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Japan grew explosively and consistently for more than a century, from the Meiji Restoration until the collapse of the economic bubble in the early 1990s. Since then, it has been unable to restart its economic engine and respond to globalization. How could the same political–economic system produce such strongly contrasting outcomes?
This book identifies the crucial variables as classic Japanese forms of socio-political organization: the "circles of compensation." These cooperative groupings of economic, political, and bureaucratic interests dictate corporate and individual responses to such…mehr
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Japan grew explosively and consistently for more than a century, from the Meiji Restoration until the collapse of the economic bubble in the early 1990s. Since then, it has been unable to restart its economic engine and respond to globalization. How could the same political–economic system produce such strongly contrasting outcomes?
This book identifies the crucial variables as classic Japanese forms of socio-political organization: the "circles of compensation." These cooperative groupings of economic, political, and bureaucratic interests dictate corporate and individual responses to such critical issues as investment and innovation; at the micro level, they explain why individuals can be decidedly cautious on their own, yet prone to risk-taking as a collective. Kent E. Calder examines how these circles operate in seven concrete areas, from food supply to consumer electronics, and deals in special detail with the influence of Japan's changing financial system. The result is a comprehensive overview of Japan's circles of compensation as they stand today, and a road map for broadening them in the future.
This book identifies the crucial variables as classic Japanese forms of socio-political organization: the "circles of compensation." These cooperative groupings of economic, political, and bureaucratic interests dictate corporate and individual responses to such critical issues as investment and innovation; at the micro level, they explain why individuals can be decidedly cautious on their own, yet prone to risk-taking as a collective. Kent E. Calder examines how these circles operate in seven concrete areas, from food supply to consumer electronics, and deals in special detail with the influence of Japan's changing financial system. The result is a comprehensive overview of Japan's circles of compensation as they stand today, and a road map for broadening them in the future.
Produktdetails
- Produktdetails
- Verlag: Stanford University Press
- Seitenzahl: 320
- Erscheinungstermin: 1. August 2017
- Englisch
- ISBN-13: 9781503602946
- Artikelnr.: 49941258
- Verlag: Stanford University Press
- Seitenzahl: 320
- Erscheinungstermin: 1. August 2017
- Englisch
- ISBN-13: 9781503602946
- Artikelnr.: 49941258
Kent E. Calder is Director of the Reischauer Center for East Asian Studies at SAIS/Johns Hopkins University in Washington, D.C. He previously served as Special Advisor to the U.S. Ambassador to Japan and as Japan Chair at the Center for Strategic and International Studies, and he has taught at Princeton, Harvard, and Seoul National Universities.
Introduction: Confronting the Paradox
1. Paradox and Japanese Public Policy
2. The Circles-of-Compensation Concept
3. The Political Economy of Connectedness
4. Finance
5. Land and Housing
6. Food Supply
7. Energy
8. Transportation
9. Communications
10. Japan's Domestic Circles and the Broader World
11. Models for the Future
Conclusion: Unraveling the Paradox
1. Paradox and Japanese Public Policy
2. The Circles-of-Compensation Concept
3. The Political Economy of Connectedness
4. Finance
5. Land and Housing
6. Food Supply
7. Energy
8. Transportation
9. Communications
10. Japan's Domestic Circles and the Broader World
11. Models for the Future
Conclusion: Unraveling the Paradox
Contents and Abstracts
Introduction: Confronting the Paradox
chapter abstract
This chapter begins by noting the dual challenge of newly developing
nations: achieving economic development as late developers, and assuring
order in changing societies. The chapter contends that although leaders of
developing nations, such as Sun Yat-sen and Chandra Bose, once manifested
substantial interest in the Japanese model, there has been little
systematic consideration of that approach.
1Paradox and Japanese Public Policy
chapter abstract
This chapter elaborates on the puzzles in Japanese economic performance and
public policy that suggest the need for new analytical paradigms. In the
sphere of economic performance, it is puzzling that Japanese growth was
distinctively rapid for nearly a century from the late Meiji period until
around 1990, slowed down sharply, and then failed to recover, despite
massive pump priming and technological strength. Policy puzzles include the
slow overall profile of Japan's globalization response, cross-sectoral
variance in response profiles, and inconsistencies in governmental
responses to specific connected and unconnected firms.
