Showing papers on "Economic stagnation published in 2000"

Patterns of growth and stagnation in the late nineteenth century Habsburg economy

Abstract: This article addresses two issues that feature prominently in the recent historiography. First, how does the Habsburg Empire's economic performance compare to the record for other European economies in terms of levels and growth of national income? Second, to what extent was the Austrian economy subject to prolonged stagnation after 1873? These questions are examined on the basis of new annual estimates of GDP for Austria and Hungary for 1870 to 1913. The article argues, first, that over the whole period under review Austrian per capita income failed to expand at a pace broadly commensurate with the country's relative income position. The Austrian economy did not catch up with the leaders and failed to keep pace with other ‘followers’. Second, the Hungarian economy recorded a markedly higher rate of per capita income growth, placing it about mid-range in a European growth comparison. Third, the new evidence supports the notion of a ‘great depression’ in the western half of the empire (Austria) after 1873. The distinct periodicity and differential rates of Austrian and Hungarian growth are consistent with the argument that the outflow of Austrian capital to Hungary after the 1873 Vienna stock market crash was crucial in prolonging economic stagnation in Austria, whilst fuelling the first widespread wave of industrialisation in Hungary. The reversal of this capital outflow in the early 1890s was associated with an increase in Austrian economic growth and a decrease in Hungary's rate of expansion.

Russian and Soviet Economic Performance and Structure

Abstract: Preface. I. THE ORIGINS OF THE SOVIET ECONOMY. 1. The Administrative Command Economy. 2. The Economic History of Russia to 1917. 3. War Communism and the New Economic Policy: 1918-1928. 4. The Soviet Industrialization Debate: Issues of Growth and Development. 5. Creating the Administrative Command Economy: 1929-1940. II. HOW THE ADMINISTRATIVE COMMAND ECONOMY OPERATED: THEORY AND PRACTICE. 6. Planning in Theory and Practice. 7. The Administrative Command Economy: Management, Labor, and Pricing. 8. Special Sectors: Foreign Trade and Agriculture. III. PERFORMANCE AND DECLINE: THE END OF THE SOVIET ERA. 9. Soviet Economic Performance: A Theoretical Appraisal. 10. The Administrative Command Economy: Economic Growth. 11. The Administrative Command Economy: Change. IV. REFORM AND TRANSITION: RUSSIA AND THE INDEPENDENT STATES. 12. Transition: Theory, Policy, and Practice. 13. Creating the Institutions of a Russian Market Economy. 14. The Macroeconomy: Institutions and Policies. 15. Russia's Integration into the Global Economy. 16. Changing Structure: Leading and Lagging Sectors. 17. Economic Stagnation: A Virtual Economy? 18. Transition of the Former Soviet Republics. 19. The Social Consequences of Transition: Russia and Ukraine. 20. Russia in the Twenty-First Century. Index.

Japan Now and the United States Then: Lessons from the Parallels

Abstract: For much of the last decade, Japan’s banking crisis has been at the center of attention in the ongoing discussion of that country’s broader economic difficulties and of what public policy actions could alleviate them. The enormous loan losses and balance sheet erosion that nearly all Japanese banks have sustained during this period, and the resulting impairment of their ability to carry out ordinary credit creation activities, have been both a consequence and a cause of Japan’s prolonged economic stagnation. Of the 21 institutions that made up the standard list of Japanese ‘‘large banks’’ in 1990, by the decade’s end two had disappeared through failure and nationalization, and four others were consolidated into two by merger. At the time of writing, five of the remaining 17 are in the process of merging into two new entities, thus reducing the list to 14. But few observers think the shrinkage is over, or that the banks that remain are now healthy institutions. Questions about what further steps the Japanese authorities should take to foster the banks’ recovery—and to ensure their soundness once they have recovered—therefore continue to be pertinent. A decade ago, it was US banks, and even more so the US savings and loan (S&L) industry, that were in crisis. These institutions too suffered major loan losses, experienced failure rates unprecedented since the depression of the 1930s (especially among S&Ls, but among banks as

Our Dream : A World Free of Poverty

Abstract: Reducing poverty is a complex and difficult challenge. Poverty has many dimensions. It certainly involves lack of human and physical assets and inadequate material means to acquire food and other necessities. But it also means vulnerability to ill-health, drought, job loss, economic decline, violence, and societal conflict. And it often means a deep condition of disempowerment, even humiliation. The history of poverty during the past few decades is diverse: great advances in some dimensions in some regions, but stagnation, even reversals, in others. Progress requires effective public action at both the national and local levels, but this action is in turn profoundly influenced by how a society functions and by the public, private, and nongovernment institutions within a country. And action within a country is powerfully affected by international conditions. The programs and projects presented in this book were selected by a team representing the staff association, the poverty reduction and economic management network, and the external affairs department of the World Bank. To be included, activities had to show poverty impact. Activities still under way had to hold the promise of enhancing the well-being of the poor and contain effective monitoring and evaluation mechanisms so that changes could be made along the way if needed. The country cases presented also include methods for monitoring and evaluation. Impact is what counts. This volume not only shows that effective public action can make a difference to poverty in all its complexity; it also highlights the importance of understanding the impact of development measures on the poor.

