Japan Remodeled: How Government and Industry Are Reforming Japanese Capitalism

Abstract

In the second half of the 20th century, Japan developed a distinctive model for an industrialized economy. Its key features were a powerful guiding bureaucracy, close government–industry ties, the main bank system, lifetime employment and dense networks linking firms. By the 1980s, the model was well known and much admired on a world scale. The prolonged recession of the 1990s deflated that admiration both inside and outside the country. A triumphalist US pressured Japan to move towards its own model of industrial capitalism characterized by liberal markets and limited government intervention. Foreign managers were imported into Japan, bringing this mindset with them, and advocates of reform sprung up in Japan itself. In Steven Vogel's view, Japanese bureaucrats and businessmen ‘seized on reform as a sort of fashion’. The question Vogel asks in this book is how far has Japan moved towards a US model as a result? Vogel's approach is a complex blend of new institutional economics, the ‘varieties of capitalism’ approach to comparative economic systems and economic sociology at the firm level. He hypothesizes that policymakers and businessmen evaluate potential innovations through three different levels of testing. First, there is the simple cost–benefit calculation of whether the innovation works and whether the results delivered are positive. Second, there is a question of what impact any innovation has on key institutions; in other words, what is its long-term impact on the system. Third, there is the issue of what impact any innovation has on the broader society in light of that society's preferences. In the Japanese case, this means the impact on the society's high valuation of harmony and relative social equality. Vogel argues that US-model reforms in government and corporate practice have been subjected to this triple filter, and examines how they have fared through analysis of policymaking and case studies at the firm level.