2The Circles-of-Compensation Concept
chapter abstract
This chapter defines "circles of compensation" as "networks of regular
participants . . . in which members have reciprocal benefits and
obligations." Such circles have five specific traits: (1) a clearly defined
set of members, (2) expansibility, (3) an iterative character, (4) a
propensity to allocate resources internally, and (5) a propensity to
externalize costs to nonmembers. After specification of the model, the
chapter proceeds to illustrate with examples from both Japanese and
international experience, including cartels, industry associations, and
agricultural cooperatives. The chapter concludes with comments on the
geographical distribution of circles, their heuristic value, and
methodological comments on case selection, to provide testable hypotheses
on the nature of circles of compensation.
3The Political Economy of Connectedness
chapter abstract
This chapter explains the progression of the empirical section of the book,
which provides concrete examples of circles of compensation in action, and
tests the central hypothesis, which is: Circles of compensation
systematically internalize reward and externalize risk, introducing a
parochial bias into both policy and corporate behavior that enhances
in-group solidarity, and reduces incentives to pursue outside initiatives,
thus inhibiting both individual and corporate responsiveness to
globalization.
4Finance
chapter abstract
This chapter describes the key institutions of Japanese domestic and
international finance, as well as their transformation over the past three
decades. It chronicles, in particular, the decline of the long-term credit
banks and the keiretsu, together with the implications of these
developments for cooperative capitalism across the Japanese political
economy. It shows how these developments have impeded innovation and
structural adjustment and contributed to stagnant growth. The revision of
Japan's Foreign Exchange and Investment Law in late 1980 also influenced
domestic incentive structures in critical ways that are described and
analyzed.
5Land and Housing
chapter abstract
This chapter shows the central role that the political economy of land has
historically played in crowded, high-growth Japan, and how land policy has
encouraged expansionary banking behavior and hence high-speed economic
growth. It also shows why the same land policies, in interaction with
cooperative capitalism in the finance area, have contributed to the
rigidity and stagnation of the Japanese political economy.
6Food Supply
chapter abstract
This chapter describes agricultural policies and institutions, stressing
the central role of public-private cooperation, and also explains the
structural relationships among agricultural policy, political stability,
and leveraged high-speed economic growth. It notes that the agriculture
policy is slowly liberalizing, but related circles of compensation
nevertheless remain salient, especially at the local level, due to
persistent human networks at the grassroots level.
7Energy
chapter abstract
This chapter shows how cooperative capitalism operates in the energy sector
to ensure stable price levels and capital investment. The analysis focuses
especially on nuclear power and how circles of compensation have promoted
nuclear power and worked to assure local acceptance, both before and after
the Fukushima nuclear accident of March 2011.
8Transportation
chapter abstract
This chapter shows how circles of compensation can impede Japan's
globalization by privileging parochial interests (heavily subsidized local
airports) at the expense of potentially competitive cosmopolitan interests
(Japan's international airlines and largest airports). The result is a
situation where neighboring Korea has become the air and sea shipping hub
for East Asia, at Japan's expense, due to perverse, inward-looking Japanese
transportation policies.
9Communications
chapter abstract
This chapter illustrates the mixed implications of circles of compensation
in a rapidly globalizing world, in two parallel dimensions-the "hard" side
of communications (telecommunications equipment) and the "soft" side
(education and mass media). In the telecommunications sector, the circles
have produced an industry focusing on increasingly specialized and arcane
applications, largely impractical outside of Japan. In education, there has
been a comparable parochial drift. In both areas, Japan is gradually
adjusting to long-term global trends, but only slowly, due to the
cushioning effect of circles of compensation.
10Japan's Domestic Circles and the Broader World
chapter abstract
This chapter addresses the impact of domestic circles of compensation on
the incentive structure of Japanese firms and policy makers as they
confront globalization. It suggests that the circles encourage them to
prioritize stability of domestic corporate relationships at the expense of
competitive response to international challenge, to the extent that those
contrasting pressures come into conflict. The argument is substantiated by
evidence from cases of Japanese firms, such as Rakuten and SoftBank, that
are not extensively involved with circles of compensation within Japan, yet
are proactive and successful abroad.
