ECO100Y1 Lecture : Innovation in the US
March 3, 2009
Current news: Japan has lost 46% of its export level, China lost 44% level, personal saving from 2005-
2008, household saving was 3% most recently, the tax cut was not used on consumption, more on
paying mortgage, bills.
Issues between Japan and US will surface between china and US
-Economic disaster allow industries to return in a stronger position
-US needs a new industrial policy, govt working with industry, changing some of the anti-trust rules, govt
supported R&D
-In 2 years, there will be demand for new cars, the cars currently have better life than before
Thurow-Similar to Pretowitz, the US economic system is vastly diff. from Japanese system, the individual
capitalism, that maximized consumer satisfaction and firm profits, In japan, the Industry was more
important, produced a bigger share of world market was primary goal of Japan.
-US should develop a new strategy, govt should be involved, should help rather than just watch
-the difference between communitarian and individualistic capitalism is profit maximization, strategic
conquest(economic power), gain additional market share in the world
-the importance of low wage bills for industry in Japan-keep labor cost down, concerned with employee,
management works with employee in Japan
-no union power in Japan, according to Thurow, household saving in Japan is about 3 times more than
the states, reason for high saving rate is high prices for housing
-Japanese make a lower rate of profit on the product market, do anything to gain market share, cut
costs to gain market penetration, this would not happen in US, US has impatient attitude for returns,
need to make money in 3-5 years
-US firms often leave the market rather than fight, radios, stereos, color t.v., US firms back off from
Japan
-most important thing for US senior executive needs to secure their promised rate of return, stock in
trouble, upset shareholders, management can get thrown out, management has to maintain profits,
could be reason that firms were moving away from pure research, and moving more towards product
and process improvement
-Computer contract to operate a water distribution system in Hiroshima, IBM vs Fujitsu, Fujitsu won the
contract with 1 Yen
-financial keiretsu is a big part of the lower rate of profit acceptable to Jap. Industry
-}uv]}v(}K[]vh^Á&K[(}u}µv]vg, their average compensation was 119 times
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-US govt provides very little R&D to private sector, social rate of return on R&D can be high, MITI
provides powerful financing for R&D
-Profit maximize should win in the long run against empire builder, but SR, Japan and Germany will win
Ch. 5-Thurow READ
www.notesolution.com
-US believes it does not need a new economic strategy, the American thinking is that other countries can
catch up in research in tech., but their progress will be stalled, what are the characteristics of the 21st
century industry, where the best manager, labor is
-International benchmarking believes US has had subpar productivity growth for 2 decades, more
investment, more education, better strategies
-Age of diminished expectations-showed importance of labor productivity
-The question is how does America force itself to do what it knows needs to be done
-Investment lead to productivity growth and modernization, US needs to consume less, savings went
down too low, the tax system should encourage savings
-real issue in US is private and public investment VS consumption
-US believes low wages will solve all problems, outsource, outsourced chips, but quality of chips were
not good, Thurow says wrong to outsource
-If going to develop a product in a industrial country, need to invest, higher labor productivity, higher
wages, low labor productivity, lower wages
-Education in the US is a problem, and the emphasis is not in high school dropouts, but the standards of
those that pass
-Anti-trust laws do not allow rivals to discuss anything, new tech, new products, MITI encouraged rivals
to discuss, and also forced rivals to share
-US needs entrepreneur to drive new innovation
-the present us laws is the equivalent of shooting oneself in the foot
-US system is not working, should make adjustments, let govt become involved
-Japan and Germany are known for teamwork, nowhere in US are there arguments for teamwork, there
are praise for individuals
-Shift from consumption to investment, opportunity cost of doing nothing in the US is high, should not
depend on Foreign inputs for computer chips
Bergsten and Noland-Reading 9.2
-Japan wants to protect home market but want international open
-ZP}(Z}ouUh^'W]]]vPU:vZ]µo]vôõv[õìUh^v}
reduce federal deficit, in Japan, Federal deficit is negative
-savings and investment habits of US and Japan are converging, Japan still maintains domestic
production increases and adding employment
-what is the unique form of capitalism in Japan, differences include: labor management
relationships(working together in Japan), Govt industry relationships (govt stays back unless military in
US, MITI in Japan), the Keiretsu system of distribution, companies develop their own retail stores in
Japan for their own products (US has open system), Stock has to meet prediction of investors in US ,
Japan has LR patient investment, where initial rate of return may be low, US has expectation of returns
in 3-5 yrs
-lifetime labor contracts in Japan vs high labor turnover in US
-infant industry targeting by MITI vs private sector openness, investment for new industries in US with
no govt protection
www.notesolution.com
Document Summary
Current news: japan has lost 46% of its export level, china lost 44% level, personal saving from 2005- 2008, household saving was 3% most recently, the tax cut was not used on consumption, more on paying mortgage, bills. Issues between japan and us will surface between china and us. Economic disaster allow industries to return in a stronger position. Us needs a new industrial policy, govt working with industry, changing some of the anti-trust rules, govt supported r&d. In 2 years, there will be demand for new cars, the cars currently have better life than before. Us should develop a new strategy, govt should be involved, should help rather than just watch. The difference between communitarian and individualistic capitalism is profit maximization, strategic conquest(economic power), gain additional market share in the world. The importance of low wage bills for industry in japan-keep labor cost down, concerned with employee, management works with employee in japan.
