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Partners in prosperity.

Partners in Prosperity.

Bringing East and West together

In this book, Julian Gresser, an attorney with experience in Japan and the United States, attempts to do several things. He argues that the United States needs an industrial policy, because future economic growth will depend extensively on the development of strategic industries. He suggests that industrial policy played an instrumental role in Japanese growth during the period of rapid expansion, and that it provides a model for U.S. policy. he proposes a "trigger" method, based on his own consulting work, for the identification of strategic industries and their cooperative encouragement by public and private authorities. although he sees the Japanese and U.S. relationship caught up in a zero-sum mentality, he believes it should be converted to one of cooperation--hence the book's title.

The key to understanding the book is found in the author's views on national industrial policy. Gresser believes that the key to economic growth is not found in mundane areas of increased capital and labor resources. Rather, he believes that it lies in technological innovations which give rise to leading or strategic industries, which in turn become the engines of future growth. In his opinion, this is the essential explanation for Japan's rapid growth in the postwar years. Yet, he argues, industrial policies designed to do for the United States what the Ministry of International Trade and Industry did for Japan cannot be expected to work because of bureaucracy and a failure to develop the cooperation of the essential parties. What is needed is an approach derived from the trigger method.

The trigger method identifies strategic industries in terms of their boundaries in time and space. They are industries with high rates of growth in exports, employment, and product gains. They have substantial commitments to research, capital investment, and innovation, and can be expected to have sharply increasing economies of scale. They significantly affect in a positive way the output levels of other industries, for example, English coal in the early days of the Industrial Revolution. The trigger method also forms the basis for planning without planning, essentially a process of negotiating with the various interested parties an investment strategy for new strategic sectors.

Two chapters deal with issues of Japanese-American conflict and the possibility for cooperation. The United States is described as having a policy of cooperation and equality at high national levels and a much less generous approach when it comes to specific issues. The author reasons that Japanese policy is based on a refusal to view the needs of others a genuine, and on a mercantilist approach to gaining power. The attitudes of the two countries, he believes, lead to a zero-sum game whose results can only be unfortunate for both countries. Because the author believes that cooperation will result in greater growth and wealth for both countries, he suggests ways that this result might be achieved.

how should the book be evaluated? There are three central questions. Are strategic industries the key to growth? Can one identify and nurture the new ones along? Would joint nurturing by Japan and the United States be a wise policy?

My difficulty with the emphasis on strategic industries and the trigger method is that these concepts seem to be more effective in looking backward than forward. The automobile industry is listed as a strategic industry. But when dis it become one? Was it in the mid-19th century or not until the 20th century? Clearly later, but when? At that time, would there have been agreement that automobiles had achieved the status of a strategic industry? Even the Japanese Ministry of International Trade and Industry did not recognize automobiles as a strategic industry. Although the Ministry of International Trade and Industry played an important role in Japanese growth, the author, along with others, gives too much credit to the Ministry. In addition, he does not adequately count the costs of errors by the Ministry. (See Kozo Yamamura, ed., Policy and Trade of the Japanese Economy: American and Japanese Perspectives.)

Chapter 9 on "planning without planning," in which the emphasis is on trying to bring competing industries with potential for conflict together to find a basis for cooperation, contains an interesting discussion and can be recommended independently of the book as a whole. Similarly, the chapter in which cooperation rather than conflict is proposed for future Japanese and American relations can be commended both for its spirit and for some of its ideas.

On balance, the book contains many interesting facts on specific industries and practices. The interpretation of events seems too much patterned by the idea of a lawyer's brief which tries to make a case, while too little attention is given to alternative and competing explanations. The range of facts is interesting, though at times there is a jumbled quality about them. For example, two pages contain major paragraphs discussing microprocessor designs, the ratio of debt to equity in the financing of Japanese corporations, and the role of city banks in the Japanese banking system.

This book is recommended to those interested in the economic relationship between Japan and the United States. Undue reliance, however, should not be placed on its explanations and interpretations of events. Lastly, there are some useful suggestions for the development of U.S. economic policy, though the central message in favor of a form of planning is based on strategic industries leaves me unconvinced.
COPYRIGHT 1986 U.S. Bureau of Labor Statistics
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1986 Gale, Cengage Learning. All rights reserved.

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Author:Evans, Robert, Jr.
Publication:Monthly Labor Review
Article Type:Book Review
Date:Feb 1, 1986
Words:902
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