4 ms·

The flipside being that the Japanese paid this cost in various ways, such as sucking in and "wasting" (vs other opportunities) a lot of talent into things like

by crdb 11y ago

The flipside being that the Japanese paid this cost in various ways, such as sucking in and "wasting" (vs other opportunities) a lot of talent into things like car manufacturing whilst leaving other fields (like software) to free market countries whose assets were better allocated, and in the invisible taxation of the entire Japanese population that resulted from having higher prices, less consumer choice, less jobs (or lower value creating jobs), etc.

crdoconnor 11y ago
If Japan hadn't done this they would have kept their 1950s level per capita income. Which was about the same level as Brazil, Bulgaria and South Africa. They were poor as dirt. Now, they're one of the richest countries in the world. I don't think it was much of a trade off. Being a 'free market country' is ok if you're already rich. If you're still developing, it's a route to continued poverty.
- crdb 11y ago
  I think it's more complicated than "free market" vs "interventionism". Japan benefited from the rule of law courtesy of both its culture and its post-war colonial rulers (and, effectively, from massive investments from the US much as the Marshall Plan boosted Europe, and then for supplies during the Korean War which amounted to a third of exports). US policy was literally to boost the Japanese economy to avoid further militarism. Making the labour available to global investment, opening borders, benefitting from the post-war industrial revolution and population growth (which itself generated demand growth). Japan was no United States, but it wasn't a mere third world colony either - it was an industrial power who held up the most powerful military force in the world for years. China is today where Japan was in the 1960s, and that's putting pressure on this kind of strategy. Property rights is almost the defining factor towards "third world to first" IMO (especially in today's environment where FDI is so much easier). The various degrees of socialism or interventionism are merely an economic brake. Being able to enforce rights is much more important, and that involves many expensive things like a police and justice infrastructure well paid enough to avoid bribes, an independent judiciary and honest politicians whose interests are independent of policy.
  - crdoconnor 11y ago
    If it were instead as simple as "property rights is all you need" there would be virtually no third world left. The same mercantilist strategy applied by Japan was repeated in Hong Kong, South Korea, Taiwan, Singapore and now China. Everywhere it's been tried, it has worked. Hell, even the United States followed this strategy (spearheaded by Alexander Hamilton) after the war of 1812. By the 1830s it had a 40% tariff rate which it kept for about another century.
    - crdb 11y ago
      But all of these countries enforce property rights. Hong Kong had the British enforce their brand of common law on it until 1997, and the Chinese haven't altered things much. It was British officers chasing Mao's bombs in 1967. The country became known as a trade hub because you could do business fairly there and tax rates were low. South Korea was defended by US Marines against the North, and in the early 1950s had over 300,000 American soldiers in the country. Again, this helped stop existing power structures from taking the country, although it is distinctly more authoritarian. Was mercantilism explaining part of the variance? Sure, but I don't buy that it would have happened without US troops to secure the country and to an extent the peace. Taiwan was guaranteed by the US (an ally of CKS and the ROC, with whom they fought the Japanese) in the same fashion including $4 billion in aid, and its prominence in electronics came from its very open policies about foreign investment in the field and low taxes. Whatever remained of the Chinese intellectual elite also moved to Taiwan with the ROC. The Economic and Financial Reform program that did away with the 4 year plans was as early as 1959. Singapore is the most interesting case because it is the one exception to