PACIFIC BASIN ECONOMIC COUNCIL
MAIN PAGE | SPEECHES & EDITORIALS | 1999 | TECHNOLOGY VS. LABOR

Technology vs. Labor Mr. Kosaku Inaba Chairman and CEO, Ishikawajima-Harima Heavy Industries Co., Ltd. Vice Chairman, Pacific Basin Economic Council May 18, 1999 I am honored to have this opportunity to give a presentation before so many distinguished guests. Today, I would like to discuss the subject of Japanese labor and technology. The subject is a very broadly based one. My discussion will focus on aspects of technology as they relate to labor. I will cover the various issues and challenges that have arisen over the course of Japan's recent technological development and how Japan's experience can serve as a useful reference for raising the general level of technology in Asia. Upon attending this year's Pacific Basin International General Meeting, I was provided with a copy of the "History of PBEC". As you may already know, the history of PBEC goes back over a period of thirty years. My discussion will include a review of this thirty-year history. I begin my presentation with the discussion of shipping, a subject with which Chairman Sohmen and Chief Executive Tung are both very familiar. Boats were used back in ancient times and even then had their captains. Originally powered by sails, boats have since been fitted with engines complete with chief engineers. If we were to compare the ship to the family, I believe the wife's role would be that of the captain and the role of the husband would be that of the chief engineer. What I mean to say here is that in ancient times ships moved according to the will of the wind. Later, as engines came into use, ships gained speed and were thus much more useful but also prone to frequent breakdowns. This has led to the development of a vast team of oil-soaked chief engineers. Meanwhile, the development of automatic piloting systems and communications devices have enabled ships captains to navigate with comparative comfort. The advents of the electric washing machine and microwave oven have made the wife's workload much lighter. The husband, on the other hand, works all day long at the company, then goes out drinking with his customers. From the wife's point of view, all the husband seems to do at work is go out and drink. As the wife's lifestyle becomes easier, that of the husband has become harder and more stressful. I hope that any wives present in the audience will forgive me for using these analogies. Getting back to the main theme of my discussion, it was exactly thirty years ago that a 150,000 ton oil tanker, known as a VLCC or very large crude carrier, was built at our company. At the time, it was the world's largest ship. In those days, ships’ main engines were based on the steam turbine. I myself have had experience designing land-based steam turbines after graduating from school. Land steam turbines have developed significantly since then, with systems in use now that combine high-pressure, high temperature turbines of 1 million and 1.5 million kilowatts, boilers and water cooled generators. These are being used to generate the power that we consume today. Steam turbines in ships, however, have declined, with their use being limited to liquefied natural gas tankers and special types of military vessels. Just as land-based steam turbines were being developed for greater pressure, temperatures and larger capacities, the diesel engines used in ships have undergone significant development. Engineers in the shipping industry inform me that the diesel engine has advanced rapidly over the past thirty years, growing significantly in size and reaching high levels of thermal efficiency. The key point I wish to make is that the ancient technology of the ship has undergone significant advances. I shall now provide an overview of Japan's shipping technology, starting a little further back in time. Let me start with the following example. As we know from books, Japan in olden times was afflicted by thieves and robbers who had to be apprehended. One such chronicle is roughly translated as "The tradition of the rope handcuffs". This refers to the fact that, where actual handcuffs were used in other countries, rope was used in Japan. Perhaps it can be said that the Japanese tie with a rope what others would secure with handcuffs. The challenges involved in using rope lie in devising ways to prevent the handcuffs being undone and in tying them on quickly. I believe this approach was suited to the Japanese mentality. I accept that the Japanese mentality has its inherent limitations and shortcomings. However, it is a mentality that also acknowledges its limitations and devises ways to get around them. The result was that, instead of spending the time and effort to develop a permanent restrictive device, such as the handcuff, the Japanese were content to do the job with the rope they had on hand. Whether rope or handcuffs, the result is the same for the prisoner. What is notable is the fact that the Japanese never got around to developing a set of metal handcuffs. Another aspect of the Japanese mentality is its tradition of liking to learn from life. I served for a period of time as the President of the Chamber of Commerce. A Chamber of Commerce is an institution that performs many different duties, including the holding of lectures and various types of examinations for certification. Exams were provided to test the use of the abacus. The abacus is a device originating in China that utilizes a system of four beads to perform calculations. Use of the abacus reached its peak about the time I graduated from school. Even now, about 200,000 people a year take abacus certification tests through the Chamber of Commerce. It was my duty to award a diploma each year to the person who scored the highest on the national abacus tests. The winners could normally conduct calculations at a fraction of the speed of today's calculators. These are incredibly accomplished individuals who, with a mere flick of the finger, can add or subtract figures of up to thirty places. Housewives in today's Japan frequently attend local cultural centers where they are able to a learn a wide variety of things. I read in the newspaper just the other day that a lecture provided on how to increase your savings in Japan where the interest rate is zero percent was attended by a large group of housewives. Simply attending a lecture is not going to increase your savings. But what it does show is how eager people are to learn something new. One drawback of