Page 176 - Global Political Economy_Understanding The International Economic Order

SYS TEMS O F POLI TICAL ECONO MY
experience to indicate whether Japan would have been more or less
successful without government intervention. 24 Certainly, as critics
charge, MITI made many mistakes and wasted resources. Yet several
comments can be made in support of Japan’s industrial policy. The
government’s support and protection of private firms in favored in-
dustrial sectors has been central to Japan’s industrial policy. MITI
and other Japanese economic bureaucracies’ supportive policies were
very important in enabling Japanese firms to close the technological
gapwith American and other Western high-tech industries. For exam-
ple, Japanese competition (antitrust) policy encouraged the formation
of the keiretsu, and by almost all accounts the keiretsu have been very
important to Japan’s industrial efficiency and international competi-
tiveness.
In the early postwar years, the Japanese government selected a
small number of powerful firms to be protected from both domestic
and, especially, foreign competition; these protected firms were given
25
tax credits and subsidies that enabled them to developrapidly. The
government also supported technological developments through pro-
motion of cooperative research programs and other means. Once the
technology was fully developed, the government strongly encouraged
domestic (but not foreign) competition to increase the firms’ effi-
ciency. This government support encouraged corporate strategies that
emphasized profit-making at home and increased market share
abroad. It is a mistake to assume, as some neoclassical economists
do, that one can make a clear distinction between government policy
and private initiatives in Japan.
The extensive use of “infant industry” protection has provided an-
other key factor in the success produced by Japan’s industrial policy. 26
Although it is undoubtedly correct, as American economists argue,
that Japan and other governments have been largely unsuccessful in
picking winners—that is, in selecting viable new industries—Japan
has been very successful in protecting and supporting those sectors
whose economic significance has been proved already in the United
24
This point is made by Ryutaro Komiya, “Planning in Japan,” in Morris Bornstein,
ed., Economic Planning: East and West (Cambridge, Mass.: Ballinger, 1975). More-
over, as Komiya, one of Japan’s most distinguished postwar international economists,
points out elsewhere, Japan’s industrial policy and its goals have changed considerably
over the course of the postwar era: Komiya, “Industrial Policy in Japan,” Japanese
Economics Studies (summer 1986): 53–80.
25
Ryuzo Sato, Rama Ramachandran, and Shunichi Tsutsui, “Protectionism and
Growth of Japanese Competitiveness,” in Dominick Salvatore, ed., Protectionism and
World Welfare (New York: Cambridge University Press, 1993), Chapter 13.
26
Ito, The Japanese Economy.
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