Rapid, Post-World War II Economic Growth for

¶ … rapid, post-World War II economic growth for the Japanese economy. A survey of the literature provides insights into management practices of Japanese firms, and offers direction for necessary changes that the American economy must make to successfully compete. Because of the exceptional growth of East Asia in the 70s and 80s, a number of studies were conducted to determine the causes of economic development, particularly in Japan. Hayumi's article explored the question of whether there were lessons to be learned that would improve U.S. economic performance.

Hayami argued that while the World Bank study of the "East Asian Miracle" acknowledged successful cases of government planning and control in Japan, Korea, and Taiwan, the report did not provide a unique model of economic development. Given the complexity of political and government interventions, Hayami argued that the success of the northern tier could not be duplicated. Moreover, countries in the southern tier also achieved rapid growth, but with much less government intervention.

Hayumi concluded that their growth did not support the hypothesis that "industrial policies" can change low-income economies into high-growth economies (Hayami 318-19). A further criticism of the Asian Miracle study was that it did not answer the question of whether East Asian growth occurred because of government intervention and protectionism or in spite of it. The absence of an answer limited the study's usefulness to serve as a practical guide for other countries and other economies (Hayami 320).

Hayami also explored the role of small government and complex institutional complementarity in an attempt to explain differences between northern and southern high performing Asian economies (HPAEs). He concluded that the most significant finding in studying East Asian economic growth was "that each developing economy should try to identify what are the most effective and practical policies under its resource endowments and sociocultural environment, rather than to imitate any model developed in different environments" (325). Other studies of Japanese management practices provide additional insights into Japanese strategy and organizational structure.

Japanese firms came to be highly regarded as a consequence of their rapid growth following World War II. By the early 1970s, Japan had become the world's second-largest economy, after the United States. Japanese firms also expanded aggressively into international markets. By 1983, Japan provided about 30% of the world foreign direct income (FDI) flows and had become the world's largest single foreign investor (Makino and Roehl 38-39). As Japanese firms continued their successful expansion into global marketplaces, Western scholars and practitioners began trying to understand the secrets of Japanese-style management.

This fascination lasted until the early 1990s, which saw Japan's economy fall into a recession that has lasted for the past two decades. The bubble economy collapsed and stock prices crashed, along with many foreign investments made by Japanese firms turning out to be disastrous. Likewise, the status of Japanese firms in global business continued to decline over the next two decades, with Japan falling from their ranking of 17 in world competitiveness to 27 in the most recent report.

In 1989 when the Institute for Management Development first published the report, Japan had been ranked number one (Makino and Roehl 40). Makino and Roehl cited a study which argued that many deteriorated Japanese firms did not make adjustments in two key organizational characteristics that had previously served the companies well during their earlier high growth period.

They argued that a management style that emphasized consensus allowed firms to quickly respond to challenges during a growth period turn out to be ineffective when the firm needs to identify new directions for continued growth. They further contend that a lack of strategic connoisseurship which was unnecessary when the growth came easily later put the Japanese firm at a distinct disadvantage. The inability to adjust these two existing organizational components led to a third challenge, an abundance of free-riders and rent-seekers.

They conclude that these three symptoms of intra-organizational dysfunction constitute what they term as "organizational deadweight" (38). Numigami et al. define organizational deadweight as "the rigidity of an organization that intends to create new knowledge through middle-up-down management but is trapped in the deadlock of an overly diverse polycentric structure without strong control mechanisms" (qtd. In Makino and Roehl 41).

Makino and Roehl cited Numagami et al.'s argument that the organizational deadweight phenomenon was prompted by the dangerous assumption that successful practices in one time period can also prove successful in another time. Makino and Roehl also posited that the time had come for Japanese business leaders to seriously consider designing management systems that could be sustained in the era of globalization (42).

Anderson also analyzed the causes of Japanese economic success as compared to American performance, which analysis was undertaken prior to the more recent two decades long decline from which the Japanese economy is still recovering. Anderson compared and contrasted the two nations to arrive at his conclusions regarding their respective economies. Until the mid-1960s, the American economy dominated world commerce, that is, until the Japanese emerged from post-World War II. Anderson argued that the eventual decline in U.S. economic dominance was based on two flawed miscalculations.

The first was that the wealth of the U.S. was limitless, and the second was that America's economic engine could continue to grow at the same pre-1980 pace. He examined the causes of the decline in American productivity. By comparison with Japan, the U.S. lacked a sense of economic direction. Since the mid-1960s, the U.S. spent less and less of its gross national product on research and development.

The article cited a number of government interventions which were responsible for the serious economic problems that the U.S. faced. According to Anderson, "the U.S. stands unique among industrialized nations in penalizing the thrifty and rewarding those who live beyond their means" (59).

Anderson noted that there was blame enough to go around, faulting American companies who allowed their plants to turn out too much shoddy merchandise; businesses that sacrificed long-range planning to short-range expedience; overly cautious firms that avoided risk-taking; firms that relied on overstated earnings during inflationary periods (60). Anderson pondered the possibility of American.