BUSINESSWEEK ONLINE : OCTOBER 30, 2000 ISSUE
ECONOMICS

Japan Explained
Author Karel van Wolferen's insights are appreciated by the Japanese themselves

Karel van Wolferen left his native Holland in 1960 at the age of 19 with a high school diploma, $100, and 80 Deutschemarks. He hitchhiked as far as Istanbul, then copped a ride with an American economist who was driving to India in a Volkswagen minibus. He never dreamed that he would wind up in Japan in 1962, put down roots, and promulgate ideas that would change how the world--and the Japanese themselves--looked at Japan.

Wolferen is truly a phenomenon. During the past 10 years, Japanese have bought close to a million of the Dutchman's five highly critical books--four of them written specifically for the Japanese market (page 150). He's in constant demand as a speaker, commanding up to $10,000 a pop, and appears often on TV shows and in weekly magazines, where he engages politicians and other Japanese luminaries. Some even attended his wedding in Tokyo last May. In a month or two, Japan's Diamond Inc. will publish his fifth book for local consumption, America's Political Mission, The New Economy and Japan.

Not bad for someone who never made it past high school and isn't fluent in Japanese. But what's most striking about Wolferen's impact in Japan is that he's dishing out trenchant critiques of the country at a time when most Japanese are fed up and furious with foreigners offering unsolicited advice. He gets away with it, in part, because ''he's looking at Japan from the inside, and he's familiar with the view of ordinary Japanese,'' says Kazuo Shima, editor of the four Wolferen books for publisher Mainichi Newspapers.

Many Japanese agree that Wolferen raises issues they themselves lack the courage to discuss. ''Even nationalists can agree with part of what he says,'' observes Professor Katsuto Iwai, an economist at the University of Tokyo. At the same time, Wolferen has had impact far beyond Japan's shores. In 1989, he gained worldwide fame as the intellectual inspiration for a school of critical thinking on Japan. The movement was called ''revisionism'' because it reversed a long-standing American propensity to see Japan as a political and economic mirror of the U.S.

DUELING ELITES. With unwavering vehemence, Wolferen has argued that Japan's breed of capitalism is fundamentally different from--and at odds with--the economic model in Western countries. He depicts Japan's government as a galaxy of contending ministries run by power-hungry bureaucrats swayed at every turn by interest groups and beyond the Prime Minister's power to control. ''What he wrote changed the debate about what Japan is,'' says Clyde V. Prestowitz Jr., a former U.S. trade negotiator, now chairman of Washington's Economic Strategy Institute. Even these days, Prestowitz says, the tone of that debate is ''the result of Karel's persistence.''

Wolferen enunciated his central theme in 1989 with the publication of The Enigma of Japanese Power: People and Politics in a Stateless Nation by Alfred A. Knopf Inc. This sweeping and seminal tome analyzes political, economic, and social power relations in Japan and concludes that the country lacks any center of political accountability. The book has sold almost 100,000 copies in English, 447,000 in Japanese, and countless more in nine other languages.

During the decade since he published Enigma, Wolferen's core insights have held up well. Even today, against a backdrop of bank consolidation and bankruptcies of life-insurance giants, Japan impotently suffers the spectacle of squabbling bureaucrats and posturing politicians. ''Who gets merged with whom in Japan, and who survives, is being decreed by the same group as always,'' says Wolferen: ''The unaccountable financial mandarins centered at Finance Ministry.''

BUM ADVICE. Wolferen believes that Japan's ongoing political paralysis will bear grim fruit. Financial deregulation, known as the Big Bang, can't begin to address the problem, he says. ''Japan will be faced, within a decade, with a colossal problem of paying its retirees and meeting its health and welfare obligations.'' The Big Bang was long overdue, ''but it doesn't at all mean that Japanese capital traffic is now directed by market signals.'' The U.S. can't help much because all its remedies hinge on the delusion that Japan will become more like America. Says Wolferen: ''The advice they get from Washington is totally useless.''

In his first book, Wolferen pointed up weaknesses in Japanese society--observations he fleshed out in later works for the Japanese audience. These include the lack of open political debate, the failure of citizens to become activists, the oppressive impact of ''salaryman'' life, and the pervasive sense among Japanese of shikata ga nai--it can't be helped. He also excoriates Japan's press as the biggest obstacle to reform. ''I'm talking about a political system that is essentially rudderless,'' Wolferen says over a glass of single-malt Scotch in his forest hideaway north of Tokyo. ''This resonates with Japanese because they can immediately connect that with their own misgivings.''

To be sure, much of what he writes disturbs the Japanese. ''When somebody says that you have to change, you don't feel comfortable even if you know it's true,'' says Tetsuya Chikushi, a prominent TV commentator and Wolferen fan. About five years ago, Chikushi hosted three back-to-back interviews with Wolferen on his late-night show, the kind of exposure he rarely gives anyone. ''Elite bureaucrats really hate him because they feel his arguments give foreign negotiators ammunition,'' Chikushi adds.

One of the Japanese who takes exception to Wolferen is Osamu Watanabe, the top bureaucrat at the Ministry of International Trade & Industry from 1997-99 and now adviser to a MITI think-tank. He bristles at the Dutchman's claim that Japan lacks a center. As an executive adviser to Prime Minister Noboru Takeshita from 1987-89, Watanabe says he watched Japan's leader impose a consumption tax and open the domestic market to beef and citrus products. ''The Prime Minister's office managed everything,'' says Watanabe. ''Wolferen's arguments don't apply.'' Still, there's no denying that bureaucrats take some of Wolferen's points to heart. Blueprint for a New Japan: The Rethinking of a Nation, released several years ago by opposition Liberal Party leader Ichiro Ozawa, echoes Wolferen's themes of accountability and individual responsibility.

Wolferen's appeal is that he doesn't only criticize. He encourages Japanese not to succumb to the shikata ga nai mentality but to get angry and start behaving like citizens. ''Japanese people listen to me because I'm always pushing what the possibilities are and how things can change...to ensure positive economic and political prospects,'' says Wolferen in accented but flawless English.

In his own country, Wolferen has made a name for himself thanks to Enigma and to his previous long career as the Asia correspondent for NRC-Handelsblad, Holland's most prestigious newspaper. Two years ago, in a move fraught with irony, the president of the University of Amsterdam sought to name Wolferen to the faculty. Because he lacked academic credentials, no department would take him. So the president made him a ''university professor,'' the most coveted academic title.

NEW PROJECT. Under this arrangement, Wolferen can do whatever he wants. Currently splitting his time between a farm outside Amsterdam and his two homes in Japan, he is teaching a few classes while embarking on a major study of small and medium-size companies--first in Asia and then around the world. ''Understanding how Japan's political economy works, compared to Korea and Taiwan, will give a perspective on human organization,'' Wolferen says.

Heady talk for someone who never went to college. ''He certainly was one of the most intelligent students,'' says Wolferen's best high school buddy, Willem van Kooij. ''Selecting his tutors and reading their books gave him much more than going to college.'' Wolferen's current friend, R.Taggart Murphy, a former investment banker, author, and now a professor at Japan's Tsukuba University, goes further: ''He's a formidable intellect.'' But not too formidable to communicate effectively with Japan's man in the street.

By Robert Neff in Tokyo

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