SOCI 235 Lecture Notes - Lecture 18: Financial Institution, Government Procurement, Human Capital
8 Jun 2018
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Department
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Professor
SOCI 235 – Technology and Society
Institutions, Product Organization, and the Use of Technology
The Japanese Factory & the assumptions of economic policy
Japan had a spectacular early postwar economic performance
• They were among the 16 richest OECD countries
• Ranked GDP per capita was 16th in 1950, 13th in 1973, and then 4th in 1990
o Great increase
What explains this success?
• General process of catch up – countries with poorer technologies and less skilled labour
forces adopted the technologies of richer countries at the same time raising their
educational standards
• But Japan seemed to have over performed
• Argued that they had institutions and policies that were different and better than those
of countries like the US and Canada
• One argument is cultural – Aeggle’s stud as a esio of this sot of aguet that
was picked up and modified by others
Aeggle’s Stud
• Visited Japanese factories after their defeat in WW2
• Defeat brought US occupation and administration to Japanese factories
• Japanese government was compelled to adopt very conservative economic policies
o It had to reduce government debt
o Subsidies to industries were reduced
o The right to strike in the public sector was withdrawn
o Support was given to the dismissal of union militants
• All of this meant → 1. Eooi oditios ee e diffiult, ad . Uios ee’t
much of a problem to management
• In this study:
o There was a lifetime commitment to an employment relationship on the parts of
both employers and employees
o There was hiring on the basis of educational qualification not necessarily into
jobs that required significant amounts of education - employees were recruited
straight from school, with different schooling levels associated with different job
levels
o Pay was determined like this →
▪ 30% was tied to age and education at time of hiring
▪ series of allowances related to family size, age, and attendance
• this produced a pay structure that was steeply graded by
experience
find more resources at oneclass.com
find more resources at oneclass.com
o Excess of supervisory positions existed – people were promoted to supervisory
positions as a reward
o Very heavy social integration into the firm, leisure activities were organized by
the firm
• He qualified this description
o Temporary employees were used for up to 10% of the workforce
o Extensive use of subcontracting
o Outside the sorts of factories, most Japanese workforce was not covered by the
lifetime commitment model – only 25-33% of it was covered
• But the question is → Was this production organization efficient?
o His answer – NO for various reasons:
▪ Lifetie oitet eat that size of laou foe ould’t e
adopted during a downturn – so $ that could have been used to fund
investment was cosued the salaies of people ho ee’t
generating revenue
▪ This excess labour retained meant the incentive to use labor intensive
production techniques was reduced – which slowed technological
innovation
▪ Hiring the most talented straight from school meant that job demands
ad eploee apailities did’t ath
• People ith lots of talet oupied jos that did’t dead those
talents
▪ Tying pay to seniority and family responsibilities reduces the incentive to
work hard – especially where the risk of dismissal is low
• Abegglen argued →
o US employers were efficient because:
▪ They adjusted employment to the need for work
▪ Were fast to introduce labour saving techniques
▪ Matched talents to job demands
▪ Used incentive pay more aggressively
o Japanese production organization was less efficient but matched production
organization to cultural demands
▪ It was an example for 3rd world countries, but not for the US
• BUT – Japanese economic performance was SPECTACULAR
o Podutio ogaizatio does’t look so ieffiiet
o Each expansion – provides a distinction between static efficiency and dynamic
efficiency
▪ Fiig people he ou do’t ko the – can lead to defensive
behaviour, unwillingness to cooperate in the pursuit of productivity
improvements which tend to eliminate jobs
▪ Hiring people with modest talents to go into jobs that require modest
talents demotivates those hired and puts people into jobs who are
unlikely to be able to figure out better ways of doing the job
find more resources at oneclass.com
find more resources at oneclass.com
▪ Paying people with piece rates can lead to problems where there is rapid
technological change, because the rates require continual renegotiation
and resetting
• This product organization might be statically inefficient, but dynamically efficient
o It provides an environment conducive to technological innovation
o This a help eplai Japa’s spetaula eal posta eooi suess
Other fators that otriuted to Japa’s suess whih are ore osistet with the stati
efficiency model
1. 1940s and 50s – Japan had the advantage of low wages in industries like textiles and
shipbuilding
2. 50s and 60s – Japan developed scale economies in shipbuilding and steel, among other
things
3. 70s – focused manufacturing, which limited the # of product lines in industries like
vehicle manufacturing
a. In several industries at beginning of the 1970s, it was difficult for them because
the relatively small size of the domestic market meant there was only limited
economies of scale
b. Japanese firms then focused on market niches and on parts of the product range
where the market demand was greatest and access to customers was the easiest
4. 80s – just in time manufacturing alloed oadeig of #’s of podut lies
a. Made greater product variety feasible
b. Broader range of products requires more component inventory
c. Holding inventory is costly
d. To reduce inventory, the Japanese firms and manufacturers established a
method to trigger component orders promptly and repeatedly and had suppliers
deliver components promptly and frequently
e. To reduce downtime – increase in defects associated with product switches –
extra tools were put at production line work stations
f. Multi-machine manning used labour more intensely, so production lines were
configured to allow workers to perform more than one operation at a time
5. It was possible to organize production in ways that demanded effort from employees
that would be hard to match in the West
Trade Policy in Japan
Principle of comparative advantage → Western approaches to trade policy tend to be framed
by this principle
• States that – countries are better off if they specialize in what they do best then trade
• Countries are better off if they specialize in what they do best, rather than trying to
conquer more things
• Anything that moves a country away from production is against the interests of the
population of that country
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Institutions, product organization, and the use of technology. The japanese factory & the assumptions of economic policy. Japan had a spectacular early postwar economic performance: they were among the 16 richest oecd countries, ranked gdp per capita was 16th in 1950, 13th in 1973, and then 4th in 1990, great increase. A(cid:271)eggle(cid:374)"s stud(cid:455: visited japanese factories after their defeat in ww2, defeat brought us occupation and administration to japanese factories. Japanese government was compelled to adopt very conservative economic policies. It had to reduce government debt: subsidies to industries were reduced, the right to strike in the public sector was withdrawn, support was given to the dismissal of union militants, all of this meant 1. U(cid:374)io(cid:374)s (cid:449)e(cid:396)e(cid:374)"t much of a problem to management. It provides an environment conducive to technological innovation: this (cid:272)a(cid:374) help e(cid:454)plai(cid:374) japa(cid:374)"s spe(cid:272)ta(cid:272)ula(cid:396) ea(cid:396)l(cid:455) post(cid:449)a(cid:396) e(cid:272)o(cid:374)o(cid:373)i(cid:272) su(cid:272)(cid:272)ess.
