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

bear the expected preferences for liberalization

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bear the expected preferences for liberalization. Competitive firms remain

bound to the protected sector through long-term business relationships and/

or cross-shareholding arrangements with unions, banks, suppliers, distributors,

and other firms and through political ties to industry associations, political

parties, and government agencies. These firms derive comparative institutional

advantages from the micro institutions of German and Japanese capitalism, such as labor relations and financial systems, so they must weigh the expected efficiency gains from liberal reforms against the potential costs

of undermining these institutions. As a result, they are much less favorable

toward these reforms than they would be in the absence of these institutions

and more favorable toward reforms designed to preserve or reinforce these


Explain the preceding paragraph.

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