Japanese culture has been that teachers do not do a thorough job when they teach. Rather than taking the systematic approach, learning in Japan has traditionally been along the lines of the apprenticeship model. This has led to the mentality in which the student learns by stealing glances at the teacher who is engrossed in what he is doing. I understand that the French use a similar approach in training cooks. There is no formal teaching and the students develop by simply watching the chef at work, with those who do well being eventually selected as apprentices. After leaving school I did some drafting work. I sharpened the pencils I used in the old flat-edge style. One day I learned by watching another draftsman how it is possible to draw both narrow lines and thick lines by sharpening pencils to a round point. Flat-edged pencil points can only draw narrow lines. Viewed historically, in the 130 years since the Meiji Restoration when the door was first opened to the outside world, the Japanese have continued to learn from Westerners and have striven to catch up and eventually overtake them. There is an old Japanese saying that goes "Follow, then break, then move on". The advice here is that one should follow the rule until one has mastered the technique, then break the rule to see what one can learn and make one's own. Then one should move on from the place of apprenticeship in order to start one's own work. I believe this is exactly what Japan has done. I believe that Japan found it difficult to start out from point zero. Over the course of its history, Japan has produced some very notable technology. The gun was introduced to Japan through Tanegashima Island off the coast of Kagoshima, located in southern Kyushu, around the year 1500. The people of the time were astounded by this new weapon. Fifty years later, at the battle of Sekigahara, during the period of the warring states, Japan's armies went to battle armed with roughly 50,000 locally made guns. I felt proud to know that there was nowhere else in the world where 50,000 guns had been used in battle during the 16th century. Even at that time, Japan was the number one gun producing nation in the world. Japan also exported guns to Southeast Asia where they were prized for their quality. I hear that people in some areas in the region believed that it was Japan that had invented the gun. The first industry to start up in Japan after the Meiji Restoration was the textile industry. This had major impact on Japan at the time. However, the most intensive technology during this period of the drive to "Enrich the nation and strengthen the Army" was that used for building warships. The building of warships involved the use of metal materials, boilers, turbines, drive engines, weapons, paints, etc. It was this drive to develop domestic products for use in warships that effectively built up a wide base of related industries. This is an area, however, where Japan is still at the "Follow" stage. The various basic concepts and systems involved in building warships were not devised in Japan. Aircraft technology was added as Japan entered the Showa Period some 70 years ago. The building of aircraft required new types of technology and materials. Japan built the famous zero fighter for use in World War II. Even in this field, Japan introduced technology from overseas for the principal components. The machine guns were the Elicon type from Switzerland and the variable pitch propeller was designed by Hamilton of the United States. Now I shall digress from the main subject. Three years ago marked the centenary of the development of the x-ray. This 100th anniversary was commemorated with various events throughout Europe. The professor who invented the x-ray was the very first Nobel Peace Prize winner. Articles appearing in European newspapers proclaimed the x-ray as the greatest invention of the last 100 years for its contribution to humanity. Make no mistake, there were other great inventions, among them being the airplane invented by the Wright brothers and, in recent years, the transistor radio and electronic technology. But in terms of peaceful application and contribution to humanity, the x-ray is no doubt the greatest invention. There were problems at the beginning. People at the time were very troubled by the side effects caused by the x-ray. Today x-rays can take sharp, clear images of the body using roughly one hundredth of the radiation used 100 years ago. The x-ray has been developed to the point where it is used for CT scans and MRI when combined with computer image processing technology. Given the number of human lives that it has been able to save, I believe the x-ray is definitely the greatest of all inventions. Traditionally, the Japanese have been weak in formulating basic concepts. I shall go into further detail later. During World War II, I was just graduating from school. Perhaps this is not such a good example, however, I recall the B-29 bombers built by Boeing Corp. of the United States flying over Tokyo in formations of 500 crafts to drop incendiary bombs in 1945. While watching the bombing from my home, I noticed red hot circles beneath the wings of these low-flying planes. I later discovered that these were turbo superchargers used on aircraft. These did not exist in Japan at the time and people were surprised to discover them on aircraft that had crash landed. After some research I did find mention of the technology in books but the concept of applying this technique to bombers that would fly over the seas did not exist in Japan at the time. Numerous cooperative technical ventures were entered into as the post-war economic rebuilding process moved into high gear with the advent of the Korean War. Despite the difficult living conditions at the time, Japan spent 10 billion dollars buying technology from Europe and the United States at the rate of 360 yen to the dollar. In line with the tendency described earlier, Japan studied this technology. It built the foundations of its future economic development on this technology. This process, however, brought the problem of patents into play. I am aware that the patent issue is one on which not all nations in Asia are in complete agreement. It was through coming up against the obstacle of patents that Japan re-evaluated its approach to technology. In the United States, the patent application provides an important means for securing certain rights. Patent applications are submitted by a large number of individuals. According to figures