Open Palms of Recruit Scandal Show Just How Closed Japanese Society Is

American observers, seeking to make sense of Japan’s Recruit scandal, might be tempted to measure it against our Watergate episode. Both involved huge sums of illegal money; both were cracked open by enterprising reporters who had been assigned to a seemingly unimportant beat; both tripped up top business leaders, featured humiliating arrests and criminal convictions, and both ultimately led to the door of the highest government official in the land. And now in Japan, in the wake of Prime Minister Noboru Takeshita’s decision to resign, there is even talk of sweeping political reform, similar to that adopted in the United States 15 years ago.

But the Recruit scandal is not what it seems. It is not about Recruit, nor is it really a scandal. And the greatest opportunity for reform coming out of this episode is not in Japan but in the United States.

The political and economic systems that underlie the scandal are fundamentally different from those in the United States. Where Watergate was a cancer on the presidency, threatening the principles of the Constitution, Recruit is a temporary headache, disrupting Japan’s ability to conduct business: The day after Takeshita’s announcement, the stock market soared--the headache had passed. In Japan, where business and personal ethics are largely situational, the crime of Hiromasa Ezoe and his Recruit Co. is hardly a moral failing. It is business as usual.

Politics in this country runs on huge under-the-table contributions from corporations. With that money, elected officials are expected to provide constituent services that no U.S. congressman would ever dream of offering. For example, when a Diet member’s supporters travel from their outlying districts to visit Tokyo, the elected official is expected to underwrite as much as 70% of the costs. Officials are supposed to contribute gifts of money to every wedding and significant social event in their district and provide funds to other Diet members if they hope to increase their power, rise in the faction and someday assume a national position. This system is neither right nor wrong; neither moral nor immoral. It is simply correct--the appropriate way for the official to behave, just as it is appropriate for corporations to provide the funds that keep the system running.

What Ezoe did was not wrong--but it was incorrect. He did too much, too fast, too blatantly. His approach lacked the kind of humility that the Japanese pride themselves on. But the practice is symptomatic of the way of life. It is part of a political and economic system that is designed to promote stability and predictability.

To call this episode a scandal is to condemn, by implication, the system that defines the way of life. Japan is a country that thrives, not so much on creating consensus, but on diminishing opposition. It is a nation that lacks an effective opposition or a meaningful alternative. There is one correct way to do everything. The most closed distribution system in Japan has nothing to do with the distribution of cornflakes or computers from the United States. It has to do with the distribution of opportunity and choice. There is only one national distribution channel for success.

For that reason, it is difficult to imagine this current episode leading to fundamental change in Japan. Fundamental change would involve creating meaningful opposition--and opening up the risk of instability and uncertainty. But there is an opportunity, for the first time since the end of World War II, for U.S. business and political leaders to take a realistic look at the important difference between Japan and the United States and to construct a pragmatic strategy to guide the relationship through the currently troubled waters. Democracy and capitalism mean vastly different things in the two countries.

For too long, the United States has tried to define Japan as if it were a nation just like us. In that regard, this episode may come at a surprisingly good time. The United States is weighing the so-called Super 301 trade declaration, deciding whether to name Japan as an unfair trader. The decision is part of a much larger--and long-overdue--reconsideration of U.S.-Japan relations. The Japanese are sounding new themes that reflect their own policy reconsideration. Most Japanese business and government officials expect the relationship to get worse before it gets better. Japan is rapidly advancing up the technological chain and is doing so without relying on U.S. capabilities. This only increases the likelihood of conflicts and produces a heightened sense of a zero-sum economic game. And many Japanese officials feel that they have done everything they can to respond to U.S. pressure. Negotiations over trade frictions serve no fruitful purpose; the only resort is to confrontational legal proceedings.

Finally, the Japanese are sounding a new note about their own identity. For years, the official party line was that Japan practices the same kind of political economy as the United States. Now there is a new argument: “We’re not unfair; we’re just using a different system.” At the same time, Japanese business and government leaders are reaffirming their status as an Asian country, working to make new friends among their regional neighbors.

Perhaps the best hope of the Recruit scandal is that the United States will see Japan as it really is. We have shared interests and intertwined economies. But we also have different values and systems at work in our countries, and different roles in the world. Perhaps in the aftermath of Japan’s current political discomfort, the United States will start to make appropriate demands that fit Japan’s own way of doing business. And at the same time, perhaps we will assume more responsibility for creating our own economic future.