J-Vids of Interest: The Myth of the Japanese Miracle (2)

J- Vids of Interest: The Myth of the Japanese Miracle  (Part One)

Japan's economic performance after WW II till the late 1980's was exceptional. As measured by per Capita GNP and net holdings of foreign assets, in only three short decades, Japan managed to rise from a country decimated by a world war to arguably one of the wealthiest nation on earth. In 1988, the Japanese economy was nine times larger than in 1955. During the same period, the United States’ economy had grown only about 2.5 times. Per capita GDP, de-nominated in U.S. dollars at the market exchange rate, had overtaken that of the United States by the late 1980s.  (Ito)

Especially the high-growth era between 1950 and 1973 had stunned many Japan observers. During that time Japan’s real GNP growth rate averaged more than ten percent per year. The high growth phenomenon was partly explained by Japan's quick recovery of the productive potential that had been destroyed during World War II. However, already in the 1960`s Japan surpassed its prewar potential trend and the economy kept on growing rapidly throughout that decade and into the beginning of the 1970s. The growth trend of the 1960's slowed abruptly after the first oil crisis in 1973-74, still the annual growth rate over 1975-90 was roughly half of that achieved (Part  in the previous two decades, it still exceeded 4 percent. (Ito)

The period was dubbed the "Japanese Miracle" by academia, whereby this terminology stems from the fact that economists, using a Solow growth model that analyzes total factor productivity, could not explain the large "Solow residuals" that they found.  (Ito)

The "Solow Residual" inspired a flurry of literature devoted to unraveling the factors behind Japan’s economic success. More and more a broad consensus emerged in academia, that Japan’s unique form of corporate governance, known as the main bank model, was a driving force behind its economic growth and a significant contributor to its competitive advantage over the United States.

Three fundamental elements to the Japanese main bank model exist:

• Strong long-term relationships between specific banks and specific firms (Main Bank)

• A Keiretsu corporate structure

• Lifetime employment

The following BBC documentary from the 1980's is mainly about the Japanese employment system. Unfortunately, it does not tackle the issues and cost that the system entails.

 

Latest when corporate Japan began trophy shopping in the U.S, and started to hoard U.S. icons like the Rockefeller Centre and Universal Studios in the late 1980's, the sentiment towards corporate Japan started to shift, especially in the U.S. Had it been envied before was it now feared.

The following video shows quite impressively how heated the debate about corporate Japan taking over corporate America was. Mainstream media and academia not seldom engaged in slander, spreaded half truth, or lies, and even outright racism was exhibited when discussing the "Japanese Miracle".

"If we do not do something about the Japanese, we are all going to frying hamburgers. That is what we are going to do." (Jack Hopper, Apr.1989)

"We are going to end up as a colony. A colony of Japan." (Jack Hopper, Apr.1989)

But not all Japan observers bought into the story of the "Japanese Miracle". A few scrutinized the "Miracle Story" more profoundly and told the public a slightly different story. One that was much murkier. Unfortunately, the last part of the documentary is missing. Nevertheless, is the video worth watching for readers interested in Japan.

Source:

TAKATOSHI ITO;  Japan and the Asian Economies: A "Miracle" in Transition;  Brookings Papers on Economic Activity; 1996