<p> Are the Japanese smarter than we Americans are? Will our
children be working mostly in Japanese-owned companies and
paying rent to Japanese landlords? It's hard to look at recent
economic history--or at a self-focusing Sony combination video
camera/VCR no bigger than a grapefruit--without wondering just
that. (JAPAN NOW AHEAD IN NUCLEAR POWER, TOO, read last
Tuesday's New York Times.) But one needn't look to genetic
superiority to account for Japan's remarkable and mostly
well-deserved success.
</p>
<p> What's more, last month's crack in the highly overvalued
Tokyo stock market makes the Japanese seem a little less
superhuman. The even wilder overvaluation in Japanese real
estate could one day make them look downright mortal, sending
shocks around the world. And America's new goals for education
by the year 2000, which the nation's Governors unveiled last
week, aim in exactly the right competitive direction. The goals
may seem fanciful--one is to make American kids first in the
world in math and science--but are they that much more
fanciful than the goal of an earlier era: to land a man on the
moon within ten years?
</p>
<p> Still, there's no denying Japan's current competitive edge.
It stems from many factors, beginning with the involuntary
"restructuring" that occurred in 1944 and 1945. Today's LBOs are
nothing compared with the old B-29s. But perhaps most important
has been the willingness of the Japanese to postpone
gratification: to work hard and save.
</p>
<p> Although accounting practices overstate the gap, the
Japanese have saved a far higher proportion of their income than
we have. We've been living better and having more fun; our
Japanese friends have for 45 years been sacrificing current
pleasures to invest in a brighter future.
</p>
<p> Welcome to the future.
</p>
<p> Many factors account for our having saved so much less than
the Japanese. But the most obvious may be simply that, having
won the war and until recently having dominated the world
economy, we've felt secure and thus under relatively little
pressure to save. Never mind that our sense of security has
become increasingly false. It's when you're worried that you
save (for example, when you have few natural resources and
you've lost a world war) and when you're always working that you
have no time to spend money.
</p>
<p> The other aspect of the savings differential isn't our
lavish personal spending but what we've spent on defense: 5% or
6% of the U.S. gross national product each year, vs. 1% or so
for the Japanese (and perhaps 15% for the Soviets). Is it
coincidence that the Japanese economy is doing so well and that
the Soviet economy has collapsed?
</p>
<p> Economically speaking, money spent on arms is largely
wasted, siphoned off from the precious pool of capital like a
big leak. (In the old days, swords could at least be beaten into
plowshares. Try beating a tank into a tractor.) And though the
annual difference between what we and the Japanese have spent
on defense--a gap of 4 percentage points--seems small, small
numbers compound. An economy growing 3% a year for 45 years
quadruples. Not bad. But an economy growing 4 points faster, at
7%, grows 21-fold! This is, very roughly, the difference in the
way the Japanese and U.S. economies have expanded since 1945.
And it has nothing to do with IQ scores.
</p>
<p> With perfect hindsight, Japan might have been obligated,
after a 30-year grace period, to devote 5% of its GNP to foreign
aid. Beginning in 1975, under such a scenario, Japan would have
had a 5% annual handicap like our defense budget, to the great
benefit of the Third World. It is obviously no longer our place
to impose terms on Japan--witness President George Bush's
respectful talks with Prime Minister Toshiki Kaifu last week.
And Japan has begun to step up its foreign aid. But it would
have to quintuple its level of giving for it to approach 5% of
GNP.
</p>
<p> Other factors have contributed to Japan's success--skillful management and a dearth of lawyers, prime among them--but the biggest may be its willingness to forgo current
gratification for future reward. In the Soviet Union, where the
prospects for profit are distant at best (Moscow's McDonald's
notwithstanding), the Japanese are already burrowing in for the
long haul. "I wish I could take Americans to see the Mezh," an
American entrepreneur told Forbes columnist Esther Dyson,
referring to Moscow's Mezhdunarodnaya hotel. "The Japanese are
taking whole floors. Not suites. Floors."
</p>
<p> We're buying videocassette recorders; they're buying San
Francisco. We're buying $20,000 cars on easy terms; they're
paying cash for Columbia Pictures Entertainment. We're flying to
Aspen to heli-ski; they're flying to Moscow to plant seeds. For
now, we live better than the Japanese and have more fun. And our
kids don't have to spend nearly so many days a year in school.
Isn't that great? But if you haven't yet contributed $2,000 to
your IRA for 1989 (and another $2,000 for 1990), take a hint
from the Japanese and do so. Tax deduction or no, it's hard to
go wrong saving for the future.
</p>
<p> The Japanese are not smarter than we are, but in some
