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Japan, Korea, and China kind of did this, but not via direct wage and salary controls. Window guidance is the informal practice where government/finance officia
by bobthepanda 1y ago
Japan, Korea, and China kind of did this, but not via direct wage and salary controls. Window guidance is the informal practice where government/finance officials tell banks which industries to prefer for loans. https://en.wikipedia.org/wiki/Window_guidance https://en.wikipedia.org/wiki/Window_guidance
It only really works where capital markets are undeveloped or heavily restricted; and it does starve out the rest of the economy, which is bad for the not-chosen-few (e.g. South Korea's chaebols) and can also backfire if you end up being bad at picking winners.
- alephnerd 1y agoWindow guidance doesn't have a great correlation with wage power, as was seen with the loss of shipbuilding capacity in Japan in the 1980s to South Korea as wages rose leading to automation (remember the whole Japanese "robots" trend).
- bobthepanda 1y agoIt is good if your concern is relative domestic wages, since favored firms and industries can pay more if they have access to cheap credit. It is hard to maintain that competitiveness as living standards rise and eventually window guidance starts running out of steam, as Japan discovered in the '90s and China is discovering now.