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For over two decades, economists and political scientists have cited Japan to show just how effective a strong, well-designed industrial policy can be. Chalmers Johnson, president of the Japan Policy Research Institute, ably represented this point of view in his 1982 book MITI and the Japanese Miracle: The Growth of Industrial Policy, writing that “Japan’s postwar economic triumph-that is, the unprecedented economic growth that has made Japan the second most productive open economy that has ever existed-is the best example of a state-guided market system currently available.”

But more recently the Japanese system has also met with a fair amount of criticism, and in Divided Sun, Scott Callon, the chief market strategist of Bankers Trust Asia Securities in Tokyo, weighs in on that side of the argument. He notes that in the case of Japan, government’s ability to combine cooperation with competition has seriously disintegrated-that in fact the process of disintegration was already under way when glowing assessments like Johnson’s appeared. “The elaborate structures to promote cooperation that appear in Japanese high-tech consortia are often nothing but a public show: seemingly cooperative institutions mask an underlying reality of fierce competition and conflict,” he says. And the evidence he uses to support this charge comes from four different Ministry of International Trade and Industry (MITI) case studies extending from 1975 to the present time: the Supercomputer Consortium; the VLSI (Very Large-Scale Integrated Circuits) Consortium, which concerns itself with advanced semiconductor technologies; the Fifth Generation Consortium, which is designed to make artificial intelligence breakthroughs; and TRON (The Realtime Operating System Nucleus), an ambitious bid to revolutionize personal computers.

Callon concludes that cooperation absolutely cannot be forced upon companies that compete in the industrial sector. One of the most vivid demonstrations of what can happen if it is occurred when engineers from NEC and Hitachi came to a Fujitsu research facility to work together on the MITI Supercomputer Consortium, he reports. The NEC and Hitachi engineers found that they were forbidden to use the bus that connects the research facility with the train station lest they overhear important Fujitsu trade secrets. For similar reasons, they were instructed to stay in their respective rooms, unless they had to go to the bathroom. More significantly, the high degree of cooperation the project required meant that Fujitsu had to provide detailed, highly proprietary information on an existing product to NEC and Hitachi, which was something “it ultimately could not bring itself to do.”

The author points out, furthermore, that when cooperation does work for companies in a MITI-sponsored consortium, it is because competition among them is not a major difficulty anyway. Of all the high-tech case studies in Divided Sun, the VLSI Consortium is arguably the only one that can be considered even a partial success, and the main reason for this, he says, is that MITI provided the Japanese firms in it with large-scale financial subsidies at a time when they were in a financial crisis and faced increased technological competition from IBM. Under the circumstances, the companies were willing to overlook their corporate differences and work together. Such a situation is unlikely to occur today: ever since the 1980s, when Japan became a leading technology-driven economy on par with the United States, it has been clear to Japanese high-tech firms that their biggest competitors are one another.

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