Economic Deregulation Research Articles

Japan’s “Lost Decade”: Causes, Legacies and Issues of Transformative Change ed. by W. Miles Fletcher III and Peter W. von Staden (review)

Reviewed by: Japan’s “Lost Decade”: Causes, Legacies and Issues of Transformative Change ed. by W. Miles Fletcher III and Peter W. von Staden Takeo Hoshi (bio) Japan’s “Lost Decade”: Causes, Legacies and Issues of Transformative Change. Edited by W. Miles Fletcher III and Peter W. von Staden. Routledge, London, 2013. x, 153 pages. $150.00, cloth; $51.95, paper. The seven essays in this book were originally published in a special issue of Asia Pacific Business Review. With introductory and epilogue chapters added here, they examine Japanese business during the so-called “lost decade(s)” for Japan, which usually refers to the period after the collapse of asset prices in the early 1990s. The main theme of the book is that the 1990s for Japan were not really “lost.” Rather, it was a time for transformation. The idea is most clearly expressed in chapter 3 by Ulrike Schaede. By the late 1990s, Japan started to change in all aspects of “formal organization, people and culture” (p. 33) to respond to new challenges, which mainly came from globalization. Japan’s model for economic growth (what Schaede calls the “development state approach”), which was successful until the 1980s, became less effective when low-cost competitors from the rest of Asia followed Japan’s path and started their own catch-up growth. At the same time, financial globalization began to transform Japan’s corporate finance and governance, and made it difficult for Japanese corporations to maintain the traditional structure. In the late 1990s and the early 2000s, the Japanese government changed economic regulations and the Companies Act, and Japanese corporations reorganized and restructured. The change that started in this period (the “strategic inflection point,” according to Schaede) is likely to continue as the repositioning is (as of 2010) still limited to a subset of Japanese corporations. Schaede’s chapter provides suggestive evidence to support this hypothesis that Japan started the process of wholesale change in the late 1990s. Although we need to wait for more data and rigorous testing to reach a [End Page 452] definitive conclusion, the data in the chapter are sufficient to convince me the hypothesis is promising. Pointing out that Japan was not completely lost after the collapse of the credit boom in the late 1980s is also important now that many advanced economies in Europe may be going into a long economic stagnation similar to Japan. Positive developments in Japan identified in some chapters of this book may be useful for European countries trying to cope with stagnation. Understanding successful adjustments in Japan is also useful for other Asian economies, such as China, that have grown rapidly more recently and are likely to face similar challenges as their catch-up growth ends. There will be positive lessons (in addition to negative lessons on what not to do) they can learn from Japan. Schaede’s chapter is sandwiched by two chapters (written by each of the two editors of the book) that examine the policymaking in Japan that eventually led to the changes discussed in her essay. Each chapter focuses on one particular aspect of policymaking that is ignored in many other studies of Japan during the 1990s and the 2000s. Chapter 2 of the book by W. Miles Fletcher III studies the role of Keidanren, the organization of the largest businesses in Japan, while chapter 4 by Peter W. von Staden emphasizes the role of ideology held by policymakers. Fletcher’s chapter reveals that the business leaders in Keidanren consistently argued for the economic deregulation that was accelerated during the “strategic inflection.” Keidanren pushed the government to implement economic reforms and the government finally started to respond. “During 2010, the policies of Keidanren remained essentially the same as they were 25 years earlier” (p. 28), but this is probably because the reform is still incomplete and does not mean Keidanren has been stubborn and continues to advocate policies that would not work. Although Keidanren seems to have contributed to bringing about the important changes described in Schaede’s chapter, Fletcher criticizes the organization by noting that Keidanren did not call “in the late 1980s for measures to prevent a speculative bubble or in the early 1990s...

