The Japanese challenge to neoliberalism: Who and what is ‘normal’ in the history of the world economy?

ABSTRACT

Since the end of the Cold War, the US has spearheaded the homogenization of the world economy along neoliberal lines. The US-led neoliberal international order, however, did not go unchallenged. Since the late 1980s, Japan has challenged the foundation of the neoliberal international order by asserting the role of the state in economic development. In the vein of constructivist scholarship with emphasis on the meaning-oriented discursive production of the world that has social effects, I ask the question of what made it possible for Japan to challenge neoliberalism. To answer this question, I examine the Japanese developmentalist discourse to uncover a historically constructed collective meaning that enabled the Japanese challenge to be conceivable as a justificatory foundation. I find a shared, intersubjective meaning called ‘normalcy,’ which the Japanese developmentalists have historically attached to the role of the state in economic development. Here ‘normalcy’ means that state-led economic development has been a normal practice for all the successful industrializers in the history of the world economy. In the eyes of the Japanese developmentalists, what is truly ‘normal’ or ‘universal’ is the proven validity of state-led economic development across time and space. I argue that this shared ‘normalcy’ meaning available in the Japanese developmentalist discourse creates the very possibility of the Japanese challenge.

KEYWORDS:

• Developmentalism
• neoliberalism
• normalcy
• state-led economic development
• Japanese challenge
• Asian economic success

ACKNOWLEDGEMENTS

I am grateful to Hayward R. Alker for his encouragement and advice on various drafts of this paper. J. Ann Tickner also deserves my special thanks for her guidance. Saori N. Katada, Gordon Berger, Appichai Shipper, and Daniel C. Lynch gave me helpful comments on previous versions of this project. I would like to extend my gratitude to Hiwatari Nobuhiro of the Institute of Social Sciences at the University of Tokyo; I immensely benefited from the research facility of the Institute. In addition, I am grateful for suggestions and comments by three anonymous reviewers of RIPE. The earliest version of this paper was presented at the Center for International Studies at the University of Southern California on 30 October 2002.

Notes

^a This table is adopted from Takatoshi Itō (1998: 21).

1 By ‘neoliberalism’, I mean here an economic development approach espousing greater roles for market mechanisms and private sector initiatives. It prescribes elimination of subsidies to inputs, liberalization of product markets, and the abolition of the state-run distribution system. It is often dubbed as the so-called ‘Washington Consensus’. Conversely, by ‘state-led’, I mean here that the role of the state in economic development or industrialization is not limited to the provision of a basic legal framework, public order, and external security. The state actively encourages public services and other institutions favorable to industrialization and even undertakes direct organizational activities in production.

2 See Chang (2003) for the critique of the neoliberal historical generalization on the role of the state.

3 In terms of the continuation of the Japanese challenge to neoliberalism, there has been a concern among scholars about the impact of Japan's ‘lost ten years’ (Japan's own economic stagnation since the early 1990s) on Japan's policy toward promoting state-led economic development. I expressed this concern at the end of every interview I had with the MOF officials, academics, and researchers when I was in Tokyo in 2002. In a nutshell, they clarified that Japan's promotion of the so-called Japanese model of economic development (which they believed was successfully applied in Asia) was/is/will be for ‘developing’ countries, not for ‘developed’ countries. If the Japanese economy has a problem (lost ten years), it is Japan's problem as a ‘developed’ country. Ultimately, they argued that Japan was the only (non-Western) country that made the successful transition from a peripheral to a core economy. In terms of the current foreign economic policies, Japan still actively engages in promoting the state-led model in various ways, as discussed below. Along this line, Vogel (1999) documents in his study of Japan's domestic economic reform debates that both Japanese business associations and general public (or Japanese consumers) were reluctant to heartily embrace the idea of abandoning the Japanese economic model to emulate the American model even when Japanese economy was at its nadir. See also Vogel (2006) for his discussion on the nature of Japan's domestic economic reform as ‘selected reform to modify or reinforce existing institutions rather than to abandon them’.

