Reckoning

by David Halberstam

  Dodge had already worked for Bill Draper in Germany, where he had created a new currency, the deutsche mark. Wary of taking on the Japanese society, he had been talked into the assignment by Harry Truman, who said, first, that he desperately needed him, and second, that he would back him up completely. The condition of the Japanese economy simply staggered Dodge. To his eye, everything that possibly could be wrong with an economy was wrong with Japan’s. There was runaway inflation. Fiscal discipline had completely broken down. Most odiously, two thirds of the Japanese gross national product passed through the hands of the government. If the budget did not work out as planned, the government simply printed more money. What more could be wrong? Japan’s economy was like a man on stilts, he said; one stilt was American aid, and the other stilt was government subsidies to industry. He intended to kick away the stilts.

  He had no illusions that he knew anything about Japan. For the first few weeks he did nothing but interview top Japanese officials, preferably bankers, preferably conservative, listening to what they thought their needs were. (He was immediately impressed by one aspect of their planning, he later told his friends in Detroit; from the start they had decided to have a weak yen so that it would be easy to export, and at the same time hard to import—there would be less temptation for them to buy the West’s goods if they were priced exorbitantly. To Dodge, unhappy with the drift of American consumerism, that made a great deal of sense.) Then he was ready. He recommended Draconian measures to control what he thought was fiscal madness. More than anything else he intended to end inflation. The Japanese, he said, were going to have to learn to live within their means. The entire nation would have to tighten its belt. So the belts were tightened. Thousands of small and medium-sized companies, too deeply in debt already, with work forces too large for their relatively low levels of production, were forced into bankruptcy. Dodge chilled the economy almost immediately. “A textbook example of how a budget can stop an inflation cold,” he later said of it.

  His relationship with MacArthur was guarded; MacArthur had not particularly wanted Dodge out there, and almost anything Dodge recommended was implicitly a challenge to the way MacArthur’s own trusted staff had operated. When Dodge finally made his recommendations to MacArthur, emphasizing a brutal cutting back of the existing budget, he was sure that the general would be enraged, for it implied that the military had been wasteful. As Dodge spoke for the new, more stringent budget, he watched MacArthur’s face cloud up and become cold and angry. This is it, thought Dodge, he’s really going to come down on me. For what seemed an uncommonly long time, the general said nothing. He simply stared out the window. Then he came over, pointed his finger into Dodge’s chest (“so hard that I thought he had pierced me,” he later recalled) and said, “You’re right—let’s get on with it.”

  During Dodge’s first year, revenues went to 108.7 percent of expenditures, and there was a governmental surplus of $1 billion. But the price was terrible for the many Japanese who, almost overnight, were told that they were no longer needed. This was particularly painful in a country where people were coming to expect that a job, once granted, was permanent. But the tide had turned. Once MacArthur’s headquarters had been perceived as filled with liberal do-gooders carrying on experiments in Japan that they hadn’t been able to get away with back in America. Now it was the turn of the conservatives. Dodge had been frustrated by the domestic policies of the New Deal. Now he was finally able to install in this distant Asian country the tough financial mechanisms that the New Dealers in the United States would never accept. Japan for him was an American ideologue’s paradise, a miniature would-be America where a man of clear vision could play with the political and economic systems without having to deal with any domestic American opponents. Bankers, after all, might be rich and successful and even respected back in the United States, but in those years, at least, they were politically impotent. Here was a country worthy of their talents. Here was a country where people had to listen. Dodge’s word was like the gospel. Fifteen years after Dodge left Tokyo, one of his deputies, Orville MacDiarmid, returned to Japan as a representative of the World Bank and urged the vice-minister of finance to issue domestic bonds to finance much-needed public works. The vice-minister was properly shocked. “But Mr. Dodge told us not to do that,” he said. It was as if Dodge had been there only the day before.

