Page Last Updated: August 18, 2007 7:35 PMRobert Angel                          © 2005: University of South Carolina Trustees

Dr. Edward J. Lincoln

Senior Fellow, Council on Foreign Relations

October 28, 2004


Introduction to Japan.
Deciding to become an economist.
Academic Training
Hugh Patrick as Mentor
Writing About Economic Japan from a Broad Perspective
Most Influential Book
Current Book Project
Economic Japan During the Next Few Decades
Dr. Lincoln's Books on Economic Japan
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ANGEL: Dr. Edward Lincoln, Senior Fellow at the Council on Foreign Relations, joins us from Washington, D.C.

Introduction to Japan

Let me begin by asking how in the world you became involved with Japan.

LINCOLN: Completely by accident. I am of the generation of Americans where interest in Japan was very low. World War Two and the Occupation were over. Japan had not yet emerged as a major economic power with lots of brand-name products that people in the United States would recognize. Certainly we did not study about Japan in the school system. What we called “World History” back then was Western Civilization: from Egypt up through Europe to England to the United States. So we never studied Japan. So interest in Japan was quite low.

Therefore, most people in my generation became interested in Japan for accidental reasons. For some reason they happened to go there, and found it interesting. Or, in my case, my high school girlfriend, my senior year, happened to be our AFS student. American Field Service exchange student. She was from Japan. We went to the senior prom together. She went back to Japan. I went to school in the United States. And I kept thinking, ‘I’d like to get back together with her.’

And that provided an incentive for me to find a way to get to Japan. Which I did. I got to teach English for a year at a university in Kyoto [Doshisha] with which my school had a long-standing relationship, since the Japanese university had been founded by a graduate of my school.

So, that got me to Japan and brought us back together. Once we had made the decision to get married, then I had an incentive to pursue study of Japan, because we needed an excuse to get back to Japan from time to time if we were going to live in the United States. So that really is what got me started.

And frankly, you know, it was not until about the mid-1980s that young people in the United States really began to take things seriously, and reach the conclusion that they wanted to study about Japan because they thought it was important.

ANGEL: Rather than just to be entertained.

LINCOLN: Rather than to be entertained by it, or rather because they had some personal reason to want to go in that direction. [Click to Return to Topics]

Deciding to Become an Economist

ANGEL: Why did you decide, then to study economics rather than any other field?

LINCOLN: Well, since you are a political scientist, I am inclined to give you a snide answer about how economic is much more relevant for understanding the world than anything else.

Again, young people make decisions for all kinds of peculiar reasons. In my case, I had had – what? – three weeks of economics in high school as part of that senior history class. And I thought it was really cool. It was a way of thinking about how human beings act that I had never been exposed to before. The idea of supply and demand, and prices as signals, and things like that. These were new ideas to me when I was seventeen years old.

So when I got to college, I thought, ‘Well, that’s sufficiently interesting that I might want to major in it.’ I took a couple of economics courses during my freshman year. And it was even a lot more interesting and fun than I had thought it was in high school. So I thought, ‘Sure, I’ll do that.’

If I hadn’t done that, actually, I probably would have majored in geology.

ANGEL: Geology? [Click to Return to Topics]

Academic Training

LINCOLN: Anything other than political science …

ANGEL: Where did you do your academic training?

LINCOLN: My undergraduate work was at a small liberal arts school in Massachusetts, Amherst College. It did not have much on Japan. There was one professor at Amherst teaching history, and I took his courses. So most of what I had as an undergraduate was my undergraduate economics education. And one year of language that I had to take on the other side of town. The University of Massachusetts is on the other side of town, and we could take courses there. They offered Japanese language. So I had a little bit of language before I went to Japan.

Went to Japan for one year. Got married. Came back, and went to Yale University, where I started in the masters program in East Asian Studies, primarily because they had more scholarship money than the Economics Department. And, if I had gone straight into economics I could not have taken more language, because the economics department had no language requirement, and therefore would not give me credit for taking a language course. And I needed more language at that point.

