Industrial Dualism in Japan: A Problem of Economic Growth and Structure Change

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Contact: igorlr3 yahoo. Contact: guilherme. This paper brings elements from the economic complexity literature to the discussions of the structuralist tradition on the central role of manufacturing and productive sophistication to economic growth.

The econometric analysis revealed that exports and production complexity is significant to explain convergence and divergence among countries. In economics structuralism is principally associated with the so-called Anglo-Saxon or Early Structuralism and the Latin American strand.

Both strands base their analyses on the concept of complementarities and poverty traps, linkages, and dualism Ancochea, The structuralist view usually stresses that economic development is strongly linked to a radical transformation in the structure of production to suppress obstacles, bottlenecks and other rigidities of underdevelopment.

Based on the hypothesis that the industrial structure affects both the rhythm and the direction of economic development, the structuralist literature highlights the importance of industrialisation as a process of structural change necessary to economic development.

Industrial Dualism in Japan: A Problem of Economic Growth and Structure Change | Semantic Scholar

Structuralists state that without industrialisation, it is not feasible for a country to increase employment, productivity and income per capita and, consequently, to reduce poverty. The main argument stresses that the development process involves a production reallocation from low productivity to high productivity sectors where increasing returns to scale prevail. In this theoretical background, economic structuralism has provided many reflections on how economic growth should be understood in a historical perspective of mutual causation in the economic system.

While various historical, political and ideological factors contributed to the structuralist view, Keynesian criticism of the neoclassical economics and its argument regarding state interventionism was very important.

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Their seminal contributions challenged the neoclassical view of market efficiency to promote structural change and recognised particularities through which the manufacturing industry plays a central role to support and propel economic development. A further theoretical contribution comes from Latin American structuralism, which is mainly related to the Economic Commission for Latin America and the Caribbean ECLAC , whose works merged into a coherent school of thought in late s. Problems relating to dualism in international trade, technology disparities, balance of payments constraints and state interventionism were all emphasised.

Broadly speaking, these authors emphasised that productive sectors are different in terms of their potential to generate growth and development. Manufacturing sectors, with high increasing returns, high incidence of technological change and innovations and high synergies and linkages arising from labour division strongly induce Economic Development Reinert, , p.

Growth Miracles and Growth Disasters

Reinert and Katel, , p. In order to achieve this goal, the construction of a complex and diverse industrial system, subject to increasing returns to scale, synergies and linkages between activities is fundamental Reinert, , p. The specialisation in agriculture and mining does not allow this type of technological change. How could one empirically measure these propositions from classical development economists?

Ideally one could study the market structures perfect versus imperfect competition of products as revealed in world trade data. From the classification of these structures, one could correlate the product and market structures found with levels of per capita incomes. If the propositions of the classics of development are correct, we should find countries with high per capita income specializing in imperfect competition markets and poor countries specializing in perfectly competitive markets in tradable goods production; something, in fact, easy to see with a quick superficial analysis of current trade patterns, but difficult to show in a more robust way.


Despite all the evidence from economic history of several successful stories that followed the recommendations of the classics Southeast Asia, Japan, etc. This study is organised as follows. The second section recovers the main insights from the structuralist tradition, in both its Anglo-Saxon and Latin American strand. The fourth section concludes the paper. In this study, Paul Rosenstein-Rodan assigned particular emphasis to the transformative power of industrialisation in the economic system Rosenstein-Rodan, Hence, their focuses were essentially on the internal special properties of manufacturing and on the way in which these properties spread to the economy as a whole, stimulating the process of economic growth.

These pioneers of economic development also focused on the identification of bottlenecks and rigidities that block the industrialisation process in underdeveloped economies. This type of argument gave rise not only to the role of demand complementarities and increasing returns to scale in manufacturing industries, but also various arguments that justify industrial policy, especially of selective type, on the basis of the existence of interdependence between different activities Chang et al.

Rosenstein-Rodan states that a remarkable feature of high-income economies, i. Unlike developed economies, underdeveloped countries were characterised by the absence of a structured and dynamic industrial sector. As a matter of fact, since industrialisation tends to be concentrated in developed countries, massive and planned investments coordinated by the state are sine qua non conditions for the creation of a new institutional environment and, consequently, the successful carrying out of industrialisation in underdeveloped countries.

With this assertion in mind, Nurkse describes the forces that limit the development process in underdeveloped countries. This dynamic, translated in a low level of investment and capital accumulation, operates both on the supply and demand side. In this way, from the supply side a low level of investment arises from the small amount of savings available in the economy as a result of its low income level which, in turn, is a consequence of a low level of productivity. Moreover, low productivity is a direct result of small amounts of capital used in the production process and is related to the low domestic savings presented in the country.

From the demand side, similar to Rosenstein-Rodan, the greatest obstacle to development was the atrophy of the domestic market through low demand for goods due to low income level in the economy which, in turn, discourages the formation of capital. The low level of capital used in the production process is associated with a weak level of investments that implies a low level of productivity existing in the country. When the productivity per worker is low, the real income is consequently low and the poverty vicious circle is complete. Additionaly, the author recognises that underdevelopment was linked to the kind of product produced by a specific country and how it was traded in the international market.

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According to Hirschman , economic growth is essentially an unbalanced dynamic process, in which successive disequilibria produce the conditions for development in different sectors. These linkages represent physical relations of supply and demand among sectors of the economy. Thus, backward linkages are associated with the magnitude that each sector demands from other sectors of the economy, while forward linkages are associated with the extension that each sector is demanded by other sectors.

