Can the gig economy save neoliberal capitalism from itself?

Will the Confucian Chinese bury us free-spirited Westerners? Or could the fissiparous nature of their employer-employee relationships be the salvation of Anglosphere economies?

Back in 1988, in my second-last year of high school, my school introduced Japanese language classes. Lots of schools in Australia and, I presume, around the world began offering Japanese language classes in the 1980s. At the time, it was widely accepted that the Japanese economic model was superior to that of the US (and its Anglosphere allies) and that Japan would, somewhat belatedly, achieve its ambition of heading up a Greater East Asia Co-Prosperity Sphere.

In much the same the way the Americans started freaking out in the late 1980s when Japan’s cashed-up consumer electronics companies began gobbling up iconic Hollywood studios, Australians had been convinced it was only a matter of time until they would all be writing in kanji ever since (mainly) Japanese investors announced their plans to construct a Brave New Worldish Multifunction Polis in Australia in 1987.

Younger readers may find it hard to imagine that the US (and its Anglosphere allies) were so paranoid about the industrious Japanese at the very moment the US was being hailed as the reigning hyperpower in a unipolar world. If so, they should leaf through 1991’s The Coming War with Japan. Or try to find the 1993 film adaption of Michael Crichton’s 1992 potboiler Rising Sun on one of the streamers. (Watch out for the scenes where Scottish-American-Japanese Zen master Sean Connery drops truth bombs such as, “Americans like to fix the blame. The Japanese fix the problem.”)

While it’s easy to laugh at the Japanophobes now, their fears weren’t entirely illogical.

Japan enjoyed three decades of turbocharged economic growth from the early 1960s to the early 1990s and was the world’s second-largest economy until 2010. It’s remained the world’s third-largest economy ever since, despite having few natural resources, not much land and a significantly smaller and older population than either the US (currently clinging to the number one spot) or China (number two with a bullet).    

Like all nations, Japan has its problems. But its post-war economic model, centred on Confucian (think quasi-feudal) bonds between employees and employers, has delivered rising prosperity, full employment, abundant social capital, a reasonably equitable distribution of wealth, a well-functioning parliamentary democracy, the world’s longest lifespans and precisely zero crack/meth/opioid epidemics.

The Japanese approach works.

This brings us to Japan’s ancient rival, China.

Déjà vu all over again

Say what you will about China’s post-Mao leaders, but there’s no denying they are ruthlessly competent. And China’s success in recent decades isn’t solely a function of its shameless intellectual property theft/forced transfer and an ability to flood Western markets with its exports while never quite getting around to properly opening its markets to foreign companies.

As persuasively argued in this article by Eamonn Fingleton, qiye jituans offer Chinese workers the same deal Japan’s keiretsus and South Korea’s chaebols do. That is, oodles of job security, upskilling, internal promotion opportunities and esprit de corps in return for being a loyal company man (or, more recently, woman).

As Fingleton observes:

As a matter of etiquette, major East Asian employers do not hire from direct competitors. Moreover, they rarely resort to lay-offs, even in the worst recessions. This creates by default a settled system of long-term employment… The psychological advantages that accrue to employers from a no-layoffs policy are a lot more beneficial than is understood in modern America. East Asian workforces feature a far greater degree of long-term accountability. They are also impressively strong on teamwork. Because the East Asian employment system expects employees to commit for the long term, there are rarely second chances for employees who fall out with their first employer. That means that workers are considerably more cooperative in taking on tough assignments. Certainly, East Asian employers enjoy the observed advantage that at all times they have at their disposal battalions of hard-working employees willing to be sent anywhere and do anything to further their employer’s agenda.

Another advantage of the East Asian system is that it provides employers with a much greater incentive to invest in worker skills. American employers have to worry that any workers they train may be quickly hired away by rival employers.

In recessions, East Asian employers beat the bushes to find work for their workers. They will even go to the extent of inventing busywork… [while American businesses] slash jobs in a recession but rarely fully restore these in a recovery. Instead, many resort to outsourcing, which they consider to make particular sense in the early, tentative stages of a recovery.”

Why we are never turning Japanese (or Chinese or South Korean)

Some employers and employees, especially those of a socially conservative bent, are keen to import Asian Tiger business practices to the West. (Employers have proven especially keen on Kaizen, which they interpret as their staff striving for ever-higher levels of productivity without any expectation of reward.)

But the reality is that Western nations importing East Asian business practices wholesale is about as likely as the US embracing Scandinavian social democracy. If 1986’s Gung Ho (released as Working Class Man in Australia) taught us anything, it’s that lazy and impertinent Western workers are never going to turn up to an hour early to their 18-hour workday to do group callisthenics with their colleagues.         

It should also be noted that for all the pros to the East Asian way of doing business, there are also some cons. As economists who are neoliberals (i.e. almost all of them) are always eager to point out, the downside of near unbreakable employer-employee bonds is that they are, well, near unbreakable.

That’s a plus if you want a 20th-century economy based on cartels of giant conglomerates churning out cars, consumer electronics and white goods. It’s less of a plus if you want a 21st-century economy where the mobility of labour helps facilitate the creation and rapid growth of companies such as Adobe, Airbnb, Alphabet, Amazon, Apple, Microsoft, Netflix, PayPal and Uber.* The creative destruction that characterises the US economy is a large part of the reason it’s been the world’s economic powerhouse for more than 130 years.  

Is a digital New Deal possible?

In late-stage neoliberalism, Anglosphere nations find themselves in a tricky situation. Business as usual doesn’t appear to be an option, despite the success of a growing number of unicorns. (Regrettably, these unicorns typically have modest headcounts and are virulently opposed to paying tax. They also often generate significant negative externalities.)  

So, to recap, it’s impossible and, in any event, probably misguided for Western nations to try to out-Confucian the Confucians. On the other hand,  the post-1979 approach of mainstream political parties of both the right and left – crushing (or quietly undermining) the unions then engaging in an orgy of global labour arbitrage (i.e. exporting as many jobs as possible to developing countries while importing as many workers as possible from those same countries to keep a lid on the wages paid to local workers doing non-outsourceable jobs) – hasn’t been proving a raging success of late, either politically or economically.       

Many, such as Fingleton, despair that there’s no way to square this circle:

The world is transitioning from an era when free societies did well precisely because they were free, to a new era in which authoritarian societies are doing well precisely because they are authoritarian. In one sentence, authoritarianism is set to inherit the earth.

Fingleton and the other declinists may well be proven right. But, before the pitchforks come out, business and political elites across the Anglosphere may want to consider navigating a Third Way between the Confucian and neoliberal approaches.

A fuller exploration of what this digital New Deal might look like will have to wait until my next Substack missive. But it would involve governments and businesses making it easier for workers – be they employees or gig-economy contractors and freelancers – to ‘learn to code’. That is, making it as straightforward and attractive as possible for workers to acquire new skills, digital and otherwise, then benefit both themselves and the wider economy by selling their skilled labour to the highest bidder.

More on which, next time.

* Yes, I know East Asian nations throw up the occasional Alibaba, but that doesn’t mean their industrial relations environment is unicorn friendly, any more than the success of Tesla means the US is about to regain its car-manufacturing dominance. (It’s perhaps also significant that, most unusually for someone growing up in 1970s China, Jack Ma spent much of his childhood hanging around with English-speaking tourists and business travellers.)    

Suggested further reading

If you’re interested in an economic perspective on why nations ceaseless rise, squander their advantages, then fall, I’d recommend Ray Dalio’s Principles for Dealing with the Changing World Order and Viktor Shvets’ The Great Rupture: Three Empires, Four Turning Points and the Future of Humanity.