how do you view post-war Japan economy and society? I remember in the 1970s – 1980s the Japan Inc. being the ultimate economic machine and now today they look like a society of Grandpa Simpsons? The Japanese culture did not suddenly turn completely 180 degree different on January 1, 1990.
I think that the conventional view of the Japanese economy is that it was well-structured for “catch-up growth” but unable to adapt when that ran out. At its best, it combined a dynamic sector of large manufacturers with stagnant retail and service sectors consisting of small firms protected by regulation. Then other catch-up countries, notably South Korea and China, started to eat into manufacturing, and things went down hill. That is much clearer in hindsight, of course, but I have no reason to second-guess that story.
More generally, I want to speculate that for economic purposes, culture has two important dimensions, which are somewhat in tension with one another. One dimension is trust, and the other dimension is receptiveness to innovation.
One way to read McCloskey, and perhaps also Mokyr (I have just started his book) is that they see the Enlightenment as creating receptiveness to innovation. The conventional story would suggest that in the 1990s Japan’s economic performance came to be dominated by the sectors where there was resistance to innovation.
Trust is valuable because when people are confident that others will follow norms, this helps to lower transaction costs. Seeing markets and government as legitimate is an element of trust.
Innovation tends to lower the status of some people relative to others. That in turn tends to breed distrust among those whose status is lowered.
So I think that societies have to navigate a trade-off. Too much innovation might lead to a breakdown in trust. Too little innovation leads to stagnation. Japan appears to have erred on the side of protecting the status of small business people but suffering stagnation. The U.S. appears to be having a hard time avoiding a breakdown in trust.
I just listened to a talk given by Victor Davis Hanson at Hillsdale College on WWII. He specifically points out the impact of the lack of trust between the Axis powers which resulted in little transfer of innovative technologies between those countries. This is contrasted with the trust and cooperation among the Allies, especially between the democratic powers of the US and Britain. This promoted an exchange of technology and a division of labor, specialization even, among the US, Britain and the USSR, which enhanced the Allied war effort.
https://youtu.be/opDuw4OZ3QI?t=2043
It seems Japan, much like the Soviet Union, was able to build upon the technology transfers after the war, but were not able to bring the other sectors of their economy to a self-sustaining innovation model.
Maybe what’s happened to Japan 1990-2016 just isn’t the end of the world. GDP factory stopped making numbers on a screen go up at pace X%/year, but when I lived there I found it very enjoyable.
Some of the goods I prize highly, that I’ll spend most of my life trying working to obtain, are much more freely available in Japan. For instance I will end up paying a ton for real estate in a safe neighborhood, but in Japan just about every neighborhood is a safe neighborhood. Ironically, all of the spending I engage in to route around the trust and behavior breakdown in America will increase GDP factory, which will make people say we are doing better then Japan.
+1
American Caesar, William Manchester’s biography of Douglas MacArthur (if I recall, Arnold, you were a fan of his Churchill bio, The Last Lion) discusses how Japan in the 1930’s still had a sort of Medieval economy. An enormous fraction of the population (the figure 40% sticks in my mind although I can’t swear to it) were tenant farmers, ie, sharecroppers and the majority of the country’s land and industrial output was controlled by just a few dozen or so families. Japan was indeed primed for post-war growth after land reform was instituted and a middle class was able to flourish.
…about that trust element:
http://www.reuters.com/article/us-japan-corporategovernance-idUSKCN0XT222
Japan has never really opened itself to the West and the ways of the West; rather it has preserved, to a surprising degree, its cultural (and commercial) insularity. How much influence or effect does that have on its growth prospects?
What’s an example of a culture and a period for which there was too much innovation?