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Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
June 1980
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Sueo Sekiguchi: Japanese Direct Foreign Investment

Allanheld, Osmun and Company, Montclair, N.J., U.S.A., 1979, 153 pp., US$20.

Rodney Clark The Japanese Company

Yale University Press, New Haven, Conn., U.S.A., 1979, 282 pp., US$17.50.

Ezra F. Vogel Japan as Number One: Lessons for America

Harvard University Press, Cambridge, Mass., U.S.A., 1979, 272 pp., US$12.50.

Over the last decade, the manifold expansion of Japanese exports, overseas investment, banking and financial services, and the like has led to an increasing awareness of the critical, not to say dominant, role played by Japan in international economic activities. The evident economic success enjoyed by the Japanese has generated a spate of books aimed at an audience which is generally unfamiliar with many aspects of Japanese society, culture, and business practices, but who more and more frequently must deal with individuals and institutions in Japan. These three books are directed primarily at this audience.

The first book, Japanese Direct Foreign Investment, while dealing primarily with the pattern of Japanese investment overseas, seeks to explain the economic and/or organizational motivation for this investment and to identify problems which arise with host governments, foreign employees, and local residents as a result of different cultural and managerial styles of the Japanese investor. The second book, The Japanese Company, is based on the personal experience of the author working within a Japanese company. Besides describing the adjustments required of a non-Japanese to understand the management and operations of a Japanese enterprise, the author examines many aspects of the Japanese labor market, including the “lifetime employment” system.

The third book, the best written of the three, attempts to view the success of Japan as an experience from which Western nations—and, in particular, the United States—can learn. Its theme is a simple one: Japan’s success in many areas is by no means an accident or a passive result of cultural heritage. Rather it derives, in large part, from a conscious tailoring of Japanese institutions to the demands of a dynamic and interdependent world economy.

Japanese Direct Foreign Investment provides a useful review of the recent rapid expansion of Japanese investment abroad, and a brief treatment of direct investment by Western nations in Japan. The book contains much data on investment derived from Japanese sources. The author notes the concentration of Japanese overseas investment during the 1960s on the development of natural resources, and more recently, the growing importance of investment in manufacturing industries. The contrast between the motivation and style of Japanese direct investment and that of the United States and Western European countries is emphasized. Aside from large government-encouraged investments for exploiting natural resources, for example, small and medium-sized firms have dominated much of Japan’s overseas investment—particularly in manufacturing industries. At the same time, primarily as a means of establishing new markets, the large trading companies—unique to Japan—have participated heavily in direct investment.

Unfortunately, this book is weakened by a sometimes superficial treatment of critical issues. The brief attempt to provide a theoretical basis for the motivation of Japanese direct investment, for instance, is resolved primarily by assertion, with little supporting evidence offered. The conclusions about the impact of investment on employment and income are likewise insufficiently supported by data. Finally, the author repeatedly discusses the need for Japanese investors to internationalize their management staff and to be sensitive to potential social frictions caused by the creation of Japanese “enclaves” in host countries. However, this issue requires detailed study of particular experiences, rather than simply repeated warnings of what has become a familiar problem.

The Japanese Company, like the first book, is rather specific in its subject matter. Though the author’s attempt to generalize from his own experience is not always persuasive, the book may be interesting to the general reader as a history of the corporation in Japan and as a review of a personal experience of working in a cultural and managerial environment that is very different from that of the West. There is useful questioning in this book of certain “received truths” about Japanese society. As one example, the author contends that the “lifetime employment” system exists in Japan more as an ideal than in practice and is relevant only to a small segment of the labor force. He claims that it is not offered by smaller companies—the predominant employers—and does not apply to temporary workers or to women. Further, the current demographic changes in Japan—an aging of the population—are diluting the system still further. This view leads to interesting speculations on the evolving nature of authority in Japanese companies and on the company-community relationship in Japan—speculations which suggest some evolution to more Western forms in Japanese institutions.

In Japan as Number One Professor Vogel deals with more general issues and focuses his examination of Japanese institutions on elements of their organization and operation which may be worth emulating, particularly by U.S. institutions. His point of departure is that Japan’s well-known economic success is complementary to its success in many other areas—a low crime rate, long life expectancy, high participation rates in education, the success of its students in international competitions, and so on. This book may be read on two levels: as an analysis of the elements and forms of Japanese institutions that have contributed to Japan’s successes and as an identification of areas of Japanese experience to help countries like the United States that are seeking to learn from that success.

