On April 9, 2014, the Taiwan Democracy Project at Stanford's Center on Democracy, Development, and the Rule of Law (CDDRL) hosted a special event featuring the President of the Republic of China (Taiwan), Ma Ying-jeou. Co-sponsored with the Taipei Economic and Cultural Office and the Office of the President of the Republic of China, the event featured a video address by President Ma on U.S.-Taiwan economic and trade relations.

The address was followed by a panel discussion with leading Stanford faculty and fellows, including CDDRL Director Larry Diamond and Freeman Spogli Institute for International Studies Oksenberg-Rohlen Distinguished Fellow Thomas Fingar. The panelists responded to the president's remarks and commented on recent dramatic events in Taiwan, including the ongoing occupation of the Legislative Yuan by students opposed to the Cross-Strait Services Trade Agreement. The discussion was moderated by Kharis Templeman, program manager of the Taiwan Democracy Project.

To view President Ma's video address, please visit: http://hichannel.hinet.net/event/2014oop/index_e.html. 

The panel discussion starts at 5:47.

Relations between China and Japan continue to fray and have no immediate chance of improving, according to one of the nation’s leading East Asian scholars.

“I think we all know that Sino-Japanese relations are about as bad as they have ever been,” said Harvard professor Ezra Vogel, who spoke to a filled room at the Shorenstein Asia-Pacific Research Center in the Freeman Spogli Institute on Thursday.

“I tend to be optimistic,” he said. “But I honestly don’t see any short-term solutions, I think we’re in for a period now where the issues are going to be very tough and the relations are going to be very tough.

“For any long-term solution, there is going to have to be some resolution of the history issue,” he added, referring to the disputes over the wartime past in Northeast Asia.

Vogel delivered the final lecture in a seminar series focused on the Sino-Japanese rivalry. The series brought various experts to Shorenstein APARC this spring to consider the historical contention between China and Japan, and its impact on that contemporary relationship. Professors Peter Duus of Stanford and Jessica Chen Weiss of Yale University were among the scholars who presented earlier this year, along with the Brookings Institution’s Richard Bush.

Professor Vogel is a renowned scholar of both China and Japan, the author of many books that have become classics in the study of both countries. A sociologist by training, he is the Henry Ford II Professor of Social Sciences, Emeritus, at Harvard University. Vogel described himself as a historian in practice, joking that he had become a historian “simply by living a long time.”

A shifting terrain of relations

In his April 3 lecture, Vogel traced the history of relations between Japan and China, particularly in the post-war era, and discussed how they have been impacted by disputes over history.

In the current atmosphere, under the influence of the media and political leaders highly responsive to public opinion, the image of Sino-Japanese relations is dominated by a sense of deep friction. But, Vogel said relations between the two great Asian powers were not always bad. 

After the early decades of the Cold War, when there were no formal ties between Japan and the People’s Republic of China, there was a relative blossoming in the relationship. Following the normalization of relations in 1972, and as Chinese leader Deng Xiaoping took over the reins of power, Sino-Japanese relations entered a period of closer ties and political thaw.

“The relationship was really moving in a very positive way,” Vogel said. Japanese aid and foreign investment was key to the opening up of China to the world economy and there was a flow of exchanges among youth and of popular culture between the two neighbors.

That “special era” remained through year 1992, even as the rest of the world distanced itself from China, both economically and politically, following the Tiananmen Square incident. The visit of the Japanese Emperor to China that year marked the peak of a “golden age” of positive relations between the two countries following the war.

‘Golden age’ fades

After 1992, the constructive relationship between China and Japan began to slip for several reasons.

By the mid-1990s, the Soviet Union no longer existed as a threat – a “broad strategic reason” that had united the countries. Taiwan’s growing independence movement was becoming a flashpoint of contention, with Chinese irritation over the close ties between pro-independence Taiwanese leaders and Japan.

Perhaps most important of all, China, in the wake of the student protests, embarked upon a “patriotic education” campaign designed to shore up the loyalty of youth by stressing broad themes of Chinese national pride. In that campaign, reminders of the wartime struggle against the Japanese invasion of the 1930s occupied a central part of the message, communicated in textbooks, movies and books that remain a staple of Chinese popular culture. The demonization of Japan has colored Chinese perceptions, Vogel said.

In Japan, the sense of anxiety about the rise of China is also reflected in a rise of conservative attacks on China and the promotion of a Japanese version of ‘patriotic education.’ The perception that Japanese leaders are increasingly unrepentant about the wartime past, symbolized by the visits of Japanese leaders to the Yasukuni shrine to Japan’s war dead, feeds these tensions over the past.

Vogel said biased education on that wartime era and misinformation in the media are key factors behind the publics’ formation of historical memory, and subsequently, encourage strong antagonism toward one another.

Guarded optimism

Disputes over history, particularly of the wartime period, must be addressed for any warming of the Japan-China relationship to occur.

“I think until we get some kind of deeper meaning of World War II, we’re not going to have much progress,” he said.

Vogel said the Japanese should try harder to give a fair representation of World War II to youth, who often only receive a few short details on that time period. The Chinese should “slow down” on anti-Japanese propaganda, he recommended.

Vogel said he is optimistic about an improvement in the bilateral relationship, but also emphasized that progress will be hard to achieve under current leadership. Even so, the two countries would be remiss to avoid dealing with issues of historical interpretation, especially as it continues to serve as a roadblock to an easing of tensions in the region.

The audio and transcript from the April 3 seminar, "The Shadow of History and Sino-Japanese Relations," are posted below.

In a new book, Gi-Wook Shin and Larry Diamond analyze the challenges and opportunities confronting the maturing democracies in South Korea and Taiwan. Much depends on the political leadership in those two countries rising above narrow interests to craft thoughtful and realistic public policies.

