Institutions, Industrial Upgrading, and Economic Performance in Japan

Institutions, Industrial Upgrading, and Economic Performance in Japan

The ‘Flying Geese’ Paradigm of Catch-up Growth

New Horizons in International Business series

Terutomo Ozawa

Terutomo Ozawa examines Japan’s once celebrated post-war economic success from a new perspective. He applies a ‘flying geese’ model of industrial upgrading in a country that is still catching-up, to explore the rise, fall and rebound of Japanese industry with its evolving institutions and policies.

Chapter 7: Analytics and Stylized Features of Structural Transformation: Additional Theoretical Expositions

Terutomo Ozawa

Subjects: asian studies, asian business, asian economics, business and management, asia business, international business, economics and finance, asian economics, international business, international economics


7.1. TIME COMPRESSION AND REGIONAL GROWTH CLUSTERING We have so far mainly described how Japan went through each different stage of catch-up growth as it climbed up the ladder of industrial upgrading, one rung at a time. This stage-ratcheted progress is the very sequence of modern industry evolving under hegemon-led global capitalism, as emphasized in Chapter 1. It is nothing but the sequential path of industrial development trekked previously by all the advanced Western countries, albeit over a much longer span of time – more than two centuries following the Industrial Revolution. It is also the same path that Japan as a latecomer capitalist economy has successfully followed ever since the start of its modernization (‘Westernization’) orchestrated by the Meiji government in 1868, though temporarily disrupted by WWII. It was in the post-WWII period, however, that Japan’s task of a sequential catch-up, all the way from labor-intensive to knowledge-driven growth, has been accomplished, all in one sweep, at an astonishing pace. Japan telescoped the evolutionary path of capitalist development in a highly time-compressed fashion, taking only four decades to fully join the ranks of the advanced countries during its postwar catch-up – but about 100 years following the Meiji Restoration of 1868. (Now, the time-compression in catch-up growth is occurring in an even more condensed manner throughout East Asia.) Japan was able to achieve a swift industrial transformation, because it had an excellent industrial flight map (a guiding perspective for climbing to the higher stages of growth), as it were – first, given...

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