On the first level, the book is tremendously interesting, and valuable to anyone dealing with Japanese institutions or studying Japanese society. The author introduces a wealth of relevant examples. The discussion of the meritocratic system in government service, for example, describes how the elite of the bureaucracy are identified and groomed for ultimate control of the ministries and how the power of this elite, through its continuity, in many ways exceeds that of its political superiors.

On the second level, however, there can be no simple extraction of lessons for the United States. Japan is not a model to be blindly imitated as the subtitle might suggest. Though the author clearly warns of this, he may understate the highly publicized problems of individuals and their families engendered by the pressures of the meritocratic system and by the educational system in Japan. However, the book is to be highly recommended to anyone seeking a broad review of institutional and social characteristics which have helped in Japan’s success and must be understood in business, diplomatic, and other dealings with the Japanese.

John Boorman

John W. Mellor (Editor) India: A Rising Middle Power

Westview Press, Boulder, Col., U.S.A., 1979, xv + 374 pp., US$20.00.

Wayne G. Broehl, Jr.: The Village Entrepreneur: Change Agents in India’s Rural Development

Harvard University Press, Cambridge, Mass., U.S.A., 1978, vi + 228 pp., US$18.50.

India has been going through a period of political crisis and change since the early 1970s. Nevertheless, due both to some far-sighted policies and to fortuitous circumstances, the economy recovered quite rapidly from the oil crisis in 1973 and now has a capability for accelerated growth. Thus, in these two important respects, India is ripe for change.

Each of these books has something different to say about the problems of social or economic change. India: A Rising Middle Power is a collection of scholarly essays on various economic and political issues originally commissioned for a conference organized by the United States Agency for International Development (USAID), which took place in 1977. The papers cover a wide range of political and economic developments apart from aid—foreign trade, research and development in India, regional power in South Asia, and the issue of non-proliferation of nuclear technology. By and large, this is a group of authoritative, well-written papers and comments that provide a useful survey of India’s current political economy.

Myron Weiner’s essay on India’s political evolution is one of the most interesting for a development economist. He analyzes the relations between the center and states, the dominance of national politics by the Congress Party until the end of the emergency, the way the power base of the Congress gradually eroded, and the constraints such factors put on economic policy. It is useful to point out, for example, that the Indian Government, like any other, is not a free agent and that it has adopted economic policies, such as the nationalization of the banks in the late 1960s or the increased emphasis on limiting the expansion of the large houses soon after, partly to preempt moves of political opposition.

By contrast, The Village Entrepreneur is a piece of original research. It is largely concerned with two topics: a survey of fertilizer distributors in the state of Tamil Nadu in the South and a seminar on “entrepreneurship” held for some of them. The survey results suggest entrepreneurs fall into two distinct groups: a modern, risk-taking, profit-maximizing group and a more traditional risk-averse, sales-maximizing group. The former are generally more “entrepreneurial” in the sense that they use as much information as they can from a variety of sources to conduct their business. They are planners, are optimistic, have leadership ability, and tend to expand and develop in new lines of business. The aim of the seminar, which brought U.S. business school techniques to bear on the problem, was to provide for a discussion of these entrepreneurial characteristics for the benefit of the participants.

This book is poorly structured, jumping somewhat erratically between the particular and the general, and there is much jargon. The statistical techniques employed to test hypotheses are not discussed fully; in at least one case, the argument behind its statistical sophistication appears to be tautological. The claim that the week-long seminar significantly changed attitudes and behavior is not convincingly demonstrated.

Despite these faults, it remains clear that both the subject matter and the approach are important. Because some of the most important innovators and wealth-creators are to be found among entrepreneurs, a micro-level study of what constitutes entrepreneurial characteristics in rural India is a step toward understanding how to alleviate rural poverty there. Entrepreneurs are catalysts for the development of new attitudes in their societies; for better or worse, this is the stuff of social change and economic development.

Both of these books shed light on the present situation in India, and each for different reasons underlines the fact that the problems are internal, that the main forces at play are internal, and that the solution, whatever form it takes, will also have to be largely internal.

Charles Taylor

Sir Jeremy Morse and others The Financing of Long-Term Development

The Institute of Bankers, London, England, 1979, xi + 206 pp., £ 7.50 (plus 50 p postage).

The 32nd International Banking Summer School organized by the U.K. Institute of Bankers at St. John’s College, Cambridge, was devoted to the financing of long-term development. The volume includes eight keynote papers prepared by leading international bankers and economists and a brief synopsis of each of ten group discussions.

