Romanian Talk fests and the World Economy

February. 1988/ TOKYO Business Today

Readers of the London Economist will have noticed how that otherwise excellent journal tends sometimes unanimously to pontificate. At times its urgings hit the mark, even if they are a bit preachy. But sometimes they miss badly, particularly when it comes to events in this part of the world. For example the Economist still hasn't told us the basis for its virulent anti- Peking bias of the sixties, when it had the Chinese at one stage plotting to take over Asia via everywhere from Vietnam to Afghanistan.

Recently it weighed in with a highly scornful attack on those of us who see emotional irrationality in some areas of Japanese economic activity. It implied we were indulging in Japan-watching esotericism. With that cool logic that has become its trademark, it hit us with the ultimate coup de grace -how could the Japanese have got to where they are today if they were irrational in things economic ?

Normally one would welcome some sophisticated Economist-style debate in this debate-starved area of the globe. But this time the Economist is being silly rather than sophisticated. If there are emotional hang- ups in ways the Japanese run their economy, their land and share markets especially, then the entire world economy could be in jeopady. We are well re- moved from haiku and ikebana (flower arranging) style Japan watching. As for the Economist's coups de grace, yes Virginia it is just possible that some us esoterics have already considered the contradictioposed. It is even possible that some of us have come up with an answer.

We live in a much more relative world than the Economist with its absolutist certainties realises. It is also a two-dimensional world. As others, including the haiku and ikebana watchers, have pointed out, the Japanese world tends to be highly instinctive and intuitive. When it works well, we see the delightful practicality of the Japanese - for example in realising that inventing the transistor is not enough, that is has to be put to some useful purpose; or that keeping people employed is more important that abstract eco- nomic theories that say you have to destroy industries in order to save them.

But when it works badly we see the harmful emotionalism that says rice farmers represent the essence of Japanese culture, or that NTT shares with a price- earnings ratio (PER) of 300 or (iinza blocks at 50 million yen a square meter are good buys.

Meanwhile most of the rest of us operate in a more reasoning or rationalistic dimension. When that works well we see great scientific and analytic achievement, like inventing the transistor or realising that PERs of 300 for NTT shares are crazy. But when it works badly we end up with dogmatic ideologues predicting Chinese invasions via Afghanistan or economists who can't see beyond their textbooks. On balance I think the Japanese dimension does better than ours. But that should not stop us from being worried at times by its excesses.

Let me close out with my favorite sharemarket story. It was hack in the early seventies, when the denizens of the Japanese market had decided the time had come for a run on fertilizer shares. At the time the world had fertilizer coming out of its ears. But that didn't worry the denizens. They pointed to a forthcoming U.N. conference on world population to he held in Bucharest.

What has a Romanian talkfest got to do with the price of fertilizer, you ask ? Simple. The U.N. conference would be dominated by Catholic Latin American delegates. These delegates would oppose birth control. The world population would explode. The hungry would have to be fed. So now was the time to buy fertilizer shares. And the record will show that these shares jumped by about 30-40 percent as a result.

Back in the seventies one could dismiss all this as a joke. Today as the Tateho affair showed, world stock markets could he punctured by just one or two cases of this sort of nonsense getting out of hand. I'm scared, even if the Economist isn't.

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