How a Great Power Falls Apart
Decline Is Invisible From the Inside
If one is to credit the participants, the conversations that took place early in May between Prime Minister Fukuda of Japan and senior officials of the Carter Administration went swimmingly indeed. Japanese officials proclaimed the Prime Minister's visit to Washington "a great success." And after a luncheon meeting with Fukuda, Secretary of State Cyrus Vance declared: "The relations between our two countries are excellent. The strength of that relationship is the cornerstone - or pillar - on which our Asian policy is founded and it will remain so."
In so saying, Mr. Vance was merely reiterating a sentiment expressed by every U.S. President and Secretary of State for the last 20 years. With all respect to Secretary Vance, however, his pronouncement rested on shakier ground than those of most of his predecessors. For today, more than at any time since the Eisenhower years, there are potentially disturbing strains upon the Japanese-American relationship. And if, as one must assume, the Carter Administration does genuinely intend to retain the Japanese alliance as the cornerstone of America's Asian policy, prompt attention should be given to finding ways of easing those strains - or at least of avoiding their exacerbation. Otherwise, there is a distinct possibility that that cornerstone will before too long begin to show the effects of erosion.
This, to be sure, is not a perception widely shared within the Administration or among the U.S. public. On the contrary, most Americans regard our problems with Japan as matters of simple economics - so much so, in fact, that the The New York Times relegated virtually all of its coverage of the Fukuda visit to its business pages.
Journalistically, that was in some respects a thoroughly understandable decision. For in response to the assaults of their U.S. counterparts, Japanese diplomats and officials themselves have of late largely focused on the economic issues between the two countries. But the fact is that by no means all the strains between Japan and the United States are purely economic in origin and even those that are have, like all things economic, political implications.
Just how strong those implications are was forcibly impressed upon me when I visited Japan this spring. In all the years since Japan and the United States formally became allies, I had never heard from middle-of-the-road Japanese such outspoken criticism of U.S. policies nor such open questioning of the degree of U.S. benevolence toward Japan.
A hint of what I encountered in Japan was detectable in some of Mr. Fukuda's remarks during his stay in Washington. Though he promised to do everything possible to reduce Japan's trade surplus with the United States, Fukuda emphasized that the success of his efforts would be greatly affected by what the Carter Administration did about holding down the U.S. inflation rate and stabilizing the value of the dollar in relation to the yen. This, of course, was a not-so-oblique way of pointing out that responsibility for reducing the massive U.S. trade deficit rests at least as much upon American shoulders as upon those of America's trading partners.
Compared to the tough talk that used to be directed at Washington by Charles de Gaulle - or even that which has emanated more recently from Helmut Schmidt - Mr. Fukuda's remarks constituted a display of high courtesy. But in the Japanese context, they represented a significant new toughness.
Except in dealings with close friends or acquaintances, the Japanese characteristically suffer a conflict of interest in silence until at last they reach a "bursting point." As recently as early March of this year, Mr. Fukuda rebuffed one of his top subordinates who strongly urged the Prime Minister to point out to American officials that a lot of their balance-of-payments troubles were of their own making. Yet only two months later Fukuda, in essence, made precisely that point - and in public rather than private forums. Whatever else he may or may not be, Mr. Fukuda is a canny politician and it seems reasonable to assume that at least in part this reversal of course reflected his awareness that a significant number of his countrymen had moved appreciably closer to the bursting point on the subject of U.S. pressures upon Japan.
In almost any country except Japan, the bursting point on this particular issue would have arrived well before now. The suggestion that the Japanese have any conceivable grounds for resentment toward the United States will surely strike most Americans as extraordinary. But the objective situation, as our Marxist friends would put it, is that over the last decade successive U.S. Administrations have repeatedly displayed gross insensitivity to legitimate Japanese concerns and a conspicuous lack of respect for Japanese pride.
As the jargon phrase "Nixon shocks" attests, the originator of this pattern of behavior was Richard Nixon, who carried out both his de facto devaluation of the dollar and his historic reversal of U.S. China policy without making even a serious pretense at advance consultation with the Japanese. What is less well remembered in the United States, perhaps because no catch phrase was ever attached to it, is the fact that Nixon rode even more roughshod over Japanese interests in the matter of textile exports. In Japan itself, however, the seemingly permanent impoverishment of a once-flourishing industry serves to keep the memory of this classic case of beggaring thy neighbor very much alive.
As a senior official of the Japanese Foreign Ministry recently reminded me, however, Mr. Nixon's tough tactics over textiles did not at the time provoke any general resentment in Japan. Instead, the members of the Japanese establishment asked themselves what errors they had committed to provoke such wrath and how those errors might be repaired. To a large degree, this response simply reflected a realistic awareness of Japan's dependence on the United States for its military security and economic well-being. But at least in part it also reflected a psychological dependence stemming from the belief that the role the United States played toward Japan was that of an elder brother, sometimes stern but always well-intentioned.
