United States, 6.7. In between continental Europe and Japan was the United Kingdom at 7.9.

A similar pattern can be seen with regard to production elasticity of employment, that is, when production goes down, how much employment goes down. In both continental Europe and Japan, even after a year, production elasticity of employment is less than 0.5. That means that even after a lapse of one year, a 10% decline in the production only leads to less than a 5% decline in employment in Germany, France and Japan. In the United States, in the case of blue collar workers, after six months this production elasticity of employment becomes 1.2. This blue collar phenomenon seems to be spreading to the white collar sector as well.

There are reasons for this variation. In Germany and France lay-offs are legally restricted by various contracts and various laws prohibiting companies to lay off those workers. It is more or less a moral obligation in Japan not to lay off workers. The United States is relatively free to lay off their workers as long as companies abide by seniority rules provided by the labor unions. Thus, in this area the United States is an outlier, not Japan.

In terms of wages, the seniority wage system is a very famous characteristic of the Japanese labor market. But if you plot the age profile of workers in the G-5 countries, the age profiles of white collar workers in G-5 countries are pretty much the same. Wages go up as ages go up. The only exception is Japanese blue collar workers, whose wages rise until the age of 50 or 55 in a manner very similar to Japanese white collar workers. But in Europe and in the United States, blue collar wages tend to hit a plateau at the age of the 30 or 35. So, here, Japan is an outlier because Japanese blue collar workers tend to be treated more like their white collar counterparts in terms of wages.

There are various other examples that illustrate that Japan is not necessarily an outlier. We have said in the study that we could probably identify three types of capitalism: a U. S. model, a continental European model and a Japanese model. Depending upon what area you are talking about, each of those capitalistic systems has identifiable characteristics. But it is really difficult to argue that one system is an outlier, one system is standard, and one is a universal model. An American neoclassical paradigm does not necessarily apply to countries like France or Germany. The continental European countries and the United States are quite different in terms of their respective economic and social structures.

However, let me add that there is some convergence going on among these countries. Globalization has affected Japan, continental Europe and the United Kingdom. There is a trend both in Europe and in Japan to "Americanize" each system. There is convergence toward a neoclassical model to some extent, but the extent of that convergence, in my opinion, is relatively limited. French characteristics will be retained. German characteristics will be retained. As against those who promote reform in Japan, I would say that Japanese characteristics should be retained as well.

IV

The 21st Century will be a time when competing models of capitalism interact with each other, particularly in Asia which will probably be a main stage for action. China, India, Vietnam, Indonesia and Myanmar- these countries are rapidly modernizing and industrializing their systems. In what direction their capitalism or their system will go is still uncertain. The question these countries are asking is if modernization is possible without completely westernizing their system. That question has not been answered yet.

But certainly these countries are seeking to create their own systems. They are not necessarily emulating the Japanese system, they are trying to come up with their own brand of capitalism or their own style of democracy. The successful creation of new systems, followed by interaction among various types of social economic systems, is possible in my opinion. If you look back at the history of Asia, particularly before the industrial revolution, Asia was the center of the world where various civilizations interacted and the globalization or networking of commercial ties existed. Certainly, commercial capitalism existed in Asia before the industrial revolution. The overseas Chinese, overseas Indians, overseas Islamic merchants, spread all over Asia, and spanned Africa and the South Pacific. A global economy certainly existed at that time along with coexistence by very different civilizations. I think that the coexistence or cohabitation of various civilizations and different types of economic systems is possible. We have had an experience of that type of coexistence for most of world history and it is essential for the 21st Century. But some turbulence has to be expected if developed countries are not going to be prevented from forcing their own models on Asian countries.

Coexistence/cohabitation is not only important among civilizations, it is very important regarding the relationship between human beings and the environment. We have to coexist with nature as well as each other. Among civilizations, among economic systems, between the civilizations and the environment, diversity and cohabitation must rule, making coexistence a key word in the 21st Century.

MAKOTO UTSUMI:

Dr. Sakakibara's comments remind me of a story written 800 years ago, which I mention from time to time. At that point in history, tea was introduced to Japan from China and it was a very precious commodity that only the elite of society could enjoy. At one temple in Kyoto a priest enjoyed a cup of tea every morning. A poor farmer who peeped in the window every day, finally asked the priest one morning, "What are you drinking? Could you let me taste it once? It seems so good."

The priest answered, "This is called tea, introduced from China. It has three attributes. One, it increases one's appetite. Second, it prevents sleeping. Third, it suppresses sexual desire."

And the farmer said, "Oh, this is not for me. I don't have so much to eat, so it's hell for me to increase my appetite. As my only pleasure is to sleep well, I don't like to be deprived of this pleasure. And third, if my sexual desire is suppressed, my wife would be extremely unhappy."

I used to tell this story to my counterparts in the United States to illustrate that what is good in the United States is not necessarily good for other countries. This is one example of the universal model approach versus the relativist approach, just as Dr. Sakakibara mentioned. But in this story, what is lacking is information about whether the tea is good to drink or not if living conditions and other conditions are the same for both the priest and the farmer. My frank feeling is that we should determine if the stance being taken on each specific issue is good for the country involved or not.