Basel and Securitization: Conflicting Incentives and Rationales

La crisis financiera presentada en el 2007 reviste una serie de factores similares a lo que generó la crisis de 1929, precedidas por un ambiente de desregulación económica. Existen entonces dentro de los sistemas bancarios una serie de incentivos y racionalidades que, dependiendo de la posición que se ocupe dentro del mercado financiero, están constantemente en conflicto con la regulación y en especial con los principios establecidos en Basilea para el correcto funcionamiento del sistema.
 En consecuencia al presentarse nuevos mecanismos de negocios, como la titulación o el mercado de futuros, estos incentivos van a influenciar enormemente en los agentes del mercado financiero, para que incumplan sus obligaciones (Basilea I, II, y III). Así logran una mayor ganancia tanto para ellos como para las instituciones a las que pertenecen.
 Por lo anterior las medidas contenidas en Basilea III, que se basan principalmente en aumentar el capital de riesgo y disminuir el apalancamiento, si no se acompañan con una política de control efectiva, teniendo en cuenta los incentivos y al agente racional dentro del mercado, no van a ser eficientes en el largo plazo, siendo posible que se produzca una nueva crisis económica, si se encuentra un nuevo instrumento financiero apto para ello.

Stuff and money in the time of the French Revolution

Rebecca L. Spang, who revolutionized our understanding of the restaurant, has written a new history of money. It uses one of the most infamous examples of monetary innovation, the assignats a currency initially defined by French revolutionaries as circulating land to demonstrate that money is as much a social and political mediator as it is an economic instrument. Following the assignats from creation to abandonment, Spang shows them to be subject to the same slippages between policies and practice, intentions and outcomes, as other human inventions.But Spang s book is also a new history of the French Revolution, one in which radicalization was driven by an ever-widening gap between political ideals and the realities of daily life. Money played a critical role in creating this gulf. Wed to the idea that liberty required economic deregulation as well as political freedom, revolutionary legislators extended the notion of free trade to include freedom of money. The consequences were disastrous. Backed neither by the weight of tradition nor by the state that issued them, the assignats could not be a functioning currency. Ever reluctant to interfere in the workings of the market, lawmakers thought changes to the material form of the assignats should suffice to enhance their credibility. Their hopes were disappointed, and the spiraled out of control.Stuff and Money in the Time of the French Revolution restores economics, in the broadest sense, to its rightful place at the heart of the and hence to that of modern politics.

Economic Entitlements via Entrepreneurial Conduct? Women and Financial Inclusion in Neo-liberal India

This paper examines the gendered local character of neoliberalism at the household level by focusing on microcredit/finance programs in India. Microfinance promoted by the state as an informal activity targeting women is intended to alleviate income inequalities, even as it contributes to maintaining the world capitalist system. In India the inception of microfinance-based Self Help Groups (SHGs) or peer groups of women savers and borrowers in the 1990s has coincided with a rightward turn towards neoliberal policies of structural adjustment, privatization and economic deregulation. In this paper, I show how Indian policy makers have endeavored to make women's economic entitlements contingent upon their disciplined financial behavior and their willing participation in neoliberal agendas of creating and deepening 'self-regulating' markets at village levels. Drawing on an ethnographic study conducted in a South Indian state, I show that the community level 'neoliberal disciplining' that microfinance entails does not proceed without resistance. Whilst SHGs seek to constitute women as fiscally disciplined savers and borrowers, women stake their 'rightful' entitlement to bank credit even as they reject outright the entrepreneurial subjectivities they are expected to assume. They pursue purposes and ends that extend well beyond 'financial inclusion.'

What’s Behind the World Bank’s ‘Doing Business’ Rankings?

Like its annual ‘Doing Business’ (DB) ranking, the World Bank’s new Benchmarking the Business of Agriculture (BBA) initiative ranks countries according to how ‘business friendly’ their agriculture and land policies are, thus promoting competitive economic deregulation as countries vie for foreign direct investment. There is an urgency to stop the DB ranking, and to halt the BBA while it is still in its early stages, to prevent land grabbing and further dispossession of smallholders, pastoralists, and indigenous populations.

Health Tourism: an institutional and budgetary co-financing alternative?