11Models for the Future
chapter abstract
This chapter documents Japan's difficulties in responding to globalization,
principally through comparison with three late-developing political
economies with broad similarities to Japan in resource endowment and
political structure, which have responded much more smoothly to
globalization than has Japan. The chapter then explores where these three
countries (Germany, South Korea, and Singapore) provide useful reference
points for Japanese policy making.
Conclusion: Unraveling the Paradox
chapter abstract
This chapter returns to the hypothesis that circles of compensation
introduce a parochial, stabilizing bias into working-level incentive
structures, inhibiting rapid response to globalization. Sector-specific
case studies and national-level data generally confirm this hypothesis.
Counterfactual foreign and Japanese cases where circles of compensation do
not prevail point to a parallel conclusion. The policy implication is that
Japan's "third arrow" structural reforms will be difficult to achieve.
Given the complexity and possibly perverse macropolitical implications of
dismantling embedded circles of compensation, this research suggests
broadening the circles through political leadership within Japan and
transnational collaboration to enhance innovative capacity. Privatization
and "third arrow" Abenomics structural reforms will likely have limited
utility, while broadening efforts such as "womanomics" and use of
pension-fund investment criteria may be more effective. Another priority
should be transnational private-sector, academic, and governmental
linkages, with centers of innovation abroad, such as Silicon Valley.
Introduction: Confronting the Paradox
chapter abstract
This chapter begins by noting the dual challenge of newly developing
nations: achieving economic development as late developers, and assuring
order in changing societies. The chapter contends that although leaders of
developing nations, such as Sun Yat-sen and Chandra Bose, once manifested
substantial interest in the Japanese model, there has been little
systematic consideration of that approach.
1Paradox and Japanese Public Policy
chapter abstract
This chapter elaborates on the puzzles in Japanese economic performance and
public policy that suggest the need for new analytical paradigms. In the
sphere of economic performance, it is puzzling that Japanese growth was
distinctively rapid for nearly a century from the late Meiji period until
around 1990, slowed down sharply, and then failed to recover, despite
massive pump priming and technological strength. Policy puzzles include the
slow overall profile of Japan's globalization response, cross-sectoral
variance in response profiles, and inconsistencies in governmental
responses to specific connected and unconnected firms.
2The Circles-of-Compensation Concept
chapter abstract
This chapter defines "circles of compensation" as "networks of regular
participants . . . in which members have reciprocal benefits and
obligations." Such circles have five specific traits: (1) a clearly defined
set of members, (2) expansibility, (3) an iterative character, (4) a
propensity to allocate resources internally, and (5) a propensity to
externalize costs to nonmembers. After specification of the model, the
chapter proceeds to illustrate with examples from both Japanese and
international experience, including cartels, industry associations, and
agricultural cooperatives. The chapter concludes with comments on the
geographical distribution of circles, their heuristic value, and
methodological comments on case selection, to provide testable hypotheses
on the nature of circles of compensation.
3The Political Economy of Connectedness
chapter abstract
This chapter explains the progression of the empirical section of the book,
which provides concrete examples of circles of compensation in action, and
tests the central hypothesis, which is: Circles of compensation
systematically internalize reward and externalize risk, introducing a
parochial bias into both policy and corporate behavior that enhances
in-group solidarity, and reduces incentives to pursue outside initiatives,
thus inhibiting both individual and corporate responsiveness to
globalization.
4Finance
chapter abstract
This chapter describes the key institutions of Japanese domestic and
international finance, as well as their transformation over the past three
decades. It chronicles, in particular, the decline of the long-term credit
banks and the keiretsu, together with the implications of these
developments for cooperative capitalism across the Japanese political
economy. It shows how these developments have impeded innovation and
structural adjustment and contributed to stagnant growth. The revision of
Japan's Foreign Exchange and Investment Law in late 1980 also influenced
domestic incentive structures in critical ways that are described and
analyzed.
5Land and Housing
chapter abstract
This chapter shows the central role that the political economy of land has
historically played in crowded, high-growth Japan, and how land policy has
encouraged expansionary banking behavior and hence high-speed economic
growth. It also shows why the same land policies, in interaction with
cooperative capitalism in the finance area, have contributed to the
rigidity and stagnation of the Japanese political economy.
