THE PROBLEM OF REGIONAL "HOLLOWING OUT" IN JAPAN : LESSONS FOR REGIONAL INDUSTRIAL POLICY

This paper considers the problems of "hollowing out" using a Case Study of Japan's machinery sector. In doing so, it explores the roots of the present crisis by focusing upon the role played by Japan's large transnational corporations. This is important because these corporations are the "central actors" within the Japanese economy and they control a significant proportion of Japanese manufacturing. It is their strategic decisions - those that determine the level and location of investment, employment and output - which ultimately shape the development path for Japanese industry (see Cowling and Sugden, 1994, 1998). In recent years, Japan’s large transnationals have become engaged in the process of elite globalisation, pursuing their own interests at the expense of domestic Japanese industry. This is a fundamental insight that is crucial for designing appropriate policy responses to arrest Japan's current industrial decline. It is argued that the lessons from Japan's experience might guide policymakers in other regions, such as Wisconsin, who are concerned with future industrial development, the effects of globalisation and problems of "hollowing out".Machinery sector ; strategic-decision making ; strategic failure ; industrial policy.

Merger Policy and Industrial Policy

The article by Adams and Brock is a welcome and important antidote to current government thinking about merger policy, both in the United States and in Europe. In both regions, the government approach presumes the efficiency-creating properties of mergers and, therefore, adopts an extremely permissive stance. The declared imperative of international competitiveness echoes the view towards mergers which prevailed in Europe during the 1960s. However, while the analysis of Adams and Brock is both important and correct, I believe it is also incomplete. If bigness is a problem created largely by the laxity of past merger policy, then it is certainly correct to argue for stricter merger policy now and in the future; yet such an approach is unlikely to suffice. Not only is a policy required to control the further growth in the dominance of the giant corporations, but the problems posed by that very dominance must be addressed. I believe those problems should not only be addressed as issues of regulation, but also as issues of development. As democratic communities, we must react to the accumulated power of the major actors on the economic scene by regulating their behavior or by divesting them of at least some of their power. We must also act strategically to counterpose our own vision of the future to that of the dominant corporations. Thus, the regulatory and developmental roles of government are complementary in the search for a dynamic and efficient economy, and these roles require the development of some sort of industrial policy

Merger Policy and Industrial Policy

The article by Adams and Brock is a welcome and important antidote to current government thinking about merger policy, both in the United States and in Europe. In both regions, the government approach presumes the efficiency-creating properties of mergers and, therefore, adopts an extremely permissive stance. The declared imperative of international competitiveness echoes the view towards mergers which prevailed in Europe during the 1960s. However, while the analysis of Adams and Brock is both important and correct, I believe it is also incomplete. If bigness is a problem created largely by the laxity of past merger policy, then it is certainly correct to argue for stricter merger policy now and in the future; yet such an approach is unlikely to suffice. Not only is a policy required to control the further growth in the dominance of the giant corporations, but the problems posed by that very dominance must be addressed. I believe those problems should not only be addressed as issues of regulation, but also as issues of development. As democratic communities, we must react to the accumulated power of the major actors on the economic scene by regulating their behavior or by divesting them of at least some of their power. We must also act strategically to counterpose our own vision of the future to that of the dominant corporations. Thus, the regulatory and developmental roles of government are complementary in the search for a dynamic and efficient economy, and these roles require the development of some sort of industrial policy

Advertising and labour supply: why do Americans work such long hours?

Americans are working much longer hours in the paid labour market than workers in Western Europe. Much of the debate focuses on whether this is the result of voluntary worker choice or whether this is a decision imposed on workers by their employers. This paper shows that American hours of work have become more or less stabilised as a result of the rising intensity of advertising in the U.S. : advertising may raise the desired amount of marketed goods and services for which workers find it necessary to work long hours

The problem of regional "hollowing out" in Japan: lessons for regional industrial policy

This paper considers the problems of "hollowing out" using a Case Study of Japan's machinery sector. In doing so, it explores the roots of the present crisis by focusing upon the role played by Japan's large transnational corporations. This is important because these corporations are the "central actors" within the Japanese economy and they control a significant proportion of Japanese manufacturing. It is their strategic decisions - those that determine the level and location of investment, employment and output - which ultimately shape the development path for Japanese industry (see Cowling and Sugden, 1994, 1998). In recent years, Japan’s large transnationals have become engaged in the process of elite globalisation, pursuing their own interests at the expense of domestic Japanese industry. This is a fundamental insight that is crucial for designing appropriate policy responses to arrest Japan's current industrial decline. It is argued that the lessons from Japan's experience might guide policy-makers in other regions, such as Wisconsin, who are concerned with future industrial development, the effects of globalisation and problems of "hollowing out"

Re-visiting the roots of Japan's structural decline: the role of the Japanese corporation

For a long period in the twentieth century, the development of the Japanese corporation appeared congruent with the development of the Japanese economy. The growth maximising behaviour of the Japanese corporation and the preference for internal growth over acquisitions (see Odagiri, 1992) appeared to suit the long-term ambitions of Japan. Now, that formerly clear connexion between the ambitions of corporate Japan and the Japanese public interest is no longer so clear. Increasingly, the global ambitions of the corporation appear as an impediment to Japan's development. By favouring the development of large-scale transnational corporations, Japanese industrial policy-making appears to have contained a fundamental flaw. Japan is now dominated by large-scale organisations that are controlled by a corporate elite. It is unlikely that their strategic decisions will correspond with the wider public interest, which raises the possibility that Japan is now afflicted with "strategic failure". Other examples from around the world suggest that Japan is not unique in this respect. Alternative ways forward are suggested

Corporate governance and the public interest

A theory of the firm based on strategic decision-making highlights governance as a central issue. Preferences vary over strategy but not all interests are currently being represented, resulting in a failure to govern in the public interest. As solutions, we consider the design of company law and also more immediate ways forward, focusing on regulation and democratically controlled public agencies, but stressing the fundamental significance of active, effective citizens. Throughout, the arguments are illustrated using examples from various countries and industries, including education, information technology, football and public utilities in Europe and the US

The Japanese model in retrospective : industrial strategies, corporate Japan and the 'hollowing out' of Japanese industry

This article provides a retrospective look at the Japanese model of industrial development. This model combined an institutional approach to production based around the Japanese Firm (Aoki's, J-mode) and strategic state intervention in industry by the Japanese Ministry of International Trade and Industry (MITI). For a long period, the alignment of state and corporate interests appeared to match the wider public interest as the Japanese economy prospered. However, since the early 1990s, the global ambitions of the corporate sector have contributed to a significant 'hollowing out' of Japan's industrial base. As the world today looks for a new direction in economic management, we suggest the Japanese model provides policy-makers with a salutary lesson in tying the wider public interest with those of the corporate sector