4 Due to Japan's continuous resistance, the ADB is the only multinational development bank (MDB) that is unscathed by neoliberalism in term of lending prescriptions and conditionalities.

5 Interview with an ADBI official, 31 July 2002, Tokyo, Japan.

6 The word ‘only’ needs some qualifications. For example, such developed European states as France and Germany currently have their own economic practice not completely dominated by the market and show some reservations about advocating a ‘market only’ approach. Their approach is, however, far less assertive than that of the Japanese. Their acknowledgement of the role of the state in economic development is limited to their positive posture on state-run enterprises. On the spectrum, this is much closer to the neoliberal doctrine than the Japanese alternative. Regarding a historical analysis of German development policy, see, for example, Messner and Nuscheler (2004). This point is further evident in Bronstone's (1999) in-depth study of the rules and norms of the European Bank for Reconstruction and Development (the EBRD). Contrary to a story told by Weber (1994) that the EBRD strongly reflects a distinctive European identity and goals, Bronstone demonstrates that in terms of lending policies, prescriptions, and conditionalities, the EBRD is even more reflective of the market-oriented neoliberal doctrine than that of the World Bank.

7 Throughout this article, I use Murakami's (1996: 145–6) definition of developmentalism, as in the following: ‘Developmentalism is an economic system that takes a system of private property rights and a market economy [in other words, capitalism] as its basic framework, but that makes its main objective the achievement of industrialization [or a continuous growth in per capita product], and, insofar as it is useful in achieving this objective, approves government intervention in the market from a long-term perspective. Developmentalism is a political-economic system established with the state [or a similar polity] as its units.’

8 Based on extensive consultations with Japanese economic historians and economists, a simple rule for choosing texts (and authors) is to select those that are most widely read and cited. In performing discourse analysis, I also pay attention to the relationship between developmentalists' texts (intertexuality).

9 As discussed below, this does not mean that all Japanese developmentalists since the late nineteenth century share the same intellectual and political interests in contexualizing Japan's pattern of economic development in ‘normal/abnormal’ meanings. Nonetheless, they have interpreted Japan's status by relating it to their understanding of the historicity of state-led economic development (the ‘normal’ path of successful economic development). Additionally, the character of Japan's development experience (whether it would be regarded as ‘normal’ in the history of the world economy) was particularly important to the early developmentalists in their struggle against economic liberals for the question of what Japan should do to survive Western imperialism. See, for example, Morris-Suzuki (1989: 59–62). I am grateful to one of anonymous reviewers for this point.

10 The way in which the Japanese developmentalists construct an alternative universalism (the ‘normalcy’ claim) around the role of the state in economic development needs some qualifications. They do not claim that there is only one method for state-led economic development. What they claim is the proven validity of the role of the state in developing and implementing appropriate development strategies for economic development. Theoretically, therefore, each country can have a different method of economic development. However, without the development and application of appropriate industrial policy (or completely relying on the function of the market), the given state cannot be hopeful for successful economic development, which is observed in the history of the world economy.

11 In International Political Economy, one observes a recent surge of the so-called ‘historicized international political economy’. See, for example, Amoore et al. (2000).

12 Similarly, see Cruz (2000) for the concept of ‘collective field of imaginable possibilities’ that shapes the future actions of national collectivities.

13 Similarly, see also Hall (2003) and Leheny (2003) for the role of collectively held social meanings in institutionalizing states' economic policies.

14 See, for example, Uriu (2000) for a detailed documentation of the US–Japan economic conflict.

15 Lehman (2005) also confirms this point.

16 This is particularly pronounced in the field of IPE. See Milliken (1999) for a critical analysis of discourse-oriented empirical works in International Relations.

17 According to Braisted (1976: 307, footnote 4), Kanda's translation of William Ellis's Outlines of Social Economy, which was published in Japan in 1867 under the title of Keizai Shōgaku, was the first book that introduced protectionist ideas to the Japanese.