6Food Supply
chapter abstract
This chapter describes agricultural policies and institutions, stressing
the central role of public-private cooperation, and also explains the
structural relationships among agricultural policy, political stability,
and leveraged high-speed economic growth. It notes that the agriculture
policy is slowly liberalizing, but related circles of compensation
nevertheless remain salient, especially at the local level, due to
persistent human networks at the grassroots level.
7Energy
chapter abstract
This chapter shows how cooperative capitalism operates in the energy sector
to ensure stable price levels and capital investment. The analysis focuses
especially on nuclear power and how circles of compensation have promoted
nuclear power and worked to assure local acceptance, both before and after
the Fukushima nuclear accident of March 2011.
8Transportation
chapter abstract
This chapter shows how circles of compensation can impede Japan's
globalization by privileging parochial interests (heavily subsidized local
airports) at the expense of potentially competitive cosmopolitan interests
(Japan's international airlines and largest airports). The result is a
situation where neighboring Korea has become the air and sea shipping hub
for East Asia, at Japan's expense, due to perverse, inward-looking Japanese
transportation policies.
9Communications
chapter abstract
This chapter illustrates the mixed implications of circles of compensation
in a rapidly globalizing world, in two parallel dimensions-the "hard" side
of communications (telecommunications equipment) and the "soft" side
(education and mass media). In the telecommunications sector, the circles
have produced an industry focusing on increasingly specialized and arcane
applications, largely impractical outside of Japan. In education, there has
been a comparable parochial drift. In both areas, Japan is gradually
adjusting to long-term global trends, but only slowly, due to the
cushioning effect of circles of compensation.
10Japan's Domestic Circles and the Broader World
chapter abstract
This chapter addresses the impact of domestic circles of compensation on
the incentive structure of Japanese firms and policy makers as they
confront globalization. It suggests that the circles encourage them to
prioritize stability of domestic corporate relationships at the expense of
competitive response to international challenge, to the extent that those
contrasting pressures come into conflict. The argument is substantiated by
evidence from cases of Japanese firms, such as Rakuten and SoftBank, that
are not extensively involved with circles of compensation within Japan, yet
are proactive and successful abroad.
11Models for the Future
chapter abstract
This chapter documents Japan's difficulties in responding to globalization,
principally through comparison with three late-developing political
economies with broad similarities to Japan in resource endowment and
political structure, which have responded much more smoothly to
globalization than has Japan. The chapter then explores where these three
countries (Germany, South Korea, and Singapore) provide useful reference
points for Japanese policy making.
Conclusion: Unraveling the Paradox
chapter abstract
This chapter returns to the hypothesis that circles of compensation
introduce a parochial, stabilizing bias into working-level incentive
structures, inhibiting rapid response to globalization. Sector-specific
case studies and national-level data generally confirm this hypothesis.
Counterfactual foreign and Japanese cases where circles of compensation do
not prevail point to a parallel conclusion. The policy implication is that
Japan's "third arrow" structural reforms will be difficult to achieve.
Given the complexity and possibly perverse macropolitical implications of
dismantling embedded circles of compensation, this research suggests
broadening the circles through political leadership within Japan and
transnational collaboration to enhance innovative capacity. Privatization
and "third arrow" Abenomics structural reforms will likely have limited
utility, while broadening efforts such as "womanomics" and use of
pension-fund investment criteria may be more effective. Another priority
should be transnational private-sector, academic, and governmental
linkages, with centers of innovation abroad, such as Silicon Valley.
Introduction: Confronting the Paradox
1. Paradox and Japanese Public Policy
2. The Circles-of-Compensation Concept
3. The Political Economy of Connectedness
4. Finance
5. Land and Housing
6. Food Supply
7. Energy
8. Transportation
9. Communications
10. Japan's Domestic Circles and the Broader World
11. Models for the Future
Conclusion: Unraveling the Paradox
1. Paradox and Japanese Public Policy
2. The Circles-of-Compensation Concept
3. The Political Economy of Connectedness
4. Finance
5. Land and Housing
6. Food Supply
7. Energy
8. Transportation
9. Communications
10. Japan's Domestic Circles and the Broader World
11. Models for the Future
Conclusion: Unraveling the Paradox
Contents and Abstracts
Introduction: Confronting the Paradox
chapter abstract
This chapter begins by noting the dual challenge of newly developing
nations: achieving economic development as late developers, and assuring
order in changing societies. The chapter contends that although leaders of
developing nations, such as Sun Yat-sen and Chandra Bose, once manifested
substantial interest in the Japanese model, there has been little
systematic consideration of that approach.
