It is harder to find a better example of all that is marvellous and all that is wrong with the Japanese economy than Kansai International Airport.
It is the main airport for Osaka and has become a overnight stop for many Australians using Japanese Airlines to fly Europe.
At once it is an engineering marvel and a catastrophe. At once it gains huge passenger numbers in the air-travel business but is running at an effective loss. It has swallowed up huge amounts of public money and caused massive debt – largely disguised in government-guaranteed bonds.
It was built on a made-made island 5km off the coast and some 50km out of the centre of Osaka. Instead of all the political buck-passing on Sydney’s aircraft noise and new airport, the Japanese Government just poured the money in to create an island in the ocean.
Work began in 1987. The island was finished by 1989 as the Nikkei index hit a record 40,000. The airport opened in 1994. The cost was a staggering $28 billion. Some came from the private sector, but the lion’s share came from local and national governments.
The airport runs 24 hours a day because it is on an island. It boasts 25 million passengers a year and 800 departures a day. Sounds a lot, but they are swallowed by the size of the place. The stereotypical images of Japan are of crowded trains and streets in Tokyo. Kansai is deserted by comparison. The under-use of capital is obvious.
But worse, the island is sinking. True, it was expected to sink a little but AirNews now reports it is sinking faster than expected and it is sinking unevenly – fairly alarming for an airport. The airport describes the $400 million repair bill as ordinary, expected maintenance.
Kansai is sinking like the Nikkei – now at just 7700, 80 per cent lower than its peak in the glory days before the bubble economy burst and the debt caused by projects like Kansai hit the vibrancy of the Japanese economy.
But you cannot help but be impressed by the project – the sheer size; the clean lines of metal, glass and plastic; the cleanliness; the efficiency of people and machine movement.
So what has happened to Japan?
I went from the terminal across a walkway to the hotel and shopping centre. In the lobby there was a place to queue. There was no queue, but there was an employee to guide me from the head of the queue to the next available check-in clerk. There were two or three of them available. At breakfast, I was greeted by a man in a dinner suit and ushered by a woman to a seat. Half a dozen other waiters and waitresses hovered about. Bizarrely, it was a buffet breakfast. There was no need for any of them. Now, it makes a pleasant change from the hideous queuing at Heathrow or Hawaii, but if you are paying for all this “efficiency” through large debt, it is economic folly.
In the 1960s and 1970s, the Japanese co-operative model was obviously more competitive than the union-dominated manufacturing of the Anglo economies. Better to have co-operative over-manning than unco-operative over-manning. But come the reforms of the 1990s, Japan was left behind.
In the shopping centre at Kansai are half a dozen brand-name shops. So instead of a camera shop, a TV-audio shop and a computer shop, you have a Sony shop and Panasonic shop and so on. The anti-competitive inefficiency is obvious.
And speaking of computers, here is another reason – unforeseen in the 1970s or even mid-1980s – that caused Japan to falter in its predicted road to outstrip the US economy. The Japanese language – with its mix of letters and pictures – is far less suited to computerisation than the Roman alphabet. The vast efficiencies that came with documents being in computer-readable form were denied the Japanese economy for a long time (and perhaps still are).
Then, walking about Kansai airport with time to kill (but not enough time to go into Osaka because it is so far away), you cannot help but notice the racial homogeneity of the employees at customs, immigration, airline counters and retail stores – and still such a preponderance of Japanese goods for sale. The results of Japan’s hidden barriers to foreign goods through retailing cartels and other “non-trade” restrictions and the barriers to foreign people are obvious. It might have worked in the 1970s and 1980s, but it does not work now. Insularity and lack of diversity has resulted in Japan closing itself to new ideas and new ways of doing things.
Even now the “rebellion” of youth takes a conformist line. The rebellion takes the same form; the rebelling youth all dye their hair and travel in couples instead of groups.
In the mid-1980s the economists and predictive commentators looked to Japan becoming the world’s largest economy. The lesson, I suppose, is that heaven knows what forces might impact upon an apparently mighty economy – driving its share index down so that $100 worth of shares 14 years ago are worth just $20 now, and property in the capital city worth less than third of what it was previously.
But if you want to see a sample of how this happened, have a look at Kansai International Airport, like the Nikkei, sinking slowly into the sea.