So, I did two years of East Asian studies. Then moved into the PhD program in the Economics Department. That left me with one more year of course work I needed to take before doing my comprehensive exams and dissertation. [Click to Return to Topics]

Hugh Patrick as Mentor

ANGEL: Was anyone at Yale especially influential on your development as a scholar?

LINCOLN: Absolutely. The reason I went to Yale University was that they had at that time one of the, oh, not more than a half-dozen specialists on the Japanese economy in the United States. And that was Hugh Patrick.

ANGEL: Certainly the best known.

LINCOLN: Probably the best known. And he was a wonderful mentor. I really valued having been able to study with Hugh Patrick. Not only a good professor, but also a good mentor. He took care of his students.

For example, after I’d been at Yale for one year, President Nixon’s Administration got into an argument with Congress over trying to cut government spending. Nixon decided to not spend money that Congress had authorized the government to spend. And one of the things he chose to cut was scholarships handed out under the National Defense Foreign Language Act. That was the money that was supporting me.

So that summer I was faced with the prospect of having no money to pay my tuition. And I didn’t have any money. Hugh Patrick went to New York, found money for me from, I think it was the Ford Foundation. He came back and said, ‘Don’t worry. I’ve got you a scholarship for this year.’ That’s the kind of thing he did for his graduate students. [Click to Return to Topics]

Writing About Economic Japan from a Broad Perspective

ANGEL: How do you think his training of you differed from that another economist might have given you?

LINCOLN: It’s not so much him, I guess, but what I chose to do. Economics tends to be very heavy on theory and quantitative techniques. What interested me, and I think what interests Hugh Patrick, is much broader than that. You want to understand the institutions, as well as the straight quantitative economic type analysis. So, I ended up coming out of graduate school with a very broad interest in how Japan works. Some of that is straight economics, some of that is about institutions, some of that is about politics, some of it’s about history and culture. And I think that’s shaped my background a lot. Particularly, I think, because I started in the East Asian studies MA program rather than going straight into economics. So I had to take more Japanese history. I had a course in Japanese religion. So, I got a broader background on Japan than just economics.

ANGEL: That’s certainly reflected in your writing today, and has been throughout your career.

LINCOLN: Yes, and, of course, that’s also been shaped by where I’ve worked -- for research institutes that try to reach out to a broad audience. You cannot write as though you were writing for an audience of the fifteen economists in the country who happen to share your particular, narrow interest in something. You have to write for, basically, a college-educated audience that’s majored in anything from literature to economics to physics. So it has to be understandable.

ANGEL: And it has to matter.

LINCOLN: Right. It has to matter. Right. You can’t talk about how many angels can dance on the head of a pin.

ANGEL: What do you think … Is it fair to say … Maybe you don’t want to say so. But isn’t it fair to say that you have published more about the Japanese economy in English than any other academic in this current period?

LINCOLN: [pause] Well, that is possible … I’m not sure that’s true. But it could be true. But again, that’s a reflection of the places where I have worked, where my job has been defined by book projects. If someone is a professor, they write a book from time to time if they get a sabbatical year or they get some research money. In my case, I have been basically paid a salary to write books. So there is pressure to crank them out on a fairly regular basis. [Click to Return to Topics]

Most Influential Book

ANGEL: What would say of all of your writing is your most important contribution to English language scholarship on economic Japan?

LINCOLN: Well, probably the book that I did in the late 1980s on Japanese trade. [Japan's Unequal Trade] Frankly, I think it’s probably not -- in an analytical sense -- the best book I wrote. I actually re-wrote the book a decade later. [Troubled Times] And when I re-wrote it I think I did a much better job. Not just updating the data. But dealing with some issues that I had not dealt with in the earlier book.

In terms of impact, I think the first of version of that book had more impact.

ANGEL: What was the title?