  The Yoshida government was delighted with Dodge’s arrival. Yoshida might dissent from Dodge on minor points, but, after dealing with the New Dealers in MacArthur headquarters, here at last was the representative of conservative fiscal America that Yoshida had been looking for. Dodge was ordering Yoshida to do exactly what he had always wanted to do. Business-as-usual America was linking up with business-as-usual Japan. The assault upon the zaibatsu soon stopped. The yen was pegged to a fixed rate, if the Dodge policy was hard on lesser firms, which, lacking connections to banks, could not so readily ride out a hard time, it strengthened the position of the larger companies. “It can’t be helped if one or two businessmen commit suicide,” Hayato Ikeda, Yoshida’s economic chief and liaison with Dodge, told the press. Equally important now, because of Dodge and the Americans, powerful Japanese businessmen had a mandate to become tougher with their workers than they had dared in the past two years.

  Ikeda, who later became prime minister, grew quite close to Dodge. One day Ikeda came to their regular meeting and announced that the worst of the inflation was over and, with it, the worst of the black-marketeering. The recovery, Ikeda said, had finally begun.

  “How do you know?” asked a suspicious Dodge.

  “Because the police chief of Tokyo told me so today.”

  “And how does the police chief of Tokyo know?”

  “Oh, he said he was sure that the recovery had begun because for the first time in years, Tokyo’s thieves have started stealing money from people again. Until now, the money was not worth enough to steal.”

  Some friends thought that Dodge was more comfortable socially in Tokyo than Detroit. He had been taken up by the upper crust of the Japanese business world. Yoshida connected him to the members of the royal family, and he soon joined with them in duck-netting, a sport of the nobility. (Ducks were funneled into small canals with high walls; they had to fly straight up, often into the net of the waiting duck-netter.) He came to like Japan immensely, particularly its puritanism. “This is the only country in the world,” he told an aide named Ralph Reid, “where you can go out for dinner, have a good time, and still be home in bed by nine o’clock.”

  In America, outside of Detroit, the name of Joseph Dodge is barely known; in Japan, particularly in business circles, his name is an especially famous one. For his coming was an important moment in the postwar history of Japan. Dodge took the full authority of the American occupiers, which was still awesome at that time, and placed it completely behind the most conservative men in Japan. The old order, somewhat revitalized and slimmer and more modern, would be restored. Business would be strong, domestic competition more intense than before the war, labor unions by comparison weak, currency tight. Dodge had helped give the postwar ruling class what it had longed for but been too impotent and discredited to achieve on its own.

  From then on in Japan it was called the Dodge Line. It brought a harsh new austerity to the country. Hundreds of thousands of men were fired. Fierce battles took place between labor and management over the issue of letting workers go; in many cases more than a third of the work force was dispensed with. There were strikes all over the country. Until then the labor unions had seemed to have the blessing of the Americans. Now the Americans seemed to be tilting the other way, deliberately placing their influence on the other side. At Toyota, Keiichi Toyoda, the head of the company and a member of the founding family (the family is spelled Toyoda, the car is spelled Toyota), tried desperately to honor the family tradition and not let go of his employees; he kept his workers on, and Toyota came so near bankruptcy that Toyoda himself had to leave the company—the b
ank chose his successor. What was at stake in these struggles, industry by industry, was the future definition of Japanese capitalism, though few realized it at the time. Eventually the ability to control its labor force proved to be critical in Japan’s challenge to other Western nations, but no one was thinking that far ahead. No thought could have been more distant than the idea of challenging the United States. Everyone was preoccupied with survival. The question for most Japanese industrialists then was how to allot the nation’s meager resources. Dodge and these men concurred: Japan had to use what little it had for machinery, not for pay raises.

  It was, then, a period fraught with ironies. Business interests in America were enthusiastically on the side of the American mission as it cracked down on leftists in the labor unions. That, of course, vastly strengthened the capitalists in Japan, but in the long run it also created a relationship between labor and capital in Japan that greatly assisted production. As one radical union after another fell, the Japanese industrialists replaced them with unions that to Americans seemed company-sponsored. What was emerging were management-union (or, some would say, management-management) relations that Americans could not match, an advantage that American industrialists did not themselves enjoy.

  The name Dodge became an honored one in both Tokyo and Detroit, but there was a painful awareness in the early eighties among some of the financial men of Detroit, as they surveyed that city’s financial ruins, that their old mentor Joseph Dodge was in good part responsible. He had taught the challenger how to be so tough.

