Japan: Class 2

Criticism of Strong State perspective n MITI did not consistently identify the right “sunrise” industries n MITI sometimes tried to discourage firms who ended up doing very well despite their lack of support

My perspective. Government activity leveraged productivity and competitiveness upward by: n guaranteeing ample supplies of low cost raw materials n made funds available on favorable terms n aggregated savings of small savers via postal service which raised overall savings rate n such effects are not easy to validate empirically

Perspective 2: Market Regulation Thesis n Market forces represent the key. Producers were appropriately disciplined by the market –strong domestic competition –competition for foreign markets n Why were Japanese producers more able to flourish in a competitive economic environment???

Important component: a labor exploitation thesis n Toyotism viewed simply as “hyper- Fordism” with an intense work pace. n made possible by disorganization and powerlessness of Japanese workers relative to workers in North America or Western Europe

Evidence of labor exploitation n 6 day work week and longest work year in industrialized world –500 more hours per year than French and Germans + so-called service work, work taken home –typical Toyota worker is away from home hours per day 30% work more than 5 extra days per month

How/when did Japanese capital get the upper hand?

Weaknesses of perspectives 1 and 2 n Very little attention paid to the actual organization of production which characterizes Japanese industry

3. David Friedman, The Misunderstood Miracle n Observes: The structure of Japanese manufacturing industries diverged from U.S. in two key ways: –smaller firms played larger role 60% of value added; U.S. 35% –adopted a different competitive strategy more emphasis of product differentiation and modification n Concludes: These are symptoms of Flexible Production Systems

Competitive advantages to adoption of Flexible Production n took away American scale economy advantage n can launch new products faster n creates demand for unique goods, particularly for production n adjust better to demand cycles n gives gains in product quality

Alternative perspective on role of small firms n evidence of existence of a dual economy n small producers largely perform a shock absorber function; absorb costs of economic fluctuations n lower wages, no lifetime employment

Friedman’s rebuttal n Impacts of recessions on size classes of firms n wage structure by size class of firms n self-employment option n profit rates by size class of firms

Donna Doane, Cooperation, Technology and Japanese Development. n THESIS: Unusual feature of Japanese development. They solved the economic dualism problem n significance of this problem n Japan shows strong ties between large- scale modern sector and small-scale semi-traditional sector from early 20th C

Historical interpretation n ties were originally exploitative n but they pulled up technological abilities n over time ties changed. From hierarchical and short-term to more egalitarian and longer-term n by 1960s true joint research is possible n types of ties: subcontracting

Role of the Public Sector n education confers skills n promotion of subcontracting through military arsenals etc. n efectively force small firms to affiliate by giving large firms preferential access to capital, imported technologies etc.