Governmental Issues and the Exit Trend in Japan due to the Globalization

Does the Government Only the Reason for Firms Leaving in Japan to Abroad?

Introduction

The exploration of the political economic situation in Japan suggests diverse perspectives about the situation converge to a similar conclusion. It is seen that for almost every controversial problem, the most scholars point their fingers to the Japanese government. From the chapter “The Post-Industrialization of the Developmental State” of the book “Japan Since 1945: From Post-war to Post-Bubble” by Professor Lonny E. Carlile (Carlile, 147-165) and, from the political economic parts, “Parasite Singles Feed on Family System” by Professor Masahiro Yamada (Yamada, 10-16), it could be noticed that many scholars in this field point out that government’s mismanagement brought about the societal chaotic effects in Japan. The zenith of the blames was Professor Leonard J. Schoppa’s argument in his book “Race for the Exits: The Unravelling of Japan’s System of Social Protection” that the government’s mismanagement has not only led many companies in Japan to leave the country, but also dismantled the societal order by leading women’s interest to areas that are not related to politics, thereby creating another social exit. (Schoppa, 5) He constantly argues in his book that the ramification of the mis-governance is the egress of the two important social components, driving down the political and economic engagement in the society.

While it is true that there is no perfect government, it is also true that the government is not the root of every evil. Consequently, this paper aims to examine if it is solely the government which made an exodus in the society or other factors such as active ongoing globalization was also the one influence to the exit trend. From this perspective, this paper will see how globalization affected to the exit of firms in-depth level, using the company Company Z^[1] as an example, which also mentioned in Professor Schoppa’s Race and Exit paper, and then, some Japanese citizens’ perspective will be brought so as to see their perspectives towards the government’s management.

Globalization

The current market trends suggest that today, almost every product has either been shipped from a foreign country or has been manufactured in another country, or the brand is not local but a foreign brand. Origin of globalization is a long debated topic. However, the most interesting fact remains that, seeds of globalization were sown during WWII. (Horowitz, 129-137) During the Cold War, the world has roughly fallen into two categories: ones that followed democracy lined up behind the U.S. and ones that followed communism lined up behind the Soviet Union. However, as it is well known, there were many more countries that lined up behind the U.S. Despite the outnumbered countries, the U.S. did not give up strategic positions around the globe for their economic situation. (Whyte, The Diplomat)

The two main countries that were strategically important countries were Germany and South Korea. Germany was strategically significant for the U.S. because it was serving as a barricade against the incoming flow of communism from the Soviet Union to the rest of Central and Southern Europe. (Jo, 423-429) Thus, the U.S. made every effort to make West Germany flourish by pouring out an enormous amount of businesses and succour. In the same fashion, the U.S. could not let the communism flow into the rest of Asia that were coming through China to the rest of Southeast Asian countries. (Whyte, The Diplomat) Thus, in this game plan of the U.S., one aspect of internationalization could be shaped.

Moving Deeper: Globalization in 1945-1970

As the world shaped into almost two big pieces, a huge expansion was seen in global trade after WWII. A sharp increase in the world merchandise exports was seen as high as 8% over the period 1950-1973. (Trend in Globalization, 15) During this period, the most influential traders were Europe and Japan. (The Changing Dynamics of the Global Business Cycle, 67-69) After WWII, the Korean was considered as the stimulus to exports from Japan and European countries during the early 1950s. However, the integration of European countries helped the intra-European trade. For Japan, the United States was the major market for Japans exports. Japan also show increased exports to western Europe and other Asia’s newly industrialized economies (NIEs). (Trend in Globalization, 15-19) The NIEs adopted an outward-oriented trade policy and thereby succeeded in increasing their exports. As a result, the share of the Asian NIEs increased to 9.7 % from 2.4%. (World Trade Report 2008, 16) On the other hand, the U.S. experienced a decrease in their subsequent share in world exports, and that led an automotive agreement. It was signed between the United States and Canada so as to strengthen the intra-North American trade. (Trend in Globalization, 15-19)

During this period, the Asian newly industrialized economies emerged into the global trade, and contributed significant shares in the world market. The U.S global trade saw a downfall. After the 1970s, the global trade not only increased in terms of volume, but more and more economies entered into global trade, and the goods and services increasingly diversified.

Globalization: 1970-Present

According to the World Trade Report 2008, “the share of the different countries in the world market varied largely after 1973 due to the price fluctuations in commodity prices and also in the exchange rates”. (World Trade Report, 16) A significant increase in the share of the Middle East oil economies was seen between 1973-1983, however, their share saw a sudden downfall due to a reduction in oil prices. (Macalister, The Guardian) Later, in the 1990s, the disintegration of Soviet Union opened new opportunities for the industrial nations like Japan, Europe, and United States. (Rhee, 240 – 256) At there, a subsequent rise in the share of world merchandise and industrial nations share reached a peak.

Japan faced a decrease in its share in global exports due to the competition exerted by the NIEs and the emergence of China. Moreover, the formation of NAFTA (North American Free Trade Agreement) and extension of European integration to central Europe and Baltic states, contributed to the decrease in the share of US and Europe in the 90s. (Globalization and Trade, 16) The liberalization of trade because of GATT (General Agreement on Tariffs and Trade) allowed the free passage of different goods and commodities internationally. (Globalization and Trade, 17) Globalization was not embraced in almost all countries, although, globalization positively impacted almost all nations but it was considered as a threat in many nations, while many newly industrialized economies flourished, some nations faced real challenges in the name of globalization. (Globalization and Trade, 21)

Global Market Dominating Countries: the U.S., Europe, and Japan

As the world’s promising countries such as the Britain were having trouble with their peers in Europe, the U.S. took the lead. At that time, the U.S.’s economy was military centric as it was just getting out of the war. However, it switched to industrious economic setting quickly, and that contributed to the unity in the States. (American History From Revolution to Reconstruction and Beyond, Web) Moreover, there was support at the federal government level such as a deregulation in market. Now, as a united nation and having the advantage of common currency, this country became the biggest holder of resources and market. (Mourdoukoutas, 10) In the 90s, with the advent of internet, and free trade agreements, U.S economy largely increased its investments and trade over-seas with a view to gain rebound of the U.S economy from the recession. (Mourdoukoutas, In the 21st century, America embraced globalization so much that it replaced security from the U.S. policy agenda, and with the formation of IMF, the World Bank, and the WTO strengthened the influence of western powers. Thus, the U.S economy experienced a shift and so did the whole world.

While the U.S. was having a change, there were a lot of products that were going from one nation to another in European continents, taking into account the geographic advantages. This led the European countries to be on the verge of creating the European Union. However, as the author of “The race for global leadership: Europe, the U.S.A., and Japan” says, “Europe is a collection of nations that behave like capricious brides, who would like to stay married but lead separate lives.” (Mourdoukoutas, 8) His comments indicate that the different economic status between the nations in Europe delayed union between themselves. Later, in the 90s Europe also expanded the European Union to include other European territories. The formation of European Union was initially political, but later when political stability was established in Europe, then the focus was more on economic integration. (Spolaore, 1-4) The integration was a promise of economic prosperity and protection of European workers during technological and global changes. Europeans did not readily embrace globalization and Europe faced major opposition from union countries against globalization. (Spolaore, 3)It was considered as a threat for the people who fear of losing their job, social welfare and changes in the life of the people. Globalization also brought in opportunities for Europeans to serve new markets with better and cheaper products. Thus, Europe saw mixed reactions in case of globalisation.

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^[1] Name of the company was anonymized due to copy rights