Countries of Central Europe began to organize their health services for over one hundred years, with Bismarck’s model (1883) a usual reference in the establishment of the State's concerns with citizens’ health. Taken to the supreme achievement of the welfare state then occurred, and provide all citizens what medical science could produce. Further alternative funding models were developed that paradigm is the Beveridgean model in the 40s. In this sense the Portuguese Health System establishes itself in 1979, according to a model most likely Beveridgean, obeying the constitutional provisions, in particular Article 64 of the Portuguese Constitution, framed by the Basic Law of Health (Law 48/1990 amended by decree 27/2002). However, the trade balance in the health sector is at least since the early 2000s deficit in a context of economic deregulation that went from a GDP growth of 3.8% per capita in the decade of its constitution to -1,4% during the stated period. Throughout this period the Health Sector was held in accordance with its original model with the sacrifice of public accounts, with successive amending budgets, contributing approximately to a total public expenditure of € 3.6 billion corresponding to 130% of GDP. Therefore speak of a single health budget, tax-based and controlled (9.3% of GDP according to the OECD average), such as life insurance of the Portuguese Health System seems very difficult to practice with pressing concern. Launched the tone in 1985 with the Schengen treaty, and recently implemented by the European Union directive on cross-border health care (EU Directive no 24/2011), the Medical Tourism and Health can then profile as co financing either for the NHS or for the private health sector. In the European project, Portugal behaves now as an importer of health care, accounting for 1% of total spending on health with an annual increase of 2.5%, in this heading. It is therefore important to reflect, taking examples from east European countries, with annual growth rates of exports of health care of around 20% (eg Slovenia and Poland) and promote excellence in the provision of health services Portuguese, the Portugal geo strategic position and its climatic conditions, are arguments that give us an advantage in the challenge of internationalization of Health.

Quality as a strategic support for businesses

The modern enterprise is included in an environmental context characterized by high and rising levels of instability and very high degrees of uncertainty regarding the continuity of their activities. This climate is related to adverse environmental occurrence of certain events that make today's business environment much more volatile than in one relative closer past, in historical terms, namely: globalization, the advent of a new paradigm in energy and environmental the rapid technological development, deregulation of economies and fierce competition in global markets. It becomes increasingly difficult to insert within the enterprise context a setting in which the uncertainty is the key attribute. Therefore, the modern company needs more of a strategic support that it makes possible the surrounding turbulent activity and enables it to achieve high levels of technological capability. As a direct result of this process there would have an increased productivity with a consequent increasing organizational competitiveness. Total Quality as a strategic variable of the basic organizations with regard to their performance in an environment characterized by instability increasingly apparent. Then it is proposed the adoption of a reformed concept of Quality as strategic support for organizations that are dealing with increasingly uncertain surroundings.

India and Global Economic Governance: From Structural Conflict to Embedded Liberalism

India's behavior in the global economy has transformed considerably, consistent with its embrace of economic globalization and deregulation since 1991. Until then, India had practiced a type of economic engagement that Stephen Krasner (1985) characterized as structural conflict. Its capacity to tax citizens was dismal. Its trade as proportion of gross domestic product (GDP) hovered around 16% in the 1980s, impeding growth. And, economic resources were redistributed authoritatively rather than through trade. India, like many developing countries, was locked in economic conflict with the West until the 1980s. Since then, it has embraced global economic integration, contributing to surging economic growth. An economy that grew at an average of 3.5% between 1956 and 1975 has grown at more than 6% since 1980 and over 7% since 2004. India is one of the fastest growing economies in the world after China, and the gap between the two countries is shrinking. In this paper, I argue that the transition from structural conflict to what John Ruggie (1982) described as embedded liberalism is the key to India's tryst with globalization. Embedded liberalism has driven the country to make decisions to spur growth and welfare within a secure international environment. Whether or not the BRICS will evolve as a coherent group will depend to a great extent on the texture of Sino-Indian relations. While structural conflict characterized Third World behavior, especially that concerning the demand for a New International Economic Order, there was nothing inherently antithetical in India's state–society relations that impeded its embrace of the global economic order. Rather, if India was locked in structural conflict with a liberal economic order on a variety of trade and financial issues until the 1980s, it was because this was what the government considered the most prudent strategy of global economic integration. When the government viewed …

