On Wednesday in Tokyo, in what greyer heads around the table may have relished as a historic role-reversal, US vice-president Kamala Harris gathered top executives from Japan’s semiconductor sector to discuss the implications of the US’s industry-boosting $280bn Chips and Science Act.
Fiscal “plan-splaining” does not get much more poignant: 40 years since Japan As Number One was a bestseller and 30 years since Rising Sun was a blockbuster, here was the America of market forces sitting down with Japan Inc to tell it all about targeted industrial policy.
A day earlier, the US trade ambassador Katherine Tai had also painted a picture of shifting times. The US, she told the FT, was now actively co-ordinating trade policy and domestic investment programmes in deliberate contrast with its traditional, single-minded prioritising of maximal liberalisation.
So might this shift — industrial policy’s ascent from curse word to the new Washington mantra of strategic competition — be the ultimate symptom of American Japanification?
The setting of Wednesday’s meeting makes it a very tempting thesis. Harris was holding the discussions on the US’s state-turbocharged semiconductor ambitions just a few hundred metres away from Japan’s Ministry of Economy, Trade and Industry. This is the successor to the Ministry of International Trade and Industry, or Miti, that authored the story of Japan Inc and oversaw the combination of industrial and trade policies that appeared to make Japan so unstoppable in the 1970s and 1980s. Her roundtable participants were from companies that had, in their heyday, been favoured by a government that saw them as critical to the national interest.
Japan Inc’s was a narrative propelled by genuine policies and a willingness of Japan itself and the outside world to believe in their effectiveness. The Japanese government really did direct resources to particular industries, semiconductors among them, in the quest for greater international competitiveness. To those (particularly the US) whom this strategy comprehensively outcompeted, the idea of a conspiratorial state-corporate complex (with its convenient “Japan Inc” terminology) was an easily grasped concept to either laud or lambast. However critical the roles of liberalised world trade and fundamental Japanese business skill may actually have been, Miti and industrial policy hogged the limelight.
Throughout the periods of both Japan Inc’s success and subsequent decline, the US position seemed clear. However enviable the trophies held by Japan, it was anathema to talk positively about a Japan Inc-style industrial policy as an option for the US. To do so, in theory, would be to admit to a range of desirable outcomes that market forces alone might never achieve, let alone guarantee.
Such an admission, though, now feels implicit — not just in the chips act itself, but in the bipartisan support it attracted. The prevailing narrative in Washington on China is alarm at its surging industrial power. But while the creation of an overt industrial policy for America may be driven by pragmatism, giving pragmatism free rein, arguably requires at least a form of ideological shift. Belatedly, perhaps, the magnitude of the perceived China threat has caused the US to decide that it cannot afford the laissez-faire approach to private sector decision-making when it affects the national interest.
This is why Japanification is probably not the right word here. Whatever the front-of-house rhetorical taboos around industrial policy may have been, the reality is that Washington has been running versions of them for years — most visibly under the framework of the military-industrial complex.
When concerns over critical technology have intensified, this has provided a mechanism for directing investment in a way that the markets might not have on their own. For all its “business is war” sloganeering during the 1980s, the overwhelming desire of Japan was to outperform its great rival in growth and market share. Its industrial policy was a reflection of that, the US understood it as such and did not, despite books like the 1991 classic The Coming War With Japan, feel the need to create industrial policy of its own to offset that.
The situation with semiconductors in the 2020s is very different. The perceived threat from China is not outperformance in business, but, in the longer term, the opening of a technological gap that cannot easily be narrowed. The immediate rival on chips may be Taiwan but America’s new industrial policy is crafted around fears of a greater foe.
leo.lewis@ft.com
Source: Economy - ft.com