of some time ago, roughly 190,000 patent applications have been submitted in the United States. Of these, roughly one half were submitted from overseas. Of the roughly 370,000 patent applications submitted in Japan, only about 30,000 came from overseas. Numbers can be deceiving, however, and many of the applications submitted in Japan are for improvements to existing patents. Others are a devious use of patent law designed to compel the patent office to conduct studies to find out whether one's own patent application violates any existing patents. I myself have experience in submitting such applications for patents for some of my own designs. The reality in Japan is that there are very few applications for basic patents. In contrast, most of those submitted in the United States include a basic concept for the technology. One problem that occurs in the United States, where patent procedure is different to that of Japan, is that of "submarine" patents in which an individual applies for patent without divulging the content. This problem became evident as the semiconductor industry in Japan grew into a major industry. Then patent-holders began to emerge out of the blue and launch actions claiming that they had designed or invented a certain technique first. There has been a rash of such cases recently and they are currently the subject of negotiations between the United States and Japan. Japan also has its advanced inventions. At Tohoku University, for example, highly original research and invention is being carried out on electrical and physical systems. A researcher named Nagai has come up with a very valuable invention for alternating bias in tape recorders. There are various other Japanese inventions. An age in which individuals are learning from other countries and adding their own improvements to create new inventions is upon us. The field of radar is another example. During the early Showa Period, Japan developed a radar system in which a magnetron was used to emit high frequency waves that were reflected off a precision directional antenna. However, just as Japan got the head start on producing tape recorders and fax machines, European and American companies were the first to apply this technology to production. Next, I shall discuss issues that must be confronted into the future. The first is the issue involved in making customer needs the most important thing, a concept that has only recently become widely accepted in industry. Until now, research and capital resources were allocated on the basis of the most interesting technology or the challenge with the most unique technical theories. Times are now changing. Customer and market needs have become the most important factors. The environment is also a factor. Too much concern over the environment means not making any goods. Therefore, it is important to strike a balance between environmental concerns and growth. This is an issue that must be approached quantitatively. Environmental awards were recently given out. We are now at a point where the amounts of such phenomena as carbon gas, nitrous oxides and the effects of growing populations in real terms have become an important issue. The fields of science and technology are now being called on to help us strike an appropriate balance between these various factors. We are on the threshold of the next millennium. The year 2001 is both the first year of the 21st century and the first year of the next millennium to the year 3000. What will happen in the next thousand years? With carbon gas increasing at a yearly rate of 6 percent for the last five or six years, we have now reached the point where we must consider where this rate of consumption would lead to if continued for the next 1,000 years. Moreover, just as with bank interest rates, such increases are compounded on a yearly basis. If the rate of increase is one percent, the interest for the second year is calculated on a base of 1.01 from the previous year. Calculated over 1,000 years, this comes to 21,000 times. This means that if carbon gas continues to increase by one percent every year, it comes to 21,000 times in 1,000 years. Suppose the rate of increase was two percent per year, this could come to an increase of 40 billion percent in 1,000 years. Thus, the current volumes of sulfur dioxides, nitrous oxides and carbon dioxides would increase by 40 billion percent by the end of the 1,000 year period if they continue to increase at two percent per year. Likewise, the world's population, which is increasing at a rate of just under two percent per year, could reach 40 billion percent in 1,000 years. The current earth's population of 6 billion would increase by 40 billion percent in 1,000 years. At present, Hong Kong is beset by the problem of the 1.4 million Mainland Chinese that have the right to enter Hong Kong. Still, this is nothing compared to what could happen 1,000 years from now. No matter how large the earth may be, an increase of 40 billion percent in the earth's population would undoubtedly result in the extinction of mankind. I believe this is another important issue confronting the world of science and technology. Allow me to refer back to the discussion of shipping. In the past, thorough efforts were made to reduce ships crews. Large tankers, which formerly carried crews of about 100 or 150 personnel have reduced that number to as low as 12 personnel. There has recently been a reversal in this trend, however. The reason for this is that too much automation makes it difficult to use cheaper, less experienced labor, even though a ship could be operated using only 12 personnel. The trend now is to build less sophisticated systems so that larger numbers of lesser experienced personnel can be hired in order to save on operating costs. As with the population problem mentioned earlier, this sort of trend could lead to major changes if continued for a period of 1,000 years. It will be important to devote serious efforts to studying these and other issues for the future. Over the course of the various negotiations conducted bilaterally between the United States and Japan, some negotiators raised the point that Japan possesses no generic technology. Generic can be defined as having far-reaching or secondary effects or influences. At the U.S.