While serving as a negotiator and confronting issues on which Japan and the United States disagreed, I always asked myself whether the U. S. position was in accord with international common sense or not; and whether Japan was also asserting views in harmony with international common sense or not. Of course, international common sense is very difficult to pinpoint, but it involves guaranteeing common gains. Along with the triumph of singular cultures and the promotion of the differences between civilizations we must also envision a future that improves the lives of everybody.

My second comment concerns the process of Japanese policy making. Dr. Sakakibara mentioned that the Japanese decision making process is much closer to that of the United States in terms of mass democratic tendencies. Very frankly, I see a very big difference between the two countries. In Japan, there is always constant close dialogue and communication between the party and the bureaucrats, and inter-party voices form interest groups which are strongly reflected in policy outcomes as well. Consequently, decisions by the government are made in consultation with many voices and interest groups.

However the reflection of these interest groups' voices does not necessarily mean the realization of mass democratization. Contrast this state of affairs with the case of the United States, where because of the division between the administration and parties and also weaker party discipline, the political decision making process is frequently very transparent and visible to everybody. Citizens can get a good education about the process from watching what is happening in Parliament, or in Congress.

In the case of Japan, as Dr. Sakakibara stated, policy decision making is done through close cooperation between the parties involved. Interest groups' voices have already been factored in. Moreover, my perception is that party discipline is much stronger in Japan than even in western European countries. Discussions within the party are not usually public. In contrast, if we look at what happens in France, divisions of opinion among conservatives as well as socialists are clearly viewed by the public. The transaction of power is not so visible in Japan. So I see a very big difference in styles of mass democracy.

MASAHIRO OKUNO-FUJIWARA:

After reading Dr. Sakakibara's interesting, yet provocative, work, I felt quite ambivalent about his conclusions. On the one hand, I totally endorse his position about the importance of pluralistic views in evaluating different economic systems. I think it is naive to consider a certain economic system, (or civilization, in his terminology), as superior to all others in all aspects.

On the other hand, I have some difficulty understanding the conclusion that the world is full of different civilizations and that they have to live together. This is true, of course. But at the same time, civilizations and economic systems must change, especially in view of globalization and drastic changes in technology, society and so forth. Just saying that we have to live together and we have to maintain diversity does not give us sufficient grounds for a policy direction, especially in the case of countries like Japan, that seem to be in structural trouble and ex-socialist countries that are desperately looking to establish market economies.

The reason that I like Dr. Sakakibara's purist view is perhaps because I liked his use of comparative institutional analysis. Comparative institutional analysis, which is often given the unfortunate abbreviation CIA, focuses on the role of institutions in the social allocation mechanism. This concerns the entire span of institutions, such as the organizational form and the governance structure of corporations, labor practices and customs, and intercorporate relationships within society such as banking systems. Sometimes the term also includes government-business relations. Examinations of administrative guidance Japan would be such an example.

CIA also emphasizes the complementarity between various institutions, such as those between institutional arrangements and technological developments, or between institutional arrangements and the societal economic environment. For example, skill formation systems that feature long-term employment and steep, seniority-based pay and promotion schedules, provide workers with incentives for investing in learning firm-specific skills. These employment practices are complementary, in turn, with technological requirements in industries that run subtle and carefully attended production processes. A prime example of this is the lean production system utilized by many assemblage industries.

But what must be emphasized is that these practices were complementary with the economic environment of Japan during the 1970s and 1980s, but are not necessarily complementary with other economies or in other times. The height of this system is epitomized by Japan's successful promotion of the automobile and electronic industries. Diversity is important, as claimed by Dr. Sakakibara. In our own domestic context, there is high variation among varieties of systems with some strong systems in some industries and other systems operating strongly in other industries. There is also variation in historical terms, with certain kinds of systems better suited to certain periods. In other words, the nature of the system depends upon the socio-cultural environment, technological environment, as well as the historical context.

As I emphasized, contemporary Japan as well as socialist countries are looking for some change as they deal with structural problems. In analyzing these cases I think that we have to be careful to identify two different kind of institutions, one spontaneous, the other legal or imposed. Among the spontaneous institutions to be considered are labor practices, which operate as corporate organizations develop. These are not very easy to change, although they can change spontaneously. More likely, if something must be done in terms of overall societal change, it is probably legal institutions which would have to change, with government as a prime candidate.

This is why we should be more serious about the study of the Japanese government and its workings. Unfortunately, we have not had very much good theorizing much less good empirical work on government. Dr. Sakakibara's paper was very important, because it urges us to go further into these matters.

