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The Japanization and Abenomics: The Saga of Falling Japanese Economy(4.끝)
chungheesoo

 

 Joseph H. Chung (정희수), Ph.D. Professor of Economics at Quebec University in Montreal (UQAM)

 

(지난 호에 이어)

 

 So, it is important for the Japanese people not only to watch closely government policies but also participate actively in the policy making process.

 To conclude, the saga of "japanization" provides a very useful lesson for us all.

 The lesson is this. In Japan, Korea and in many other countries, the oligarchy plays a vital role in the early stage of economic development for the mobilization of national resources, capital formation, construction of industrial and social infrastructure facilities, market development and the development of all sorts of institutions needed for the take-off and the sustained growth of the economy.

 But, there is a trouble. In order to accelerate the development of the economy, at the early stages of the economic development, the government allocates most of available resources to large corporation at the expense of the development of SMEs and the welfare of the people.

 As long as the large corporations remain competitive, the economy continues to grow, but when they lose their competitiveness, we have problems.

 Large corporations lose their competitiveness primarily because of the intensifying international competition and the lack of flexibility due to large size.

 But there is another reason. Their global competitiveness has been assured, in part, owing to government subsidies and other forms of aids. But as the rate of economic growth slows down, the government can no longer provide such aids. When this happens, the growth of the economy slows down.

SMEs should take over the big firms and restore the economy. After all, SMEs in Japan account for 99.7% of the total number of firms and 87% of job creation. But the SMEs could not have developed because of the government's pro-large corporation policies; SMEs cannot be a great help.

 The only solution is the bold structural reforms which should aim at the following objectives: supply of needed labour force through immigration of people, liquidation of non-competitive large corporation, strengthening SMEs competitiveness, widening and deepening the domestic market through more balanced income distribution and sustained communication between the government and the ordinary people.

 What has happened in Japan is the story of how the economic miracle can be realized owing to the devotion and strong will of the oligarchy; it shows, at the same time, how the economy can crumble because of wrong policy choices made by the oligarchy and the unfair distribution of the fruits of the miracle.

 This can happen to many countries, especially developing countries. There is only way to prevent it; it is the direct participation of the ordinary people in policy decision making.

 It is happening in Korea where, since Moon Jae-in took over the power in 2017, if more than 200,000 people ask the Blue House to take certain measures, the government must reply and react.

 Moreover, the greater freedom of press and the interventions of NGOs constitute effective mechanism of watching over public policies and preventing the abuse of power and privileges by the elite of the society.

 

 

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