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How Japan affects the international system

Published online by Cambridge University Press:  22 May 2009

Henrik Schmiegelow  and
Michèle Schmiegelow
Henrik Schmiegelow
Affiliation:
Counselor at the Foreign Ministry in Bonn, Federal Republic of Germany.
Michèle Schmiegelow
Affiliation:
Chargé de Cours in the Department of Political and Social Sciences and Director of the Center for Asian Studies at the Université Catholique de Louvain, Belgium.
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Abstract

To cope with more than incremental change in the international system, the neorealist concept of structure and the neoliberal concept of process must be complemented by a third analytically distinguished element: the concept of action. All three concepts can be used on the systemic level of analysis of international relations theory. Their obvious differentiation is the degree of systemic consolidation, with structure at the highest, action at the lowest, and process at unstable intermediate degrees. Without analyzing prevailing models of action of important units of the international system, it is impossible to predict the possible range of outcomes of processes and structural changes in the international system.

This article offers Japan's “strategic pragmatism” as a model of action. The model, representing a functional cut across contending economic doctrines, combines relative fiscal conservatism with “progressive” provision of credit, dynamic capitalism with public policy activism, and critical rationalism with philosophical pragmatism. Japan's strategic pragmatism has not only enabled its government and enterprises to cope with uncertainty and change in their domestic and international environment but has also increased global welfare and changed the balance of strategic components of power in the international system. The spread of this model of action both within and beyond Japan's control points to a paradigm change in economic and international relations theory—that is, to the most pervasive form of systemic consolidation.

Type
Articles
Information
International Organization , Volume 44 , Issue 4 , Autumn 1990 , pp. 553 - 588
Copyright
Copyright © The IO Foundation 1990

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References

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The pattern of macroeconomic integration has become one of the most salient features of the U.S.-Japan relationship, with Japan alone having financed one-third of the U.S. budget deficit ever since 1984. There are two conceivable interpretations of the political economy of this pattern, one in terms of the mercantilist paradigm and one in terms of the theory of economic integration. From the point of view of the mercantilist paradigm, the two countries may be seen as simultaneously involved in two grandiose zero-sum games for different stakes: Japan exporting unemployment to the United States through undervaluation of the yen and the United States importing wealth through overvaluation of the dollar. (For a categorization of the instruments of various mercantilist strategies, see Schmiegelow, Henrik, “Japan's Exchange Rate Policy: Policy Targets, Non-Policy Variables and Discretionary Adjustment,” in Schmiegelow, Michèle, ed., Japan's Response to Crisis and Change in the World Economy [Artnonk, N.Y.: M. E. Sharpe, 1986], pp. 28–43.)Google Scholar However, autonomous variables have gained too much influence on capital flows since the 1980 liberalization of Japan's foreign exchange control regime to make mercantilist policy control possible even if it were attempted. Thus, whatever the policy calculations on both sides, we are left with a two-country macroeconomic equilibrium based on complementary fiscal policies, interest rate levels, capital flows, and exchange rates. If global recession is to be avoided, neither Japan nor the United States, nor the rest of the world for that matter, can afford to break out of this pattern. (See Schmiegelow, Michèle and Schmiegelow, Henrik, “The Revisionists Aren't Looking Beneath the Surface,” International Herald Tribune, 31 01 1990, p. 6.)Google Scholar Nothing similar to the U.S.-Japan macroeconomic integration exists anywhere else in the world. Members of the EC, having pursued a strategy of precarious policy harmonization by adopting a common exchange rate regime before liberalizing intra-EC capital flows, are still a considerable number of steps behind the type of macroeconomic integration evident in U.S.-Japan relations.

While Japanese portfolio investments in the United States became the principal carrier of economic integration between the two countries, direct investments on which the transnational paradigm of international relations has always focused have long failed to contribute significantly to integration in either the EC or the U.S.-Japan relationship. In the course of the 1980s, however, direct investments became at least a factor of public debate in both areas. U.S. firms in Japan had become a source of U.S. imports of a magnitude sufficient to account alone for the U.S. trade deficit with Japan. (See Pempel, T. J., “The Trade Imbalance Isn't the Problem,” Cornell International Law Journal, vol. 22, no. 3, 1989, pp. 442–44.)Google Scholar On the other hand, spectacular direct investments did have dysfunctional political side effects in European host countries as well as in the United States. When Italy's maverick tycoon de Benedetti attempted to take over Belgium's treasured Société Générale, the public outcry provoked resentments of a nature similar to U.S. reactions against Sony's acquisition of Columbia Pictures and Mitsubishi Estate's purchase of the Rockefeller Center.

The question of whether intrasectoral trade or complementary trade structures are better measures of integration through trade is still unsettled in the theory of economic integration. While trade integration in the EC is marked by intrasectoral trade, the classical pattern of complementary supply structures and thus much higher degrees of division of labor continues to distinguish the U.S.-Japan relationship. The reliability of any measure of technological interdependence is as uncertain as the epistemology of science and technology itself. But as the sources quoted in footnote 22 (above) make plain, if there is any interdependence on the higher end of marketable high-technology products, it is interdependence between the United States and Japan, with EC members risking dependence on either or both of these two if they do not manage to join their forces more effectively in the 1990s than in the previous two decades. See M. and Schmiegelow, H., Strategic Pragmatism, pp. 62–69Google Scholar.

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