Homa Motamen Expenditure of Oil Revenue:

An Optimal Control Approach with Application to the Iranian Economy

St. Martins Press, New York, N.Y., U.S.A., 1980, xli + 189 pp., US$27.50.

Iran presents a typical case of an oil based economy. Motamen’s model is an attempt to identify the appropriate investments of revenue from a nonrenewable resource. It provides a guideline for making rational expenditures and favoring the accumulation of non-oil capital. It also indicates the maximum level of such capital that could be accumulated before the oil runs out, and in view of the limited absorptive capacity of the Iranian economy at this time, the time when it would become more profitable to invest abroad.

Edward F. Denison Accounting for Slower Economic Growth:

The United States in the 1970s

The Brookings Institution, Washington, D.C., U.S.A., 1979, xiv + 212 pp., US$16.95 (cloth), US$7.95 (paperback).

This volume, the third in the author’s pioneering studies on the sources of economic growth, is a major contribution to economic literature, distinguished by the quantitative techniques of growth accounting he has developed and applied to experiences in the United States, Western Europe, and Japan. The study focuses on the sudden retardation of growth in the United States which became apparent in 1974 and which could not be attributed to the transient or the inevitable factors that had accounted for a decline in the rate of productivity increase in the late 1960s. Of advanced technical and academic interest.

W. Keddeman (Editor) Experience and Issues in Rural Development

Royal Tropical Institute, Amsterdam, the Netherlands, 1979,56 pp.

This slim volume is based on papers presented at a seminar sponsored by the World Bank and the Royal Tropical Institute in May 1979. It offers a succinct review of experience with rural development in the post-1973 period, especially efforts to alleviate poverty. Background reading.

Pierre Dhonte Clockwork Debt

Lexington Books, D.C. Heath and Company, Lexington, Mass., U.S.A., 1979, xiv + 124 pp., US$15.95.

La Dette des Pays en Développement

Notes et Etudes Documentaires, La Documentation Francaise, 1979.

A worthy addition to the growing literature on the debt problems of developing countries with the theme that LDCs cannot manage their debt unless their exports expand, and the volume of world trade cannot expand unless the LDCs can handle their debt burdens. The discussion thus focuses on the borrowing capacity of the LDCs. Available in English and French.

Frank A. Southard, Jr. The Evolution of the International Monetary Fund

Essays in International Finance, No. 135, International Finance Section, Department of Economics, Princeton University, Princeton, N.J., U.S.A., 1979, 50 pp., US$1.50.

This essay, prepared by the former Deputy Managing Director of the International Monetary Fund, describes its evolution into an international institution at the center of world monetary problems, primarily from an operational and policy point of view.

International Monetary Fund

World Economic Outlook

A Survey by the Staff of the International Monetary Fund

This publication reviews recent developments in the world economy and examines its short-term prospects. There are separate chapters on the global perspectives for balance of payments adjustment and financing, on the situations of the industrial, oil exporting, and non-oil developing groups of countries, and on key issues of policy. Appendices provide regional and country surveys, statistical tables, and technical notes.

Copies are available free of charge from:

The Secretary

Attention: Publications Section

International Monetary Fund

Washington, D.C. 20431

U.S.A.

Staff Papers

Staff Papers makes available to the public selected studies prepared by Fund staff members on monetary and financial problems. Studies published thus far have dealt with such subjects as balance of payments and exchange rates, monetary systems and analysis, inflation in relation to economic development, national monetary and fiscal policies, methods of taxation, and international liquidity.

Papers on the Fund’s Articles of Agreement and bibliographies of publications about the Fund are also published. Summaries of each article in English, French, and Spanish are included. Published by the International Monetary Fund in March, June, September, and December. The March 1980 issue includes the following studies:

Distributional Aspects of Stabilization Programs in Developing Countries

Omotunde Johnson and Joanne Salop

A Supply Framework for Exchange Reform in Developing Countries: The Experience of Sudan

Karim Nashashibi

The Optimal Basket in a World of Generalized Floating

Leslie Lipschitz and V. Sundararajan

Why Does the Current Account Matter?Joanne Salop and Erich Spitäller

Estimation of the Timing Asymmetry in International TradeWilliam L. Hemphill

The Influence of Social Security on Household Savings: A Cross-Country Investigation

George Kopits and Padma Gotur

New prices, effective June 1, 1980, are:

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Special rate to university libraries, faculty, and students: US$4.00 a volume; US$1.00 a single issue.

Advice on payment in other currencies will be given upon receipt of order.

The Secretary, Attention: Publications Section, International Monetary Fund, Washington, D.C. 20431, U.S.A.

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