Asia's Flying Geese

Asia's Flying Geese: How Regionalization Shapes Japan

Walter F. Hatch
Copyright Date: 2010
Edition: 1
Published by: Cornell University Press
Pages: 304
  • Cite this Item
  • Book Info
    Asia's Flying Geese
    Book Description:

    In Asia's Flying Geese, Walter F. Hatch tackles the puzzle of Japan's paradoxically slow change during the economic crisis it faced in the 1990s. Why didn't the purportedly unstoppable pressures of globalization force a rapid and radical shift in Japan's business model? In a book with lessons for the larger debate about globalization and its impact on national economies, Hatch shows how Japanese political and economic elites delayed-but could not in the end forestall-the transformation of their distinctive brand of capitalism by trying to extend it to the rest of Asia.

    For most of the 1990s, the region grew rapidly as an increasingly integrated but hierarchical group of economies. Japanese diplomats and economists came to call them "flying geese." The "lead goose" or most developed economy, Japan, supplied the capital, technology, and even developmental norms to second-tier "geese" such as Singapore and South Korea, which themselves traded with Thailand, Malaysia, and the Philippines, and so on down the V-shaped line to Indonesia and coastal China. Japan's model of capitalism, which Hatch calls "relationalism," was thus fortified, even as it became increasingly outdated. Japanese elites enjoyed enormous benefits from their leadership in the region as long as the flock found ready markets for their products in the West.

    The decade following the collapse of Japan's real estate and stock markets would, however, see two developments that ultimately eroded the country's economic dominance. The Asian economic crisis in the late 1990s destabilized many of the surrounding economies upon which Japan had in some measure depended, and the People's Republic of China gained new prominence on the global scene as an economic dynamo. These changes, Hatch concludes, have forced real transformation in Japan's corporate governance, its domestic politics, and in its ongoing relations with its neighbors.

    eISBN: 978-0-8014-5872-9
    Subjects: Political Science

Table of Contents

  1. Front Matter
    (pp. ii-vi)
  2. Table of Contents
    (pp. vii-vii)
  3. Acknowledgments
    (pp. ix-xi)
  4. Introduction: External Sources of Continuity and Change
    (pp. 1-9)

    Japan’s model of capitalism has, until quite recently, stood apart. In the last half of the twentieth century, it tended to be organized around social relationships, and thus acquired characteristics that made it different from the mostly laissez-faire systems that emerged in the United States and England, but also different from the more corporatist systems of northern Europe.¹ In Japan, government bureaucrats, acting in collaboration with and often at the behest of industry executives, routinely have used not only formal means such as rules and regulations but also informal means such as “administrative guidance” to organize markets. Private firms have...

  5. Part One BASELINE

    • 1 Social Networks and the Power They Produce
      (pp. 13-39)

      Why on earth would Japanese elites in the 1990s want to extend the shelf life of an economic system that yielded little or no growth? In this chapter, I introduce a sociological model of network politics to begin answering that question, arguing that Japanese elites sought to preserve relational structures that privileged them. In the process of answering that question, I engage overlapping debates in three fields: political economy (technological and economic development); comparative politics (institutional change); and international relations (power and dependency in a region of the world). My model is driven primarily by two concepts: selective relationalism, the...

    • 2 The Postwar Political Economy of Japan
      (pp. 40-70)

      The Japanese political economy of the 1950s and 1960s performed magnificently, despite the presence of illiberal institutions fostering cooperation between government and business, between firms, and between labor and management—a fact that has raised serious questions about the laissez-faire prescriptions of neoclassical economic theory. But the Japanese economy of the 1990s performed miserably, despite the presence of the same set of illiberal institutions—a fact that has undermined the so-called revisionist theory that often seemed to champion cooperative capitalism. What shall we conclude, finally, about Japan’s postwar system?

      I have two goals in this chapter. First, using a consistent...

