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The above article is best understood as a political piece, rather than a business story. Every single sentence in this article can be picked apart, but doing a

The above article is best understood as a political piece, rather than a business story. Every single sentence in this article can be picked apart, but doing a line-by-line critique would miss the larger problems with the article. The author assumes that more productivity is always good, even though Japan has been suffering a lack of economic demand for most of the last 26 years. Big gains in productivity would only make the lack of demand worse. If the goal of Japanese policy makers is to boost demand, and that does seem like a wise goal, then keeping 50,000 workers employed at Sharp seems like a smart bet, compared to keeping 100 people employed at some nimble, fast-moving startup. More so, Japanese electronics firms still hold great global market share, so there is reason to think that their productivity is more than adequate to compete in the global markets. And this sentence can only be understood if your political beliefs align with the political beliefs of that author: "If Japan’s bailouts remind you of the U.S.'s rescue of its auto companies, you’re not alone. There is a strong argument that the auto bailouts only delayed the day when General Motors and Chrysler lose out to nimbler competitors like Tesla Motors." Right, but the USA bailout of the auto companies seems to have been a good bet. Hundreds of thousands of jobs were saved, and the companies bounced back and paid off their debts, and the USA was able to sell its stake in GM at a profit. So it was win-win-win all the way: the taxpayers won, the workers won, and the economy won.

