Competing Capitalisms and Contrasting Crises: Japanese and Anglo-Capitalism


   (Draft Only, Please do not cite!)


Rob Steven


This paper attempts to theorise the differences between Japanese capitalism and what is loosely called Anglo-capitalism, which refers to the broad features which systems like the US, Britain and Australia have in common. It also tries to show how each system is vulnerable to a type of crises which stems from its distinctive features, and that recipes for solving crises in the one are likely to have at best a limited impact on crises in the other, at worst to exacerbate these crises.

When is Capitalism Capitalism?

Whilst I do not want to argue in an 'essentialist' sense for what constitutes the essence of capitalism, I do want to suggest that the following are necessary features of all capitalist systems, and I think I would also want to argue that they are sufficient features of any system I would call capitalist. They resemble, but are not identical to, the Marxian notion of 'the capitalist mode of production.' This latter is too riddled with features of Anglo-capitalism to serve the more general purpose I require.

1. The production of most goods and services is for exchange rather than for the direct use of the producer. There is no assumption here about the kind of market, if any, through which the exchange takes place. Neither is there any assumption about the numbers of buyers or purchasers of the goods concerned. Considerable variation is possible, from the use of the full 'auction model' of the market to rigid long term contracts. Neither is more capitalist than the other.

2. The term 'capital' refers to a relationship of ownership and control over the various means of production in those majority enterprises which produce for exchange. There are many concrete forms in which this ownership and control can be found, and these variations, typically from high levels of individual ownership and control to various forms of predominantly institutional or group ownership and control, also contribute to the distinctiveness of different systems.

3. The overwhelming majority of direct producers are wage labourers, which means that it is possible for them to contribute more to the production process than what they are paid for, or alternatively to contribute less than what they are paid for. The problem with the neo-classical theory of wages as equivalent to the marginal product of labour (wages are equal to the contribution made) is that it rules out by definition the possibility of exploitation, except when 'collusion' undermines competition so that unions end up exploiting employers. What was so useful about Marxian wage theory was that it provided a conceptual distinction between money wages, real wages and what was called the 'value' of wages. This latter concept was an attempt to measure the purchasing power of wages (real wages) on the same scale as the productivity of the labourer in order to measure the degree of the exploitation, if any, to which the worker is subjected.

4. The mechanism through which the social surplus (difference between the total product created by the society and what is consumed) is appropriated from the direct producer is the wage system, specifically the pricing of wages and the goods consumed by those who work for wages. Marx was not alone in emphasising that it was the cheapening of the goods consumed by workers, that is, increasing the productivity of labour through new technologies which allowed labourers to work smarter rather than simply harder, that contributed most to the expansion of the social surplus. There is no single or even dominant method through which all capitalisms lift the productivity of labour, and a large part of the distinctiveness of each system lies in the way it drives this process.

5. There is no single mechanism through which the surplus is distributed, and many of the most distinctive features of different types of capitalism stem from their dominant forms of surplus distribution. Again the price system is central to this process, although what is bought and sold (eg. managerial skills, land, gold, video-cassettes), who are the buyers and sellers (eg. institutions, individuals, groups of individuals) and the degrees to which the market is used to mediate the transactions are all variables that can result in wide divergences among capitalist systems. Obvious examples are seven-figure executive 'salaries,' booms and slumps in the prices of assets like shares and land and 'post-Fordist' managerial systems that rely more on shop floor initiatives than top down directives.

6. Each of the above features contributes to the notion that capitalism is a system of class relations. However, its essential political character takes an economic form, so that politics is as it were once removed. Although the political relationship rests primarily on ownership and control of the various means of production, the 'economic form' of the system is expressed in at least three key 'moments' which must work together in an appropriate balance, or as Marxist put it, the total social capital must continue to move uninterruptedly through its full circuit. The key moments in the circuit are:

M (money) capital, which purchases means of production and wage labour, which are then used in

P (a production process) which creates

C (a new commodity) which is then sold for

M' (more money than was initially laid out) which enters the circuit again from the beginning.

7. The mechanisms through which 'the total social capital' moves through the circuit, or more concretely, through which the activities of banks, manufacturers and traders are connected and kept in balance, vary considerably among systems. They range from reliance on profit signals expressed through the market, to long term 'crony' relationships with little reliance on the market, to state-level planning.

If one accepts the above reasoning, it should be clear that many of the features commonly associated with 'the essentials of capitalism' especially by neo-classical writers and those Marxists for whom an efficient market is the very lifeblood of the systemムtend to be peculiar to particular capitalisms. Anglo-capitalism, which relies heavily on the market to perform a large number of functions, is normally put forward as the ideal type, while Japanese and Russian or even 'Soviet' capitalism are seen as somehow deficient. I will argue that this is a mistake, that the market is simply one possible mechanism through which the more ヤessentialユ functions of the system are performed and that the degree to which the market is used is one of a number of variables which distinguish capitalist systems from one another. The main variables I will focus on in this paper are:

1. The degree to which the market is the mechanism through which the productivity of labour, and hence the exploitation of labour, is increased;

2. The degree to which the market is used to drive the system through the different 'moments' of the circuit;

3. The degree to which the social surplus is distributed to individuals;

4. The degree to which individuals are the agents of accumulation;

5. The degrees to which individuals are exclusively associated with the functions of either capital (control over the labour process and accumulation process) or labour (the requirement to produce more than what is received in wages).