dependence on a foreign power for rights protection. In a way, Singapore exists today because of the immense skill and drive of Lee Kuan Yew. He successfully manoeuvred the exit from Malaya and 2 years-early British exit, kept the communist agents from Maoist China at bay via both pretending to act in their interest in the election (as the "safe" socialist candidate that could be the face of the Party) and by systematically exiling them thereafter. He successfully avoided US interference ("The Americans should know the character of the men they are dealing with in Singapore") yet built up an extremely impressive Army and police force inspired in great part by the martial law he had observed run by the Japanese, thus securing individual rights in the street. His economic programme - at least according to the aptly named From Third World to First - consisted of attempting to attract foreign companies so that they would both invest, and train the local workforce. Both foreign and local companies could do business safely and fairly. Looking at tariff rates and things like income tax in isolation is not productive. Did the post-war period result in considerable US growth for decades despite sky-high personal and corporate tax rates? Sure, but most other first world countries also had them. The marginal capital gains tax was at one point in the high 90s in the UK. I remember Ogilvy saying that at his peak, Ogilvy & Mathers was paying something like 70% corporate tax. Any country that attempts these rates today would destroy whichever of its companies were unable to move abroad, and to a certain extent few countries have much ability to set tax rates and tariffs to be far from global standards, with any deviation having to be justified by other factors (for example, local ownership rules in China are mitigated by the fact that it was until recently growing at 10% a year for a while, is a market of a billion people, and had easily available, relatively high quality, cheap labour).
- vacri 11y ago
  Japan has an unusually strong work ethic and cultural demand for quality work; I don't think you can simply paint their succcess as mere economic policy that could be replicated anywhere.
  - hga 11y ago
    Another factor is that Japan is a "high trust" society, like the US, which has a major effect on the types and sizes of business we can do effectively. The classic counterexample are ethnic Chinese abroad, where they tend to do things like trading companies, where putting relatives in high positions doesn't tend to hurt vs. e.g. Wang Laboratories, where founder An Wang crippled the company by promoting his unqualified son, as a friend working for them in their R&D lab at the time told us; per Wikipedia (https://en.wikipedia.org/wiki/Wang_Laboratories#Decline_and_fall https://en.wikipedia.org/wiki/Wang_Laboratories#Decline_and_...): Dr. Wang's insistence that his son, Fred Wang, succeed him contributed to the company's failure. Fred Wang was a business school graduate, "but by almost any definition," wrote Charles C. Kenney, "unsuited for the job in which his father had placed him." His assignment, first as head of research and development, then as president of the company, led to resignations by key R&D and business personnel.... One turning point occurred when Fred Wang was head of R&D. On October 4, 1983, Wang Laboratories announced fourteen major hardware and software products, and promised dates of delivery. The announcement was well received, but even at the time there were warning signs.... Very few of the products were close to completion and many of them had not even been started. All were delivered late and some were never delivered at all. In retrospect this was referred to as the "vaporware announcement" and it hurt the credibility of Fred Wang and Wang Laboratories. In 1986 Fred Wang, then 36 years old, was installed as president of Wang Laboratories. However, the company's fortunes continued to decline. Unlike most computer companies that funded their growth by issuing stock, An Wang had used debt to avoid further dilution of family control of the company. By August 1989 that debt was causing conflicts with its creditors. On August 4, 1989, Dr. Wang fired his son....

