Rebuilding Japan With the Help of 2 Americans

Japan’s path from post-war devastation to export powerhouse has involved many important factors, a lot of hard work and a bit of luck. But two Americans who played important parts in the world’s greatest economic recovery story--a story that has altered lifestyles around the world and sent countless vehicles, VCRs and Walkmans into our homes--are Gen. Douglas MacArthur and quality guru W. Edwards Deming.

MacArthur’s principal contribution as supreme commander for the Allied Powers in Japan (1945-1951)--a de facto dictator--was to break apart an outdated and ossified economic and social structure, allowing Japan’s inherent creativity to blossom. “This was all very important for the development of Japan’s post-war economy,” said Masayoshi Tsurumi, an economics professor and financial historian at Hosei University.

On the corporate front, MacArthur smashed the grip of Japan’s family trusts, known as zaibatsu, which had dominated Japan’s economy for decades and sent their avaricious tentacles into every corner of economic life. Although some survived in modified form, including Mitsui, Mitsubishi and Sumitomo, the retrenchment opened the field to a new breed of innovators with names like Sony, Honda, Toyota and Panasonic that would over the next 30 years catapult Japan onto the global stage.

On the labor front, MacArthur encouraged trade unions, which further checked the oligopolies, broadened Japan’s wealth distribution and helped develop an increasingly affluent middle class that would serve as a domestic base for exporters. And his farm reform policies, arguably his most far-reaching achievement, blunted the sort of rural discontent that would soon spring Mao Tse-Tung to power in neighboring China, argued MacArthur biographer William Manchester in “American Caesar.”

Although some insist that the Japanese labor movement was eventually co-opted, its members enjoyed sharply expanded living standards, a far stronger voice in production decisions than their American counterparts and, for many, lifetime employment. This spurred tremendous company loyalty, a minimum of labor disputes and a companywide commitment to quality.

In another important move, MacArthur brought from Detroit Joseph M. Dodge, a former president of the American Bankers Assn., who overhauled Japan’s budget, tightened monetary policy and strengthened the banking system.

The general also ensured that a large number of war contracts went to Japan during the Korean War. Those war orders gave cash-short companies the confidence to invest in plants and equipment that would soon yield tremendous dividends as the nation’s export machine revved up.

As Japan’s products started moving to overseas markets during the 1950s and early 1960s, however, their quality was often a joke. “Made in Japan” had such a bad connotation initially that some companies set up plants in the Japanese village of Usa, which allowed them to say their products were “Made in USA.” It’s difficult to believe now, but even Japan’s vaunted autos flopped miserably when first introduced to the United States in the late 1950s.

Much of the credit for Japan’s flight to quality and the making of its world-class reputation goes to quality guru W. Edwards Deming. Deming urged companies to concentrate on constant improvements, improved efficiency and doing it right the first time.

Deming was a professor of statistics at New York University when he was invited to Japan in 1950 to run a seminar for business leaders. Since the 1930s, Deming was interested in using statistics as a tool to achieve better quality control. Essentially, his idea was to record the number of product defects, analyze why they happened, institute changes, then record how much quality improved, and to keep refining the process until it is done right.

Deming owes at least part of his legendary status in Japan to a professor named Genichi Taguchi, Japan’s home-grown quality management expert, who credited many of the American’s ideas for his so-called Taguchi method. Taguchi and others would go on to influence a generation of Japanese engineers who would become the backbone of the nation’s growing manufacturing prowess.

“I’m very impressed by the way the Japanese admire [Deming],” said Gregory Clark, president of Japan’s Tama University. “They keep on talking about him as if he’s a god.”

Scholars note that Japan was also receptive to Deming at a time when America was not, in part because Deming’s ideas dovetailed with many of Japan’s own traditions. Japan had long held hard work and quality craftsmanship as important virtues, and its technology even during the war surprised many Americans. Deming preached that companies must treat workers as associates, not hired hands, and he blamed management if workers were not motivated to work well.

“We imported the system, but modified it to the Japanese style,” said Naohiro Yashiro, professor of economics at Sophia University.

When Japan hit its peak in the 1980s, forcing many U.S. industries to their knees and prompting Americans to experiment with quality circles and low-inventory manufacturing systems, many of Deming’s ideas were rediscovered by the United States.

As Japan looks ahead, some argue that Japan could learn a thing or two again from the likes of MacArthur and Deming. Japan needs to restructure, weaken the grip of the second generation of huge companies and open the door for a new group of dynamic entrepreneurs.

Likewise, others argue, a decade-long recession, weaker confidence and the complacency that springs from significant wealth may be undercutting Japan’s legendary attention to detail.