Abstract
AbstractJapan's steep postwar growth was nested in a political economy built around producer‐oriented policies: by fostering the growth of large firms using the tools of industrial policy, the government could jumpstart development. Many large firms, and their employees, benefited indirectly from this growth program, and very small firms and industries not included in the growth model were compensated through preferential policies or subsidies. Japan's social contract evolved around this system, having as its centerpiece lifetime employment. The government spent more resources on supporting exporting industries and compensating domestic ones than on building a forward‐looking welfare system. Japan's decade‐long economic downturn marks a structural transition towards a postindustrial society. While excelling in producing tangibles, Japan has fallen behind in fostering modern industries, including services; the country also lacks a welfare system to handle increasing structural unemployment that this transition brings about. Without a commitment towards a welfare system and a welfare society, and a reorientation of the social contract towards citizens, Japan is unlikely to transition successfully.
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