Organizer: Yul Sohn, Seoul National University, Korea
Chair: Bernard S. Silberman, University of Chicago
Discussant: Takashi Abe, Osaka University
The field of Japan's industrial policy has put overly narrow focus on the relationship between state bureaucracy, politicians, and industry. This has been so in studying both prewar and postwar Japan. Institutional choices were mostly the outcome of domestic politics while international impacts (both geopolitical and world-systemic) were insufficiently treated.
Our panel has the goal of rethinking the roots and nature of Japan's industrial policy by taking international factors seriously and also by looking at the interwar period, 1920s and 1930s. Drawn from three different academic disciplines (political science, history, economics), our panelists plan to look at the role of various kinds of international pressures (i.e., the international oil regime for Kikkawa, the rapid foreign investment penetration for Sohn, the Asia-Pacific War for Miyajima) in the making of specific policy responses. This is not a standard systemic approach, however, for we focus on the state's and firms' response to systemic pressures rather than system structures that determine their choices.
We will deal with the interwar period, not just because this period has drawn relatively less analytical attention than do both the Meiji and postwar periods from the existing literature, but also because it means much in considering the nature of the postwar Japanese political economy and the high-speed growth. Each will judge differently the place of the interwar experiences in the postwar institutional context. We hope to use this panel to generate discussions on the issue of transwar history, and to ask further questions concerning the lessons of history in shaping Japan's new role in the world economy.
The Origins of the Licensing System in Japan
Yul Sohn, Seoul National University
Governmental licensing is one of the key industrial policy instruments in Japan. We all know that the Japanese state targets industry and strategically alters the resource allocation by granting subsidy, preferential lending, tax-breaks, etc. What is often ignored is the fact that those measures are frequently combined with the use of licensing by which the state regulates the entry barriers into the targeted industry and thereby strategically organizes the structure of it in the first place. These practices are widespread-10,945 licenses in 1994.
This paper will trace the rise and development of the licensing system in the interwar years: from where did the ideas for it come?; whose interests did it serve?; who pushed for it?; and through what process was it institutionalized? Drawing from the experience of two industries in the interwar years, autos and machine tools, it will argue that the licensing system has been aimed at protecting key industries from foreign competition. Especially crucial here was the internationalization of the Japanese market which refers to the rapid investment penetration by foreign multinational corporations during the 1920s. This paper will show that the licensing system emerged as a device for regulating foreign investment and thereby stabilizing the domestic market.
The use of governmental licensing has continued and proliferated in postwar Japan. I will suggest that this has been so because licensing has dealt with confronting the internationalization problem, i.e., how states can effectively stabilize and protect domestic markets that are subject to being buffeted by global forces.
The Japanese Interwar Capitalism: The Origins of the Developmental State?
Hideaki Miyajima, Waseda University, Japan
Interwar Japan figured a relatively higher growth rate than that of other industrial nations. It achieved import substitution in the heavy industries and had a highly competitive textile industry. Concerning the role of industrial policy (or state intervention in general) in facilitating the interwar economic growth, there exist quite contrasting views: one is positively appreciating the developmental function of the state in the economy; and others emphasize either the private entrepreneurship or the increasing inputs and factor endowments.
What most of these works have consistently ignored in the debate over the role of the state, however, is the institutional aspect of the complementarity of industrial policy (or the government-business relationship as its institutional framework) with other economic sub-systems such as corporate finance, corporate governance, and labor relations. By using the comparative institutional approach developed recently by some economists, this paper will explore how the pieces of the institutional arrangements prefiguring the postwar economic system were put together under the wartime or quasi-wartime circumstances from 1937-1945. A particular attention will focus on the process by which both corporate structure and industrial policy changed complementarily into a new institutional equilibrium point in those years. I will then compare the presurrender system with the postwar system, and argue that despite the similarity of the ideas and policy measures taken by government bureaucrats in both systems, the content and nature of the complementarity is quite different.
Yoshisuke Ayukawa's Quest for American Capital and Technology, 1937-1941
Haruo Iguchi, Doshisha University
In the summer of 1937, financial problems in his Nissan conglomerate in part motivated Yoshisuke Ayukawa to cooperate with civilian and military bureaucrats in their pursuit of accelerating Manchukuo's industrialization centered around the heavy industries. Ayukawa, however, agreed to get involved in this scheme only after the high-ranking policymakers in the civilian and military bureaucracy agreed to cooperate with his demand that Manchukuo promote joint ventures with foreign, namely American, companies, and seek foreign currency from foreign, namely American, capital market.
With hindsight, Ayukawa's efforts may seem counterproductive, futile, suicidal, or even comical: Ayukawa's efforts failed to avoid Japan's war with the U.S. through economic interdependence; and in the postwar years Japan's mainstream approach to obtain foreign technology and managerial methods in less competitive industries and foreign exchange took a more indirect approach rather than promote joint ventures with foreign corporations, actively liberalize Japan's financial market, and prioritize finance of companies through securities market instead of bank loans. Yet, if we are to examine the domestic response to systemic pressures in the interwar years, it is pertinent to ask why Ayukawa and the government officials thought feasible his quest for economic interdependence between Japan and the U.S. through U.S.-Japan economic cooperation in Manchukuo.