Even today, it must be said, this set of attitudes is widely held in Japan - particularly among older members of the economic and political establishment. Both the president of one of Japan's largest industrial concerns and a leading conservative politician expressed their views of current Japanese-American tensions to me in almost identical terms; Japan, they said, was "at fault" for having concentrated its exports to the United States too heavily in a few product lines such as steel, motor vehicles and electronic equipment. And while they politely concurred in the suggestion that the United States too might be at fault for failing to curb its oil imports or to produce goods as acceptable to consumers as those it has been importing from Japan, they clearly felt that this was essentially irrelevant and that the central question was what Japan could do to appease American anger.
But widespread as it remains, such humility is no longer universal among the members of Japan's centrist and conservative majority. At least one astute Japanese bureaucrat argues that the seeds of doubt concerning U.S. readiness to come to Japan's aid in time of need were planted at the time of the 1973 oil crisis. The Arab oil embargo and the subsequent OPEC price increase lent new horror to a specter that has long haunted the Japanese psyche: Japan's almost total dependence on imported raw materials and energy. And given this special sense of vulnerability, the fact that the United States made no particular provisions to help Japan cope with the oil crisis and its aftermath inevitably raised in some Japanese minds a nagging question about the strength of the American commitment to Japan.
Unhappily, since the advent of the Carter Administration, the seeds planted in 1971 and 1973 have sprouted shoots. Mr. Carter's original program for Korean troop withdrawals and the emphasis that he and some of his subordinates have placed on strengthening NATO's military posture led some Japanese bureaucrats and geopoliticians to question whether Asia still played a central role in American strategy. Reportedly, Mr. Fukuda came away from his Washington trip reassured about the sincerity and durability of the U.S. commitment to Asia, but it is clear that Japanese fears on this score could be revived by a single ill-considered or inadequately explained policy decision in Washington.
Another issue that could come back to inflict major damage on U.S.-Japanese relations had its origins in Mr. Carter's decision to try to forestall further nuclear proliferation by securing worldwide renunciation of the use of fast breeder reactors. Whether Mr. Carter was aware of the considerable investment the Japanese had made in a prototype breeder reactor plant at Tokaemura when he launched his campaign is unclear. What is clear, according to one of the Japanese diplomats involved, is that the U.S. officials designated to negotiate the Tokaemura question came to their task almost totally unaware of the supreme importance that the Japanese government and much of the Japanese public attach to developing an alternative to oil as a primary energy source. And while the Americans concerned have subsequently developed such awareness, it is still questionable whether they understand the Japanese feeling that to be totally dependent on the United States for nuclear fuel would mark only a limited improvement over being totally dependent on the OPEC nations for oil.
As a consequence of these blind spots, the Carter Administration succeeded for a time in creating a political situation unprecedented in recent Japanese history. So intense was public outrage at the U.S. stance on Tokaemura that Japan's previously vocal opponents of reliance on nuclear power abruptly fell silent. More remarkable yet, the Japanese press, which normally regards it as a sacred duty to oppose the country's Liberal Democratic rulers on all issues, unanimously rallied behind the government on this one. With some bemusement, one senior Japanese bureaucrat recalls that at the height of the Tokaemura uproar Japan's negotiators had to avoid any show of accommodation toward the Americans for fear that the press would accuse them of betraying the national interest.
Since then, the uproar has subsided, allayed by a "compromise" that provides for a joint Japanese-American search for alternate technologies to the one originally intended for use at Tokaemura. But one young Liberal Democratic parliamentarian, a man whose influence seems certain to grow with every passing year, bluntly declared: "A few of us who know that this compromise will mean a three to four year delay in Japanese development of nuclear energy are still very angry." If his prediction proves true, there is an obvious danger that in due course the majority of Japanese rather than just a few may come to see the United States as one of the forces contributing to Japan's energy problem.
Meantime, a significant number of Japanese, if not a majority, already see the United States as a major contributor to international economic instability. Among economically sophisticated Japanese, it is an article of faith that the United States has made a particular and deliberate effort to depreciate the dollar vis-à-vis the yen. And the harsh pressures that the Carter Administration brought to bear on Japan in last winter's confrontation over the trade surplus inevitably aroused resentment. Among Japan's political elite, it is common talk that U.S. Trade Negotiator Robert Strauss confronted Japan's Minister of State for External Economic Affairs, Nobuhiko Ushiba, with "crude threats." This charge may, of course, reflect no more than the difference between the prevailing modes of discourse in Texas and Tokyo. But however Strauss may have comported himself, it is an undeniable fact that when Ushiba visited Washington late last autumn, a group of U.S. Senators assailed him on the trade issue in essentially these words: "Remember, the United States doesn't need Japan, but you do need us."