1Paradox and Japanese Public Policy
chapter abstract
This chapter elaborates on the puzzles in Japanese economic performance and
public policy that suggest the need for new analytical paradigms. In the
sphere of economic performance, it is puzzling that Japanese growth was
distinctively rapid for nearly a century from the late Meiji period until
around 1990, slowed down sharply, and then failed to recover, despite
massive pump priming and technological strength. Policy puzzles include the
slow overall profile of Japan's globalization response, cross-sectoral
variance in response profiles, and inconsistencies in governmental
responses to specific connected and unconnected firms.
2The Circles-of-Compensation Concept
chapter abstract
This chapter defines "circles of compensation" as "networks of regular
participants . . . in which members have reciprocal benefits and
obligations." Such circles have five specific traits: (1) a clearly defined
set of members, (2) expansibility, (3) an iterative character, (4) a
propensity to allocate resources internally, and (5) a propensity to
externalize costs to nonmembers. After specification of the model, the
chapter proceeds to illustrate with examples from both Japanese and
international experience, including cartels, industry associations, and
agricultural cooperatives. The chapter concludes with comments on the
geographical distribution of circles, their heuristic value, and
methodological comments on case selection, to provide testable hypotheses
on the nature of circles of compensation.
3The Political Economy of Connectedness
chapter abstract
This chapter explains the progression of the empirical section of the book,
which provides concrete examples of circles of compensation in action, and
tests the central hypothesis, which is: Circles of compensation
systematically internalize reward and externalize risk, introducing a
parochial bias into both policy and corporate behavior that enhances
in-group solidarity, and reduces incentives to pursue outside initiatives,
thus inhibiting both individual and corporate responsiveness to
globalization.
4Finance
chapter abstract
This chapter describes the key institutions of Japanese domestic and
international finance, as well as their transformation over the past three
decades. It chronicles, in particular, the decline of the long-term credit
banks and the keiretsu, together with the implications of these
developments for cooperative capitalism across the Japanese political
economy. It shows how these developments have impeded innovation and
structural adjustment and contributed to stagnant growth. The revision of
Japan's Foreign Exchange and Investment Law in late 1980 also influenced
domestic incentive structures in critical ways that are described and
analyzed.
5Land and Housing
chapter abstract
This chapter shows the central role that the political economy of land has
historically played in crowded, high-growth Japan, and how land policy has
encouraged expansionary banking behavior and hence high-speed economic
growth. It also shows why the same land policies, in interaction with
cooperative capitalism in the finance area, have contributed to the
rigidity and stagnation of the Japanese political economy.
6Food Supply
chapter abstract
This chapter describes agricultural policies and institutions, stressing
the central role of public-private cooperation, and also explains the
structural relationships among agricultural policy, political stability,
and leveraged high-speed economic growth. It notes that the agriculture
policy is slowly liberalizing, but related circles of compensation
nevertheless remain salient, especially at the local level, due to
persistent human networks at the grassroots level.
7Energy
chapter abstract
This chapter shows how cooperative capitalism operates in the energy sector
to ensure stable price levels and capital investment. The analysis focuses
especially on nuclear power and how circles of compensation have promoted
nuclear power and worked to assure local acceptance, both before and after
the Fukushima nuclear accident of March 2011.
8Transportation
chapter abstract
This chapter shows how circles of compensation can impede Japan's
globalization by privileging parochial interests (heavily subsidized local
airports) at the expense of potentially competitive cosmopolitan interests
(Japan's international airlines and largest airports). The result is a
situation where neighboring Korea has become the air and sea shipping hub
for East Asia, at Japan's expense, due to perverse, inward-looking Japanese
transportation policies.
9Communications
chapter abstract
This chapter illustrates the mixed implications of circles of compensation
in a rapidly globalizing world, in two parallel dimensions-the "hard" side
of communications (telecommunications equipment) and the "soft" side
(education and mass media). In the telecommunications sector, the circles
have produced an industry focusing on increasingly specialized and arcane
applications, largely impractical outside of Japan. In education, there has
been a comparable parochial drift. In both areas, Japan is gradually
adjusting to long-term global trends, but only slowly, due to the
cushioning effect of circles of compensation.