gizi 11y ago
It is not 50,000 versus 100 but 50,000 versus 500,000 or even 5,000,000. Most people (in advanced economies) work for family businesses. The government would never bail them out. It only bails out large interests. That is unfair, because the government also collects the same taxes -- if not more -- from these small and medium sized companies and their employees, but it will only bail out large companies with that very tax money.
- jsprogrammer 11y ago
  At least ownership of larger corporations is typically more spread out. Bailing out family businesses, who typically offer no ownership to their employees, only really serves to enrich a particular family and maybe helps them afford to use others for labor a bit longer.
- hkmurakami 11y ago
  If you don't bail out the big ones, hundreds if not thousands of the family owned suppliers to the Japanese big business will go under.
orangecat 11y ago
If the goal of Japanese policy makers is to boost demand, and that does seem like a wise goal, then keeping 50,000 workers employed at Sharp seems like a smart bet, compared to keeping 100 people employed at some nimble, fast-moving startup. If you want to make sure people have money so that demand is increased then just give them money, don't keep useless jobs around. the USA was able to sell its stake in GM at a profit No: http://www.usatoday.com/story/money/cars/2013/12/09/government-treasury-gm-general-motors-tarp-bailout-exit-sale/3925515/ http://www.usatoday.com/story/money/cars/2013/12/09/governme...
- lmm 11y ago
  > If you want to make sure people have money so that demand is increased then just give them money, don't keep useless jobs around. Ideally yes, but that's politically difficult.
  - hkmurakami 11y ago
    Also something about the commonly held belief in the dignity of having employment (especially in a culture like Japan's) and supporting the family.
  - TheOtherHobbes 11y ago
    In spite of fifty+ years of MBA thinking, jobs aren't really fungible. When you fire a lot of people you're not just reducing costs - you're also hoping that you will never again need the skills and the knowledge of your internal processes that those people have. Sometimes it's a good bet. Sometimes it isn't.
- jljljl 11y ago
  USA didn't sell at a profit. But the loss was $10.5B to save (according to the article) 1.2M jobs, and saved $34.5B in tax losses. Even if you ignore the saved tax income, thats less than $9,000 per job saved. So the bailout was probably _still_ a net positive for the US.
  - deleted 11y ago
primrosepath 11y ago
> Right, but the USA bailout of the auto companies seems to have been a good bet. Hundreds of thousands of jobs were saved, and the companies bounced back and paid off their debts, and the USA was able to sell its stake in GM at a profit. According to a link in the article the government lost over $9 Billion. I live in Metro-Detroit, saw plant closings, saw waves of dealerships close, watched whole car brands die, got my hours cut and watched delayed work hurt a lot of people around here. Just because GM and Chrysler go into bankruptcy sans the gov doesn't mean all those jobs disappear. Yes, GM and Chrysler would take a cut (which happened anyway) but I think they'd also get reorganized better at the very least. From what I've heard the reorganization that took place was not nearly enough. Chrysler has a mandate on the minimum number of workers needed for some contracts. This leads to situations where Chrysler is paying for 4 people so 1 person can put in half a day at a 3rd party supplier. I have stories for days. The real tragedy in all this is a new better company could've started in Detroit. Instead, due to Zombie GM and Chrysler continuing to dominate the market, all the automotive engineering talent is slowly migrating to Silicon Valley.
- wozniacki 11y ago
  While we are on the issue of Detroit and automakers here's a topical scene about some collective bargaining of jobs at an auto supplier, from the well-made documentary, Detropia [1] http://www.youtube.com/watch?v=q7vJA9AVvdQ&t=6m22s http://www.youtube.com/watch?v=q7vJA9AVvdQ&t=6m22s [1] Detropia (Rental / Purchase link) https://www.youtube.com/watch?v=cv2RSWehfaM https://www.youtube.com/watch?v=cv2RSWehfaM
tonyedgecombe 11y ago
General Motors and Chryslers competitors didn't win from the bailout.
raddad 11y ago
China owns GM. http://qz.com/594984/the-secret-history-of-gms-chinese-bailout/#8230; http://qz.com/594984/the-secret-history-of-gms-chinese-bailo...
- primrosepath 11y ago
  Even more scary for Detroit, once the American public figures out Tesla is actually more American made than the big 3 they will feel no guilt in buying Teslas instead. This is especially the case if we start losing a bunch of coastal areas and the big 3 look apathetic about their role in global climate change.
  - deleted 11y ago
    [deleted]
  - superuser2 11y ago
    Tesla's prices need to fall by at least 75% before Detroit has anything to worry about.
    - lumpypua 11y ago
      The infrastructure/economies of scale to make that profitable don't exist yet, but Tesla is working at setting them up. Elon Musk: "Model 3, our smaller and lower cost sedan will start production in about 2 years. Fully operational Gigafactory needed." http://www.techinsider.io/we-now-know-when-teslas-cheaper-model-3will-be-available-2015-9 http://www.techinsider.io/we-now-know-when-teslas-cheaper-mo... Two things are at play: 1. Tesla doesn't really give a crap about owning the entire market. If their competition causes the big 3 to build low cost zero-emissions vehicles, then Tesla has fulfilled their part of Elon's goals towards saving the world. Basically, putting a stake in the heart of the internal combustion engine and putting automotive economies of scale behind battery and energy storage development. 2. Cheap cars have awful margins, only worth playing in at scale. SUVs on the other hand are hideously profitable. The sport SUV has been the savior of BMW and Mercedes over the past decade, with high margins versus their cars. Porsche got in on this and built an SUV, now Lamborghini is too, margins are just too good to ignore. Tesla's pursued an Intel-like tick-tock strategy, where they shoot at the high end to make money and get performance knowledge (Roadster, Model X) and with the cash reserves take their next model downmarket (Model S, Model 3).
duncan_bayne 11y ago
