weak understanding of western culture and business practice

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Regional FortunesJAPAN
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Real per capita GNP growth (1955-1980)
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GNP per capita (PPP) U.S. 100
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Dissimilarity Index to measure economic
restructuring
DI sum of positive or negative differences
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Trade Statistics, 1995
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Midcentury Handicaps

• post-war recovery problems
• weak natural resource base
• weak understanding of Western culture and
  business practice
• limited English language skills
• pre-WWII reputation for shoddy goods
• distance from major markets
• lack of political economic autonomy
• shortages of capital technology

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Major Turning Points and Development Phases
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Phase 1 Starts in late 19th C.

• Meiji Restoration (1868)
• decision to westernize
• response to treaties with West
• beginning of developmental state
• study of foreign technology
• experimented with direct state operation
• state-private collaboration (zaibatsu)

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Phase 2 late 1940s--early 1970s/very rapid growth

• begins with serious economic difficulties
• role of Korean War--special procurement --1950-55
• pumped 2.4 to 3.6B into economy
• accounted for 60-70 of all exports
• espec. textiles, steel, auto equipment
• role of broader American support
• catch-up essentially is completed at about the
  end of Fordist postwar period of rapid global
  economic growth

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Phase 3 1973--mid 1980s

• slower growth and structural transformation
• shift in economic goals
• impact of oil crisis influenced by
• many Japanese industries were young with new
  equipment
• Japanese industries mobilized technology to
  reduce costs
• both capital and labor sacrifice
• deficit---gtdepreciation of yen--gt exports

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Phase 4 Endaka

• major revaluation of yen relative to dollar--60
  appreciation in 10 months (mid 1985-mid 1986)
• economic growth has slowed substantially,
  especially since 1991
• 1990s performance problems were triggered by
  bursting of bubble economy
• debate re. how to re-start

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Key Issue What accounts for Japans economic
success???

• Kinds of explanations
• single factor explanations
• synthetic (multifactor) perspectives

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Bureaucratic Regulation (strong state) Perspective

• best known example
• Chalmers Johnson, 1982. MITI and the Japanese
  Miracle. Look in Ravenhill, Japan, volume 1.

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Thesis

• Japanese government played a significant role as
  a developmental state
• MITI (Ministry of International Trade and
  Industry) 1949.
• development of infrastructure
• identified and nourished targeted industries
• Emphasis on capital and technology intensive
  industries

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Techniques used to promote targeted industries

• allocation of scarce foreign currency
• direct subsidies
• granting of licenses for foreign technology
• accelerated investment depreciation
• protection of domestic market via tariffs and
  NTBs
• encouraging or approving cooperative behavior
  (cartels) to reduce competition

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Computer Industry example(1960-1975)

• 1. Protectionism
• tariffs--25 in 1960
• import quotas--need a license
• Why do you need a foreign computer?
• by 1982 56 of all computers were Japanese (91
  in govt institutions)
• protectionism and foreign technology
• the case of IBM

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2. Financial assistance

• direct governmental financial assistance
• 1961 thru 1969 subsidies and tax benefits
  equalled 46 of total private sector investment
  -- plus loans
• Japanese Electronic Computer Company
• solves the rental problem
• fraction rented grew 4 in 1960, 46 1962, 78
  1965

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3. Cooperative research projects

• used especially following IBM announcement of a
  new computer model

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Why did the strategy work???

• not a strategy favored by Western
  economists--misallocation of resources
• were structured in ways that maintained market
  competition--on the whole
• did not create one-firm industries like Frances
  national champions
• was a catch-up phase of development
• a period of expanding global markets