Even Japan Is No Paradise For Small Business

The Japanese Communist party's periodic festivals are among the best places to meet small businessmen who are willing to talk about their problems. Japan's Communists have pledged to strengthen small business if they ever take power. They've attracted thousands of tailors, small wholesalers, independent printers, and other tradesmen who dislike the modestly successful entrepreneur's tenuous place in free enterprise society.

It is true that an economy growing as fast as Japan's quickly makes many small businesses obsolete, so life in a small Japanese company is rarely as secure as life in a big one. On the average, the wages of a small-company worker in Japan are only 71% of what his counterpart in a big company makes. Widespread reliance on subcontracting emphasizes the contrast between the power of big companies and the weakness of small ones. The big companies keep subcontracting prices low enough that small business can rarely pay wages as high as those of big business, and big firms often reduce subcontracting and give the work to their privileged lifetime employees during recessions. Thus subcontractors often must lay people off or encourage them to resign.

The programs that aid small businesses in Japan also make them fragile: The government helps companies get loans, but dependence on credit keeps many firms close to the breaking point. As a result, the bankruptcy rate in Japan is twice that of the United States. Japan's government frets incessantly when a big company seems on the verge of failure, yet argues it can't save the 1,00 or more small firms that go bankrupt each month.

Hundreds of thousands of small company employees lose their jobs each year, and thousands of entrepreneurs spend years repaying their bankrupt firms' debts because of the social stigma attached to not paying off. They have good reason to envy the unexciting but dependable life in big companies.

What many Japanese seem to want is the stability and high pay of the big companies combined with the freedom from internal bureaucracy enjoyed by small firms. A few Japanese -- the owners of well-located grocery stores and fertile rice farms, for instance -- have that kind of life, largely because of Japan's policy of discouraging supermarkets and agricultural imports. But most Japanese aren't ever likely to find such a nirvana.

Growth almost always means the whole structure of the economy must constantly change -- and Japan's economic growth over the last 30 years has been tremendous. The Japanese businessman who bought his suits from a neighborhood tailor 20 years ago now buys them from a ready-to-wear store whose employees may be three times as efficient as the tailor. Though their efficiency increases Japan's GNP, it doesn't benefit the tailor. If he's still working as a tailor, the ready-to-wear competition has kept his prices from rising fast enough for his income to keep pace with that of other Japanese; he may be as poor now as he was in 1960.

Most Japanese small businessmen recognize that they could become victims of change like the nation's tailors. Some see change mainly as opportunity, but many see it as threat. Most stress that they want to remain independent, but dislike facing the risks in the Japanese economy today.

"What we want is not money, it's business," declared the owner of a small trading company who, as a volunteer for the Communist party, visits neighbors once a month to collect subscription fees for the party's daily newspaper. (He asked that his name not be reported in the U.S. press, since he sells to American wholesalers who don't know he's a Communist.)

He feels that he's as much a victim of Toyota and Nissan as he is of Detroit. His company is mainly an exporter; after Japan's auto sales to the United States soared in the mid-1970s, so did the value of the yen. While Americans could buy nearly 297 yen's worth of Japanese goods for a dollar in 1976, by 1978 they got 208 yen's worth. That wreaked havoc with the markets for the glassware, toys, and small motors he sold.

The Communist party lacks a detailed program to aid small business, and no one expects it to take over Japan's government any time soon. But millions of non-Communist Japanese share its view of small business's problems. Why, they demand, can't the most efficient economy in the world stabilize the lives of its small business-people and give them incomes equal to Japan's internationally famous big-company employees?

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