The problem with Kishida’s ‘new capitalism’ philosophy


When things were downright dismal at Nintendo in 2013, its late, remarkable president Satoru Iwata told shareholders exactly why two straight years of operating losses was no reason at all to sack anyone.

“I sincerely doubt employees who fear they may be laid off will be able to develop software titles that could impress people around the world,” he said, dismissing morale-sapping pressure from investors to cut headcount and jeopardise the brilliance of game franchises such as Mario and Zelda for the sake of short-term financial results. 

A decade later, corporate Japan remains defined by that clash: a top-down, instinctive rejection of full-bore shareholder primacy versus the mostly imported faith that it is both the only guarantee of progress and the only way to secure the future of an old, shrinking society.

Iwata, rather unexpectedly, is now being quoted on social media from beyond the grave — his assertions about how to run a happy software ship in rough seas have been repeated by the tearful and newly jobless of Silicon Valley. But was he right?

For those who see the cull as necessary, the large-scale lay-offs at Google, Microsoft, Amazon, Salesforce and other technology sector titans should, in principle, be a masterclass for the likes of Japan in how “real” shareholder capitalism does corporate evolution. Instead, even in the US, it has reignited questions about how desirable and beneficial shareholder-focused savagery really is.

In theory then, this might be a golden opportunity for prime minister Fumio Kishida to press harder and more globally on his “new capitalism” narrative — a formidable-sounding economic howitzer he introduced in 2021 but which has so far done little more than unfurl a flag that reads “bang!”

There was a chance that a well formulated blueprint for “new capitalism” could be Japan’s gift to the world at the precise moment that old capitalism was looking rather too bloodthirsty. It might, with some serious thought, have provided a framework for toning down the shareholder primacy pressures in favour of the sort of broader stakeholder capitalism with which Japan was more comfortable anyway.

Japanese companies, despite pressure from more vocal investors to show them the money, have largely stuck to their line that employees should carry equal weight with shareholders among the priorities of CEOs. A lot of that is the self-justifying fluff of ossified management, but much of it is genuine.

Kishida has made substantial speeches on new capitalism — one last year in London and one last week at the opening of parliament. He has also established a steering committee of outside experts on how to shape policy around the simultaneous ideals of greater wealth equality, stronger national economic security and the promotion of innovation. Concrete measures, and even a proper definition of “new capitalism”, remain largely elusive, and people on the committee say privately that its approach is too scattergun.

Two reasons are likely to prevent a great coming out party for new capitalism, or even a vindication of Iwata-ism. The first is that Kishida seems to have realised the idea works better, the more vaguely it is defined. He is not, say people close to him, especially doctrinaire, and has not precisely worked out where problems are faults of capitalism, and where they are simply those of a self-preservational management cohort, inefficiency and inherited risk-aversion. To tightly define new capitalism would commit him to major reforms he does not, 15 months into the job, appear eager to push through.

A second reason is that there is a growing — very quiet — recognition among many Japanese CEOs that the sort of mass lay-offs hitting the US tech sector, while ugly and sad in themselves, reveal something highly desirable about the liquidity of the US job market into which those ex-Google and ex-Microsoft people have now been jettisoned. They will get other jobs, and different sectors will benefit from the cross-pollination of talent.

Larger, listed Japanese companies, at the cost of corporate innovation and other issues, have never encouraged that liquidity: many may now wish that they had. To produce a new capitalism with a promise of far greater vitality, Kishida must, unfortunately, acknowledge the need to accelerate one of the nastier and more destabilising features of old capitalism.

The great problem with Iwata-ism, is that — as the man himself said — its contention relies on his own “sincere doubt” rather than the empirical tests that the US has been running for years.

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