Efficiency drivers in the Brazilian trucking industry: a longitudinal study from 2002-2010

Purpose – The purpose of this paper is to investigate the issue of efficiency in the Brazilian motor carrier industry, which has undergone significant transformations since the economy deregulation in the mid-1990s. The main research objective is to determine whether or not different types of cargoes and geographic regions serviced significantly impact trucking managerial efficiency levels. Design/methodology/approach – Research objectives are accomplished by applying a two-stage data envelopment analysis model with bootstrapped estimates. Based on an unbalanced panel model, secondary data from the annual study published by Transporte Moderno (years 2002-2010) were collected and analyzed. Findings – Results support anecdotal evidence regarding a heterogeneous impact of cargo mix and route mix on efficiency levels. Research limitations/implications – A major limitation of this work concerns the fact of working with secondary data instead of primary data, especially with respect to the set of inputs and out...

Life-course Diversity, Housing Choices and Constraints for Women of the ‘Lost’ Generation in Japan

This article explores housing choices and trajectories of women in their 30s during a period of new risks and opportunities in Japan's post-growth urban context. Due to the economic recession and the broader context of neoliberal globalization, there has been an observed delay among post-youth adults in their progression through the life-course. Many of the life-course transitions including leaving parental home, family formation and purchasing home, which used to occur earlier in people's 20s, now often occur in their 30s. Thus the 30-somethings are a transitional cohort and women in particular are more likely to experience a profound impact in the context of economic deflation and deregulation. Drawing on qualitative data obtained through fieldwork, this article examines how women's diversified life-courses are shaping their housing choices; and how their housing opportunities are shaped by the wider structures of housing markets and institutions. It explores such processes of interplay between housing choices, opportunities and constraints of the ‘lost’ generation in Japan.

Strategy, culture and safety

This article summarizes the research conducted into the emerging concern of the cultural transformation of nuclear power plants as a result of the economic deregulation of the electricity markets which began in most Western countries in the 90s. An alternative theoretical framework is proposed, the cultural organization model, which enables cultural analysis to be performed from the twofold dimension of competitiveness and safety. The empirical application of this model to analyze the cultural configurations of four Spanish nuclear power plants provides a hitherto inexistent baseline of cultural research, centered on revealing the companies' commitment to identifying problems and their capability for collective learning, two basic processes for understanding the social construction of nuclear safety.

Causality of Interest Rate Policy and Agricultural Production in an Atmosphere of Economic Deregulation in Nigeria

Abstract This study was carried out to examine the causal relationship between interest rate policy and agricultural production in a deregulated economic setting in Nigeria using time series data covering 1987 to 2011. The data utilized include data on interest rate and agricultural production which were obtained from various publications of central bank of Nigeria. Augmented Dickey Fuller (ADF) test, Vector autoregression (VAR) lag order selection test and granger causality test were employed in the data analysis and the result indicated that market driven interest rate was not significant in influencing agricultural production over the period of deregulation and this was attributed to the substantial volatility and high market driven interest rate leading to limited accessibility to credit facilities by small scale farmers. It is recommended that the central bank of Nigeria should strongly exercise some measure of interest rate control that favours investment friendly interest rate policy that is supportive of credit mobilization for sustainable agricultural production and also the realization of the goal of Agricultural Transformation Action Plan (ATAP) in Nigeria

Measuring efficiency improvement in Brazilian trucking: A Distance Friction Minimization approach with fixed factors

This paper investigates paths for improving efficiency in the Brazilian motor carrier industry, which has undergone significant transformations since the economy deregulation in the mid 1990s. The main research objective is to determine whether or not different types of cargoes and geographic regions serviced significantly impact trucking efficiency levels by applying a Distance Friction Minimization approach with fixed factors. Results support the evidence regarding a heterogeneous impact of cargo mix and route mix on input reducing and output increasing potentials. Managerial impacts in terms of fleet subcontracting and increased focus on specific transport demands are also addressed.