  7. THE BANKER

  WHAT HAPPENED AT NISSAN was a microcosm of the struggles going on throughout the country. In the early 1950s Japan’s industrial class was still shaken and groggy from the war. Against it, an energetic working class was rising, often led by militant radicals. A confrontation was inevitable. When it occurred, at Nissan, it helped define the future of Japan and had profound implications for America.

  The militants tended to mount their main challenge against the leading company in each industry, and in autos this meant either Toyota or Nissan. Because Toyota was in Toyota City, a classic company town near Nagoya, it was a less attractive target than Nissan, headquartered in Tokyo. They believed that if they could crack a company as strong as Nissan, then the lesser auto companies would readily fall in line. The businessmen, not just the other auto men but other industrialists throughout Japan, agreed with that reasoning. They were worried about Nissan, because its union was powerful and well led. By contrast, its management was weak, badly thinned out by the American purges. Yoshisuke Ayukawa, the founder, had been purged. He had put together the Nissan-Hitachi combine, which had rivaled Mitsui and Mitsubishi as a zaibatsu and which, backed by the Japanese army, had played a major role in the Japanese colonization of Manchuria; for that the Americans purged him. With him and several of his top aides gone there was a considerable vacuum in Nissan’s leadership. As for the Nissan union, though many of the Communists had been driven out during the Red Purge, it had remained left-of-center. Its leader, Tetsuo Masuda, was considered brilliant and charismatic. His rhetoric was sometimes anti-American, which was ironic, because what he wanted to do—and what the industrialists feared he would do—was to create an American-style, industry-wide union modeled along the lines of the United Auto Workers.

  In the postwar years Japan was different from the Western nations that had gone through comparable periods of industrialization. It had a proletariat, but it did not see itself as having a proletariat. Rather it had a hierarchy, into which everyone fit. (Even today, when Japan is one of the two or three most industrialized nations in the world and when the class distinctions, to Americans at least, seem distinct, the Japanese themselves insist that they are a classless society. If that is true, then it is a classless society in which everyone knows his place.) There was little tradition of trade unions, and the prewar union movement had been pitifully weak. In the past, most attempts to form a strong union movement had foundered on the nation’s powerful Confucian value system, in which a boss was to be a good paternalist and the employee a loyal worker. The American occupation somewhat changed that. New, alien ideas, based on Western tradition of class conflict, had suddenly been imported. That gave a great boost to the Japanese labor leaders, heretofore struggling with the Confucian order. Until the occupation, a labor leader who challenged the boss was virtually challenging the order of the nation, and in Japan, the order was the nation.

  Yet if there was ever a time in Japan for rebellion, this was it. The old regime had failed. It had lost most of its legitimacy because of its association with a war that no one wanted to be connected to anymore. Furthermore, the times were terrible. Years later the average Japanese worker or small businessman, remembering those days, would recall first and foremost two things: the constant, pervasive hunger and the feeling of always being cold. The immediate postwar years for most Japanese had been given over to an almost constant daily search for food. The day began with thoughts of food and it ended with thoughts of food. In larger families in the cities, usually one member was detailed to do nothing each day but get on a train and go out into the countryside and try to negotiate with a farmer for rice, if the family could afford it. Rice had once been the staple of the diet, but it was too scarce and too expensive for most Japanese, and anything available—wheat or cornmeal or anything procured from the Americans—would do.

  Sometimes if a family was lucky there was not only rice but an egg or two as well, a genuine feast. No one ate very much chicken, for no one was killing chickens in those days—they were a source of eggs. (Yoichi Funabashi, later a major journalist on the Asahi Shimbun, remembered that when he was a boy his family’s two chickens were named Hansel and Gretel—that is, they were not to be eaten.) Anyone who had a family member who worked for the Americans was considered unusually fortunate, because the Americans, so carelessly rich, were a wondrous source of foodstuffs and could upon occasion even supply tinned meats and canned milk to the desperate Japanese. The tinned meat was judged to have a somewhat unpleasant taste, and there were Japanese who even as they were eating it and grateful to be doing so wondered why a people so affluent would consume such a thing. The shrewd traders among the Japanese, and it was a time when shrewdness was critical to survival, took the goods from the Americans and bartered them with other Japanese for rice.