10Japan's Domestic Circles and the Broader World
chapter abstract
This chapter addresses the impact of domestic circles of compensation on
the incentive structure of Japanese firms and policy makers as they
confront globalization. It suggests that the circles encourage them to
prioritize stability of domestic corporate relationships at the expense of
competitive response to international challenge, to the extent that those
contrasting pressures come into conflict. The argument is substantiated by
evidence from cases of Japanese firms, such as Rakuten and SoftBank, that
are not extensively involved with circles of compensation within Japan, yet
are proactive and successful abroad.
11Models for the Future
chapter abstract
This chapter documents Japan's difficulties in responding to globalization,
principally through comparison with three late-developing political
economies with broad similarities to Japan in resource endowment and
political structure, which have responded much more smoothly to
globalization than has Japan. The chapter then explores where these three
countries (Germany, South Korea, and Singapore) provide useful reference
points for Japanese policy making.
Conclusion: Unraveling the Paradox
chapter abstract
This chapter returns to the hypothesis that circles of compensation
introduce a parochial, stabilizing bias into working-level incentive
structures, inhibiting rapid response to globalization. Sector-specific
case studies and national-level data generally confirm this hypothesis.
Counterfactual foreign and Japanese cases where circles of compensation do
not prevail point to a parallel conclusion. The policy implication is that
Japan's "third arrow" structural reforms will be difficult to achieve.
Given the complexity and possibly perverse macropolitical implications of
dismantling embedded circles of compensation, this research suggests
broadening the circles through political leadership within Japan and
transnational collaboration to enhance innovative capacity. Privatization
and "third arrow" Abenomics structural reforms will likely have limited
utility, while broadening efforts such as "womanomics" and use of
pension-fund investment criteria may be more effective. Another priority
should be transnational private-sector, academic, and governmental
linkages, with centers of innovation abroad, such as Silicon Valley.
Introduction: Confronting the Paradox
chapter abstract
This chapter begins by noting the dual challenge of newly developing
nations: achieving economic development as late developers, and assuring
order in changing societies. The chapter contends that although leaders of
developing nations, such as Sun Yat-sen and Chandra Bose, once manifested
substantial interest in the Japanese model, there has been little
systematic consideration of that approach.
1Paradox and Japanese Public Policy
chapter abstract
This chapter elaborates on the puzzles in Japanese economic performance and
public policy that suggest the need for new analytical paradigms. In the
sphere of economic performance, it is puzzling that Japanese growth was
distinctively rapid for nearly a century from the late Meiji period until
around 1990, slowed down sharply, and then failed to recover, despite
massive pump priming and technological strength. Policy puzzles include the
slow overall profile of Japan's globalization response, cross-sectoral
variance in response profiles, and inconsistencies in governmental
responses to specific connected and unconnected firms.
2The Circles-of-Compensation Concept
chapter abstract
This chapter defines "circles of compensation" as "networks of regular
participants . . . in which members have reciprocal benefits and
obligations." Such circles have five specific traits: (1) a clearly defined
set of members, (2) expansibility, (3) an iterative character, (4) a
propensity to allocate resources internally, and (5) a propensity to
externalize costs to nonmembers. After specification of the model, the
chapter proceeds to illustrate with examples from both Japanese and
international experience, including cartels, industry associations, and
agricultural cooperatives. The chapter concludes with comments on the
geographical distribution of circles, their heuristic value, and
methodological comments on case selection, to provide testable hypotheses
on the nature of circles of compensation.
3The Political Economy of Connectedness
chapter abstract
This chapter explains the progression of the empirical section of the book,
which provides concrete examples of circles of compensation in action, and
tests the central hypothesis, which is: Circles of compensation
systematically internalize reward and externalize risk, introducing a
parochial bias into both policy and corporate behavior that enhances
in-group solidarity, and reduces incentives to pursue outside initiatives,
thus inhibiting both individual and corporate responsiveness to
globalization.
