Japanese spirit, Western economics: the continuing salience of economic nationalism in Japan

Abstract

Japan is arguably the single most important country in the International Political Economy (IPE) literature on economic nationalism. The spectacular success that the Japanese state has enjoyed, both during the Meiji period in the late 19th century and during the high growth decades of the Cold War, in promoting economic development has made the country the most effective advertisement for economic nationalism since interest in the concept began to re-emerge in the early 1970s. The precise mix of policies that Japan has employed in spurring economic growth is, of course, the subject of scholarly debate. However, there is widespread agreement that mechanisms like industrial targeting, directed lending, protection and subsidies for infant industries, efforts to procure and indigenise technology, and state control over finance have been central to Japan’s success. While Alice Amsden coined the phrase ‘getting the prices wrong’ to describe South Korea’s industrial policy, the willingness of the Japanese state to change price incentives in the economy has been a key part of the country’s economic nationalism. 1 During the 1980s Japan was touted as a model not only for the rest of Asia, where various states made efforts to emulate Japanese policies, 2 but even for the United States itself. At a more theoretical level, much of the discussion about economic nationalism in IPE took Japanese policies as paradigmatic. Given that Japan’s economic success has had so much to do with both the study and the advocacy of economic nationalism, it is not surprising that the country’s prolonged doldrums during the 1990s have encouraged critics of nationalist economics. Japan’s ‘lost decade’, and the 1997 Asian financial crisis which laid low many other states ostensibly following the Japanese model, have widely been seen as decisive refutations of economic nationalist policies. Indeed, with the Asian crisis following on the heels of the collapse of the Soviet Union, liberal economists (particularly in the USA) were quick to argue that both communist and nationalist economics had been discredited and that liberalism was now the only game in town. Whatever usefulness Japan’s nationalist economic policies may have had in earlier decades, they were hopelessly