I think the author was criticising malinvestment, rather than arguing for higher productivity. https://en.wikipedia.org/wiki/Malinvestment https://en.wikipedia.org/wiki/Malinvestment According to the Austrian school, market interventions like those in Japan are bad _regardless_ of the effect on productivity, because they represent malinvestment.
- jljljl 11y ago
  How exactly do you judge a malinvestment if you don't measure its effects?
  - cturner 11y ago
    So the issue is - is it possible to produce a valid measurement? In scientific method, part of an experiment involves a control. There's no way to produce one in economics - the systems are too complicated. You can't know whether measurements you take are the result of your change directly, or caused by network effects of the change as part of other things going on, or just weather from unrelated things happening in the economic system. Austrian instincts are partly about building a defense against corruption and tyranny. If you let politicians spend money or introduce mechanisms that are difficult to measure, or which can be easily hand-waved away ("we did what we thought was right based on the information at the time"), then they are incentivised to spend. Instead, they form a line in the sand and say that you're not allowed to do anything which can't be clearly justified from a set of first principles. The back-story is not so much a faith in the inherent goodness of markets as in the inherent evilness of governments.
    - jljljl 11y ago
      I'm not sure if the response to difficulties in measurement is to build a system out of faith and assumptions. We can analyze different policy decisions, either by modeling human behavior (based on experiments which can be controlled and analyzed), or through natural experiments (e.g., What happens when a bunch of states and municipalities alter their minimum wage policies?)
JackFr 11y ago
I believe you are largely correct as to the aims. It is not so much a corporate welfare program as a social welfare program, with the money sluicing though corporate coffers rather than an extensive bureaucracy, with the added benefit of supporting the illusion that all is as it has ever been in Japan Inc. But there are issues I think you would be foolish to ignore. First, the government largesse has to come from somewhere, taxing or borrowing. Taxing in the long term will become difficult, as the misallocation of capital contributes to shrinking that sector of the economy that can pay taxes. Borrowing kicks the can down the road, but with Japan's demographics a smaller less productive workforce will be saddled with that debt.
gozur88 11y ago
>The author assumes that more productivity is always good, even though Japan has been suffering a lack of economic demand for most of the last 26 years. Big gains in productivity would only make the lack of demand worse. The Japanese unemployment rate is now at 3.1%, which is very low, even for Japan. In that kind of job market you need big gains in productivity because employers will have trouble filling job openings. There's no reason for the government to artificially stimulate job creation.
simonh 11y ago
>...then keeping 50,000 workers employed at Sharp seems like a smart bet, compared to keeping 100 people employed at some nimble, fast-moving startup. Where does the money to subsidize those jobs come from? Are you seriously suggesting that sucking subsidy money out of the productive economy to pay for those jobs is not depressing demand? All our economies could do with some of this magic money, it sounds like it would solve all our problems. >...More so, Japanese electronics firms still hold great global market share... Japan functionally has two economies, an export economy and a domestic economy (of course they're not completely decoupled, as Sharp shows). It's managed to maintain a fairly competitive export economy because those companies have to cope with foreign competition, but the domestic situation has festered for a whole generation. It seems like China is following the same pattern.
- crdoconnor 11y ago
  >Are you seriously suggesting that sucking subsidy money out of the productive economy to pay for those jobs is not depressing demand? Which part of giving people money do you think would reduce their tendency to spend it?
  - nandemo 11y ago
    Presumably, the implication is that the government must first excise taxes from the public, thereby depressing demand. The alternative is to borrow money by issuing bonds, but that's just a way of postponing the problem, eventually the government has to excise more taxes to pay the debt.
  - simonh 11y ago
    Productive companies and organisations generate demand for the things they need in order to be productive. Unproductive ones generate less demand per worker. Yes those workers still need to pay for things, but if they are sitting around at work not doing much their work activity is a waste. Building a bridge to nowhere only creates demand for concrete and steel and goods for the workers. A useful heavily used bridge can generate demand from the economic activity it enables. An efficient factory producing goods generates the same demand as an inefficient one producing the same goods, but the inefficient one consumes money that could otherwise be invested in more demand producing factories, employing workers in demand producing activities.
crdoconnor 11y ago
>>"If Japan’s bailouts remind you of the U.S.'s rescue of its auto companies, you’re not alone. There is a strong argument that the auto bailouts only delayed the day when General Motors and Chrysler lose out to nimbler competitors like Tesla Motors." > >Right, but the USA bailout of the auto companies seems to have been a good bet. There's also the fact that Toyota was initially perpetually bailed out by the Japanese and had their exports subsidized by suppressing the value of their currency. The Asian tigers and their auto companies didn't just appear out of nowhere. In a way, the auto bailouts can be seen as just levelling the playing field somewhat. Free market religion never did build a wealthy industrial economy. Judicious application of subsidies did though.
- hkmurakami 11y ago
  I once asked why the Japanese govt didn't do more to help the auto industry, compared to say Germany (this was 2010 when I worked in the Toyota group in Aichi). What I didn't know was what parent refers to -- that the Japanese govt went way too far in supporting its industries back in the day, and getting backlash for it politically.