4Finance
chapter abstract
This chapter describes the key institutions of Japanese domestic and
international finance, as well as their transformation over the past three
decades. It chronicles, in particular, the decline of the long-term credit
banks and the keiretsu, together with the implications of these
developments for cooperative capitalism across the Japanese political
economy. It shows how these developments have impeded innovation and
structural adjustment and contributed to stagnant growth. The revision of
Japan's Foreign Exchange and Investment Law in late 1980 also influenced
domestic incentive structures in critical ways that are described and
analyzed.
5Land and Housing
chapter abstract
This chapter shows the central role that the political economy of land has
historically played in crowded, high-growth Japan, and how land policy has
encouraged expansionary banking behavior and hence high-speed economic
growth. It also shows why the same land policies, in interaction with
cooperative capitalism in the finance area, have contributed to the
rigidity and stagnation of the Japanese political economy.
6Food Supply
chapter abstract
This chapter describes agricultural policies and institutions, stressing
the central role of public-private cooperation, and also explains the
structural relationships among agricultural policy, political stability,
and leveraged high-speed economic growth. It notes that the agriculture
policy is slowly liberalizing, but related circles of compensation
nevertheless remain salient, especially at the local level, due to
persistent human networks at the grassroots level.
7Energy
chapter abstract
This chapter shows how cooperative capitalism operates in the energy sector
to ensure stable price levels and capital investment. The analysis focuses
especially on nuclear power and how circles of compensation have promoted
nuclear power and worked to assure local acceptance, both before and after
the Fukushima nuclear accident of March 2011.
8Transportation
chapter abstract
This chapter shows how circles of compensation can impede Japan's
globalization by privileging parochial interests (heavily subsidized local
airports) at the expense of potentially competitive cosmopolitan interests
(Japan's international airlines and largest airports). The result is a
situation where neighboring Korea has become the air and sea shipping hub
for East Asia, at Japan's expense, due to perverse, inward-looking Japanese
transportation policies.
9Communications
chapter abstract
This chapter illustrates the mixed implications of circles of compensation
in a rapidly globalizing world, in two parallel dimensions-the "hard" side
of communications (telecommunications equipment) and the "soft" side
(education and mass media). In the telecommunications sector, the circles
have produced an industry focusing on increasingly specialized and arcane
applications, largely impractical outside of Japan. In education, there has
been a comparable parochial drift. In both areas, Japan is gradually
adjusting to long-term global trends, but only slowly, due to the
cushioning effect of circles of compensation.
10Japan's Domestic Circles and the Broader World
chapter abstract
This chapter addresses the impact of domestic circles of compensation on
the incentive structure of Japanese firms and policy makers as they
confront globalization. It suggests that the circles encourage them to
prioritize stability of domestic corporate relationships at the expense of
competitive response to international challenge, to the extent that those
contrasting pressures come into conflict. The argument is substantiated by
evidence from cases of Japanese firms, such as Rakuten and SoftBank, that
are not extensively involved with circles of compensation within Japan, yet
are proactive and successful abroad.
11Models for the Future
chapter abstract
This chapter documents Japan's difficulties in responding to globalization,
principally through comparison with three late-developing political
economies with broad similarities to Japan in resource endowment and
political structure, which have responded much more smoothly to
globalization than has Japan. The chapter then explores where these three
countries (Germany, South Korea, and Singapore) provide useful reference
points for Japanese policy making.
Conclusion: Unraveling the Paradox
chapter abstract
This chapter returns to the hypothesis that circles of compensation
introduce a parochial, stabilizing bias into working-level incentive
structures, inhibiting rapid response to globalization. Sector-specific
case studies and national-level data generally confirm this hypothesis.
Counterfactual foreign and Japanese cases where circles of compensation do
not prevail point to a parallel conclusion. The policy implication is that
Japan's "third arrow" structural reforms will be difficult to achieve.
Given the complexity and possibly perverse macropolitical implications of
dismantling embedded circles of compensation, this research suggests
broadening the circles through political leadership within Japan and
transnational collaboration to enhance innovative capacity. Privatization
and "third arrow" Abenomics structural reforms will likely have limited
utility, while broadening efforts such as "womanomics" and use of
pension-fund investment criteria may be more effective. Another priority
should be transnational private-sector, academic, and governmental
linkages, with centers of innovation abroad, such as Silicon Valley.