Religion, politics and social assistance in Turkey: The rise of religiously motivated associations

Religiously motivated welfare provisioning has played an increasingly important role in the Turkish social welfare arena over the previous two decades. This paper investigates the society-specific mechanisms behind the contemporary proliferation of religiously motivated associations (RMAs) in Turkey. The historical analysis of the development of the Turkish welfare regime demonstrates that the spread of RMAs cannot be attributed to retrenchments within the welfare state. In fact, the provision of social assistance by central and local state institutions has expanded over the same time period. The paper claims that the rise of RMAs is not only a response to increasing liberalization and economic deregulation, but also an outcome of the rise of religion as a principle line of cleavage within the political sphere.

Economic Deregulation and Firm Acquisition Activity: a Stakeholder Perspective

This study examines how economic deregulation endorsing socio-political legitimacy to previously illegitimate market players - non state-owned enterprises (NSOEs) in our context - influences their ...

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This document examines the long-term behavior and determining factors of imports into the departments on the Pacific coast of Colombia from both a theoretical and an applied perspective. This is done considering that the local production development and domestic consumption are sustained by foreign purchases which have been favored by economic integration efforts on the part of Colombia since the implementation of an economic opening model in the early 1990s. To identify these determining factors and examine their behavior, a model of import demand was built and estimated, which includes a cointegration review and an error correction method which identify, at a practical level, the economic variables that should be taken into account in stimulating imports into the Colombian Pacific region. The model demonstrates that, in all territories with the exception of Choco, there is a stable, long-term relationship between total imports, exchange rate, and GDP, and a positive impact on economic deregulation processes in purchases from abroad in these departments. Hence, political efforts should evolve around production growth by means of institutional arrangements, exchange rate regulations, risk management mechanisms, and a larger number of free trade agreements.

Competition, Capital Market Feedback, and Earnings Management: Evidence from Economic Deregulation

Using economic deregulation as a quasi-natural experiment for increasing product market competition, we find increases in earnings manipulation and accounting frauds following deregulation. This “dark-side” of product market competition is particularly evident for deregulated firms in high market-to-book industries, where we find evidence of short-termism in the capital market. We further find that firms in these industries, if actively manage earnings, tend to make more acquisitions and have higher survival rates. Overall, our results are largely consistent with Shleifer (2004), who predicts an important interplay between product market competition and capital market valuation feedback that could induce misbehaving incentives among firms in competitive industries.

A Note from the General Editor About This Special Issue

The enactment of the Interstate Commerce Act (ICA) in 1887 was a landmark in the annals of the American system of the regulation of business. It was one of the first major pieces of legislation that regulated industry in the US;1 and the ICA’s creation of the Interstate Commerce Commission (ICC) provided the template for subsequent economic regulatory efforts (e.g., vis-a-vis other surface transportation, the airlines, and over-the-air broadcasting) and regulatory organizational structures [e.g., the Civil Aeronautics Board (CAB), the Federal Communications Commission (FCC), and the Federal Energy Regulatory Commission (FERC)] for many decades. Even though the economic deregulation efforts of the 1970s and 1980s (and the continuing efforts in subsequent decades) have undone many of the specific efforts and effects of the ICC, the spirit and philosophy that underlay the ICA and the ICC have continued to wax and wane—and then wax and wane again—over the decades in the US policy arena. The year 2012 marked the 125th anniversary of the ICA and the ICC. This seemed to be a fitting time to have a special issue of the Review of Industrial Organization (RIO) that would take a retrospective look at the ICA and the ICC and the long shadow that they subsequently cast on railroads and surface transportation more generally. Fortunately, Wesley W. Wilson agreed to “shepherd” this special issue; and the results are to be found in the subsequent articles in this issue of the RIO. I am fully confident that the readers of the RIO will find the reading of these articles to be well worth the effort.