LINCOLN: It was called Japan’s Unequal Trade. It was about the difficulty of penetrating the Japanese market. For foreign companies to penetrate the Japanese market. It focused on an indicator of trade that has been used to some extent in economics, but hadn’t been applied to Japan up until that point, called intra-industry trade. That is an index that measures the extent to which we have both exports and imports at a very narrow industry level in an economy.

I don’t want to get into the technical details of it. But what came out of it all was a picture of a Japan that either exported or imported at a very fine industry classification, compared to the United States and European countries, where you tend to find that even at a narrow industry level, you get both imports and exports.

And I felt that had important implications for the politics of how trade relations between Japan and the United States worked out. It helped to explain why American companies were ticked off about their relative lack of access to Japan. Because they could see in their own industries in the United States that, ‘Yes, we’re successful exporters. But we also import a lot – within those industries.’

In Japan, yes, there were a few lucky industries where American companies said, “Yes, we have a great market, because the Japanese import a lot. They don’t export anything to us because they’re not very competitive.” But by and large, the industries that we were good at were the same ones where the Japanese were exporting. And they were not importing very much.

Whatever the explanation for that might be – And I happen to believe that protectionism was a large part of that explanation. Whatever the explanation was, that was not a pattern likely to create warm and fuzzy feelings among American companies. And therefore that got transmitted to the U.S. government.

ANGEL: I can’t imagine that Tokyo would have been too pleased with your book.

LINCOLN: Well, no, they were not. In fact, I went through probably a year or two after that book came out when mysteriously I would be at a conference, and there would be a Japanese professor or a Japanese government official who would sit down next to me at the conference table. And he would say, “Oh, you are Dr. Lincoln. Oh, Dr. Lincoln, I read your book, and it’s so interesting. You know, I just happened to have here in my briefcase a whole bunch of data that proves that your book is wrong.”

ANGEL: Did that really happen?

LINCOLN: It did. It actually happened to me. I had some difficulty keeping a straight face. Because I knew that this was not at all accidental. And the data they would have would always be, ‘Your explanation applied in the past, but in the last six months, trade flows have changed. So you are out of date.’

ANGEL: That suggests that your book had some influence on American policy, and maybe American thinking.

LINCOLN: I think it did. I heard from both Japanese and Americans after that that some of the things I had talked about in that book, and some of the data I had, ended up being used by the U.S. Government in the late 1980s and early 1990s, when they had to sit down and negotiate with the Japanese. So, I think that one had some impact.

Sadly, when I re-did the book, as I say, expanded it, added on a lot of discussion of investment flows, which I had not had in the first book at all -- and that was, in retrospect a big mistake. By the time the second book came out, I don’t think Americans were as interested in trade issues with Japan and the U.S. Government was not pushing as hard. So I don’t think the second edition had as much impact. [Click to Return to Topics]

Current Book Project

ANGEL: What is your current book project?

LINCOLN: I’m just starting something which, for the first time, is not primarily about Japan. I’m just beginning a book on why economics matters to foreign policy. As I’m sure you know, much better than I, there’s been a debate among political scientists for at least a century, between so-called ‘realists’ and so-called ‘liberals’ – two terms that I think are not terribly accurate -- either position.

But, I’ve long felt that neither side in that debate fully understands what has happened to the world economically, and how the changes in the economic world have impacted the way that governments perceive their national interests. So I’d like to weigh into that debate. And I think I can contribute something to it, using, of course, China, Japan, and other Asian countries, as examples along the way. It is not primarily a book about Japan.

ANGEL: Do you have a title yet?

LINCOLN: I have a working title for the project. I’m not sure that will end up as the book title. It’s something about the importance of economics in foreign policy, or something of that sort. But it needs a sexier title. [Click here for a paper summarizing progress on this project.] [Click to Return to Topics]

Economic Japan During the Next Few Decades

ANGEL: You’ve studied Japan’s economy, and Japan’s economic relationship with the United States and other countries now for nearly three decades. Where do you see economic Japan, domestic and international, moving in the next decade or so? Is it even possible to comment?

