|
applet-magic.com Thayer Watkins Silicon Valley & Tornado Alley USA |
|---|
|
|
Shigeto Tsuru in his Japan's Capitalism: Creative Defeat and Beyond provides an analysis of the sources of changes in production as a guide to interpreting the historical record of production and resource utilization in Japan.
A comparison of the sources of U.S. and Japan's economic growth:
|
RATE OF GROWTH OF OUTPUT DUE TO: |
||||
| COUNTRY | PERIOD | LABOR FORCE |
CAPITAL DEEPENING | TECHNICAL CHANGE |
| U.S. | 1900-1986 | 2.1% | 0.25% | 1.85% |
| JAPAN | 1970-1989 | 0.3% | 2.9% | 1.5% |
U.S. growth 1900-1986
4.2% = annual average rate of growth of output
%Q = (3/4)(2.8) + (1/4)(1) + 1.85
= 2.1 + 0.25 + 1.85 = 4.2
Japan 1970-1989
4.8% = annual average rate of growth of output
%Q = (3/4)(0.4) + (1/4)(11.6) + 1.5
= 0.3 + 2.9 + 1.5 = 4.7 (difference due to independent rounding)
Shigeto Tsuru notes that the end of the war brought about a net increase in the population and labor force in Japan. The civilian labor force in Japan itself increased by 7.1 million due to demobilization, 2.6 million due to repatriation, 1.6 million due to release of workers from the armaments industries in Japan. Also there may have been an increase in capital devoted to civilian production. However, the dissolution of the zaibatsu (financial cliques) and banning of those associated with the wartime regime may have reduced the availability of managerial and entrepreneurial talent. The intended dismantling of productive capacity would have severely reduced the stock of capital.
Edwin Pauley called for a "program of removals" of substantial shares of Japanese plant capacity in the manufacture of machine tools, aircraft, bearings, ships, steel, sulfuric acid, magnesium, aluminum. In addition he called for the confiscation of any assets owned outside of Japan by the Japanese Government, the Empereor or the zaibatsu. All gold was to be shipped out of Japan to San Francisco. Pauley's recommedations were not implemented because it was realized that they would severely cripple the Japanese economy and result in a burden on American taxpayers to cover the necessities of life for the Japanese people.
This commission called for the dissolution of 325 firms.
Ladejinsky recommended the purchase of land from absentee landowners and its sale to tenant farmers. The payment to the landowners would be in bonds with 3.6% interest redemable in 30 years plus a cash bonus.
The Japanese legislators did not produce a draft constitution acceptable to Douglas MacArthur and he ordered a committee of SCAP to prepare a draft constitution in about one week. Many of the staff members who prepared the draft were ardent New Dealers and the content of the constitution they drafted reflects this orientation. MacArthur himself inserted the clause renouncing the use of military force by Japan even in the case of self-defense. The draft was forced upon the legislators under the threat that if they did not pass it there would be a national referendum called for its passage.
When the U.S. became worried that Japan would fall under the control of Communists many of the policy measures previously supported, such as the role for unions, were reversed. This period was called the Era of the Reverse Course.
Initially there were 325 firms to be dissolved, but this number was reduced to 100 and then further reduced to 9, the largest and most infamous of the zaibatsu.
The Harrod-Domar Growth Model provides some insights into the mechanism of economic growth and development.
Land price did not keep up with inflation during the war years and the Occupation but shortly after the independence land began to increase in price dramatically faster than inflation. Between 1956 and 1990 land prices increased by a factor of 145 whereas wholesale prices only doubled. In 1987 the increase in the value of capital gains was 20 percent more than the GNP for that year. The Japanese government tried to curb speculation in land by imposing severe taxes on realized capital gains. For land held for less than three years the tax was even greater than the capital gain; i.e., landowners would actually lose money on the sale of the land. This had the effect of discouraging the sale of land so the turnover in land ownership was very small. This meant that the market value of land was based upon atypical transactions.
In 1987 Japan set up the JNR (Japanese National Railways) Settlement Corporation to clear up the Y25.5 trillion ($176 billion) in debts of JNR. JNR was broken up into seven companies but the shares were held by the Settlement Corporation. The Settlement Corporation also got one fifth of the land of JNR, worth at that time Y7.7 trillion. The value of the land has now fallen to Y4 trillion. Only two of the companies have been privatized, JN East (serving Tokyo and the North) and JN West (serving Osaka and the South). The Settlement Corporation retained one third of the shares of both JN East and JN West.
| Date | Amount $Billions | Description |
|---|---|---|
| Aug 92 | 98.2 | Public works, housing loans |
| Apr 93 | 121.1 | Public housing and infrastructure |
| Sept 93 | 56.9 | Deregulation of the corporate bond market |
| Feb 94 | 140.4 | Direct spending (64%) tax cuts (36%) |
| Apr 95 | 44.1 | Issuance of general revenue bonds |
| Sept 95 | 130.3 | Public works (Kobe earthquake reconstruction) (90%) Deregulation (10%) |
The two Japans of the title are:
Murphy makes an interesting contrast between the West Wing of the White House in Washington, D.C. and the Ministry of Finance (MOF) in Tokyo.
