Japan, in the 1980s, wassupposedto be the future. Its industrial groups, protected by dense networks of banks, suppliers and friendly shareholders, were praised as more patient, more loyal and more strategic than America's purportedly short-term capitalism. Germany, meanwhile, wassoldas the humane alternative to Anglo-Saxon brutality: strong unions, worker participation, industrial discipline, export prowess and a "social market economy" that allegedly reconciled capitalism with solidarity.
Both the Japanese and German models, then, had real achievements. Both produced world-class companies and generated admiration. Both, however, also concealed the same poison: the gradual conversion of the private company into a social institution whose first duty is no longer to create value, but to preserve existing arrangements.
The results are now visible. In the IMF's 2025results, GDP per capita, in terms of purchasing power parity (PPP), stands at about $90,000 for the United States, around $74,000 for Germany and only about $57,000 for Japan. The country once imagined as America's replacement is now far behind America. Germany, once Europe's industrial engine, has been flirting with stagnation and contraction: official German data show that GDProseby only 0.2% in 2025, after two consecutive weak years.
The usual explanations are not false. Japan suffered a monumental asset bubble, then a banking crisis, then demographic aging. Germany suffered the energy shock after 2022, the self-inflicted damage of theEnergiewende(a turn toward "renewable energy"), Chinese competition, high labor costs and suffocating bureaucracy.
Regrettably, these explanations do not go deep enough.
A private company creates jobs, trains workers, pays taxes, supplies customers and sustains communities. These areconsequencesof its central function, not substitutes for it. Its central function is to allocate capital profitably. If that sounds cold, it is – but it is, in fact, the underlying condition of prosperity.
When profit is treated as morallysuspect, the company transforms into something else: a pension office, an employment agency, a regional planning tool, a national prestige project, a union stronghold or a political theater. It may still have shareholders. It may still publish accounts. It may still use the vocabulary of business. But its "business plan" and operating principle have changed.
Japan and Germany did not abolish capitalism. They domesticated it. They surrounded it with obligations, customs and veto players until its most important goal — profit — became almost indecent.
In Japan, socialization took the form of thekeiretsu, cross-shareholdings, "main bank" relationships, lifetime employment norms, seniority-based promotion and a corporate culture that often confused loyalty with efficiency.
A recent illustration of the keiretsu system's paralyzing effects is Toshiba's prolonged decline and difficult restructuring in the 2010s and 2020s. Tied to the Mitsui group through historical cross-shareholdings, main-bank relationships, and cultural norms of loyalty and consensus, Toshiba faced massive losses from its U.S. nuclear business (Westinghouse), accounting scandals, and operational inefficiencies. Instead of swift divestitures or bold pivots, the group's emphasis on stability and internal supportdelayeddecisive action. The Mitsui keiretsu's attempt to rescue it ultimately failed, leading to delisting from the stock exchange in 2023 and acquisition by a consortium. Only under new private ownership has Toshiba implemented aggressive job cuts (up to 4,000 domestically) and restructuring —steps that traditional keiretsu mechanisms had long resisted.
Source: Gatestone Institute :: Articles