LINCOLN: Oh, I think it is. For the past decade, Japan has been particularly troubled with extremely low growth, an enormous amount of non-performing loans in their banking system, and deflation – price levels going down. That’s probably coming to an end. Sometimes countries do go through prolonged rough patches. They’ve done that.

Things are beginning to get a little better. But even though they are looking better, as we look out over the next decade or so, we are looking at an economy that is going to grow very slowly. Because from this point on, the big issue for economics, politics, and society more broadly, is demographics.

The birthrate in Japan is very low. Total population is set to begin falling from 2007, and will fall indefinitely thereafter, so long as the birthrate remains low and the country takes in very few foreign immigrants. It’s difficult to grow an economy when the labor force is shrinking. And the labor force now is starting to shrink in Japan. It will create difficult problems for social security as the ratio of elderly people, retired people, to working people shifts very rapidly. It will create similar financial problems for the national healthcare system. Japan, unlike the United States, has a European style national healthcare system.

It will drive a debate about the role of women in society, because the economic pressures will be there to use women more effectively in the workforce. But that will be difficult given social behavior patterns in the past in Japan, where the stereotype was the husband worked very long hours, and the wife stayed home and raised the kids. Well, does the wife work long hours too? Then who takes care of the kids? Does the husband work shorter hours, so the wife has more time to go out and work? Those things are very big and difficult social issues for any society. And the Japanese may have to face that.

And finally, they’re going to have to face the immigration problem. If you don’t have your own people available to work, you can bring in people from somewhere else in the world. Certainly people from around the world would like to go to work in Japan since wages are high. But this has not been a society that has been receptive to immigrants, or even short-term foreign workers, in the past. So that’s also going to be a difficult issue.

These things will begin to play out over the next decade. For young people today going into the study of Japan, I think these are the big issues for Japan over the next thirty to forty hears.

ANGEL: Some people might argue that one advantage Japan had for its rapid economic growth during the post-World War Two era was followership. Maybe even before that. They were able to watch where other advanced societies went, and then follow that same path. It might be argued that isn’t as useful a strategy now for Japan. What do you think about that? And if it’s true, can Japan adapt to that change?

LINCOLN: That is an apt description of what Japan was doing from the late nineteenth century up until the 1980s, and particularly after World War Two, I think they were very effective at this strategy. They structured their economy, educational system, and R&D programs all toward followership.

And I don’t mean to denigrate that. If followership was easy, then every nation in the world would be developed. And Japan still stands out today as one of the few late developing societies – you know, starting in the late nineteenth century – that has made the breakthrough to being a high income society. Some others are found along the road -- South Korea, Taiwan – are maybe three-quarters along that path. But Japan still is the only one that has made it the whole way.

However, the structures in education, society, the economy, that were very effective at borrowing technology from the outside world, adapting it to Japanese conditions, and often figuring out how to tweak it to make it work a little better … those mechanisms are not necessarily well suited to a country that is out there at the global technological frontier. And the Japanese have been wrestling with that issue since about the mid-1980s.

I am not convinced that they have been terribly successful at their attempt to alter the existing mechanisms. They are, for example, still debating what they can do to change their educational system to produce, as they put it, more creativity as opposed to more tinkering with existing technology. It’s hard to make those changes.

ANGEL: Is there anything else that you’d like to add?

LINCOLN: Maybe the final thing to add is that even though we have been talking about some of the problems that Japan faces and will face on into the future, that it remains the world’s second largest economy, a very affluent one, and though in some ways the Japanese are having trouble figuring out what to do in the future, there are some bright spots there.

I see young people today interested in Japan for things like anime. So I think Japan remains an important and endlessly fascinating place. And so I think even today if I were a young person today, I’d still want to get into the study of Japan.

ANGEL: Good to hear. Thank you for your time.