In this dynamic, manufacturing industry is characterised by both strong backward and forward linkages, enabling this sector to generate higher economies of scale with positive effects in terms of productivity gains and cost savings in later stages of the production chain. From this perspective, Hirschman focused particularly on the intermediate and capital goods sectors while Rosenstein-Rodan and Nurkse focused essentially on productivity growth in the consumer goods sector. This leads to the first insights on the concept of spillover effects, which stems from manufacturing to the rest of the economy and is approached by the contemporary economic developmental literature, e.

Furthermore, according to him, economic development also involves not only economic relationships of supply and demand but also institutional and political structures, denominated non-economic factors, which operating in a process of cumulative causation reveals challenges to be faced by underdeveloped countries 5. The assertion made by Myrdal was important because, while international economic inequality grew and became a common concern in many schools of thought, the neoclassical theory of international trade insisted on the idea that there was a gradual equalisation tendency of factor prices and income across countries.

Based on this theoretical background, the basic analytical components of ECLAC and other Latin American structuralists were grounded in historical methodology, the study of domestic determinants of economic growth and technological progress, as well as an evaluation of arguments in favour and against state intervention. Through a sharp critique of neoclassical economics and its idea that specialisation based on comparative advantages, whatever its nature, was a superior solution for economic growth, the Latin American structuralist school gave life to an important interpretation where the productive structure matters to the pace and scope of the development process.

Comparing commodity-producer economies and industrialised countries, Prebisch noted that productivity was essentially higher in the manufacturing sector than in primary activities. This dichotomy in levels of productivity between the productive structure of developed centre and underdeveloped periphery countries, the so-called structural heterogeneity, was also analysed by Furtado , and Pinto 6 , For Furtado , the mainspring of capitalist development is technological progress through a process of incorporation and diffusion of new techniques with a consequent increase in production and productivity 7.

Therefore, underdevelopment is seen as a partial and blocked version of development, either because of the uneven spread of technical progress or the limited transmission of productivity gains to wages. According to him, in developed countries, dynamic growth is headed by technical progress while in underdeveloped countries it is determined primarily by external demand for imports.

While the centre countries internalised new technology by developing an industrial capital goods sector and by spreading the improved technology to all economic sectors, the periphery remained dependent on imported technology which in turn was mainly confined to the primary export sector. Consequently, a sizeable low-productivity pre-capitalist sector continued to survive in the periphery producing a continuous surplus of labour and consequently keeping wages low.

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  • Without the processes of industrialisation, the asymmetry between the centre and periphery would not only perpetuate but also deepen. Thus, contrary to what the comparative advantage theory suggested, prices of primary products produced and exported by peripheral countries, such as in Latin America, tended to present an antagonistic evolution when compared to prices of manufactured products exported by industrialised countries.

    Despite of many historical evidences regarding a vast range of successful development strategies based on the manufacturing sector as source of sustainable economic growth, there still remains a lack of robust empirical content to reinforce the structuralist approach. The methodology devised to build the economic complexity indices using Big Data culminated in an atlas that collects extensive material on countless products and countries over 50 years starting in The two basic concepts used to measure whether a country is economically complex are the ubiquity and diversity of the products in its exports basket.

    If a given economy is capable of producing non-ubiquitous, rare and complex goods, this indicates the presence of a sophisticated productive structure. This measure obviously involves a scarcity problem, particularly of natural resources like diamonds and uranium, for example.

    The Developing Economies

    Non-ubiquitous goods can be divided into those with high technological content, which are therefore difficult to produce airplanes , and those that are highly scarce in nature, such as diamonds, which are therefore naturally non-ubiquitous. To control for this issue of scarce natural resources in complexity measurements, the authors of the Atlas use an ingenious technique: they compare the ubiquity of the product made in a given country with the diversity of the exports of countries that also produce and export this good. To illustrate: Botswana and Sierra Leone produce and export something that is rare and therefore non-ubiquitous, rough diamonds.

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    Javascript is not enabled in your browser. Enabling JavaScript in your browser will allow you to experience all the features of our site. Learn how to enable JavaScript on your browser. First Published in Part 2 Industrial dualism and economic policy in Japan: the scale of industry and recent economic policy; industrial dualism and the subcontracting system.

    Trickle down was alive and well during the twilight decades of the Tokugawa shogun. With the opening up of Japan and the establishment of the treaty ports in late Tokugawa and early Meiji Japan the consumer demonstration effect evolved, becoming two pronged, dualistic. On the one hand Japanese began imitating the consumer behavior of the Westerners living in the treaty ports: beer consumption and clothing fashioned from broad looms favored by the Americans, Dutch and English living in the treaty port enclaves caught on among the Japanese.

    Industrial Dualism in Japan: A Problem of Economic Growth and Structure Change

    On the other hand as per capita incomes rose among the Japanese? In short the evolution of Japanese consumerism became increasingly dualistic, on the one hand reflecting Westernization, on the other hand reflecting a breathtaking explosion in the already well entrenched arena of traditional Japanese goods.

    Testifying to this dualism was the proliferation of goods that combined Western manufacturing techniques? Picture a Japanese businessman wearing a Western? Francks ably tells this seemingly contradictory story in Chapter 4 of her book. Chapter 5 takes us through the interwar years, emphasizing the spread of suburbs and department stores associated with the proliferation of inter-city electric railroads and intra-city trams allowing commuters to trek into great industrial belt metropolises like Yokohama, Nagoya and Kobe to work during the day, returning to bedroom communities chock a block with rice producing villages in the evenings.

    Once again, as in the Tokugawa period, urban consumerism spread out to embrace rural Japan. The focus is on consumer durables, especially those employing electricity. Life in the high-rise danchi apartments built in profusion through Japan? In this chapter Francks focuses on the diffusion in automobile ownership, globalization of consumerism?