EH 15 Third worlds

Describe pre-WWII Japan

• diversification and expansion of industry

• lifetime employment ; employment stability

• ringi decision making system

• shifting to modern corporate governance structure: managing structures in companies

• nationalism, militarism, economic growth

• Zaibatsu dominated

ringi decision making system

consensus based decision making system in japanese companies during the interwar period

How was Japan shifting to a modern corporate governance structure pre WWII

• zaibatsu: large-scale corporations

• ringi system

• banto managers

Describe the transition from zaibatsu to keiretsu in the 50s

The American occupation dissolved zaibatsu, but the business networks reorganized as keiretsu, which were:

• centered around a main bank

• based on cross-shareholding between firms,

• allowing long-term investment stability

coordinated capitalism

Government contribution to the post WWII Japanese Miracle

• emphasized international markets

• export-led growth strategy of second industrial rev products

  • steel, auto, electronics

• importing tech to imitate

• “do ut des”— I give so that you give

  • gov subsidizes companies who must meet performance requirements

Legislative  attitude contributions to Japanese Miracle

not concerned with consumers losing in the short run

focus on LT competition

Company strategies contributing to Japanese Miracle

• brave investment policies

• coordination and cooperation between firms without centralized ownership

• both small and big firms

• virtuous relationship with workers

Example of steel in Japanese Miracle

• MITI (ministry of international trade and industry): protectionism, support prices, subsidize

• 72% of subsidies given to 4 companies 1951-1958

• investments carefully planned based on domestic and global demand

• strict monitoring of productivity and efficiency

• fewer but larger steel mills

Park Chung-Hee

strict dictator Park Chung Hee assassinated

5-year plan

strict discipline across all social strata inspired by the Japanese

nationalized banking, import substitution

the chaebol: richest families owning biggest firms, imprisoned for corruption with release contingent on cooperation with the 5-year plan

Mid-1960s Asian countries with per capita income above world average

Japan and Hong Kong

1985 East Asian countries with per capita income above world average

Japan, Hong Kong, Singapore, SK, Taiwan

“Four Asian Tigers”

Amsden and Hikino’s 4 trajectories of third-world countries

Staying Behind — no structural change (many African economies).

Stumbling Back — early industrialization followed by decline (Argentina).

Sneaking Up — gradual catch-up without dramatic breakthroughs (Thailand).

Soaring Ahead — dramatic industrial rise (Japan, South Korea, Taiwan).

Effect of colonization on the divergence of economic ability in the third world

1. left weak, undiversified economies like in Africa which was primarily used for resource extraction

2. Asia and South America benefited from transfer of technology and skill (british tech in India, Migration from Japan to Taiwan and korea, migration of people and firms from europe to SA)

divergence in 50s and 60s between those those that “appropriated” foreign technology (created their own production systems),

those that simply imported it without building domestic capability.

Disadvantage of latecomers in third world development

gap enormous by the 1970s

traditional strategies no longer effective. not enough to lower wages or devalue

late industrialization required state intervention and targeted strategic sectors. market forces alone couldnt close huge technological gaps.

What sectors did third world countries focus on at this time

easier to learn “medium” technologies: steel, shipbuilding, chemicals

How did third world firms gain competitive advantage

• incremental improvements in production processes

  • organizational and managerial efficiency

Strategy of large-scale enterprise development in third world countries

• high diversification for economies of scope and bc of small domestic market

• reduce risk

• leverage ease of acquiring medium tech

Successful third world developers had a ____ model in their economies

group

chaebols in SK

zeiretsu in Japan

grupos in Argentina

The role of public initiative in third world economic development

• important role creating favorable conditions for private enterprise

  • direct private capital to max efficiency within an integrated development strategy

The private sector was required to ____

pursue its own aims of profitability within a framework of regulated production

common strategic state functions to grow manufacturing

• incentives, price controls

• creation of an efficient banking system

• promotion of firms’ international competitiveness