A case for developing a US industrial policy
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Q Did the '81-'82 recession change this situation in any structural way, or was it simply a cyclical feature?Skip to next paragraph
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Mainly a cyclical feature. The whole trouble with '81 and '82 was a bad fiscal and monetary policy mix. That can be undone. These problems of reindustrialization, or restoring competitiveness, are longer-range problems that transcend the '81-'82 recession.
Q To what extent is an industrial policy responsible for Japan's economic success?
I think to a large extent. (Japanese experts) say that MITI consciously chose certain areas for expansion and that there was an enormous use of national consensus to agree to do these things. Professor (Michio) Morishima (with the London School of Economics), in a book entitled ''Why Did Japan Succeed?'' says it really is something inherent in the national character - the philosophy of putting the corporation ahead of self, the government ahead of self, the work team within the corporation ahead of self. Having centuries of that built into a culture made it possible for a coalition of industry, government, trade unions, and ordinary workers to go ahead with a very conscious, deliberate industrial policy.
When I was a student, the Japanese slide rule was the one-dollar cheap version and inaccurate. The German slide rule was expensive and correct. Now the Japanese product is high-quality and inexpensive. They had to have a conscious policy to overcome all this.
The revolving door between Japanese industry and Japanese government is very important. The exploration of foreign markets and producing exclusively for foreign tastes, foreign needs, and foreign sizes was very consciously done in terms of an integrated policy.
Q What about the argument that a good part of Japan's success is due to a high savings rate and capitalizing in the early years on technology already developed elsewhere?
Some people say the success of Japan was due to the corporate structure, including lifetime employment, and the high ratio of debt to equity capital. Some say it was income distribution and the high savings rate. That's a complicated story. And we're not going to handle the problem of industrial policy by that story.
Such explanations will tell you how Japan grew in the last hundred years. And particularly how it grew in the last 30 or 40 years. But that isn't going to tell you what the Japanese did to make the surge during the 1960s when they really turned on the steam, when they changed from this concept of cheap, inferior products to high-quality products underselling the market.
Q Now that the Japanese have caught up technologically, is government intervention in Japan better equipped to foster industrial policy than would be the case here?
I have just come back from a visit to Japan, particularly to Tsukuba University, where high-technology efforts are centered. They told me that Japan did have an industrial policy in the '60s that was successful, but it was like a piece of cake. Almost anything they touched worked out pretty well. Now all the choices are tougher. It isn't so certain they are going to be successful. The competition from other countries wanting to do the same thing is much fiercer.
Q For an industrial policy to be successful, it must be able to pick winners and protect losers. Is a US government agency better able to do that than the private sector?
The government is not now better able because it is not gearing up to (do) it. The effort has to be in the hands of a sympathetic administration, or it won't work. (A government agency) has to be dedicated and needs to have dedicated civil servants to make the right kind of studies. Those studies are not presently being made.
Q Does the US political system allow the government to favor one industry or one group of workers or one region over another?
Maybe, and maybe not. We have already started to implement some aspects of industrial policy. That required getting permission to do certain things - easements, so to speak. We have some trading companies. A trading company is an essential part, one little cog, in the wheel of industrial policy. To get a trading company into operation, we had to make sure we could circumvent the antitrust laws. We had to make sure we could circumvent some banking laws and have banks engaged in close association with nonbank business activities.