Like the Tokaemura hubbub, the trade surplus dispute has now cooled off considerably. From the Japanese point of view, the United States made no major concessions of substance during the Fukuda visit to Washington. Indeed, even before Mr. Fukuda arrived, it had been made plain to him that he would not achieve one of his primary objectives, which was to persuade the U.S. government to intervene actively in currency markets to check further appreciation of the yen against the dollar. Since the United States has for some time intervened in the market on behalf of the West German mark, the Japanese might with some legitimacy have charged discrimination. Instead, they chose to take comfort from the fact that the language used by senior American officials in their conversations with Mr. Fukuda and his aides was, in contrast to the tough talk of last fall and winter, refreshingly moderate.
How long this equable tone will be maintained, however, is uncertain. For the fact is that U.S. expectations concerning the extent to which Japan can reduce its trade balance this year are almost surely unrealistically great - and this is particularly true of the expectations of U.S. industry and its friends in Congress.
To be sure, Mr. Fukuda continues to insist that the Japanese economy will achieve a seven percent growth rate this year - a goal whose realization is generally regarded as crucial to any significant reduction in Japan's trade surplus. Many private economists, both in Japan and in the United States, however, believe that the seven percent figure is unrealistically high. For one thing, the steep upward appreciation of the yen in recent months, gratifying as it has apparently been to the Carter Administration, will inevitably have a deflationary impact upon Japan's domestic economy. And that, of course, will inhibit the economic expansion Washington has so vigorously urged upon the Japanese.
The international monetary situation could also adversely affect Japan's drive for growth in yet another way. Fukuda's primary device for stimulating the Japanese economy is a vast increase in government expenditure, but precisely how much effect such government expenditure has will depend in considerable part on the behavior of Japan's traditionally cautious consumers. The rate of personal saving in Japan is already the highest in the world and the consensus of most Japanese economists is that another cycle of instability on the part of the dollar would further impair the economic confidence of ordinary Japanese and lead them to save even more. (If that seems to argue an uncommon degree of economic awareness on the part of the Japanese man in the street, so be it. When, lacking yen, I offered a dollar tip to a Tokyo bellboy last March, he stared at the proffered bill and remarked sadly: "Getting smaller, smaller.")
In any case, whether Japan does or does not achieve seven percent economic growth is a matter of only academic concern to those U.S. businessmen and politicians who have complained most loudly about Japanese imports. What they want to see is a reduction in the Japanese trade surplus with the United States and, even more important, a reduction in the flow of Japanese goods into the United States. And on that score the omens are mixed.
Thanks to measures taken by the Fukuda government and by Japanese industry, Japanese exports to the United States have already dropped significantly both in terms of yen value and of physical quantity. But because of the depreciation of the dollar vis-à-vis the yen, they have not yet dropped at all in terms of dollar value and may even show no decline for this year as a whole.
This, of course, is a situation that can scarcely fail to cause public confusion. As evidence of that, trade figures released by the Japanese government in April of this year showed that between November 1977 and February 1978 Japan's exports had already declined somewhat both in quantity and in yen value. Yet The New York Times, drawing its conclusion solely from the dollar figures involved, reported that Japanese exports "continue to expand vigorously."
If the Times can be misled by this statistical paradox, millions of ordinary Americans will certainly be misled as well. And those U.S. businessmen whose primary concern is to fend off Japanese competition by all means possible can be expected to use the dollar figures to justify fresh demands for protectionist measures. By late this year, then, if it appears that Japan's trade surplus with the United States as expressed in dollars will approach last year's massive nine billion dollars, it is not unlikely that loud protectionist outcries will once again be heard in the Congress. Should that occur, we might well see renewed Administration pressure on Japan for tighter "voluntary" export controls and even what are euphemistically referred to as "structural changes" in the Japanese economy.
In my view, any such course of action on the part of the United States would carry with it the danger of inflicting serious damage on the Japanese economy. What tends to get overlooked in all the heady talk about seven percent growth is that Japan's economy is today in disturbingly fragile condition. The overall level of corporate profits in the United States last year was 40 percent higher than in 1973; in Japan, it was 20 percent lower. A quarter of all the firms listed on the Tokyo Stock Exchange are currently operating at a deficit and the rate of business bankruptcies in 1977 was the highest in Japanese history. "The present state of our industry," lamented the Nomura Research Institute in a paper published last February, "may be compared to that of a barrel that has come to the edge of Niagara Falls."