gizi 11y ago

It is not 50,000 versus 100 but 50,000 versus 500,000 or even 5,000,000. Most people (in advanced economies) work for family businesses. The government would never bail them out. It only bails out large interests. That is unfair, because the government also collects the same taxes -- if not more -- from these small and medium sized companies and their employees, but it will only bail out large companies with that very tax money.

jsprogrammer 11y ago
At least ownership of larger corporations is typically more spread out. Bailing out family businesses, who typically offer no ownership to their employees, only really serves to enrich a particular family and maybe helps them afford to use others for labor a bit longer.
hkmurakami 11y ago
If you don't bail out the big ones, hundreds if not thousands of the family owned suppliers to the Japanese big business will go under.

orangecat 11y ago

If the goal of Japanese policy makers is to boost demand, and that does seem like a wise goal, then keeping 50,000 workers employed at Sharp seems like a smart bet, compared to keeping 100 people employed at some nimble, fast-moving startup. If you want to make sure people have money so that demand is increased then just give them money, don't keep useless jobs around. the USA was able to sell its stake in GM at a profit No: http://www.usatoday.com/story/money/cars/2013/12/09/government-treasury-gm-general-motors-tarp-bailout-exit-sale/3925515/ http://www.usatoday.com/story/money/cars/2013/12/09/governme...

lmm 11y ago
> If you want to make sure people have money so that demand is increased then just give them money, don't keep useless jobs around. Ideally yes, but that's politically difficult.
- hkmurakami 11y ago
  Also something about the commonly held belief in the dignity of having employment (especially in a culture like Japan's) and supporting the family.
- TheOtherHobbes 11y ago
  In spite of fifty+ years of MBA thinking, jobs aren't really fungible. When you fire a lot of people you're not just reducing costs - you're also hoping that you will never again need the skills and the knowledge of your internal processes that those people have. Sometimes it's a good bet. Sometimes it isn't.
jljljl 11y ago
USA didn't sell at a profit. But the loss was $10.5B to save (according to the article) 1.2M jobs, and saved $34.5B in tax losses. Even if you ignore the saved tax income, thats less than $9,000 per job saved. So the bailout was probably _still_ a net positive for the US.
- deleted 11y ago

primrosepath 11y ago

> Right, but the USA bailout of the auto companies seems to have been a good bet. Hundreds of thousands of jobs were saved, and the companies bounced back and paid off their debts, and the USA was able to sell its stake in GM at a profit. According to a link in the article the government lost over $9 Billion. I live in Metro-Detroit, saw plant closings, saw waves of dealerships close, watched whole car brands die, got my hours cut and watched delayed work hurt a lot of people around here. Just because GM and Chrysler go into bankruptcy sans the gov doesn't mean all those jobs disappear. Yes, GM and Chrysler would take a cut (which happened anyway) but I think they'd also get reorganized better at the very least. From what I've heard the reorganization that took place was not nearly enough. Chrysler has a mandate on the minimum number of workers needed for some contracts. This leads to situations where Chrysler is paying for 4 people so 1 person can put in half a day at a 3rd party supplier. I have stories for days. The real tragedy in all this is a new better company could've started in Detroit. Instead, due to Zombie GM and Chrysler continuing to dominate the market, all the automotive engineering talent is slowly migrating to Silicon Valley.

