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Hitachi Research Institute

President Column

Commentary by our President, Hitoshi Shirai

President Column #1: 40 Years of History

On April 1, I assumed office as president of Hitachi Research Institute. It was in May 1973 that the Hitachi Research Institute was established, so the publication of this issue coincides with the milestone of our 40th anniversary.

Hitachi Research Institute was established at the suggestion of Kenichiro Komai, then Chairman of the Hitachi Corporation. Mr. Komai was one of the few Japanese members of the Club of Rome. The Club of Rome was established in March 1970, prior to the establishment of the Hitachi Research Institute, as an organization to address global issues such as resources, the environment, world population, and arms proliferation.

The name of the Club of Rome first became widely known following the publication of its report “Limitation of Growth” in 1972. This report predicted that if mankind continued its population growth and destruction of the environment at the current rate, in approximately 20 years the world's resources would be depleted and population growth would reach its limit due to environmental degradation and limited resources. This report had an enormous impact in a world which at the time was trying to come to terms with the need to reconstruct the post-war free economic order in the wake of the Nixon Shock. In hindsight, this time may be seen as the beginning of an ensuing period of turbulence. Based his own experience from the Club of Rome, Kenichiro Komai probably felt strongly that a think tank which looked toward future economic, social, and global issues would be essential in the time of tumultuous change which seemed set to arrive in the near future. In fact, just five months after the establishment of the Hitachi Research Institute, the first oil shock occurred. This was a wakeup call to people of the world that brought with it a sharp sense of reality regarding the predictions of the “Limitation of Growth.”

The Club of Rome and the “Limitation of Growth” report also left a strong impression on me as I commenced my university education in 1975. I first learned of this report in a lecture on a general education course entitled “Environmental Economics,” which I took as a new freshman. A lecture title that contained and linked both “environment” and “economy” was a very novel concept at the time. However, the details of the “Limitation of Growth” report that were introduced during the course lectures hit me as an intellectual shock, as if cold water had all of a sudden been thrown on my unlimited freshman dreams and hopes. I still remember how our professor explained, “The world economy is in a state of stagnation, which is probably a good thing from the perspective of the global environment.” This was prior to the economic reforms in China. Hunger and poverty not only in Africa but also in Asia were much more widespread than they are today. I could hardly agree with the notion that stagnation of the world economy was a good thing, but I did feel as if mankind were being challenged with “a puzzle without a solution” inside Spaceship Earth.

In the 1980s, the world economic order made a significant transition from “controlled capitalism,” which had been maintained for over 30 years following the end of the Second World War, to a market-oriented economy. This was followed by an accelerating trend toward deregulation led by the developed countries and characterized by monetary easing and privatization. Then, by the time the Cold War ended in the 1990s, approximately 80 to 90% of the world's population was engaged in activities attributable to the mechanisms of a free market economy. Previously a major socialist power, China now emerged as the world's second-largest economy under “a socialist market economy.”

This megatrend toward an open, market-oriented economy brought with it opportunities for economic growth not only for China but also for many developing countries. On the other hand, neither the policy authorities of the world's countries nor the world of academia including economists had sufficient knowledge or accumulated experience in controlling with any sense of stability the new type of economy that market mechanisms brought with them across national boundaries. As a result, both the object economy and the money market became saddled with high volatility.

Even since the beginning of the 21st century, the world has faced many unprecedented situations during the 40 years of the Hitachi Research Institute’s lifetime so far, such as the collapse of the IT bubble, the September 11 terrorist attacks by Islamic extremists and the Lehman Shock in the United States, and the Great East Japan Earthquake and nuclear power plant accident in Japan. Today we not only face difficulties regarding the environment, as we struggle to reach a new agreement over the post-Kyoto Protocol, but also widespread conflicts over race and religion that persist in almost every corner of the world. Consequently, we live in a world which seems to have far more complicated “puzzles without solutions” even than at the time when “Limitation of Growth” was published.

The world today is growing more complicated and changes are occurring more dynamically than in the past, making the future even more difficult to predict. Hitachi Research Institute is determined to utilize the knowledge, information, and value creation platform it has developed as a think tank over the past 40 years of its history, to pursue even higher standards of analysis, insight and conceptual thinking.