An important aspect of the Japanese government is the lack of separation of powers. Formally speaking, Japan has three different branches; legislative, administrative and judicial. But bureaucrats seem to have a very strong hold on the legislative branch due to the management of politics, according to Professor Utsumi. Dr. Sakakibara asserted that one of the characteristics of the Japanese parliamentary system is that there is constant coordination. I think that means not only coordination within the major party, but coordination between a particular party and bureaucrats. My view, although not backed up by hard evidence, is that because of this communication flow, bureaucrats can anticipate future agendas and seem to have fairly large discretion in the interpretation of law. Bureaucrats who already have substantial power built into their main role as coordinators of political actors and interest groups, have much more power in this discretionary privilege.

Turning to Japan's judicial system, in my view Japan's court system is not functioning very well. For example, if somebody has a complaint against the administration, they have to bring it to a court where it is well-known that if appeals go on to the Supreme Court it takes on average ten years to get a verdict. This is obviously very costly. I am not saying that Japan's government is a bad system; it is a good system in certain kinds of environments. My view is that government structure has been one of the reasons why Japan was so successful from the 1960's through the 1980's. Bureaucrats knew what would be a desirable route for the economy because at that time Japan was in a catching up stage with the West.

I think a similar thing in a slightly different form is prevalent in East Asian governments. Frequently these are of a more authoritarian type. In essence, they have similar features such as virtually no separation of powers, and no checks and balances among branches of government. This kind of government is very useful during the industrializing stage of an economy.

The key question for Japan is this: is the status quo a desirable form of government for Japan? I am not sure about that. Because of this position Dr. Sakakibara may call me a revisionist, but I see myself as a proponent of CIA. But obviously, being a CIA proponent as well as being a revisionist may make my life miserable.

HIDEKI KANDA:

I have one comment on CIA, or comparative institutional analysis, and another on the importance and power of bureaucrats in Japan.

As a matter of positive analysis, I am generally on Dr. Sakakibara's side. That is to say, different systems operate perhaps properly under different conditions or cultures, and also systems compete with each other and systems influence and are influenced by each other.

The question is: so what? Are we looking for what is different among major countries, or are we looking for what is similar among major countries, or are we looking for something else? What is the purpose of the analysis?

Let me illustrate three questions about Japan to see the implications of this kind of analysis. The first question - is the Japanese system transferable to developing economies? The answer is, no. The second question - can you defend the Japanese system? The answer is, again, no, because the analysis only suggests that the Japanese system did make sense and does make sense and nothing more. The third question - can you tell where Japan should go in the future? The answer is, of course, no, because the model doesn't have any implications.

Let us take a concrete example of one aspect of CIA, that is, the ownership structure of the public companies, like Toyota, Nippon Steel and other major companies listed on the exchanges of Tokyo, New York, London, and so on. It seems to me that if you look at the United States, the role of the capital market is very important for firms to obtain capital, whereas in Japan as well as in Germany, banks are very important capital suppliers to these major firms. The question is why? There are many plausible explanations, but what is commonly thought is that in the United States banks are prohibited by law from owning the stock of another company although there are small exceptions to this rule, while German and Japanese banks are not prohibited from owning the stock of another company. This has affected the ownership structure of public firms drastically. German and Japanese banks and other financial institutions own major portions of listed stocks, whereas in the United States banks virtually have no equity ownership in public companies. This means the degree and the size of capital markets has been affected by this regulation, which in turn probably stems from political culture and so forth.

Past studies show that there are two systems; one is the bank- centered system (Japan and Germany), the other is a capital market based funding system (US). The former system, the bank- centered system, is quite good at sustaining stability. On the other hand, the capital market based system is quite good at adapting to the changing financial environment. The first system works well when the economy is stable and the country itself looks for the stability, whereas the capital market based system is quite good when the country needs adaptability and faces a changing environment.

Let me go back to the three questions I posed, the answers to which are still not entirely clear.

Nevertheless, I believe the answer is yes and no to the first question - is a system transferable to the working economies? The answer is also yes and no, depending upon whether you prefer stability rather than adaptability or vice versa, to the second question - can you defend the Japanese system? The answer to the last question concerning policy direction is again yes and no, depending upon whether Japan now needs adaptability rather than stability or vice versa.

It seems to me though, that the point of this type of inquiry is more helpful for normative implications in comparing economies. If you look at the trend in this area it is clear and universal: the weight and the importance of the capital market is increasing in many countries, including Japan and Germany. The degree of development is different, that is true, but the trend is clear. Although I basically agree with the analysis, I think it should be a starting point, not a destination.

My second comment concerns the importance and power wielded by bureaucrats in Japan. One could assert that they are powerful or that they are not. I am not sure which is true. I don't have scientific evidence, but quite a lot of anecdotal evidence suggests to me that bureaucrats are not as important as generally suggested. On the other hand, I don't think parties are as important as Dr. Sakakibara has portrayed. It clearly depends on the policy area being considered. It you look at the financial services area, political parties are not very important because the parties generally do not know what is going on because the details are so technical. Sometimes, for that matter, the bureaucrats do not know much either. I think the most important player in this sector is the industry itself.