wozniacki 11y ago
While we are on the issue of Detroit and automakers here's a topical scene about some collective bargaining of jobs at an auto supplier, from the well-made documentary, Detropia [1] http://www.youtube.com/watch?v=q7vJA9AVvdQ&t=6m22s http://www.youtube.com/watch?v=q7vJA9AVvdQ&t=6m22s [1] Detropia (Rental / Purchase link) https://www.youtube.com/watch?v=cv2RSWehfaM https://www.youtube.com/watch?v=cv2RSWehfaM

tonyedgecombe 11y ago

General Motors and Chryslers competitors didn't win from the bailout.

raddad 11y ago

China owns GM. http://qz.com/594984/the-secret-history-of-gms-chinese-bailout/#8230; http://qz.com/594984/the-secret-history-of-gms-chinese-bailo...

primrosepath 11y ago
Even more scary for Detroit, once the American public figures out Tesla is actually more American made than the big 3 they will feel no guilt in buying Teslas instead. This is especially the case if we start losing a bunch of coastal areas and the big 3 look apathetic about their role in global climate change.
- deleted 11y ago
  [deleted]
- superuser2 11y ago
  Tesla's prices need to fall by at least 75% before Detroit has anything to worry about.
  - lumpypua 11y ago
    The infrastructure/economies of scale to make that profitable don't exist yet, but Tesla is working at setting them up. Elon Musk: "Model 3, our smaller and lower cost sedan will start production in about 2 years. Fully operational Gigafactory needed." http://www.techinsider.io/we-now-know-when-teslas-cheaper-model-3will-be-available-2015-9 http://www.techinsider.io/we-now-know-when-teslas-cheaper-mo... Two things are at play: 1. Tesla doesn't really give a crap about owning the entire market. If their competition causes the big 3 to build low cost zero-emissions vehicles, then Tesla has fulfilled their part of Elon's goals towards saving the world. Basically, putting a stake in the heart of the internal combustion engine and putting automotive economies of scale behind battery and energy storage development. 2. Cheap cars have awful margins, only worth playing in at scale. SUVs on the other hand are hideously profitable. The sport SUV has been the savior of BMW and Mercedes over the past decade, with high margins versus their cars. Porsche got in on this and built an SUV, now Lamborghini is too, margins are just too good to ignore. Tesla's pursued an Intel-like tick-tock strategy, where they shoot at the high end to make money and get performance knowledge (Roadster, Model X) and with the cash reserves take their next model downmarket (Model S, Model 3).

duncan_bayne 11y ago

I think the author was criticising malinvestment, rather than arguing for higher productivity. https://en.wikipedia.org/wiki/Malinvestment https://en.wikipedia.org/wiki/Malinvestment According to the Austrian school, market interventions like those in Japan are bad _regardless_ of the effect on productivity, because they represent malinvestment.

jljljl 11y ago
How exactly do you judge a malinvestment if you don't measure its effects?
- cturner 11y ago
  So the issue is - is it possible to produce a valid measurement? In scientific method, part of an experiment involves a control. There's no way to produce one in economics - the systems are too complicated. You can't know whether measurements you take are the result of your change directly, or caused by network effects of the change as part of other things going on, or just weather from unrelated things happening in the economic system. Austrian instincts are partly about building a defense against corruption and tyranny. If you let politicians spend money or introduce mechanisms that are difficult to measure, or which can be easily hand-waved away ("we did what we thought was right based on the information at the time"), then they are incentivised to spend. Instead, they form a line in the sand and say that you're not allowed to do anything which can't be clearly justified from a set of first principles. The back-story is not so much a faith in the inherent goodness of markets as in the inherent evilness of governments.
  - jljljl 11y ago
    I'm not sure if the response to difficulties in measurement is to build a system out of faith and assumptions. We can analyze different policy decisions, either by modeling human behavior (based on experiments which can be controlled and analyzed), or through natural experiments (e.g., What happens when a bunch of states and municipalities alter their minimum wage policies?)