Some of Japan's current economic problems admittedly are of a purely cyclical nature - but some are of a basic, long-term nature which can probably only be solved by fundamental alterations in the way the Japanese economy functions. Peter Drucker dealt ably and at length with these long-term challenges to Japan's economic stability in a recent article in this magazine.1 Accordingly, I will not dwell on them except to note that two of these phenomena - the increasing difficulty of maintaining Japan's traditional system of lifetime employment and of finding suitable employment for Japan's burgeoning army of college - educated youths - also constitute potential social and political problems of a serious order.
What all this suggests is that simply to deal successfully with the economic problems they already have will require all the ingenuity the Japanese possess. If, in this situation, the United States were to complicate matters by insisting upon measures that would require a drastic reordering of Japan's export-oriented trade structure, it is not inconceivable that Japanese industry - and the Japanese economy - might, in fact, go over Niagara Falls.
So far, the Japanese reaction to the often cavalier treatment that country has received at the hands of the United States over the past decade has been, as I suggested earlier, remarkably mild. Among Japanese political observers of my acquaintance, there is virtually unanimous agreement that in the last year or two nationalist sentiment in Japan has visibly increased. (One sign of this has been a significant increase in public support for the long-suspect Self-Defence Forces.) But up to now, what has manifested itself has been nationalism of a nonaggressive, essentially healthy variety totally lacking in anti-American overtones.
Whether such reasonableness would endure in the face of serious economic difficulties which were perceived as U.S.-induced, however, is another question. For one thing, widespread economic distress could well undermine still further the strength of the Liberal Democratic Party, whose hold on the Japanese electorate and control of the parliamentary process has been eroding for some years now. Whether an effective alternative to the LDP could be put together is highly arguable. And if economic instability were to be accompanied by political instability, the ultimate public response in Japan could well take forms that the United States would find unwelcome.
It appears to be an article of faith with many Americans that, come what may, Japan will remain a U.S. ally because it has nowhere else to go. That proposition, however, is valid only if one assumes that the Japanese will inevitably retain their present devotion to democracy, an open society and material well being.
All present evidence would suggest that the Japanese will, in fact, remain devoted to those things. But it is worth remembering that there are other aspects to Japanese society too - dedication to consensus, a predilection for social discipline, a strong emotional pull toward China and, among the young in particular, considerable Marxist influence. And in a prolonged period of economic and political unrest it is impossible to predict how all these forces might interact or what role rationality would play in the process. As Zbigniew Brzezinski once wrote: "Japanese society can be said to be characterized by a kind of metastability, that is to say a kind of stability that appears to be extremely solid until all of a sudden a highly destabilizing chain reaction is set in motion by an unexpected input. . . . [And] once instability is set in motion, insecurity tends to intensify the instability."2
It would be alarmism of the highest order to suggest that the kind of chain reaction described by Brzezinski is either imminent or inevitable in Japan. And it would be equally wrong to ignore the fact that the manner in which the United States has handled its relations with Japan in recent years has had its positive side. However unintentionally, the vagaries of American policy have served to wean the Japanese at least in some degree away from an excessive psychological dependence on the United States. Says Liberal Democratic parliamentarian Yukihiro Ikeda: "World War II is finally over. We do not wish to deny our reliance upon the U.S. in security and economic matters. But we will speak out. And we are ready to assume a greater role in the world."
This, however, in no way indicates that more of the same medicine will also have positive effects. To continue operating on the assumption, unspoken and perhaps even unconscious, that Japanese interests, however important, must invariably give way to perceived U.S. interests, however debatable, can only create a risk that Brzezinski's chain reaction may one day become painful reality.
Happily, moreover, the abandonment of that assumption would involve no compromise of truly fundamental U.S. interests. With a handful of relatively painless measures, Japanese-American relations could be vastly strengthened. The Carter Administration should lose no time in seizing upon and developing to the fullest degree possible Mr. Fukuda's ideas for joint development of alternative energy technologies. It should avoid any word or deed that, even by inadvertence, suggests that Asia plays a secondary role in American considerations. Most important of all, the Administration should cease to play games with the yen and eschew further confrontation over the Japanese trade surplus - a phenomenon that Dr. Lawrence Klein, once Jimmy Carter's principal economic advisor, has flatly dismissed as "not a principal reason for America's balance of payments troubles."
To say that all this would be relatively painless is not to say that it would be totally so. On the trade front, Mr. Carter would have to be prepared to put up a tougher fight than he hitherto has against the neo-protectionists - and that would have its political price. But the President has rarely hesitated to take on vested political or economic interests when he felt his cause was just. And the buttressing of relations with a principal U.S. ally, which also happens to be a pivotal factor in the world balance of power, would seem to be a just cause indeed.
2 The Fragile Blossom: Crisis and Change in Japan, New York: Harper and Row, 1972, p. 16.