A specific example is insurance regulation. Following over fifty years of regulatory history, insurance regulation was completely overhauled and revised very recently and will be effective as of April 1, 1996. Were party politics important? The answer is, no. Insurance regulation is very technical, and generally speaking, with some exceptions, without clear political elements. Were the bureaucrats important? The answer is, yes, they were key, they drafted the law. But I do not think that they made a substantial contribution on the merits of the new regulations. When a committee was gathered together to prepare a draft of the new regulations, the insurance industry prepared the whole document and the background materials for the committee discussion. I would say that the new insurance regulations were written by those being deregulated, that is, the insurance industry. This may not be true for other fields.

MASAHIRO KAWAI:

Dr. Sakakibara gave us a very stimulating argument about how we should take a look at different types of capitalist systems and more generally at different types of economic regimes. In economics we have both a positive approach and a normative approach. The positive approach is a value-free one that looks at questions from a theoretically neutral, objective standpoint. Economists have accumulated a fair number of tools, like CIA(comparative institutional analysis), along with other apparatuses such as game-theoretic analysis for a positive approach. The normative approach involves value judgement and is not value-free. Policy makers must use their judgement in choosing from a set of policy alternatives by resorting to a normative approach..

Dr. Sakakibara emphasized the importance of appreciating the presence of different capitalist systems. Diversity is important. Maybe diversity itself has its own value. He also emphasized the importance of globalization and international interactions, which may change the nature of the capitalist system. When Dr. Sakakibara talks about the importance of diversity, I do not believe he is saying that the Japanese capitalist system cannot be changed at any cost. He seems to recognize that any capitalist system can be changed or may even by chosen, though perhaps at a cost.

We can present various theoretical models which could give rise to Dr. Sakakibara's conclusions or observations that different capitalist systems do coexist in the world. Using an economist's jargon, I would say that this is an issue of the existence of multiple equilibria. Given the initial state and condition from which the economy starts i.e., given its past history, the subsequent path the economy takes can vary and can lead to different outcomes. If one starts with a different historical context, for example, the emerging capitalist system can be different. The final outcome also depends on the type of government intervention and regulations. Moving from one initial state to another may be costly. If these costs are very high, it is possible that we end up with a world where different types of capitalist systems coexist. As Dr. Okuno-Fujiwara emphasized, however, with continuing technological innovation and globalization, the cost of moving from one state to another may not be as high as in the past.

I emphasize the importance of taking a look at this issue from a positive perspective. In economics we have several theoretical approaches to this issue, and I will focus on one that centers on the selection of a trade regime. A collection of countries may select a type of trade regime in a global environment. Each country may face two choices, either free trade or protectionist trade. If one country selects free trade and the other country selects protectionist trade, the result may tell us that the free trade country will lose and the protectionist country will gain. One can write down a payoff matrix and can make an analysis of how a trade regime would be chosen, if each country is left to its own decision making without any coordination. The usual outcome is the so-called prisoners' dilemma, where both countries choose protectionist trade regimes, leading to an undesirable outcome for each country and for the world as a whole.

If each country competes in a global market and pursues its own national interest, the resulting outcome is that the economic payoffs are very limited from both the global and national perspectives; the outcome is not Pareto efficient. However, if all the countries agree on free trade, the economic payoffs would be greater and each country would gain substantially; Pareto efficiency is order to implement this, some mechanisms are necessary to sustain the free trade regime. Currently we have the GATT, WTO, IMF, and OECD. In the Asia Pacific Basin we have APEC. All these arrangements are to insure a Pareto efficient outcome from the global and national perspectives. Can we not apply this same approach to a positive analysis of the choice of a capitalist system?

I am not suggesting that the Anglo-Saxon capitalist system is a free trade regime and the Japanese capitalist system is a protectionist regime, but a similar payoff matrix can be constructed to analyze the process of selecting different types of capitalist systems. A capitalist system is not simply given to us; it can be endogenously selected, though at a cost. If each country is left to its own decision making in choosing a capitalist system and pursues its own national interest what would be the resulting outcome? That outcome may be quite different from a Pareto efficient outcome, because some countries may choose less desirable capitalist systems for fear of being taken advantage of by other countries. This means that since there are interactions across countries and across capitalist economies, there may be a need to coordinate on the choice of a capitalist system.

I encourage Dr. Sakakibara and his followers to adopt a more positivist approach to this question: would the world converge to a uniform capitalist system globally or is it in the best interest of all different countries to maintain different types of capitalist systems? Maybe the latter is possible, but this all depends on what sort of payoff matrix we have i.e., the benefit and cost of moving from one type of capitalist system to another, and on the extent of technical innovation in communication and information processing.. Furthermore, because there is dynamic evolution of the economic system, the payoff matrix may change over time.

TAKATOSHI ITO:

I would like to assert that there is a trial of the Japanese system going on which can be termed the people of Japan versus regulatory agencies. The main prosecutors are not in this room, but very strong reformers are out there who argue that there are lots of regulations which are killing entrepreneurship and consumer benefits in Japan. The defendants are the ministries of Japanese government and their defense lawyer is Dr. Sakakibara.

