I am sympathetic to Ron Dore's charges of ethnocentric arguments. Indeed, I often tell students and other audiences that Japanese, or anyone else, have a right to make arrangements that suit them. However, there are consequences to the choices.

In particular, I would argue that Japanese returns on their investments have been lower than most rich countries', including Britain, France, US, and Germany since roughly 1980. This is not just a case of comparing to the US.

This over-investment and low returns have consequences for the average Japanese: lower levels of employment as firms substitute capital for labor; lower returns on savings; lower income from dividends or other payouts from company profits. All this means that fewer Japanese are working than otherwise and that personal income is lower.

Who benefits? Managers benefit who do not have to worry about their jobs while they piss away their shareholders' wealth; exporters, who benefit from excess national savings that enlarges the current account; investment equipment makers; those in the lifetime employment pool (to the degree that investment is intended to keep them employed).

Who loses? Potential workers who compete against capital; other potential workers that are kept out of the system by the protection of the lifetime workers; savers; shareholders; consumption goods makers and providers.

An additional possible issue is that the excess capacity from the over-investment is a drag on prices, contributing to deflationary forces. I am not so sure about this point, but it bears consideration.

As I noted above, these may be honorable choices that may be made by a willing population; however, there are tradeoffs and consequences that should be borne in mind.

Arthur Alexander