JackFr 11y ago

I believe you are largely correct as to the aims. It is not so much a corporate welfare program as a social welfare program, with the money sluicing though corporate coffers rather than an extensive bureaucracy, with the added benefit of supporting the illusion that all is as it has ever been in Japan Inc. But there are issues I think you would be foolish to ignore. First, the government largesse has to come from somewhere, taxing or borrowing. Taxing in the long term will become difficult, as the misallocation of capital contributes to shrinking that sector of the economy that can pay taxes. Borrowing kicks the can down the road, but with Japan's demographics a smaller less productive workforce will be saddled with that debt.

gozur88 11y ago

>The author assumes that more productivity is always good, even though Japan has been suffering a lack of economic demand for most of the last 26 years. Big gains in productivity would only make the lack of demand worse. The Japanese unemployment rate is now at 3.1%, which is very low, even for Japan. In that kind of job market you need big gains in productivity because employers will have trouble filling job openings. There's no reason for the government to artificially stimulate job creation.

simonh 11y ago

>...then keeping 50,000 workers employed at Sharp seems like a smart bet, compared to keeping 100 people employed at some nimble, fast-moving startup. Where does the money to subsidize those jobs come from? Are you seriously suggesting that sucking subsidy money out of the productive economy to pay for those jobs is not depressing demand? All our economies could do with some of this magic money, it sounds like it would solve all our problems. >...More so, Japanese electronics firms still hold great global market share... Japan functionally has two economies, an export economy and a domestic economy (of course they're not completely decoupled, as Sharp shows). It's managed to maintain a fairly competitive export economy because those companies have to cope with foreign competition, but the domestic situation has festered for a whole generation. It seems like China is following the same pattern.

crdoconnor 11y ago
>Are you seriously suggesting that sucking subsidy money out of the productive economy to pay for those jobs is not depressing demand? Which part of giving people money do you think would reduce their tendency to spend it?
- nandemo 11y ago
  Presumably, the implication is that the government must first excise taxes from the public, thereby depressing demand. The alternative is to borrow money by issuing bonds, but that's just a way of postponing the problem, eventually the government has to excise more taxes to pay the debt.
- simonh 11y ago
  Productive companies and organisations generate demand for the things they need in order to be productive. Unproductive ones generate less demand per worker. Yes those workers still need to pay for things, but if they are sitting around at work not doing much their work activity is a waste. Building a bridge to nowhere only creates demand for concrete and steel and goods for the workers. A useful heavily used bridge can generate demand from the economic activity it enables. An efficient factory producing goods generates the same demand as an inefficient one producing the same goods, but the inefficient one consumes money that could otherwise be invested in more demand producing factories, employing workers in demand producing activities.

crdoconnor 11y ago

>>"If Japan’s bailouts remind you of the U.S.'s rescue of its auto companies, you’re not alone. There is a strong argument that the auto bailouts only delayed the day when General Motors and Chrysler lose out to nimbler competitors like Tesla Motors." > >Right, but the USA bailout of the auto companies seems to have been a good bet. There's also the fact that Toyota was initially perpetually bailed out by the Japanese and had their exports subsidized by suppressing the value of their currency. The Asian tigers and their auto companies didn't just appear out of nowhere. In a way, the auto bailouts can be seen as just levelling the playing field somewhat. Free market religion never did build a wealthy industrial economy. Judicious application of subsidies did though.

hkmurakami 11y ago
I once asked why the Japanese govt didn't do more to help the auto industry, compared to say Germany (this was 2010 when I worked in the Toyota group in Aichi). What I didn't know was what parent refers to -- that the Japanese govt went way too far in supporting its industries back in the day, and getting backlash for it politically.