  The cold was just as bad. Housing was extremely scarce. The endless bombings had left Tokyo with many buildings that were just shells. What American bombs had torn asunder, people now patched as best they could to keep out the cold. Families clustered in unfinished and unheatable rooms. Often several families would live in what had ostensibly been one house, though in fact very little of the house remained. Tokyo winters are hard anyway, not cold in the Russian sense, with heavy snow and very low temperatures, but cold with a relentless, penetrating dampness that enters the bones early in the winter and does not depart until long after spring arrives. Everyone seemed to have one suit of clothes and one overcoat, and no one took his coat off indoors. Whenever anyone entered a room from outdoors, he did it as quickly as possible, sliding in through a barely opened passage, so that whatever heat there was—most of it from other human bodies—would not escape. Years later, when Japan was a successful capitalist society, Westerners riding in taxis in the winter or entering offices would find them flagrantly overheated. Yes, their Japanese friends would confide, it was overheated, but this was because they had such clear memories of so many cold days and nights. It was if their bodies were still trying to catch up for warmth long ago missed.

  What little resources the nation had just after the war had gone into the most basic of industries, railroads, steel, and shipping. For a time it was unclear whether or not Toyota and Nissan would be allowed to produce passenger cars. Trucks, certainly. But even trucks were hard to make, so meager were the resources. An American named Robert Alexander, a captain of an ordnance battalion at the end of the war and later a high Ford executive, happe
ned to be at the Nissan factory in early 1946 when the first postwar truck was produced. It was a festive occasion, one of the few Alexander had seen in the devastated country. The Emperor had shown up, and Alexander was impressed by that, by the regenerative spirit it represented. When the first truck came down the line, Alexander was startled by how naked it looked. It had neither cab nor fenders. It was a box on wheels. There was some modest applause. Someone got in and tried to start the truck. It would not start. Alexander left, pessimistic about the prospects for a Japanese truck and auto industry.

  The nation needed trucks, and so trucks they were willing to build. But passenger cars were the symbol of a frivolous society, too expensive for the average Japanese, a waste of precious metal. Where would the fuel come from? Besides, there was a feeling that it was a mistake to enter auto production because the Americans were simply too powerful there; if Japan needed cars for its most successful citizens, it could import a few of them from America. Most senior officials of the Japanese industrial establishment were opposed to an auto industry. These, after all, were prosperous men in their sixties and seventies, and they did not drive cars, their friends did not drive cars, and they saw no need for cars. But the younger men carried the day, the labor unions helped lobby for the loans, and an embryonic auto industry started in 1949.

  The early postwar years at Nissan were very difficult. The union seemed stronger than management and dominated the decisions about wages. Until the Dodge Line the company had largely accommodated to the union; it believed that it was supposed to, that that was what the Americans wanted. Beyond this, there was a lack of will to draw the line. Those who normally would have been running the company had been purged by the Americans. Those who were running the company were still in shock, doubting their own legitimacy. Nissan was not part of the industrial-financial houses that were extensions of a family-bound ruling class, one of the old and time-honored zaibatsu, whose histories were bound up with the nation’s history. Rather Nissan (the name was an abbreviation for Nippon Sangyo, or Japan Industries) was a new, almost instant zaibatsu, and Yoshisuke Ayukawa, the founder, was an arriviste among the old boys of the great family empires, Sumitomo, Mitsui, and Mitsubishi. Where they, at the start of the automotive age in Japan, had been cautious and wary, Ayukawa was enterprising and adventurous. His rise as an industrial leader in the 1930s had coincided with the rise of the militarists, and he became, inevitably, their partner, particularly in the Manchurian adventure. In the militarists’ view, which was essentially fascistic, the zaibatsu reflected the old, gray, decadent Japan, a Japan that was too subservient to the West, and on occasion they assassinated zaibatsu leaders just as they murdered political rivals. But Ayukawa was closer in age to their own generation, a go-getter, a builder, someone they could deal with. So his company rose faster in the thirties and early forties than most of its competitors. After the war, however, by which time Nissan had grown into a complex of seventy-four different firms, it was considered tainted, more than most big companies, because of its cooperation with the militarists; its activities in Manchuria were considered especially damning. As a result, it was devastated psychologically—more than physically—by the demise of the Japan that had created it.