Letters

Not on the List

Steve Clemons suggests some thinkers who deserved an honorable mention in 2010.

I very much enjoyed your FP Top 100 Global Thinkers list -- though I think what makes the roster more interesting than many such lists is that you include "doers" rather than just "thinkers." I have two recommendations for you.

The first is Charles Kupchan, whose book How Enemies Become Friends ought to be vital reading for anyone in the foreign-policy or national security business. He explains the bottom-line benefits of strategic restraint and swims upstream in a profession that thinks of conflict and the breakout of war as the punctuation points that matter. Although the world may be less anarchic these days, understanding the factors that lead to and maintain peace may be more important than understanding the factors that drive states into war. Kupchan also saw much sooner than others the circumstances that would erode America's unchallenged global dominance in his The End of the American Era, which had but one flaw: The precipitous fall of American power happened much more rapidly than he predicted. But he was out there alone challenging American triumphalists in the self-congratulating networks of the Council on Foreign Relations long before such critiques came into fashion.

The second is the recently deceased Chalmers Johnson, who led the way in four vital arenas. He saw through the ideological thinness of the United States' confused understanding of what was driving many communist revolutions in the mid-20th century, pinpointing peasant nationalism as the real fire in these movements. Johnson also birthed an entire field of modern economic and political study in his work on the "developmental state" with his pathbreaking book on Japan's political economy, MITI and the Japanese Miracle. Johnson nearly single-handedly sparked a still-simmering civil war in political science in his broadside on the hyperapplication of rational-choice theory in studying political phenomena. And perhaps most importantly, Johnson thought through at both granular and macro levels the characteristics of American empire today and how this structure of empire is generating "blowback" aimed at the United States. Johnson's four-book empire series provides a singularly unique body of work that is as important to understanding America's global circumstance as was Henry Kissinger's Nuclear Weapons and Foreign Policy.

Steve Clemons
Founder and Senior Fellow, New America Foundation/American Strategy Program
Publisher, the Washington Note
Washington, D.C.

Letters

What Saved Japan?

Dick Beason takes issue with Clyde Prestowitz's argument that government action, not free markets, beat the Japanese juggernaut.

Clyde V. Prestowitz makes so many misleading statements that it is difficult to know where to begin ("Lie of the Tiger," November 2010). For one, Japan's economic miracle was not the result of "subsidized investment in 'strategic industries.'" While various Japanese bureaucracies did indeed want to pursue such policies, the final policies were ultimately the product of a political process: Industrial subsidies throughout the period were primarily focused on the slowest-growing industries, namely processed food, mining, and textiles. Electrical machinery and automobiles received the least support. The closest parallel in the United States was the recent bailout of domestic auto companies -- subsidies went to dying industries, not thriving ones.

Furthermore, the Japanese economy's collapse over the past 20 years has little to do with tough U.S. trade policies. Rather, the extended crisis was the cumulative result of macroeconomic policies pushed by Washington and voluntarily implemented in Tokyo. During President Bill Clinton's administration, Larry Summers, Timothy Geithner, and Laura Tyson -- familiar faces in the current recession -- argued that Japan needed massive fiscal stimulus. Unfortunately, that allowed Japanese banks and companies to avoid necessary restructuring. Later efforts proved too little too late, as Japanese taxpayers still find themselves footing the bills for corporate bailouts.

There is a valuable lesson in that for Washington. But maybe Prestowitz really believes it's possible for government policy to somehow outsmart the market.

Dick Beason
Professor of Business and Economics, University of Alberta
Edmonton, Canada


Prestowitz knows the "real" story of the American industrial response to Japanese competition in the 1980s, having been part of that successful reaction while in the U.S. government and afterward. I heard him describe the challenge, and the most promising American response, 25 years ago when I was living in Tokyo and he was working on this strategy. What he says now is entirely consistent with what he was describing then. And the question is why what "everyone knows" about those years is so different from what really occurred.

A political version of "magical realism" -- a preference for mythical or invented versions of history, rather than the plain facts of what actually occurred -- plagues many parts of American public life. Among its most damaging manifestations is the political-media myth that America's industrial successes have been free of any taint of government encouragement, support, or coordination. That is not true of today's triad of great high-tech wealth generators: information technology and the Internet (fostered by the Defense Advanced Research Projects Agency), genomics and biotechnology (fostered by the National Institutes of Health), and geospatial and GPS applications (fostered by the military). Nor is it true of America's engagement with Japan and future interactions with China (or Europe). Congratulations to Prestowitz for attempting to dispel magical thinking with reality.

James Fallows
National Correspondent, the Atlantic
Washington, D.C.


Clyde V. Prestowitz replies:

Dick Beason is correct to say that some slow-growing Japanese industries received subsidies. But he is wrong in saying that "strategic industries" were not subsidized. It's an error that reflects his misunderstanding of Japan's bureaucratic modus operandi.

In the "miracle" years, the Japanese bureaucracy made sure to maintain a stranglehold on the financial system. As in China today, Japan's savers had virtually no alternatives to putting their savings in the banks at low interest rates. These savings were then channeled by the government into loans made on a preferential basis to selected strategic industries. The export-oriented auto companies got these loans while the domestically oriented pharmaceutical industry did not. There were other interventions by the Japanese government: The yen was manipulated to be undervalued, and exporters were allowed to deduct the entire amount of their foreign exchange exposure -- calculated as equivalent to the amount of their export sales -- from their taxes. Because these measures worked so well and required no budget appropriations, the Japanese bureaucracy actually never wanted to provide heavy direct subsidies. It is not clear why Beason thinks otherwise.

As for the United States' pushing Japan to do massive stimulus to encourage buying of U.S. exports, I'm not sure where Beason gets his facts. I was a very active player in U.S.-Japan affairs in those days, and I clearly remember the Japanese vice minister of finance explaining to me that Japan would spend as much and for as long as was needed to counteract the impact of the collapse of the Japanese bubble in 1992. That stance did not require any cajoling on the United States' part.