Model Management: Japan - "The whirligig of time"

In the aftermath of World War II the US General MacArthur sent business guru W. Edwards Deming into Japan to help in the task of reconstructing the country's industrial base. Deming achieved more than anyone could have imagined. From a time when the "made in Japan" label aroused mainly suspicion or ridicule, the 1970s and 80s saw the rise of Japanese manufacturing and technological excellence.

Deming was a prophet honoured more abroad than in his native US. The irony always was that latter-day inferiority complexes in the west about Japanese business performance stemmed in part at least from the insights of a neglected western expert (or export, if you prefer). Anti-Japanese sentiment in the recession-hit America of the early 1990s was not only unpleasant but spectacularly badly informed.

But as Shakespeare's clown Feste observes in the comedy Twelfth Night, "The whirligig of time brings in his revenges." Japan today is at the bottom of a very deep hole. The central bank has cut its main interest rate to 0.15 per cent in the hope of stimulating economic activity - but to no avail. The Japanese stock market hasn't even managed a "dead cat bounce". Can putrefaction be far off?

Political turmoil, and a confused three-party coalition government, delay necessary reforms. On Friday 9 March a package of tax concessions and investment to support both share prices and the ailing banks was launched, but the still dominant impression was that of a government doing too little, too late. Prime Minister Mori looks doomed, while Finance Minister Miyazawa has tried to "unspeak" his admission that the government's fiscal position was close to collapse.

Where is the new Keynes with the radicalism and creativity to help Japan? The Japanese have tried most pump-priming techniques short of Keynes' ironic plan to pay people to bury money and unearth it again. Could JK Galbraith be persuaded to fly out and repeat the Deming trick?

Japanese consumers have lost faith in their government and in their economy. They are refusing to spend money. Indeed, if the current crisis continues, remaining bank deposits and pension plans could be unwound with even more devastating effect.

The admirable solidity and steadiness of the Japanese approach to business has become a burden and impediment to action in the "faster, faster" new economy. Japan's problems are deep-seated, cultural and moral as well as political and economic.

What emerges blindingly is the irresistible force of the business cycle, the inevitability of the ebbs and flows of economic history that cannot be denied and which have to be respected.

Japan's problems are our problems too. If one of the world's three biggest economies stutters and even fails, everyone faces difficulties. Not only is Japan's economy the motor for the whole Asia-Pacific region, but Japanese companies have been serious and committed overseas investors. A collapse and withdrawal of Japanese interests would have highly damaging consequences for the world economy.

On the back of a US slowdown, it would be the last thing anyone needs. It would also represent one of those chaotic, unpredictable "events" that destroys all forecasts and business plans. It would constitute President Bush's first big crisis, one that he and his administration appear less than ideally prepared for.

So the next few days in Tokyo are of profound significance for all of us. This is the flip-side of globalisation. International co-operation becomes not merely a nice idea but an economic and political necessity. It's time for some effective leadership, again.

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