History of Capitalism

Describe and explain the institutional basis for the high rates of economic growth achieved by Japan in the post-1945 period.

Post World War II to Japan is popularly known as the Japanese post war economic miracle marked by significant economic growth in the country. History records that Japan and West Germany experience huge benefits from the cold war that boosted their economy. The economic miracle for Japan was partly because of aid and assistance by the US. However, the main contributor to this historical achievement is the economic interventionism by the Government of Japan. Economic interventionism is when a government welcomes intervention in the industry in the public interest of the state in an effort to escalate the economic performance beyond the basic guidelines of fraud in providing goods or services to the public. As such, Japan was positioned to receive economic assistance from the United States such as supplies and manufacturing facilities.

The distinct features of the Japanese economy that define the economic miracle were the cooperation of manufacturers, suppliers as well as banks in closely knit keiretsu. In addition, other enhancements in this context were the mutual relationship with the states bureaucrats as well as assurance of a period of employment among the corporations. Assurance of employment was also extended to the unionized blue collar companies that undertook manufacturing activities. The economic miracle became a reality because of the economic policy in the country as put in place by the Ministry of International Trade and Industry (MITI).

The MITI was fundamental in the country’s post war miraculous economic recovery. As pointed out by numerous researchers and authors, MITI had the greatest economic impact in Japan that came from the policies undertaken in the industrialization and rationalization of the country. In this effort, the ministry of international trade and industry made wide strides to involve industries in a way that it counteracted the Supreme Commander of the Allied Powers deflationary regulations. As such, MITI policies were effective in creating cooperation between the government of Japan and the private sector in the country. In effect, production was experienced in escalating trend since this focused on production machinery, as well as steel production. In addition, the extent of this cooperation included neo-zaibatsu capital, which included its capital and other investments like the construction assets and production machinery.

The Ministry of International Trade and Industry also encouraged success in the industrial security sector by opening doors to imports of technology and defining it separately to deal with technology.

The technological control enabled the industries to have high prospects of production and promising performance. The reduced costs of importing technology made it possible for increased industrialization growth in the country, as well as improvement in quality and performance such as quality of equipment, effective management and increased standardization.

The Ministry of International Trade and Industry took over control of major boards that mostly related to importations, as well as seeing others get abolished because of irrelevance and redundancy. In addition, the ministry was able to launch the japan development bank that offered the private industries low cost of capital that favored long term growth. The banks came up with other financial products like loans and fiscal investments that attracted many individuals to save and invest. In the same line, FILP controlled the world largest bank at this time that favored a big number of construction companies in Japan. This structures and initiatives led to increased production, manufacturing and service delivery domestically and through exports, thus propelling the national GDP to increase significantly.

It is clear that Japan’s incredible performance at this time was not just because of support from other countries, but the initiatives and measures it undertook to develop into an industrialization economy with huge returns. 

How did late development in Taiwan condition the institutional arrangements between the state, manufacturers and banks and what role did Japanese colonialism play in preparing the way?

The Information Processing theory views organizations as open systems, which face two basic situations, environmental threats and uncertainties and task uncertainty. This is the difference between the amount of information already possessed by the organization and the amount of information required to perform. The organization depends on its external environment for its resources.  It also depends on its external environment for marketing its goods and services.  These dependencies give environmental elements power over the organization. When these dependencies are small and isolated as in, the case of placid, randomized environments, significant coping is not required.  When the dependencies are large and are changing rapidly, the organization must take steps to cope with these dependencies and reduce them. Organizations have various coping techniques. The first one is internal change.  This involves altering its structure, internal work patterns, or policies, or planning and forecasting. The second technique is to reach out and change the external environment.  The organization can try to reduce environmental change, or to change external conditions in a direction suitable to its own needs (Kaar 32).

The Information Processing theory views organizations as open systems which face two basic situations, Environmental threats and uncertainties and Task uncertainty. This is the difference between the amount of information already possessed by the organization and the amount of information required to perform. The organizations of this time have put mechanism and are structured in such a way that it can diagnose the information it has, and the information required. In particular, the company must be able to gather, interpret, and use the appropriate information in order to reduce this task uncertainty. However, BP has had a rough time in the year 2010 with the environment interest parties; Greenpeace went ahead and sued the company over the oil spills.

