What The United States Can Learn From Japan Essay, Research Paper

What The United States Can Learn From Japan

Japan and the Four Little Dragons in order to achieve their

industrialization goals have a diverse set of policies ranging from limited

entitlement programs to a education and government bureaucracy that stresses

achievement and meritocracy. But one of the most significant innovations of

Japan and the Four Little Dragons is there industrial policy which targets

improving specific sectors of the economy by focusing R&D, subsidies, and tax

incentives to specific industries that the government wants to promote. The

United States could adopt some of these industrial policies to help foster

emerging high tech businesses and help existing U.S. business remain competitive

with East Asia.

In Japan the government both during the Meiji period and the post World

War II period followed a policy of active, sector selective industrial targeting.

Japan used basically the same model during both historical periods. The Japanese

government would focus its tax incentive programs, subsidies, and R&D on what it

saw as emerging industries. During the Meiji period Japan focused it’s attention

on emulating western technology such as trains, steel production, and textiles.

The Meiji leaders took taxes levied on agriculture to fund the development of

these new industries. Following World War II Japanese industries used this same

strategic industrial policy to develop the high-tech, steel, and car industries

that Japan is known for today. Some American industries are currently heavily

supported by the government through subsidies and tax breaks to farmers, steel

producers, and other industries that have been hurt by foreign competition

because they are predominantly low-tech industries. But this economic policy of

the U.S. is almost a complete reversal of the economic policies of Japan and the

Four Little Tigers; instead of fostering new businesses and high tech industry

it supports out of date and low tech firms who have political clout. The

existing economic policy of the United States fails to help high tech businesses

develop a competitive advantage on the world market instead it stagnates

innovation by providing incentives primarily to existing business. The structure

of U.S. industrial policy like the structure of an advance welfare state has

emphasized rewarding powerful lobbying groups and has not targeted emerging

sectors of the economy. The current U.S. industrial policy is a distribution

strategy and not a development strategy.

Instead of this ad-hoc industrial policy the United States should follow

Japan’s model of strategic targeting of emerging technology. The U.S. instead of

pouring its money into subsidies and tax breaks for failing low-tech industries

should provide loans, subsidies and R&D money for firms that are producing high

technology products. Unfortunately, there are several impediments to copying

Japan’s model: first, tremendous political pressure from interest groups forces

politicians to give corporate welfare to failing established firms and not

emerging firms. Second, it is difficult for a government to select which sectors

of the economy it will target. But despite these obstacles the U.S. is now

confronted with trading powers who have coordinated government programs to

foster the development of new technology; in comparison the U.S. governments

reliance on individual initiative and a lack of government support for new

industries has allowed Japan and the Four Little Dragon’s to catch up to the U.S.

in the area of high technology. In the coming years the U.S. could not just lose

its advantage but fall behind if it fails to redirect government subsidies from

failing firms to emerging sectors of the economy copying Japan’s industrial

development model.