    • 3 Leading a Flock of Geese
      (pp. 71-102)

      In the summer of 1990, Japan’s financial “bubble” began to stretch thin and crack, signaling an end to the happy days spawned by runaway asset inflation. Business and government elites faced mounting pressure, both economic and political, as the Japanese economy, like Snow White, fell into a deep sleep that would last throughout the 1990s.

      Much of this pressure came from an increasingly competitive global market. Manufacturers struggled to hang onto sales volumes as labor productivity declined slowly but steadily to the point that, by 1994, Japan’s rate was about 34 percent lower than the U.S. rate.¹ Profits suffered as...

  6. Part Two THE 1990S

    • 4 Maintaining the Relational Status Quo
      (pp. 105-141)

      In 2001, a year that should have been filled with hope and anticipation, many Japanese looked back on the 1990s as a “lost decade” characterized by slow or no growth. Income and wages had remained flat throughout those years. But more than the economic stagnation, what really caught the eye of Japanese observers was the remarkable stagnation in the institutions of their own political economy. Those institutions had defied the odds, remaining surprisingly constant in the face of political and market pressure for change.

      This may seem surprising in light of the head-spinning tumult in electoral politics. During the 1990s,...

    • 5 Elite Regionalization and the Protective Buffer
      (pp. 142-174)

      The institutions of cooperation informed by selective relationalism survived largely intact during the 1990s. In the previous chapter, I documented massive distributional change, but only very limited structural change in the political economy of Japan at the end of the twentieth century. In this chapter, I explain that surprising result by using what Gourevitch (1979) calls “the second image reversed”—a perspective that examines the effect of external factors on the domestic environment.¹ In a nutshell, I find that the process of elite regionalization served as a protective buffer, checking the forces of globalization—at least for a while. In...

    • 6 The Costs of Continuity
      (pp. 175-200)

      What was so wrong about Japanese bureaucrats and corporate executives working feverishly in 1998 to rescue the flying geese pattern of regionalization led by Japan? After all, the Asian financial crisis was still spreading and, in some countries, getting deeper. Was it not threatening to ground the entire flock? The problem was this: the bird came home to roost. That is, elite regionalization in Asia extended the shelf life of selective relationalism in Japan, which had already lived well beyond its expiration date. For Japan, the consequences were increasingly dire. By the late 1990s, relationalism had become highly selective, organizing...


    • 7 Grounding Asia’s Flying Geese
      (pp. 203-222)

      In the early and mid-1990s, elite regionalization protected Japan’s political economy from the “creative destruction” of globalization. This was a fine thing for Japan’s well-positioned and thus powerful insiders: the bureaucrats who held top posts in the leading economic ministries, the managers who ran Japan’s largest multinational corporations, and the regular employees who enjoyed long-term employment in those corporations. They all welcomed this outcome. But this unlikely prolongation of the status quo imposed perverse consequences on almost everyone else in Japan, especially younger and female workers, and on the Japanese economy as a whole. These outsiders longed for structural change...

    • 8 Some Change . . . at Last
      (pp. 223-245)

      In the red dawn of this millennium, Japan’s political economy began to acquire a new shape—but only at the margins. The ancien régime did not crumble completely; political and business elites who had come to enjoy the positional power afforded by selective relationalism continued to resist change.

      Vogel (2006, 3) is certainly correct: “As government officials and industry leaders scrutinized their options, they selected reforms to modify or reinforce existing institutions rather than to abandon them.” And yet the Japanese government did enact laws and rules to promote greater market liberalization, while industry did adopt policies and practices that...

  8. Conclusion: Beyond Asia
    (pp. 246-256)

    The case study outlined in this book demonstrates clearly that, during the 1990s, Japanese government and business elites managed to preserve the administrative and production networks that made up the highly relational political economy of Japan by extending those networks into developing Asia, where they were able to generate net gains. This is because strong relational ties work best in the context of development, when firms are still adopting technology from the global reservoir of existing know-how. Thus, by going regional, Japanese elites bought themselves precious time in the face of pressures associated with globalization: (a) growing demands from political...

  9. References
    (pp. 257-283)
  10. Index
    (pp. 285-292)