Dr. Sakakibara's argument is that there are two views: revisionism and proponents of different kinds of capitalism. The revisionists' argument is that Japan is different, which means backward, and has to converge to a western norm. Classical economics is universal and is the norm. The new capitalism view (the defense argument), is that Japan is indeed different, but proud of it. Everybody is different and there is no need to converge.

Dr. Sakakibara put out three exhibits: first, the political system, which spans from a centralized system to a decentralized system with Japan somewhere in the middle. France is much more centralized than the U. S., and Germany is more of a federal state. Regarding mass democracy, Japan is actually closer to the U. S. Industrial organization/corporate governance, is the second exhibit. Japan and Germany are strong systems with close connections between banks and business. The U. S. and UK are much more capital market-oriented, with individuals and pension funds playing important roles. Exhibit three was employment and wage systems, with that of Germany and France featuring very strict legal binding contracts on labor and very centralized negotiations, and the U.S. and the UK practicing much more locally-based negotiation. Japan is seen as being somewhere in the middle of these two extremes. Actually, in terms of union bargaining aspects, Japan is very close to the U.S. rather than to Germany and France, but concerning the characteristic long tenure to firms, Japan is more comparable to Germany and France.

What do these pieces of evidence prove? Dr. Sakakibara would say everybody is different and Japan sometimes is similar to U.S. and sometimes is similar to France. That's good. There is no need to change. A revisionist would agree that Japan is different, but the typical revisionist, if asked whether difference is bad, would answer yes, while Dr. Sakakibara would say no.

But there is yet another camp, which we term reformist. Dr. Kawai belongs to this group, which gives different answers to the standard questions - sometimes Japan is different, it is an act of multiple equilibria, you happen to become different. But in a deep down sense, Japan is not different. In a deep down sense, people behave the same way. Japanese consumers and entrepreneurs are the same as those found elsewhere in the world. What happens to become different is due to historical accident, or regulations, and other phenomena. Is the difference bad? Reformists would say, implicitly, yes, it is bad if difference is caused by overregulation. But it is not if it is due to a pure historical accident. As to convergence, revisionists would say, systems should converge by numerical targets. Reformists would say yes to convergence to some extent, but by deregulation and letting markets work. Of course, new capitalists like Dr. Sakakibara say no to convergence both in terms of prediction and predilection.

EISUKE SAKAKIBARA:

I am not defending the status quo. Neither am I saying that convergence is not right, or that convergence should not occur. I think that in any sort of situation, in any country, systems will change. Systems interact with each other, and by the sheer fact of that interaction systems do evolve into different systems. This is the essence of comparative institutional analysis. Different systems exist and there are merits and demerits to them. They interact with each other, and an evolution takes place.

Having said that, let me try to respond to the comments of the various commentators. With regard to Professor Utsumi, I do agree with him that systems have to change. Just as I said, I am not defending the status quo. What I am arguing is just what Professor Utsumi has argued. Those reforms or changes have to be judged case by case. They should not be judged by ideology, particularly that of the neoclassical paradigm.

Deregulation is necessary. I do commit to that. But deregulation depends upon specific situations that a country and a market happen to be in. Commercial aviation and telecommunication deregulation in the United States and global financial deregulation occurred in the 1980's; we have not passed a final judgment on the merits and demerits of those policies. In some instances, particularly if you take environment problems into consideration, deregulation may not be desirable. In general, I cannot support a generic deregulation syndrome which can only be backed up by the ideology of the neoclassical paradigm.

With regard to the political process in Japan, again, I do not necessarily disagree with what Professor Utsumi has said. Political processes in the United States and Japan are different. I made a very gross oversimplification. Compared to a somewhat elitist pattern of policy making in France and in Germany, the Japanese and American systems tend to be somewhat mass democratic. There are problems with the Japanese policy making process, but I do not necessarily endorse what is happening in Washington, DC at this moment either.

I want gun control to pass the US Congress. I do not support the National Rifle Association and their democratic, transparent lobbying activities. Lobbying activities can be transparent, lobbying activities can be democratic, but at the same time, they may not be very helpful to the national interests of the country.

With regard to Dr. Okuno-Fujiwara, I would like to emphasize my agreement with what he has said in terms of the complementarity of institutions. A partial change, a partial reform of one institution without regard to the of the system is bound to fail. If it is all right to aim for those reforms, you should be very much mindful of the of certain types of prevailing practices vis a vis certain types of institutions.

Although he calls himself a promoter, as a matter of fact, Dr. Okuno-Fujiwara is a main architect of comparative institutional analysis along with Masahiko Aoki. However, he thinks that the Japanese system has to be reformed since the environment has changed. He is partially right.

I think you could probably argue that the American system is well suited for certain kind of industries and the Japanese system is better suited for other types of industries. We do have some kind of institutional comparative advantage. I also think it is very difficult to change the nature of institutional comparative advantage. In an industry like multimedia it is very difficult to compete with the U. S. industries effectively. But with regard to something like automobile manufacturing and electronics and so on, probably we maintain some kind of comparative advantage vis a vis the United States. Unlike Ricardian comparative advantage, I think we will probably trade with each other with the U. S. prospering with some types of industries, and Japan prospering with others. I think that is the sort of system that we should engage in.

