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Old Boy System
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Relations among the government, labor and business
Topical Seminar in Japanese Political Economy Hang Nguyen – I32031
Oil crisis of 1973
Japan: survived
Enjoyed steady economic growth without serious inflation or high unemployment
Second oil crisis 1979: less troubled than the first one
Cooperative and ‘rational’ labor unions, industrial policies and corporate strategy
Transformation of the Shuntou (春闘 ) system
Shuntou (春闘 ) system (to 1974)
Shuntou: the spring labor offensive – wage negotiation system
A concerted campaign by workers in all industries
National level
Originally proposed in 1954, by K. Ohta (later chairman of Sohyo)
The most booming industries would lead the year’s bargaining, the rest would follow the pattern
1969-1974: wage increases by a considerable margin
After oil crisis
1974: 32.9% nominal wage increase >< average profit rate of individual firms decreased drastically.
Typical trade-off: unemployment and inflation
LDP’s study: wage increases (32%) <-> CPI increases (10%)
A new pattern of wage determination and industrial relations
1975: 15 percent of wage increase
1976: less than 10 percent
create favorable economic circumstances + persuasion
Labor – politics
Sohyo (General Council of Trade Unions of Japan): try to change the existing political system as a whole
Domei (Japanese Confederation of Labor) and IMF-JC (International Metal Workers’ Federation-Japan Council): approach to change policy within the existing political system
Achievement: Real wage continuity through tax reduction and anti-inflation
policies Full employment
Labor – politics
Concern employment securityEmployment Insurance Law (1974) Measures to Halt Layoffs in the Structurally Depressed
Industries (1977) Failed, criticized Sohyo’s ‘political’ strike Employment Stabilization Funds (1977)
Labor Standards Law revision (1984)
WHY?
Labor – politics: Explanation
Sohyo: public sector and services industries
Domei & IMF-JC: private sectors -> heavily dependent on export
Wage increases = threaten international competitiveness
Disillusionment with socialism
Support from LDP
moderate in wage demands and active in policy demands
The “Old Boy” Network
‘Old Boy’ : retired government officials boardrooms of private corporations
Network phenomenon
Hypothesis: “bureaucrat-led economic growth’ mechanism Small firms need OB for governmental information & lobbying
OB standard career path
Bureaucrats: long-term civil servants
Employed annually, ‘vintage’ groups with close contact
Low salary -> dependent on employment after retirement
‘Amakudari’: appointed by National Personnel Authority
Alternatives: Head of public corporation Private non-profit associations Politics Transfer to further government agency
OB mechanism
Personal connections and seniority hierarchies
‘vintage’ meetings
Smooth flow of information
Remain loyal to government
Hypothesis:
Preferential treatment
Government ties with business
Prospect high-paying motivation of second-employment
Power equalization
OB network
Distribution: Commercial banking, investment banking, insurance: <50% Electronics, automobiles, steel and construction: >75%
Factor: ‘trade industry’ (trade restraints) VERs in TV sets (1977, U.S.) VCRs (1983, EC) Semiconductors (1986-91, U.S.) Automobiles (1980s, U.S. and EC) Steel (1980s)
MITI advocated “export control scheme”
OB network
Purpose: Quotas information Industry competition
Construction case: secret bidding procedures acquiring information and government price ceilings
Other industries: lobbying is the restrictions imposed by the law
notion of Japanese “consultative capitalism”.
Thank you!