Through the Eyes of Yankelovich

Ethical Confusion is the Main Obstacle

ALL the economies of the developed world are struggling to regain their old vitality. This is particularly true of the economies of Japan and the United States. Both look back nostalgically to an earlier era of steady growth, dynamism and social mobility, which both nations would dearly love to recreate.

In the post WWII era, both Japan and the United States embraced a “democracy-friendly” form of capitalism. This is the form of capitalism that achieves a close alignment between its profit-making institutions and the aspirations of the public to live a free and ever more prosperous life. In the consumer-driven economy of the United States from the end of WWII up to about 1980, the link between corporate profitability and social mobility was simple and direct. Then as now, two thirds of GDP depended on consumer spending, and the most direct way to increase corporate profits was to put more money in the hands of consumers to spend on profit- able products and services.

Japan’s economy was more export driven. It achieved its stunning success in those years through exporting to the United States and other nations products that were superior in design, quality and value for money. As a consequence, the Japanese people achieved a higher standard of living and an impressive rate of savings.

Gradually, however, in recent decades both the American and Japanese economies have become less democracy-friendly. And both have suffered as a result.

Capitalism and democracy do not coexist automatically and effortlessly. We have learned from China and other nations how flexible capitalism can be. It can take many forms and flourish under non-democratic governments. But democracy-friendly capitalism has proven to be the ideal form for safeguarding the pub- lic’s freedom and social mobility as well as enhancing the dynamism of the private sector.

Both Japan and the United States are finding it difficult to recreate their golden era. I am convinced, however, that it is achievable for both nations. If successful, it would constitute a huge win; it would raise public morale; business would regain the public trust it craves; and our political systems could once again be counted on to “do the right thing,” just as they had in earlier decades. Then our economies would achieve the higher levels of growth we need to sustain productivity and prosperity.

The complete article can be found in Issue #276 of the Tokyo Journal. Click here to order from Amazon.