by crdb 11y ago

crdoconnor 11y ago

If Japan hadn't done this they would have kept their 1950s level per capita income. Which was about the same level as Brazil, Bulgaria and South Africa. They were poor as dirt. Now, they're one of the richest countries in the world. I don't think it was much of a trade off. Being a 'free market country' is ok if you're already rich. If you're still developing, it's a route to continued poverty.

crdb 11y ago
I think it's more complicated than "free market" vs "interventionism". Japan benefited from the rule of law courtesy of both its culture and its post-war colonial rulers (and, effectively, from massive investments from the US much as the Marshall Plan boosted Europe, and then for supplies during the Korean War which amounted to a third of exports). US policy was literally to boost the Japanese economy to avoid further militarism. Making the labour available to global investment, opening borders, benefitting from the post-war industrial revolution and population growth (which itself generated demand growth). Japan was no United States, but it wasn't a mere third world colony either - it was an industrial power who held up the most powerful military force in the world for years. China is today where Japan was in the 1960s, and that's putting pressure on this kind of strategy. Property rights is almost the defining factor towards "third world to first" IMO (especially in today's environment where FDI is so much easier). The various degrees of socialism or interventionism are merely an economic brake. Being able to enforce rights is much more important, and that involves many expensive things like a police and justice infrastructure well paid enough to avoid bribes, an independent judiciary and honest politicians whose interests are independent of policy.
- crdoconnor 11y ago
  If it were instead as simple as "property rights is all you need" there would be virtually no third world left. The same mercantilist strategy applied by Japan was repeated in Hong Kong, South Korea, Taiwan, Singapore and now China. Everywhere it's been tried, it has worked. Hell, even the United States followed this strategy (spearheaded by Alexander Hamilton) after the war of 1812. By the 1830s it had a 40% tariff rate which it kept for about another century.
  - crdb 11y ago
    But all of these countries enforce property rights. Hong Kong had the British enforce their brand of common law on it until 1997, and the Chinese haven't altered things much. It was British officers chasing Mao's bombs in 1967. The country became known as a trade hub because you could do business fairly there and tax rates were low. South Korea was defended by US Marines against the North, and in the early 1950s had over 300,000 American soldiers in the country. Again, this helped stop existing power structures from taking the country, although it is distinctly more authoritarian. Was mercantilism explaining part of the variance? Sure, but I don't buy that it would have happened without US troops to secure the country and to an extent the peace. Taiwan was guaranteed by the US (an ally of CKS and the ROC, with whom they fought the Japanese) in the same fashion including $4 billion in aid, and its prominence in electronics came from its very open policies about foreign investment in the field and low taxes. Whatever remained of the Chinese intellectual elite also moved to Taiwan with the ROC. The Economic and Financial Reform program that did away with the 4 year plans was as early as 1959. Singapore is the most interesting case because it is the one exception to dependence on a foreign power for rights protection. In a way, Singapore exists today because of the immense skill and drive of Lee Kuan Yew. He successfully manoeuvred the exit from Malaya and 2 years-early British exit, kept the communist agents from Maoist China at bay via both pretending to act in their interest in the election (as the "safe" socialist candidate that could be the face of the Party) and by systematically exiling them thereafter. He successfully avoided US interference ("The Americans should know the character of the men they are dealing with in Singapore") yet built up an extremely impressive Army and police force inspired in great part by the martial law he had observed run by the Japanese, thus securing individual rights in the street. His economic programme - at least according to the aptly named From Third World to First - consisted of attempting to attract foreign companies so that they would both invest, and train the local workforce. Both foreign and local companies could do business safely and fairly. Looking at tariff rates and things like income tax in isolation is not productive. Did the post-war period result in considerable US growth for decades despite sky-high personal and corporate tax rates? Sure, but most other first world countries also had them. The marginal capital gains tax was at one point in the high 90s in the UK. I remember Ogilvy saying that at his peak, Ogilvy & Mathers was paying something like 70% corporate tax. Any country that attempts these rates today would destroy whichever of its companies were unable to move abroad, and to a certain extent few countries have much ability to set tax rates and tariffs to be far from global standards, with any deviation having to be justified by other factors (for example, local ownership rules in China are mitigated by the fact that it was until recently growing at 10% a year for a while, is a market of a billion people, and had easily available, relatively high quality, cheap labour).
vacri 11y ago
Japan has an unusually strong work ethic and cultural demand for quality work; I don't think you can simply paint their succcess as mere economic policy that could be replicated anywhere.
- hga 11y ago
  Another factor is that Japan is a "high trust" society, like the US, which has a major effect on the types and sizes of business we can do effectively. The classic counterexample are ethnic Chinese abroad, where they tend to do things like trading companies, where putting relatives in high positions doesn't tend to hurt vs. e.g. Wang Laboratories, where founder An Wang crippled the company by promoting his unqualified son, as a friend working for them in their R&D lab at the time told us; per Wikipedia (https://en.wikipedia.org/wiki/Wang_Laboratories#Decline_and_fall https://en.wikipedia.org/wiki/Wang_Laboratories#Decline_and_...): Dr. Wang's insistence that his son, Fred Wang, succeed him contributed to the company's failure. Fred Wang was a business school graduate, "but by almost any definition," wrote Charles C. Kenney, "unsuited for the job in which his father had placed him." His assignment, first as head of research and development, then as president of the company, led to resignations by key R&D and business personnel.... One turning point occurred when Fred Wang was head of R&D. On October 4, 1983, Wang Laboratories announced fourteen major hardware and software products, and promised dates of delivery. The announcement was well received, but even at the time there were warning signs.... Very few of the products were close to completion and many of them had not even been started. All were delivered late and some were never delivered at all. In retrospect this was referred to as the "vaporware announcement" and it hurt the credibility of Fred Wang and Wang Laboratories. In 1986 Fred Wang, then 36 years old, was installed as president of Wang Laboratories. However, the company's fortunes continued to decline. Unlike most computer companies that funded their growth by issuing stock, An Wang had used debt to avoid further dilution of family control of the company. By August 1989 that debt was causing conflicts with its creditors. On August 4, 1989, Dr. Wang fired his son....