With regard to the comment on government, I would again be a little bit provocative. Opinions not supported by hard evidence are termed prejudice. Many assertions about politics, the policy making process and the bureaucracy are being made without hard evidence. Politics is a subject people feel that they can talk about without knowing the facts. It is fine to talk about the reform of the bureaucracy, but investigate the facts in comparative terms. People talk about the Japanese bureaucracy being strong or being weak, but strength or weakness can only be compared vis a vis some other country. The Japanese bureaucracy mat be stronger or weaker than the French bureaucracy or the American bureaucracy or the UK bureaucracy. You cannot really talk about the strength of a bureaucracy, or of a political party, for that matter, in absolute terms.

I am not defending the present state of the Japanese bureaucracy, I am willing to debate the issue. I am willing to debate administrative reform. I am willing to debate the current relationship between the bureaucracy and party politics and so on. But let us do that based on the facts and based on the hard evidence.

With regard to Dr. Kanda's comment, I essentially agree with him. Is the Japanese system transferable? The answer is yes and no. The presentation of an alternative model, other than the usual Anglo-Saxon one, is important because it widens the range of options for other countries. Probably Dr. Kanda is well aware of discussions going on concerning the financial systems of countries in transition; investment funds versus banks, bank systems versus investment funds. The analysis done by Dr. Aoki and others on the main bank system has contributed greatly to enlarging the options for those countries in transition. I think that even if the Japanese system is not transferable, in any strict sense, analyzing the system in an objective and legalistic manner and presenting it in English to a wide audience is a very useful practice.

Can the Japanese system be defended or not? I am in no position to defend the Japanese status quo. We have to change. But the question is, how should we change? Reforms are fine, but what kind of reforms, in what kind of direction should we proceed? There has not been much discussion regarding the content of reforms in this country. There are a couple of fashionable words such as deregulation and privatization. There is another fashionable practice of bashing the bureaucracy.

With regard to Dr. Kawai's comments, technical advancement of any social science is desirable, but I am somewhat prejudiced because I left academia in the early 1970's so I do not understand game theory or some of the mathematical models which many of our top economists are engaged in. I am interested in analysis, but I would like to know what the pre-conditions are, what the conditions are, what the assumptions are, what the implications of the analysis are.

Quantitative analysis is important, but sometimes history is more useful than mathematics. I am not against the use of mathematics or statistics in economics, but I would prefer it if economists in addition to what they are doing, consider history a little bit more. When we do not know where to go, when we do not know what kind of pictures we should draw in the future, we should look back at history. The lessons are usually there.

I agree with Dr. Kawai that we do not have any concrete blueprints of how Japan should be transformed, or how the United States should be transformed, for that matter. But the best lesson at least in my opinion, could be learned from history, not from mathematics.

GARY SAXONHOUSE:

I agree with Dr. Sakakibara that history is tremendously important, and that economists really need to supplement model-building and quantitative work with historical perspective. Sometimes, however, when a sharp historical perspective is married with so-called comparative institutional analysis, baffling paradox is the result. For example, some ninety to one hundred years ago, Japanese economic performance was already extremely impressive, but the economic institutions that existed in Japan at that time were totally unlike the economic institutions of today's Japan. The labor markets operated in a different way. Capital markets operated in a different way. Even the role of government was quite different.

Why are such differences found? It is possible that in Japan economic institutions are in some way endogenous to industrial comparative advantage in a very fundamental way. In the early twentieth century, it was textiles that dominated Japan's manufacturing landscape. The scale of production in the textile industry is quite different from industries such as automobiles that are relevant for today's Japan. The labor needs are also very different, and to their credit, the Japanese industrial leaders of that time approached the organization of this industry in a manner almost unrecognizable today. What seems to be characteristically Japanese is not any particular set of economic institutions, but a willingness to adapt these institutions to meet new industrial imperatives.

As we look ahead to the 21st century, Japan may find that its future lies in industries such as multimedia. Success in such industries may require very dramatic changes in Japanese economic institutions. History suggests such change can and will occur.

Contributors to this Volume

Yoko Hayashi is an attorney with the law firm of Koga and Partners in Tokyo. She is also director of the Japan Civil Liberties Union, as well as director of the Japan Committee for the International Movement Against All Forms of Discrimination and Racism (IMADR). Ms. Hayashi also serves as a legal advisor for both the Tokyo Rape Crisis Center and the Asian Women's Shelter "HELP." Ms. Hayashi earned her law degree at Waseda University and received a postgraduate diploma in law from Newnham College at Cambridge University. An author of numerous publications, her recent work included A Commentary: Convention on the Elimination of All Forms of Discrimination Against Women produced by the Japanese Association of International Women's Rights.

