Japan: Cybercapitalism and the threat of catastrophe

Sakikabara: the centre is moving from New York to cyberspace; expect turbulence

What has happened during the last five to 10 years is a telecommunications and information revolution. I call this new type of capitalism, cybercapitalism. It is driven by new information technology, and is a new sort of capitalism of the late 1990s and 21st century. Obviously Japan has to adapt to that. Sure, Japan should retain what is good about the Japanese model - take, for example, the stability of employment among blue-collar workers. But for those in the information technology sector you need to have more mobility in the labour market. This means that such countries as Japan, France and Germany - which used to have a different kind of capitalism from the Anglo-Saxon variety - are adapting. I have not changed my view that each country has a different style of capitalism, but you obviously have to adapt to change. Nothing is fixed. Times are changing. What has happened in the last five years could be compared to the Industrial Revolution.

Does Japan's educational system handicap Japan in this new revolution?

I don't think so. I don't think you could argue that Japanese by nature are disadvantaged in areas like computer software. Or that the Japanese educational system is that much behind in such areas. In higher education we are lagging behind American graduate schools. But we can catch up. I agree we are somewhat behind. But we are good at catching up.

Some economists say that Japan faces a problem that is structural. In spite of its phenomenal development in the past 30 years, Japan still wants to be a purely manufacturing nation. Other mature economies have moved up the value chain and become intellectual-property economies. Do you agree?

I do. Japan is lagging behind in the information and telecommunications areas and also in finance. Finance, to me, has become a sort of information industry. It thrives on information and transacts on computers. The financial industry has become a part of the information industry. Japan is lagging behind the US in these respects.

So the question is: why has Japan missed out so far in this information revolution?

The environment for creating new corporations is not favourable here. In the US every year new companies are born - new births account for about 17% of the total number of US companies annually. In Japan the figure is 5% a year, and 5% of companies drop out every year. In the US, the drop-out rate is 12%. So company numbers increase and dynamism is injected into the system by new corporations. In Japan, new corporations have not been created for the past five or 10 years and finance has not been available. But now times are changing and venture capitalists can raise money in the capital markets globally. So the Japanese system which centres around the main bank [the keiretsu system] is rapidly changing. I am not that pessimistic. The Japanese system in times like these can be quite flexible.

We barely avoided a meltdown last year. Where do you see the world going?

I share the view of George Soros that global capitalism - or cybercapitalism - is an extremely volatile and unstable system. We barely avoided a catastrophe in 1998. In September and October we were on the verge. We avoided it and the immediate crisis is over. But the basic nature of this cybercapitalism is still with us. A huge amount of money can move across borders within a very short period of time.

That movement is driven by a vast amount of information. We still have a boom and bust cycle, but the duration has become much shorter than, say, 20 years ago. All of a sudden a region receives an enormous amount of capital from the centre, and then all of a sudden it can leave. This needs to be monitored. We need to monitor the movements of short-term capital, but that is very difficult.

So what do we do?

Studies are now going on among the authorities about how to monitor them, but it's really difficult.

Is it possible to monitor and control these flows?

We need to. But it's really difficult. It's like controlling pornography on the internet. The internet is a good thing, but we need to control pornography there. We need new rules for this cybercapitalism. We have had rules, for example, in stock markets. Circuit-breaker regulations are necessary, and the US has them. But when everyone starts transacting on the internet, how can you have a circuit-breaker? This is a brave new world, and we need to catch up with the new reality, and have new rules. If we lag in forming these new rules we will probably be doomed to some major catastrophe.

Many economists have said the world has global oversupply. This can be solved in two ways. You either raise demand or face deflation. Which do you think will happen?

Global oversupply is a relative concept. I suspect we are overemphasizing this problem of global oversupply. Many economies are now depressed: Japan, Asia, China. But demand will return. Having said that, the sort of development we had in the post-Industrial Revolution world may be over. Maybe we are coming into the age where materials are abundant and we don't need to produce more. We may have hit the limits of the environment.

You mean there will be no more economic growth?

I don't know, but population in the developed countries is declining. So per capita income could increase without economic growth. There are environmental problems we need to face and there is definitely a limit to the environment's capacity to absorb the enormous amount of materials we are now producing and consuming.

But in Japan success has always been equated with the economic growth rate. So what does this mean for Japan?

This is a problem for the world, and needs to be faced globally. What it means for China, what it means for the US and Europe is something we need to seriously consider in the 21st century. That's a medium-term to long-term proposition. In the short term, I don't think oversupply will be a dominant problem. Demand will rise. But in the longer term, we must face what will be the post-industrial, post-modern era. Obviously the period of western modernism, western industrialism is over. The 21st century will be different.