Page 214 - The Drucker Lectures

Deregulation and the Japanese Economy [ 195

that I consider it practically inevitable that deregulation will
come, and very soon, but I’m not happy about the prospect. I’ll
give you a piece of history to help explain why.
When I first went to Japan, it was in the ’60s, and I was
working very intensively with the Japanese government, mostly
on the organization of local government. And I was absolutely
convinced that in two big areas deregulation would come—and
come very fast.
One was agriculture. Japan was then still more than 50 per-
cent rural, incredibly backward, incredibly inefficient, and to-
tally regulated. And I was quite sure that deregulation would
have to come—and soon.
The other area was the retail sector, which wasn’t even nine-
teenth century. It was maybe late eighteenth century—mom-
and-pop shops with an annual turnover of their goods of 1.7
percent at times. If you know anything about the retail business,
anything under 10 percent is a disaster. And I was sure that they
couldn’t survive. And the bureaucracy said, “We know that too,
but if we liquidate them fast there’ll be social catastrophe.” I
said, “What’s going to happen if you postpone and postpone
and postpone?” And they said, “We don’t know, but sometimes
something does happen.” And I said, “You are crazy.”
As perhaps you know, the mandarin in Imperial China was
an absolute king in his domain except for one criminal sentence
that had to go up to the emperor because it was so cruel: killing a
man, a criminal, by cutting off his legs one millimeter at a time.
And I said, “You are trying to cure the patient by amputating
one millimeter at a time, and that kills the patient.” They said,
“Something will happen.”
And I was wrong, and they were right. They postponed and
procrastinated, and today Japan is down to 6 percent farmers,
and what they have is reasonably efficient. And the mom-and-
pop stores have become franchisees of the big retail chains of