Robert M. Immerman is a senior research associate of Columbia University's East Asian Institute in New York City. Before retiring from the US Foreign Service, Mr. Immerman served as Minister Counselor for Political Affairs at the US Mission to the United Nations, however most of his diplomatic career was spent in Japan during four different tours of duty at the American Embassy in Tokyo, including stints as Labor Attache (1975-1979) and Political Counselor (1980-1984). Mr. Immerman received his undergraduate degree in international relations from the University of Wisconsin and a Masters of Public and International Affairs from the Woodrow Wilson School at Princeton University. One of his recent publications was a chapter entitled "Japan in the United Nations" in the volume Japan. A New Kind of Superpower? published by the Woodrow Wilson Center.

Takashi Inoguchi is Senior Vice-Rector and an affiliate scholar of the United Nations University. He is also a professor at the Institute of Oriental Culture at the University of Tokyo. Dr. Inoguchi has held membership in a variety of consultative councils formed by the government of Japan including the Economic Council, the Council for Stabilization of National Life, the Academic Council and the National Land Research Council. He did his undergraduate work at the University of Tokyo and received his Ph.D. from the Massachusetts Institute of Technology. Dr. Inoguchi serves as editor for two book series from the University of Tokyo Press. Among his many books in Japanese and English, a recent title is Global Changes: An Analysis.

Takatoshi Ito is an economist with the International Monetary Fund and a member of the Abe Fellowship Program Committee. He has also held research appointments with the National Bureau of Economic Research, and various academic positions both in the United States and Japan. Dr. Ito did his undergraduate work at Hitotsubashi University and received his Ph.D. in economics from Harvard University. His most recent work is Vison for the World Economy, coauthored with Robert Lawrence and Albert Bressand (1996).

Sumiko Iwao is professor of social psychology at the Institute for Communications Research and a faculty member of the Graduate School of Human Relations at Keio University. Dr. Iwao is currently a member of the National Public Safety Commission of Japan, the Prime Minister's Task Force on Gender Equality, and the US/Japan Conference on Cultural and Educational Interchange. She received her undergraduate degree from Keio University and her Ph.D. in social psychology from Yale University. Her most recent publications include The Japanese Woman: Traditional Image and Changing Reality and Foreign Students in Japan: Social Psychological Analysis.

Hideki Kanda professor of law at the University of Tokyo where he also received his law degree. Professor Kanda's main areas of specialization include commercial law, corporate law, and securities and banking regulations. He has held a number of academic positions including visiting professor of law at the University of Chicago Law School, associate professor of law at Gakushuin University, and associate professor of law at the University of Tokyo.

Masahiro Kawai is professor of economics at the Institute of Social Science at the University of Tokyo as well as a consultant to the Economic Research Institute of the Economic Planning Agency of the Japanese government. Dr. Kawaii also previously held consultant positions in the research department of the International Monetary Fund, the Institute of Fiscal and Monetary Policy of the Japanese Ministry of Finance, and the Institute of Monetary and Economic Studies at the Bank of Japan. Dr. Kawaii received his undergraduate degree from the University of Tokyo and his Ph.D. in economics from Stanford University. His numerous publications include an article in The Journal of Money. Credit and Banking entitled "Twin Deficits v.s. Unpleasant Fiscal Arithmetic in a Small Open Economy."

Masahiro Okuno-Fujiwara is professor of economics in the economics faculty of the University of Tokyo. He is also Director of the Tokyo Center for Economic Research and a council member of The Econometric Society. Dr. Okuno-Fujiwara previously held positions at the Institute for Monetary and Economic Studies at the Bank of Japan and the Ministry of International Trade and Industry Research Institute. He earned his undergraduate degree at the University of Tokyo and his Ph.D. in economics from Stanford University.

Eisuke Sakakibara is Director-General of the International Finance Bureau of the Japanese Ministry of Finance. Since 1965 Dr. Sakakibara has held numerous important posts with the Ministry, including service as President of the Institute of Fiscal and Monetary Policy, Senior Deputy-Director General of the International Finance Bureau, and Director of Planning and Research. Dr. Sakakibara received his undergraduate degree from the University of Tokyo and his Ph.D. in economics from the University of Michigan. Of numerous publications, his most recent book was entitled Beyond Capitalism: The Japanese Model of Market Economics (1993).

Gary Saxonhouse is professor of economics at the University of Michigan and a member of the Abe Fellowship Program Committee. Dr. Saxonhouse is a member of a number of international committees and advisory groups, and was appointed by President Bush to serve as a member of the Council of Economic Advisors. He received both his undergraduate and Ph.D. in economics from Yale University. Dr. Saxonhouse is widely published, with his latest work being "A Short Summary of the Long History of Unfair Trade Allegations Against Japan," in Fair Trade and Harmonization, edited by Jugdish Bahagwaiti and Robert Hudec (1996).

Hideo Sato heads the Graduate School of International Political Economy at the University of Tsukuba. He also directs a number of international research projects, and is a member of various government and private advisory groups including the Industrial Structure Council of the Japanese Ministry of International Trade and Tndustry. Professor Sato received his Ph.D. in political science from the University of Chicago, and is the author or co-author of numerous books and articles in English and Japanese.