Masahiko Aoki has been engaged with Stanford University for over four decades. He has witnessed the roots of Silicon Valley grow and seen the many successes of students who formerly passed through his classroom. Selected academic papers written over his 40-year academic career have recently been published.

Aoki is the Henri and Tomoye Takahashi professor emeritus of Japanese Studies in the department of economics and a senior fellow at the Stanford Institute for Economic Policy Research (SIEPR) and the Freeman Spogli Institute for International Studies (FSI), in residence at Shorenstein APARC.

You have been at Stanford since 1967 in different capacities – what has changed since then? Can you share some memories with us? 

I first came to Stanford as an assistant professor in 1967. Campus and the surrounding environment were different then – there were series of apricot orchards along El Camino to the south and my office was located in a wooden building – the old president’s house where the engineering buildings stand today. Changes at the university and in Silicon Valley have been fascinating to witness. I was away from Stanford in the 1970s, but when I came back in the 1980s, I had over 200 students at a time in my classes. This was because of widespread interest in Japan’s economic performance, which was then challenging American industries. Now students are inclined to be more interested in the rise of China. I share the same interest.

What has been most interesting for me is collaboration with graduate students and faculty to develop institutional studies. In the 1990s, I worked with Paul Milgrom, Avner Greif and Marcel Fafchamps among others, to initiate the field of comparative institutional analysis in the economics department. Greif and Fafchamps now have appointments in FSI like myself. Our research worked to understand why and how institutions matter to economic performance. However, my interests have expanded since then. I aim to understand relations between economic and demographic variables as well as institutional complementarities between economic institutions, social norms and political governance. As for my former students, many of them can now be found in important academic, government and private sector roles across the world.

What particular “lens” do you use to conduct your research?

Some influential economists understand that the nature of polity determines economic performance. They say this correlation is obvious if we compare the exploitative political regime like North Korea with that of a democratic political regime like South Korea. But this “lens” is a bit too simplistic for me. Why do ‘bad’ political regimes persist in some countries?  The relationship between political governance and economic performance is more complex than “the former simply causes the latter.”

To understand the relationship between political governance and the economy, I use game-theoretic concepts. While I am not a game theorist, I still believe that human interaction – whether economic, political or social – is a kind of game. People form beliefs based on how others play societal games. One of the important insights derived from these ideas is that political governance and economic institutions actually co-evolve. Furthermore, we need to look at the historical context to understand the present.

How have you applied these theories to the cases of Japan and the United States?

One of my major research interests has been the comparison of corporate governance across countries. Financial economists view the corporation as the property of stockholders. But we can also view the corporation as a system of distributed cognition. That is, the corporation is a group of people who have different cognitive roles and capabilities. Individuals can be organized to achieve economic value using physical assets as tools for respective cognitions.

By looking at corporations in this reversed way, we can identify different types of organizational architecture and their comparative advantages. In short, my research has found that managers’ cognitive assets are prioritized in U.S. corporate model, while workers’ entrepreneurial cognitive assets are prioritized in Silicon Valley’s model. In contrast, Japan favors a model where manager and workers’ cognitive assets are more interdependent.

You emphasize the connection between economics and demographics. What can be done about Japan and greater Asia’s rising demography problems?

Human capital is very valuable, but cultivating human capital is quite costly. Due to this constraint, the total fertility rate of women has declined as the economy develops. Scholars call this phenomenon the demographic transition. In addition, as economies further develop, people live longer and the working age population in the total population declines. Japan, Singapore and Taiwan are experiencing this phenomenon. Korea will follow this trend soon and at an even faster rate than Japan. Even if China modifies the one-child policy, the demographic dilemma cannot be escaped. And even for California, which is typically considered to be the youngest state in the U.S., a study predicts it will become the oldest state around year 2030.

So, what can be done to cope with this phenomenon? One option to raise the retirement age. Over two decades ago, Japan started this policy and has seen noted, positive effects. Another option is to increase and secure participation of women in the workforce. Across Asia, total populations are still rising due to immigration. Japan should consider liberalizing immigration. It is interesting to note that in the past 1,500 years Japan’s cultural development benefitted greatly from migration and assimilation of people, such as monks, political refugees and artists from Korea and China. 

With the recent execution of Abenomics, what performance can we expect to see from Japan’s economy in year 2014?

Abenomics has only been assessed in terms of short-term effects on the economy. Instead, my view is that Japan is now in the process of longer-term institutional change. Lifetime employment was the core of Japan’s overall institutional arrangement until some twenty years ago. The main banking system and government-industry relationship complemented and mutually reinforced lifetime employment. Though, with the demographic transition, the Japanese government has found it increasingly difficult to sustain. However, Japan’s institutional arrangements are normally very resilient. I think institutional transformation fitting this new demographic phenomena will require the duration of one generation. Institutions cannot be changed overnight by a revolution or government decree.

Of course, Abe could accelerate institutional adaptation by expanding the roles and opportunities for women and young people and creating more open foreign policy. This policy agenda may be related to the so-called “third arrow” of Abenomics, a period of structural reform following monetary easing and fiscal stimulus. But what Abe can do and has the willingness to do has yet to be fully seen. Thus, if we believe that Japan started the process of institutional change in the early 1990s and requires one generation to attain visible outcomes, the next several years are crucial. Tokyo has been chosen as the host city for the 2020 summer Olympics. I hope this event will act as Japan’s opportunity to display its changes to the international audience. 

The Faculty Spotlight Q&A series highlights a different faculty member at Shorenstein APARC each month giving a personal look at his or her teaching approaches and outlook on related topics and upcoming activities.