Relations among the government, labor and business

Topical Seminar in Japanese Political Economy Hang Nguyen – I32031

Oil crisis of 1973

Japan: survived

Enjoyed steady economic growth without serious inflation or high unemployment

Second oil crisis 1979: less troubled than the first one

Cooperative and ‘rational’ labor unions, industrial policies and corporate strategy

Transformation of the Shuntou (春闘 ) system

Shuntou (春闘 ) system (to 1974)

Shuntou: the spring labor offensive – wage negotiation system

A concerted campaign by workers in all industries

National level

Originally proposed in 1954, by K. Ohta (later chairman of Sohyo)

The most booming industries would lead the year’s bargaining, the rest would follow the pattern

1969-1974: wage increases by a considerable margin

After oil crisis

1974: 32.9% nominal wage increase >< average profit rate of individual firms decreased drastically.

Typical trade-off: unemployment and inflation

LDP’s study: wage increases (32%) <-> CPI increases (10%)

A new pattern of wage determination and industrial relations

1975: 15 percent of wage increase

1976: less than 10 percent

create favorable economic circumstances + persuasion

Labor – politics

Sohyo (General Council of Trade Unions of Japan): try to change the existing political system as a whole

Domei (Japanese Confederation of Labor) and IMF-JC (International Metal Workers’ Federation-Japan Council): approach to change policy within the existing political system

Achievement: Real wage continuity through tax reduction and anti-inflation

policies Full employment

Labor – politics

Concern employment securityEmployment Insurance Law (1974) Measures to Halt Layoffs in the Structurally Depressed

Industries (1977) Failed, criticized Sohyo’s ‘political’ strike Employment Stabilization Funds (1977)

Labor Standards Law revision (1984)

WHY?

Labor – politics: Explanation

Sohyo: public sector and services industries

Domei & IMF-JC: private sectors -> heavily dependent on export

Wage increases = threaten international competitiveness

Disillusionment with socialism

Support from LDP

moderate in wage demands and active in policy demands

The “Old Boy” Network

‘Old Boy’ : retired government officials boardrooms of private corporations

Network phenomenon

Hypothesis: “bureaucrat-led economic growth’ mechanism Small firms need OB for governmental information & lobbying

OB standard career path

Bureaucrats: long-term civil servants

Employed annually, ‘vintage’ groups with close contact

Low salary -> dependent on employment after retirement

‘Amakudari’: appointed by National Personnel Authority

Alternatives: Head of public corporation Private non-profit associations Politics Transfer to further government agency

OB mechanism

Personal connections and seniority hierarchies

‘vintage’ meetings

Smooth flow of information

Remain loyal to government

Hypothesis:

Preferential treatment

Government ties with business

Prospect high-paying motivation of second-employment

Power equalization

OB network

Distribution: Commercial banking, investment banking, insurance: <50% Electronics, automobiles, steel and construction: >75%

Factor: ‘trade industry’ (trade restraints) VERs in TV sets (1977, U.S.) VCRs (1983, EC) Semiconductors (1986-91, U.S.) Automobiles (1980s, U.S. and EC) Steel (1980s)

MITI advocated “export control scheme”

OB network

Purpose: Quotas information Industry competition

Construction case: secret bidding procedures acquiring information and government price ceilings

Other industries: lobbying is the restrictions imposed by the law

notion of Japanese “consultative capitalism”.

Thank you!