Seiichiro Takagi is professor of international relations at the Graduate School of Policy Science at Saitama University. Dr. Takagi did undergraduate work at the University of Tokyo and received his Ph.D. in political science at Stanford University. Of his numerous publications is a chapter entitled "Human Rights in Japanese Foreign Policy: Japan's Policy Towards China After Tiananmen" in a book on human rights and international relations edited by James T.H. Tang.

Makoto Utsumi is special advisor to the Japanese government's Ministry of Finance and professor at the Faculty of Business and Commerce of Keio University. Among Professor Utsumi's many important posts during his career with the Ministry of Finance, service as Director General of the International Finance Bureau, Vice Minister of Finance for International Affairs, and Minister Extraordinary and Plenipotentiary to the Japanese Embassy in Washington, DC stand out. Professor Utsumi holds a number of international prizes and honors, including the Mexican Order of the Aztec Eagle and membership in the French Legion of Honor.

Toshio Yamagishi is professor and director of the Social Psychology Division of the Department of Behavioral Science at Hokkaido University as well as an affiliate professor of the Department of Sociology at the University of Washington. Dr. Yamagishi was one of a the first group of researcher/scholars given an Abe Fellowship in 1991. He is also an executive committee member of the Japanese Social Psychological Association. Dr. Yamagishi received his Ph.D. in sociology from the University of Washington. Among his publications is a book entitled Social Dilemmas (1990).

Participants at the Third Annual Abe Fellows' Conference Yokohama and Tokyo

Attending Committee Members

Takatoshi Imada

Takatoshi Ito

Merit Janow

Akira Kojima

Takeshi Matsuda

Fred Notehelfer

Gary Saxonhouse

1993-94 Fellows

Kiyoshi Adachi

Yuko Asakura

Susumu Awanohara

Theodore Bestor

Ruth Campbell

Robert Evans, Jr.

Kathryn Graven

Nobuhiro Hiwatari

Susumu Kurokawa

James Marsh

Aurelia George Mulgan

Ulrike Schaede

James Schear

Spencer Sherman

Yu Takeda

Mamoru Tsuda

Shin Watanabe

Alison Wetherfield

1994-95 Fellows

Naoyuki Agawa

Mary Brinton

Laurie Freeman

Tony Freyer

Andrew Horvat

Susan Long

Michael Mastanduno

Deborah Milly

Yutaka Osada

Susan Pharr

Iwaaki Sato

Tatsujiro Suzuki

Steven Vogel

Hyuck-Soo Yoo

Akihiro Yoshikawa

Daizaburo Yui

Invited Guests

Yoko Hayashi, Koga and Partners

Nagayo Homma, Center for Global Partnership

Makoto Iokibe, Kobe University

Takashi Inoguchi, United Nations University

Robert Immerman, Columbia University

Sumiko Iwao, Keio University

Hideki Kanda, University of Tokyo

Masahiro Kawai, University of Tokyo

Edward Lincoln, U.S. Embassy, Tokyo

Tetsuro Ogimura, Kanagawa International Association

Masahiro Okuno-Fujiwara, University of Tokyo

Eisuke Sakakibara, International Finance Bureau of the Japanese Ministry of Finance

Hideo Sato, University of Tsukuba

Seiichiro Takagi, Saitama University

Makato Utsumi, Japanese Ministry of Finance and Keio University

Brackette Williams, University of Arizona

Toshio Yamagishi, Hokkaido University and University of Washington

Conference Staff

Jennifer Bourque, SSRC

Mary Lea Cox, SSRC

Norio Furushima, CGP

Mary Byrne McDonnell, SSRC

Sheri Ranis, SSRC

Takuya Toda, SSRC

Steven Wheatley, ACLS

Footnotes

Note 1: The nature of human relations varies even within one society by historical period, region, and type of organization, but for the purposes of the discussion here I would like to highlight two sharply contrasting social milieus represented by Japan and the United States in a rather simplistic manner stressing their differences. Back.

Note 2: Japan's police system includes the National public Safety Commission (NPSC), a council under the jurisdiction of the Prime Minister's Office consisting of five persons (currently representing the legal and academic professions, business, the bureaucracy and the media) and chaired by a minister of state. The NPSC supervises the National Police Agency with its nationwide force of 260,000, and the Commissioner-General of the NPA directs, supervises, and coordinates prefectural police offices that are controlled by prefectural public safety commissions. The NPSC meets weekly as a rule to hear reports from NPA heads and to make decisions when necessary. The author has been a member of the NPSC since 1992. Back.

Note 3: "Report of the Committee on the Elimination of Discrimination Against Women", CEDAW Fourteenth Session, (A/50/38). Back.

Note 4: "Socio-Economic Systems of Japan, U S. and Europe" Institute ol' Monetary and Fiscal Policy, Ministry of Finance, Tokyo, Japan, July 1995. Back.