Page 169 - Global Political Economy_Understanding The International Economic Order

CHA PTER S EVEN
danren (the organization representing Japanese big business) or the
Federation of German Industries. Both the Japanese and German or-
ganizations can speak with a single strong voice and frequently do
act on behalf of major business interests.
A fundamentally different conception of the corporation and its
role in society underlies many of these contrasts between shareholder
(stockholder) American capitalism and Japanese/German stakeholder
capitalism. In the American system of shareholder capitalism, a firm’s
fundamental purpose is to make profits for its investors or sharehold-
ers; in principle, the firm has minimal obligations to employees and/
or to the communities in which its production facilities are located.
Moreover, in the United States, a business corporation is regarded as
a commodity that is bought and sold like any other commodity with-
out regard for the social consequences of such transactions; waves of
leveraged buyouts and corporate takeovers in the 1980s and 1990s
were extreme examples of this mentality. In both Japan and Ger-
many, on the other hand, the corporation is assumed to have a major
responsibility toward its stakeholders (workers, subcontractors, etc.),
and the interests of shareholders are given much less attention than
in the American system; instead, firms are expected to promote larger
social objectives. Japanese firms are expected to increase the power
and independence of the Japanese nation and to promote social
harmony; Germany also places a high premium on social welfare.
American law is designed to ensure neutrality and fair play in the
competitive market for corporate control. In Japan and Germany,
profitability has been assigned less importance than economic stabil-
ity. Moreover, German and Japanese policies are intended to limit
hostile and foreign takeovers, and to control what Carl Kester has
called “the global contest for corporate control.” 10

The Japanese System of Developmental Capitalism

G. C. Allen, the distinguished British authority on Japanese economic
history, tells a story that provides an important insight into Japanese
economic psychology. At the end of World War II, American occupa-
tion officials advised the Japanese that they should follow the theory
of comparative advantage and hence concentrate on labor-intensive
products in rebuilding their economy. Japan’s economic and political
elite, however, had quite different ideas and would have nothing to

10
W. Carl Kester, Japanese Takeovers: The Global Contest for Corporate Control
(Boston: Harvard Business School Press, 1991).
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