-Japan financial conference, the United States side insisted that they have generic rights to technology. This is like saying that the Japanese are fine if they wear their traditional clothing but if they wear Western clothing then they have to pay a monthly fee to England. Of course, this is an extreme example. This generic sort of claim was also made by the English against the Americans when the Americans gained their independence. The claim was that the Americans profited by using the pure research conducted by the English. This argument goes round in circles. If I may be allowed, once more, to emphasize a Japanese characteristic, it is the saying "The parent that raised you is more important than the one that gave birth to you". One naturally feels a close attraction to the child one gives birth to. However, it is the child that one devotes one's all to raise that becomes the most important. When I explained this saying to people in the United States, I was told that there is no such saying in the United States. It was just at that time, however, that American television was showing the case of a victim of child abuse who was refusing to leave its foster parent to return to its natural parent. In the same way, the Japanese may not be good at giving birth, but they are very good at raising the child. Another issue is the systemic approach, systemic referring to the entire body. The systemic approach may be an area in which the Japanese are weak. The body could be quite healthy, for example, except for a case of athlete’s foot or pimples. But these alone can make the body feel bad. A single problem can affect the whole system. A more concrete example is the Techno-Super Liner project currently in progress in Japan. The project is designed to move 1,000 tons at a speed of fifty knots over a distance of 1,000 kilometers. Success would mean that some products, such as milk and fruit, could be delivered from Hokkaido to Tokyo for the first time. It is a revolutionary idea but there is one catch. At the point when a ship enters congested Tokyo Bay it must slow down to five knots, and after the products are unloaded, trucks carrying them are caught in a city traffic jam. Because of this, critics point out that, in the end, the project would be meaningless. Debate on this particular project continues. But this is what I mean by the fact that the Japanese don't always look at the whole system. Another important issue is that of software versus hardware. The United States is a big producer of movies. Japan also makes movies. It is said that only 30 percent of the movies viewed by Japanese people are Japanese-made movies. The rest are all American-made movies. Conditions in Japan are not as bad as elsewhere. In Germany, for example, which used to make good quality movies, all of the movies now being viewed are American movies. This is the essence of the hardware versus software issue, software being the content. Machines used to playback tapes were 100 percent Japanese-made, though produced in other Asian countries at present. On the other hand, most of the music tapes that young people listen to in Tokyo are produced overseas. This is another issue arising from the way technology has developed in Japan. As I am running short on time, I shall move on to the conclusion portion of my presentation. I would like to discuss how Japan can create economic growth and areas where care must be taken. There are various ways to look at economic development. I myself divide economic development into three categories. One category involves the growth in capital investment. The infusion of capital investment is one of the factors that contributes to economic growth. The infusion of labor is another way to effect economic growth. The third factor that can effect economic growth is increased productivity. Increasing these three factors simultaneously will create economic growth. Although there are many other factors influencing economic growth, categorizing growth using these three factors provides an easy way to understand the model. Capital investment in the Japanese economy grew at an annual rate of six percent until early 1990, the period of the economic bubble. Currently, there is such a surplus in plants and facilities that the government has set up a special committee to study the problem. There is unlikely to be any further growth in capital investment in the future. With regard to the infusion of labor, Japan's current labor force is estimated to be 65 million. The labor force steadily grew at an annual rate of just under one percent until the year 1989. Last year the labor force shrank by 0.5 percent. More than anything this decline is due to an overall decline in Japan's population. A process called the aging of society is underway in Japan. The labor population is expected to reach its peak in the year 2005, and the overall Japanese population is expected to start to decline from the year 2010. A nation's population cannot be maintained unless each couple has two children. With the birth rate at only 1.5 children per couple, a decline in the population is unavoidable. This makes it difficult to create economic growth through increasing the labor force. The last problem is the issue of raising productivity. There are many factors affecting productivity and there are many methods for calculating productivity. Some calculations estimate that Japan's productivity has declined by one percent. Various international comparisons indicate that productivity was at its lowest in the 1987 to 1993 period. Of the three economic growth factors mentioned earlier, there is little prospect of increasing capital investment and the labor force. The only factor remaining is productivity. The various factors that affect productivity include labor, capital investment by the financial sector and, of course, technology. I believe that the only way Japan can improve its economy and make a positive contribution to the economies in Asia and the rest of the world is to improve its technical capabilities. Fortunately, Japan currently spends over two percent of its GDP on research and development. Although less than that spent by the United States in absolute terms, it is 1.5 times their level on a per capita basis. Much of this investment is being directed towards pure research and a number of major projects are already underway. I'm confident that this investment will produce great results in the long-term, but they have yet to take firm root. At this point the roots are just beginning to emerge, there is fruit as of yet and it will take considerable time to see concrete results. I believe that we can only wait for these efforts to bear fruit so that Japan can contribute to Asia and to other parts of world.