The Auction Model: A Critique

The tendency to idealise the market as a mechanism through which virtue rather than power is expressed is deeply embedded in the basic building block of neo-classical economic theory: the notion of consumer choice as an expression of taste and therefore of the sacrosanct concept of demand. A demand price, in neo-classical theory, expresses how badly someone wants a good or service, what the person is prepared to pay for it, or for purists it expresses the quantity of utility the person will derive from it given their tastes or 'values'. The notion of supply is constructed in a similar way on the basis of the disutility of parting with something and the compensation wanted. A supply price is the price at which one is willing to part with a good or service. A good is then sold on the market at a price which corresponds to the intersection of the demand and supply 'curves' : the price the buyer is prepared to pay coincides with the price the seller wants.

This theory of price is at best vacuous, at worst misleading. It is vacuous because it is circular:

i) Why did that car sell for $1,000?

ii) Thatユs what was paid.

iii) Why was that paid?

iv) That was the price where demand and supply coincided.

v) What was the demand price?

vi) The price the buyer was prepared to pay.

vii) And the supply price?

viii) The price the seller was willing to accept.

ix) How do you know that the buyer and seller were willing to accept this price?

x) Because it was the price that was actually paid.

xi) So the price that was paid is the price that was paid, I see.

The notion of choice adds absolutely nothing to the explanation, which requires the circumstances shaping and constraining the choices to be filled in. Maybe the seller was desperately hungry and had to accept virtually anything, or perhaps the buyer had a sick relative in need of immediate hospitalisation and was vulnerable for that reason. It is simply trivial to say that human beings choose to act in the ways they do, for example, it is virtually tautological to say that people who are poor in a capitalist society choose either to work for wages or they choose to be unemployed.

But the attempt to explain an action by claiming it was chosen is also very misleading, because the primary function of adding the notion of choice is to justify the action as the right one because it was chosen. To say that prices are determined by (the neo-classical conceptions of) demand and supply is therefore to say that all prices and transactions determined by competitive markets are the right prices. It is a political prescription for all forms of collective organisation and collusion, especially by governments and unions, to refrain from interference in the competitive activities of business. Keynes actually recognised that if the notion of demand was to have any real explanatory power, it had to be interpreted as effective demand, that is, in terms of the power to exercise a preference. The market is thus a space in which power is wielded, in which there are winners and losers, and prices express the power possessed by those who participate in the market.

That capitalism is about power is perfectly consistent with what I have been arguing, and that the market should be used to enforce the power of the various individuals and classes in capitalist society is quite normal. What I am taking issue with is the auction model of the market as an institution which does more than this: the view that a competitive market is somehow more fair than other institutions or mechanisms through which the exchanges take place that are necessary to the functioning of capitalism: the buying and selling of skills, goods and services.


I only have time to present the substance of my argument in summary form. This argument is that on each of the five above-mentioned variables (bottom of page 2 to top of page 3) that distinguish the different kinds of capitalism from one another, Japanese and Anglo capitalisms are opposed. In summary:


Japanese capitalism

1. Market competition among producers, resulting in the survival of capitals that achieve high labour productivity via 'smarter' work methods and in the bankruptcy of those that do not


Market competition is limited and distinctive systems of managerial control and extra-economic coercion are also used extensively to lift the exploitation of labour


2. Market competition and variations in profit rates allocate capital from one moment to the next

Relationships of mutual dependence (keiretsu system) greatly affect allocations from one moment to the next

3. Since the purpose of capitalism is to enrich individuals, very large proportions are distributed to individuals, either as 'dividends' or high salaries for executives

Purpose of capitalism is to protect the nation: much more of the surplus is retained by institutions, & much less is distributed in individuals, either in the form of 'dividends' or 'salaries'

4. Individuals then decide where to invest this money, giving them leverage over the accumulation process

Institutions rather than individuals have the greatest leverage over the accumulation process

5. Functions of labour and capital fairly exclusively performed by different groups of individuals (classes); with potentially high levels of class conflict

Almost all individuals perform both functions (varying combinations), so that 'class' does not take the form of groupings of individuals; class conflict is thus minimal


Comparative Crises

In no case does the peculiarity of either system give it an advantage over the other, although each tends to have its own peculiar vulnerabilities and predispositions towards crisis. A major part of this paper that is still to be written, even in summary form, concerns the different types of crisis and the different forms of crisis management that are appropriate. Anglo-capitalism is pre-disposed to what might be called 'crises of individual greed and fear' which are transmitted rapidly and violently through market mechanisms and which can produce very powerful political reactions. These reactions are more explosive because Anglo crises affect the fortunes of individuals much more devastatingly than do Japanese crises and because the ways classes are formed tends to mobilise groups of individuals into collective political action more easily than in Japan.

For Japanese capitalism, in which the power of capital is institutionalised much more thoroughly, where it takes much longer for individuals to be affected and where class formation is blurred, the crises tend to be much more systemic, with the major contradictions occurring more between different parts of the system than between groups of individuals. Since Anglo crises are more likely to result in organised political struggles, they are also more able to produce major social changes. Japanese crises, on the other hand, do not produce the same degree of social conflict and therefore tend to result in much less social change.

What is so striking about the current recession in Japan is that crisis management has been so ineffective, and that this has resulted in stronger and stronger demands for more public works spending and more market liberalisation, remedies which might well have some relevance in the United States, but which have repeatedly had no impact on Japan. What I believe to be the fundamental problem is Japan's very high level of specialisation in consumer goods production through heavy reliance on extra-economic coercion and low wages. Japan's production system is out of kilter with its consumption system.