Class Notes (839,191)
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POLS 3470 (45)
Tim Mau (45)
Lecture 3

pols 3470 week 3 notes.docx

6 Pages

Political Science
Course Code
POLS 3470
Tim Mau

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Week 3 notes Japan  Post war economic miracle – poverty to economic powerhouse  Modern state – partnership with business o Pre-war  Zaibatsu – small number of very larger enterprises  Broken up after war o Post war  Reality is that system largely remained  Large firms clustered around banks (horizontal kereitsu) eg. Mitshibishi  Vertical kereitsu – suppliers  Small/medium sized forms provided components Japan – Movie - high savings - 1980s unsustainable trade with rest of world - US pressured to reduce trade surplus - stock market and property inflated - massive inflation - low interest rates - encouraged to buy America bonds - spending > saving - not enough investment opportunities to absorb all the money - spilled over into international markets - car manufacturers spent billions in US and UK - 1989 – inflation over, unmanageable, slowed down, interest rates went up, stock market fell 60%, property market fell – deflation on economy - bubble burst - lots of corruption discovered – public tolerance falling - ‘spend your way out of recession’ - shift in values - saving opposed to consumption  BUREAUCRACY  RECRUITMENT FROM KEY UNIVERSITIES  PRESTIGIOUS CAREER  POWERFUL – MADE MOST POLICY  Main rival – military  Recruitment came from key universities  Intense pressure to get into the best post-secondary schools  Most prestigious career possible  Bureaucrats expected to make most of policy decisions  DOMINANCE OF LIBERAL DEMOCRATIC PARTY (LDP) o Consevative o Farmers – overrepresented Week 3 notes o Business and above average income citizens o Pork below politics – rewarded for loyalty – financial benefits o A lot of $ spent on infrastructure projects o Received subsidies o State and business want economic growth o Politicians want office and perks of being in power ERAS OF JAPANESE DEVELOPMENTAL STATE  GOVERNMENT DOMINATION (1955-1970) o Post-war o Power of industry o Close relationship between stat capital and manufacturing o GOVERNMENT WIELDED GREAT POWER o MAJOR SOURCE OF CAPITAL o PRIORITIES ESTABLISHED BY MINISTRY OF INTERNATIONAL TRADE & INDUSTRY (MITI) AND DEPARTMENT OF FINANCE o Took profits earned and put back into growth and expansion o Save money – invest in corporations o PROMOTED COMPETITION, NOT ‘NATIONAL CHAMPIONS’ o Import – had to get certificate of approval (MITI) o Not a lot of conflict o MITI plans were market conforming o EXPORT-LED GROWTH o Focus on export o Good quality and fair price o Innovation and competitiveness o Ministry of Finance o VALUE OF YEN KEPT LOW o Unequal trading with US – tolerated because US wanted to maintain relationship because of threat of Soviet Union o US TOLERATED UNEQUAL TRADE RELATIONSHIP MORE EQUAL PARTNERSHIP (1970s & 1980s) o CHANGED CIRCUMSTANCES – JAPANESE ECONOMIC SUCCESS & ECONOMIC DOWNTURN o ADOPTION OF GATT o MITI STILL IMPORTANT – BUT SOME DEFIANCE, E.G., HONDA o ESTABLISHED OVERSEAS FACTORIES o Auto plants in North America and Europe - Britain o OVERALL LESS GOVERNMENT INFLUENCE DOWNFALL OF DEVELOPMENTAL STATE (POST-1990s) o GOVERNMENT INFLUENCE CONTINUED TO DECLINE o INFLUENCE OF GATT & WTO o Increased pressure to join o IRRESPONSIBLE CAPITALISM EMERGED Week 3 notes o LOSS OF CONFIDENCE IN BUREAUCRACY o LDP LOST POWER o Bureaucracy influence less on policy decisions o Manufacturers and banks expansion so large beyond control of MITI o Lack of rules for company transparency o Irresponsible capitalism – unsound investments, irresponsible loans o Senior bureaucracy – public criticisms of corrupt o Electoral politics more prominent o MITI LOST STATUS o Collapse of old order o Remained METI o Strengthen power of ministers and PM over bureaucracy o Japan no longer economic growth machine o GDP shrinking o Became victim of own success o France and Japan less able to steer and direct own economies o Likely to never emerge again o More globalized NEW JAPANESE MODEL o LOOKED TO THE US MODEL – GLOBALIZATION, DEREGULATION, PRIVATIZATION o Pressure on business to transform model o Focus on flexibility, core competence, and shareholder value o NEVER FULLY EMBRACED LIBERAL MARKET SYSTEM THOUGH o More selective and adaptive approach o Pointed foreign to board of directors – needed outside voices o 2 phases of reform o SELECTIVE ADJUSTMENTS USING 3 CIRCLES OF RATIONALITY: o PURE COST BENEFIT ANALYSIS  Calculate cost of relationship with current bank  Consider foreign (US) banks if cost is lower o ADD INSTITUTIONAL COSTS & BENEFITS  Other factors in e
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