Ikko Shimizu - The Dark Side of Japanese Business: Three Industry Novels

Three Industry Novels
Silver Sanctuary, The Ibis Cage, Keiretsu

Ikk Shimizu
Translated and Edited by
Tamae K. Prindle

First published 1996 by M.E. Sharpe

Published 2015 by Routledge
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Library of Congress Cataloging-in-Publication Data

Shimizu, Ikk
[Selections. English. 1995]
The dark side of Japanese business: three industry novels
Ikko Shimizu; translated and edited by Tamae K. Prindle.
p. cm.
An east gate book.
Contents: Silver sanctuary = Gin no saji The Ibis cage = Toki no saya Keiretsu.
Distinctive title: Gin no saji. English. Toki no saya. English. Keiretsu. English.
ISBN 1-56324-616-3 (alk. paper). ISBN 1-56324-617-1 (pbk.: alk. paper)
1. Shimizu, IkkTranslations into English. 2. Business enterprisesFiction.
3. BusinessFiction. 4. JapanSocial life and customsFiction.
I. Prindle, Tamae K., 1944 . II. Title. III. Title: Gin no saji.
IV. Title: Toki no saya. English V. Title: Keiretsu. English
PL861.H537A26 1995
895.6'35dc20
95-17323
CIP

Illustrations on pages 33 and 83 by Kazan Prindle.

ISBN 13: 9781563246173 (pbk)
ISBN 13: 9781563246166 (hbk)

Tamae Prindle tells us that the model for Shimizu Ikk's Keiretsu is Nissan Motors, one of the big two of the Japanese automobile industry. As I write this, I have before me the Nikkei Weekly of March 13, 1995, which details Nissan's efforts to control costs and regain profitability in light of the rising yen. According to this issue, Nissan "aims to cut material costs by 240 billion over three years by asking suppliers for price reductions of up to 30 percent." The report goes on to say that financial analysts and securities dealers applaud these cuts by Nissan because "they seem to have got a grip on costs." We read this sort of thing all the time in the economic press, and we tend to accept it as part of the normal workings of laissez-faire capitalism. What we do not normally read is the meaning of that 30 percent cut in terms of overwork, lowered wages, children not sent to universities, substandard housing, frustrated careers, and many other aspects of "rich Japan, poor Japanese" ( tomeru Nihon mazushii Nihonjin ), the phrase that many Japanese use to describe their country's status as the economic superpower of the Pacific.

Shiraizu's novella is concerned with exactly these subjects, including how and why the small suppliers of Nissan have no choice other than to accept a 30 percent cut in their revenues, regardless of the ideology of the "free market," and to live with it as best they can. The Japanese word keiretsu has become part of the vocabulary of modern Japanese capitalism and international trade. It refers to Japan's great industrial conglomerateswhat before the war were called zaibatsu such as Mitsui, Mitsubishi, Sumitomo, and Yasuda. The American occupiers of Japan after World War II thought that they had broken them up, but no sooner had the Occupation ended in 1952 than the conglomerates began to spring back to life with governmental help, except that they now referred to themselves with the much tamer term keiretsu. (Zaibatsu means "financial clique" and is comparable to the phrase "monopoly capitalist" in English, whereas keiretsu merely means "lineage.") The keiretsu is one of Japan's most important contributions to the institutions of modern capitalism.

Seen in a positive light, the keiretsu is a brilliant device for introducing advanced technology into a developing economy, particularly under conditions of scarce capital. Basically, it means incorporating into one cooperative body many utterly heterogeneous industries and then using the profits of the secure, well-established businesses to finance and leverage the new or risky ventures. For example, in the 1920s, Mitsui licensed German machines needed by the Imperial army and for many years financed their development and lack of profits with returns from its coal mines. In this example, the keiretsu can also be seen as an excellent way to combine planned development with private management, thus avoiding the costs and misallocation of resources associated with socialist displacement of the market.

But in another sense, the keiretsu is a form of industrial feudalism. It uses the norms and institutions of capitalismindependence, entrepreneurship, private ownership, market forces as traps to keep the labor force docile and working, accepting of its fate, and oblivious to notions of unity or resistance to the forces that are working it to death. Shimizu believes the key to the structure of the keiretsu is the practice of gaich, meaning "outsourcing" or "subcontracting." Whereas in the American automobile industry, for example, a manufacturer like Ford typically subcontracts some 30 percent of the parts that go into a car; the figure in Japan is 70 percent. Japanese automobile makers are really assemblers, not manufacturers. They are the feudal lords who control some 400 or more "suppliers," each of whom in its turn is also a petty lord over its own "suppliers," and so on, down to the housewives who do piecework in their own homes. "The abuse of housewives," writes Shimizu, "is what makes dumping possible.... The suppliers of each level are sacrificing short-term gains for long-term job security." Shimizu's novel is a "backstage expos of the story behind high-quality, modestly prices automobiles."

What, then, is a keiretsu? In Shimizu's words, "it's a permanent warranty for TM [Tokyo Motors, the author's pseudonym for Nissan] to keep its production costs low." Why is the core company able to pay its own employees so much better than its subcontractors pay the drones of the chsh kigy (medium and small enterprises) sector? Because it has "squeezed every last drop from its keiretsu suppliers, their subsidiaries, and other related firms." How is it able to get away with this on a stable, long-term basis? Since these subsidiaries are allegedly privately owned and have only a market relationship to the keiretsu leader, why do they tolerate 30 percent cuts in their prices? Why don't they seek other customers? Why, in particular, after they have gone abroad and invested in, say, Kentucky or Malaysia, don't they slip the leash and become genuinely independent private enterprises? This is a key question, and Shimizu answers it in a much more complete and satisfactory manner than the handbooks on the Japanese economy written by economists. The subcontractors are kept on a short leash mostly through personnel policies. The core company inveigles its own covert agents into key positions in the supplier firms, and it devotes an unbelievable amount of time to manipulating the boards of directors and drafting secret rules that have the effect of tying the guileless and often highly creative parts suppliers to the exploitative assembler. That is what Shimizu writes about in Keiretsu. The novella is a rare glimpse into corporate culture in Japan, as distinct from the bloodless "incentives" and "disincentives" posited by the so-called rational choice theorists of most American economics departments.