18 Under the influence of the German historical school, the Japanese counterpart established ‘The Society for Social Policy (Shakai Seisaku Gakakai)’ in 1896, modeled after the German Verein fÛr Sozialpolitik. Regarding the impact of the German historical school on Japan, see Pyle (1974).

19 Wakayama (1871) in Giichi Wakayama, Wakayama Norikazu ZenshÛ, Vol 2. Interestingly, Wakayama was at that time an official of the Ministry of Finance (MOF). As discussed below, the MOF has been an intellectual power house of exporting the Japanese model of economic development since the 1980s.

20 Wakayama (1940 [1877]: 769–771). This work was written immediately after Wakayama returned to Japan from Europe as a member of the Iwakura mission. See also Halliday (1975: 3–61) for the impact of the Iwakura mission on the development of Japanese capitalism.

21 Kōji Sugi, ‘On Reforming Trade’, Meiroku Zasshi, 24 (December 1874), in Braisted (1976: 304).

22 Takuzō Ushiba in Minkan Zasshi, 24 (1875), in Sugiyama (1994: 9).

23 Shikeki Nishimura, ‘On Free Trade’, Meiroku Zasshi, 29 (February 1875), in Braisted (1976: 356–8). Italics added.

24 Sadamasu Ōshima, in Tsukatani (1986: 101–2). Italics added. Similarly, in his Jōseiron (1891), Ōshima also argues that engaging in free trade when a country is in an underdeveloped state is a practice that ‘liberates other nations at the expense of one's nation’. See Sugiyama (1994: 11–12).

25 Okubo, for example, met with Bismarck and von Moltke in Berlin and heard directly from them about their experiences in founding the German Empire. See Sugihara (1998: 219).

26 Okubo in Sugihara (1998: 220).

27 Ibid, 221.

28 See Derek Hall (2005) for the embeddedness of economic nationalism in Japan's economic policymaking.

29 Fukuda, under the guidance of Brentano, a leading member of the German social policy school, published his work in 1900 under the title Gesellschaftliche und Wirtschaftliche Entwicklung in Japan (Social and Economic Development in Japan). For the discussion of the ‘normalcy’ claim below, I rely on Kang's (1997) interpretation of Fukuda. Fukuda was also a leading figure of ‘The Society of Social Policy’ noted above.

30 Kang (1997: 94).

31 Ibid, 84.

32 Ibid, 95.

33 Akamatsu's flying geese theory had already become famous in Japan during the 1930s, but Akamatsu continued to refine it until the 1960s. See Akamatsu (1962: 12, footnote 1) for his evolutionary refinements of his flying geese theory (Akamatsu, 1935, 1937, 1945, 1956, 1961, 1962). Below, I will focus on his three works (1945, 1961, and 1962) as they are most relevant for historicizing the development trajectories of late industrializers, including Japan.

34 Akamatsu applied the flying geese theory to the growth of Asia's clothing industry and Japan's transistor radio industry since 1945 and confirmed that ‘the wild-geese-flying development completed its course from import to domestic production, and, further, to export in the short period of several years’. See Akamatsu (1962: 23).

35 Akamatsu (1945: 305). He uses the US as an example that had exercised such a practice after its independence.

36 See, for example, Saburo Ōkita (1975a: 145–6) and Hatch and Yamamura (1996).

37 See, for example, Ōkita (1975b: 33–58) for his enumeration of the elements that led to high economic growth: (1) technological catch-up; (2) high productivity and low consumption; (3) abundant supply of labor; (4) dual structure of the economy; and (5) high savings. Nonetheless, he emphasized the important role of the government. On the policy and planning side, the elements are: (1) the ‘economy first’ principle of the government; (2) production-oriented policies; (3) expansion of heavy industries; (4) export promotion; (5) use of the price mechanism and planning; and (6) the financial system.

38 One major difference is that compared to their predecessors in the nineteenth century who emphasized the role of the state (industrial policy) for the survival of Japan in the vein of economic nationalism, postwar Japan's developmentalists (particularly ‘government economists’) have had an additional concern with legitimizing their role in Japan's economic success. This observation, however, does not deny their ‘objective’ or ‘sincere’ attempts to identify the real causes of Japan's economic success. I thank one of anonymous reviewers for bringing this point to my attention. See, for example, Komiya ([1975] 1980, especially Chapters 1 and 2).