Murphy say that the MOF officials do not see themselves as all-powerful but consider themselves as an elite responsible for the fiscal integrity of Japan. This means that they have to protect this integrity from "rapacious politicians, a selfish ignorant electorate, and the pleaders of special interests at the other ministries." (p. 31) He says that the MOF treats the banks, brokers and insurances companies as their charges "who, if left to their own devices, would quickly destroy themselves and the country." (p. 31)
An example of what the Japanese themselves refer to as the "arrogance problem" and the Western refers to as hubris.
Sometime about 1989 Masaaki Kurokawa became head of Nomura Securities International, the New York-based subsidiary of Nomura Securities of Japan. Shortly afterward Kurokawa was entertaining American guests at an expensive restaurant on the fiftieth floor of a building owned by Nomura in Tokyo. He gave an after dinner speech. He opened with the statement that, "We Japanese will have to come up with much bolder ideas to play our role properly in the world." He then outlined a plan for Japan helping the United States solve its trade deficit problem. At that time the dollar was trading for 140 yen. Kurokawa called for a weakening of the dollar to 100 yen. At that exchange rate Japanese industry would find it difficult to compete with American industry. U.S. domestic industry would not be threatened by Japanese imports. Next, according to Kurokawa's plan a joint currency would be created. This would allow Japan to invest freely in the U.S. economy without worrying that unwise American fiscal policy would weaken the value of the dollar and decrease the yen-value of Japanese investments in the U.S. As to the question of what Japan would get in return for this help Kurokawa answered with one word: "California!"
California would be turned into a joint U.S.-Japan economic community shared by both countries. No visas would be required for Japanese citizens to come and go. Japan would export several million Japanese workers to California to take advantage of cheap California real estate.
"Rarely has a country fallen so far so fast as Japan in the past five years. What went wrong?"
In 1991 Japan could look back on three decades of growth at an average rate of 6.5 percent. In the 1980's Japan dominated consumer electronics, semiconductors, automobiles and Japanese companies were buying up American properties at an alarming rate. But the past five years have been ones of economic gloom and the solution is elusive. Nissan's auto sales have fallen 22 percent and it has closed factories. Property values have fallen 50 percent and resulted in bad loan losses for Japanese banks of as much as $1 trillion. Homebuyers on around 1990 are burdened with properties that are worth half of what they paid for them.
Japanese companies are suffering and not investing, at least not in Japan. The new factories are going to Malaysia and Thailand. This is called kudoka, the hollowing out of the Japanese economy.
Only about 20 percent of Japanese workers, those working for the blue chip companies, have so-called lifetime employmemt. The other 80 percent are subject to layoffs. Even among the blue chip companies the downtown has affected the employment picture.
These companies are not filling vacanies and sometimes employees are pressured to leave voluntarily by humiliating pay cuts or rediculous job assignments. This is called kata tataki, the tap on the shoulder.
Unemployment is now up and new university graduates are facing what is called the "super ice-age of employment." The unemployment rate is expected to double. Japanese unemployment rates have been generally low, partly because of the way unemployment is defined in Japan.
The economic malaise is paralleled by a social deterioration in Japan involving higher crime rates and corruption of the government.
Japan had domestic producers of industrial sewing machines but the comsumer sewing machine market was was held by Singer sewing machines imported from the U.S. Conditions in post-war Japan were conducive to the creation of a domestic and export sewing machine industry:
Singer filed suit against some of the Japanese sewing machine companies for infringement of the Singer patent and the use of the Singer name (Seager), but also pursued the creation of a joint venture, the Pine Machine, with a subsidiary of Nippon Steel. The Japanese government did not give approval to the joint venture Pine Machine until the other domestic sewing machine companies were strong enough to withstand the competition.
It was difficult for the Japanese sewing machine manufacturers to break into the European markets because Europe applied the same sort of protective tariffs that Japan used to keep out competition. However Japan solicited the aid of European machine tool manufacturers because an expansion of sewing machine manufacture in Japan would increase the demand for European machine tools. The Japanese sewing machine companies got big orders from German sewing machine companies by showing them that Japan was manufacturing parts for their arch-rival Singer.
Sewing machine manufacture was just about the first major export industry developed by Japan after World War II.
|
HOME PAGE OF Thayer Watkins |