Contemporaneous Traditions: The World in Indigenous Art/Indigenous Art in the World

It may turn out ... that going back can be a way to go forward.1Multiple ModernitiesIn the 1980s postmodernism's retro culture was widely diagnosed as the endgame of modernism. Some suggested that a bigger endgame was in play. Hal Foster glimpsed the end of a ruling civilisation: 'a moment when the West, its limit apparently broached by an all but global capital, has begun to recycle its own historical episodes'.2 By the end of the century the West's cultural hegemony did indeed seem over. From about 1990 global capital began delivering a completely deterritorialised contemporary art practice. Even Indigenous art, previously considered a primitive artifact of pre-modern times, was claimed (by a few) for contemporary art.3 This is one reason why Terry Smith believes that 'Modernism' and what he names 'Contemporary Art' are 'different in kind'.4 Yet one thing did not change. Deterritorialised or not, modern, anti-modern, postmodern or contemporary, it is all the culture of capitalism.Postmodern deterritorialisation coincided with the deterritorialisation of capital spearheaded by economic deregulation i.e., the surrender of nation-state regulation of capital to financial globalisation.5 Just as Marx and Engels had predicted in the Communist Manifesto, having used the West to subjugate the rest for the expansion of capital, capitalism now turned on Western nations. Or as Slavoj Zizek described it, former colonial relations were globalised, so that today 'there are only colonies, no colonising countries-the colonising power is no longer a Nation-State but directly the global company'.6These economic and cultural deterritorialisations were the culmination of postcolonial power arrangements that emerged in the second half of the twentieth century. As capitalism globalised it changed its stripes from a site of antagonistic confrontation (with tradition, communism, the proletariat and the colonised) to the smooth invisible logic of the Real. Now, said Zizek, we face 'the massive presence of capitalism as universal world system', meaning that 'everybody silently accepts that capitalism is here to stay.'1 It follows, argued Zizek, that 'the ideal form of ideology of this global capitalism is multiculturalism', the attitude which, from a kind of empty global position, treats each local culture the way the coloniser treats colonised people-as natives whose mores are to be carefully studied and respected. That is to say, the relationship between traditional imperialist colonialism and global capitalist self-colonisation is exactly the same as between Western cultural imperialism and multiculturalism'.8 A similar equation can be drawn between modernism (as the aesthetic expression of imperialist colonialism) and contemporary art (as the aesthetic expression of global capitalism). Whatever their different appearances, each is a theoretical object of capitalism.One symptom of self-regulated or autonomous global capitalism (i.e., a capitalism no longer in need of the Western nation-state) was the erosion of Western hegemony. Before 1990 it appeared that modernity was 'the result of forces largely internal to Europe's history and formation'.9 Even postmodernism was then considered a Western phenomenon. In the early 1990s Stuart Hall could still confidently assert that the terms 'modern' and 'Western' were 'virtually identical'.10 But by the end of the decade this was no longer the case. Charles Taylor bluntly announced in 1999 that 'modernity is not specifically Western'.11 Current theories of modernity, argued Taylor, don't account for 'the multiple encounters of non-Western cultures with the exigencies of science, technology, and industrialization.'12 'Instead of speaking of modernity in the singular', he proposed 'we should better speak of alternative modernities'.13 The next year Shmuel Eisenstadt developed similar ideas into a cogent manifesto with the more arresting heading of 'multiple modernities. …

The Effect of Regulation on Innovation

Clear rules of the game (e.g., established property rights and institutions of exchange) are important for innovation and entrepreneurship to flourish, but how those rules are defined is important. The scope and reach of federal regulation in the United States has been increasing over the last 30 years, and while federal agencies often try to quantify the benefits and costs of their regulations before they are issued, those measures are necessarily static, and bounded by data available to, and assumptions made by, the analyst. These analyses cannot capture the organic, dynamic nature of innovation nor anticipate how participants in a market might respond to incentives created by the regulation. Arguments that support “technology forcing” regulations often neglect the opportunities foregone when resources are devoted in a particular direction. Further, because regulations can confer competitive advantage on certain market participants at the expense of others, they provide incentives to focus innovative energy on influencing the rules, rather than innovating along more productive dimensions. Scholarship of the 1960s and 1970s showed that price and entry regulation tended to benefit organized interests at the expense of the broader public interest, and led to the economic deregulation movement that served to increase competition in several previously-regulated industries, with resulting improvements in innovation and consumer welfare. I hope to generate discussion of the effects of regulatory practices on innovation using current examples.