39 Ōkita was one of the chief architects of the 1960 National Income Doubling Plan. Embracing Akamatsu's flying geese theory of economic development, he became famous for his missionary role during his travels to East and Southeast Asian countries (in the 1960s and 1970s) in promoting the theory of the flying geese pattern of economic development.

40 He also did not forget to include a favorable international environment led by the US. See Ōkita (1975b: 58–63).

41 Ōkita (1980: 105–148). See also Ōkita (1984). The entire volume was about whether or not Japan's path to modernity and Industrialization was ‘unique’.

42 Ōkita (1994), in Woo-Cumings (1995: 241).

43 Italics added.

44 This is a more specified form of the infant industry argument. See Murakami (1996: 151–4).

45 Ibid, 189–204.

46 Murakami (1992), in Yamamura (1997: 260–261, 268–269).

47 Ibid, 217.

48 Ibid, 233.

49 Takatoshi Itō, a Harvard-trained economics professor at the University of Tokyo, also served the government until recently (1998–2000) as Director-General of the International Financial Bureau at the MOF. Takatoshi Itō is often regarded as a liberal due to his advocacy of ‘more’ liberalization of Japan's economy. His liberalization advocacy, however, is premised on his conception of Japan as a developed country (not a developing country). As shown below, he advances the developmentalist idea of the role of the state in economic development when a country begins to industrialize.

50 In particular, see Watanabe (1998) in the volume.

51 Watanabe (1998: 201–2).

52 Kenichi Ohno (1998: 7).

53 For a careful analysis of the differences and similarities, see Ohno and Sakurai (1997: 205–85).

54 Regarding detailed analyses of the influence of the Japanese developmentalists in challenging neoliberalism in the ADB and the World Bank, see the literature noted above. Additionally, see Katada (2004).

55 Interim Report of Asia-Pacific Economic Research (Tokyo: Foundation for Advanced Information and Research, 1990: 64), in Bernard and Ravenhill (1995: 184).

56 At times, Japanese developmentalists emphasized Japan's ‘uniqueness’ when they explained Japan's success of economic development. For example, Murakami is also famous for his analysis of social values and their role in promoting or retarding industrial growth. In the case of Japan, he argued that its successful industrialization was considerably indebted to its collectivism-based traditional family values, the famous ‘ie’ thesis. On this basis, some scholars tend to categorize Murakami's explanation of Japan's high economic growth within the ‘unique’ thesis along with Morishima (1982) who stressed the collectivist ethos in Japan for Japan's economic success. As discussed above, however, for Murakami, such cultural variables as values are more or less ‘intervening’ variables (but he did not depict the causal relation in this way). In the final analysis, it was the state that was able to ‘direct society as a whole toward industrialization’ and to foster and utilize the sense of group solidarity originally centered around the family (ie). The state was able to harness this value to the common cause of competing with the West. See Murakami (1984, 1986).

57 See, for example, Ōkita (1975b: 119–59) and Johnson (1992: 21–6).

58 Since the 1960s, the MITI and the MOF have been inviting and training young bureaucrats across Asia with issues regarding economic development.

59 For useful information on the current status of the Japanese challenge, visit GRIPS Development Forum operated by National Graduate Institute for Policy Studies in Japan (http://www.grips.ac.jp/forum-e/index.html). The Asian financial crisis has had almost no impact on the Japanese confidence in the validity of state-led economic development, as Japan defined the nature of the crisis in terms of ‘a crisis of global capitalism’, not of Asian capitalism. In other words, the main cause of the crisis resulted from too much liberalization and deregulation pushed by the Wall Street–Treasury complex. See, for example, Wade and Venerosso (1998).

60 Amsden's (1994) claim resonates with this: why isn't the whole world experimenting with the East Asian model to develop?