In This Review

Japan's Economic Dilemma: The Institutional Origins of Prosperity and Stagnation
Japan's Economic Dilemma: The Institutional Origins of Prosperity and Stagnation
By Bai Gao
Cambridge University Press, 2001, 300 pp
Arthritic Japan: The Slow Pace of Economic Reform
Arthritic Japan: The Slow Pace of Economic Reform
By Edward J. Lincoln
Brookings Institution Press, 2001, 247 pp

Drawing heavily on Japanese sources, sociologist Gao provides an admirable interpretation of Japan's economic boom and subsequent stagnation. Both resulted from postwar strategic decisions regarding the choice of national objectives, above all economic growth and social stability, and the distinctively Japanese means to achieve each goal. The Japanese system emphasized high coordination of economic activity but neglected monitoring and control. It also left the maintenance of social stability to private firms, through their employment practices and tight relationships with suppliers and distributors. Both approaches served Japan well during periods of high growth but became dysfunctional during the sluggish 1990s and today contribute to continuing stagnation. Lincoln's analysis is complementary, offering less detail on postwar Japanese history and more on recent years. He sees many vested interests resisting an economic shakeup, each for its own reasons, as well as inadequate countervailing forces. Institutional structures inherited from previous decades and cultural proclivities also inhibit reform. One should therefore expect muddling through rather than dramatic change. Given publication lags, there is no discussion of Prime Minister Junichiro Koizumi, but his meager record to date supports Lincoln's analysis.