The second assumption of the information processing theory is that given the various sources of uncertainty a basic function of organization structure is to create the most appropriate configuration of work units (as well as the linkages between them) to facilitate the effective collection, processing and distribution of information. The third assumption of the theory deals with the sub systems or the various departments of an organization. Because the sub systems have different degrees of differentiation that is to say they have different time perspectives, goals, technology, the important question is not what the overall organization should be but rather what the optimal structures are for the different sub units within the organization.

The information processing theory views the organization as having the tasks of the organization vary in their degrees of their uncertainty. As work related uncertainty increases, so does the need for increased amount of information and thus the need for increased information processing capacity. An organization will be more effective when there is a match between the information processing requirements facing the organization and the information processing capacity of the organization. An organization has got enough capacity to effectively provide the world with over a fifth of all the oil that is being produced today. If an organization (or sub units) faces different conditions over time, more effective units will adapt their structures to meet the changed information requirements.

What problems face late developing economies?

In the recent past, we have experienced significant economic turmoil marked by bankruptcy, bailout to governments, falling in world stock market performance, and changes in austerity measures. Some of the impacts are increasing unemployment, strain of governments’ budgets, fluctuating interest rates and the current Euro Crisis, irrespective of measures undertaken to curtail the crisis. In particular, developing economies in Africa have been subjected to worse impacts of the crisis as reflected in increasing poverty levels, foreign debt and ultimate devaluation of their currencies. The world is increasingly becoming more global, hence, the need for an intensive and extensive evaluation of global economic status is key in drawing the lines of international integration, as well as developing a clear direction of achieving world goals (millennium goals), not to mention of an initiative to set back the world economy back to normalcy.

Concerns over the stability of the United States economy escalated as an epic of economic crisis shattered leading companies ushering in the economic recession of 2007. The end of December 2007 marked the beginning of the longest and deepest recession since 1930. By the start of 2008, US experienced a decline in the labor market with over 325,000 jobs loss within a month (Isidore 2). Pressure piled in consumers’ personal income coupled with declining industrial production saw the gross domestic product decline to unexpected low levels. Just like the previous recessions in 1990-1991 and 2001, the 2007 economic recession ran deepest into the economy becoming the longest financial crisis since the great depression in 1930s. The recession spread to other countries of the globe.

The economic recession of 2007 demonstrates the difficulty in restoring confidence in the global financial market once it is shattered. In an increasingly globalized economy, liquidity problem is a serious cause of solvency crisis for many financial institutions. The liquidity crisis extends to the balance of payment crises responsible for shattering the consumer confidence in the whole world. The sharp deterioration in house prices reduced purchases of homes subsequently damaging the real estate market. Price deterioration extended to increased mortgage closure that subsequently led to massive loses in billions of dollars by leading banks in the country. The ultimate condition was tightening credit by financial institutions.

The Federal Reserve Bank began to cut the discount rate and funds rate to no avail. Major Banks such as Lehman Brothers started filing for bankruptcy. Other banks opted to undertake mergers and acquisition. JPM Chase acquired Bear Stearns as a strategy to survive in the crippling economy. As indicated by Kaar (9), the Federal Reserve cut the two rates below 2% by the fall of October 2008. In the same line central banks of leading world economies like China, Canada and United Kingdom, as well as the ECB slashed their rates to rescue the global economy. These efforts had little impact as liquidity problem that proved to have spread widely and damaged operation and of financial institutions.

Other efforts to stabilize the economy focused on returning the financial and credit markets to normal. This would act as a buffer to the housing industry. Nevertheless, the damage had already precipitated into rising cost of living and increasing unemployment.

The rate of unemployment increased by 1.2%, while an increasing number of distributions of jobless claims in the industry proved the economy was under recession (Cadieux & Conklin 12). The manufacturing and construction industries experienced large labor losses that significantly shattered business cycle.  Although the level of unemployment declined as time moved to the end of recession in 2010, the nonfarm employment declined to 1.2 million as at February 2010 (Kaar 24). This indicates the severity of the crisis. Even after its end, the impact of the recession could be felt in the levels of nonfarm employment.

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