Jpri occasional Paper No. 22 (August 2001) Japanese "Capitalism" Revisited by Chalmers Johnson plan-rational and market-rational economies capitalist developmental state capitalist regulatory state

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Frieden and Rogowski (1996) offer a model for deducing societal preferences that suggests the competitive sector should favor liberalization, the protected sector should oppose it, and internationalization should strengthen the competitive sector vis-à-vis the protected sector. According to standard economic analysis, economic liberalization should reduce prices and expand choices for consumers, lower costs for producers, and boost economic growth. It not only improves efficiency in the short run but also can bring more dynamic long-term benefits by stimulating business activity and innovation. Protection has both a distributive cost, in that it punishes consumers in favor of producers, and a social welfare cost, in that it distorts the allocation of resources within the economy.

how economic ties between the two sectors shape industry policy preferences and how political ties between the two affect the aggregation of these preferences. First, those groups with the greatest apparent stake in liberal reforms, such as large manufacturing exporters, are reluctant to embrace reforms that might undermine the comparative institutional advantages of close long-term relations with workers, financial institutions, other business partners, and the government.

Second, those who do favor liberal reforms cannot forge a strong political coalition because the major industry associations and conservative political parties incorporate both the potential winners and the potential losers from reform. Thus the associations and the parties must work out internal compromises between constituent groups before proposing reforms. The other political parties are even less likely to support liberal reforms. As a result, Germany and Japan wind up with a distinctive pattern of economic reform: They proceed with reforms slowly and cautiously; they package delicate compromises, including considerable compensation for those who might be disadvantaged by the reforms; they design reforms to preserve the core institutions of their respective models as much as possible; and they seek novel ways to build on the strengths of these models.

In the United States and Britain, in contrast, industry has supported liberal reforms more strongly; industry groups have been more likely to lobby on their own or to form ad hoc coalitions rather than to work through national peak associations; and the conservative parties have embraced the liberal market model much more wholeheartedly. As a result, the United States and Britain have moved much more boldly with liberal reforms than have Germany and Japan

Why should we expect any changes in the German and Japanese models? Globalization? Political pressure from abroad?

What is the Frieden and Rogowski model? Does Vogel agree with this?
In Germany and Japan, however, the competitive sector does not necessarily

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