The context surrounding health sector reforms.

Abstract: In Latin America, health sector reforms have gone hand in hand with social and economic trends during the latter half of the twentieth century and have reflected the particular concept of "development" that has been in vogue at different times. Economic stagnation and increased social spending, both hallmarks of the 1960s, led to the decline of the "import substitution" development model, which had prevailed since the beginning of the century, and slowly gave way in the 1980s to the "globalization" model. From the earlier model, a transition took place toward a restructuring of production and a series of economic adjustment policies that led, ironically, to an increase in poverty in Latin America. Implementation of the new model has occurred in two phases. The first, known as the "social reform" or "first generation" phase, sprang from the notion that poverty is the sum of a number of material shortages that can be corrected through an equitable redistribution of a fixed volume of goods belonging to society. This conceptual framework, which was completely devoid of all historical linkages and separated from economic policy, led to social policies whose entire purpose was to mitigate poverty through subsidies targeting the poorest persons in the society. In the second phase of the globalization model, which arose in the 1990s and became known as the "second generation" or "postadjustment" phase, new economic rules came into play that were based primarily on international competition, efficiency in production, and openness and fairness in the capital markets. And if during the initial stage the conceptual strategy behind all social policy was to fight poverty, in the second stage the strategy became one of achieving equity, which was no longer interpreted as the even distribution of a fixed volume of capital goods, but as the sustained provision of greater and better opportunities for all. Having grown accustomed to the protectionism inherent in the earlier development model, Latin American societies today feel threatened by a new model that offers them no social safety net. The feasibility of economic and social reform policies during the second phase, which reflect the demands of a "globalized" world, thus depends on the ability to overcome people's lack of trust and to garner the support of a political, social, and institutional majority.

Poverty and Employment in Timber-Dependent Counties

Abstract: One of the most controversial aspects of federal and state policies aimed at protecting old-growth ecosystems has been the potential impact of job losses on local economies. A fundamental question for historically timber-dependent communities is whether these policies will result in local economic stagnation and enduring pockets of poverty. In this paper, we examine the long-run impact of changes in timber-related employment on other types of employment and participation in major federal poverty programs. We use monthly, multi-county time series data to estimate a vector autoregressive model of the experience of northern California counties during the 1980s and 1990s. We find that employment base multiplier effects of timber employment on other types of employment in each county are small, and state economic conditions rather than local employment conditions are the principal driver behind local poverty.

Chapter 1. Introduction: The Emergence of Permeable Insulation

Abstract: Circumstances have changed dramatically between the early 1990s, when the world hailed Japan as one of its economic superpowers, and the early twenty-first century, as the country entered its second decade of economic stagnation. Domestically, Japan's industries have experienced major structural change, the relocation of production abroad, deregulation, and experimental macroeconomic policy such as zero-level interest rates. Internationally, the rise of the yen after 1985 and the increasing competitiveness of industrializing economies in Asia have reduced opportunities for firms producing inside Japan. At the same time, trade liberalization and financial market integration have increased pressure for governments throughout the developed world to comply with international rules in such diverse areas as competition policy, financial regulation, subsidization of private investment, and the adoption of multilateral trade dispute settlement. External and internal pressures have thus combined to force Japan to ...

The Journey So Far: The Effect of Structural Adjustment Programme (SAP), Sustainable Growth, and Development in the Caribbean Region

Abstract: Introduction The economic stagnation of the Caribbean islands in the eighties could be attributed to the general slow growth of Latin American countries in the eighties. The significant drop in the aggregate rate of growth from 5.9% in the seventies to 1.1 in the eighties was a major concern (Economic and Social Progress in Latin America, 1997). In order to address the economic distortion (in terms of external debt and declining GDP) and macro imbalances, most of the Latin American countries including the Caribbean Community and Caribbean Common Market (CARICOM)(1) decided to seek assistance from the World Bank/IMF. The centerpiece of IMF policy prescription to developing indebted countries in the Baker and Brady plan lies on the structural adjustment programmes (SAP). A SAP may be defined as a complex set of multilevel organizational and inter-organizational interventions with multiple goals and objectives, a wide range of public and private sector organizations and organizational actors, with many intended and unintended consequences (Jamal Khan, 1991). The intent of SAP is to address both exogenous and endogenous shocks confronted by these countries and restore the economy to a steady growth path if recommended policies were adequately and correctly implemented. In the case of an exogenous shock, current account deficits are offset by sustainable private and official capital flows; while the endogenous shocks, are the responsibility of the participating country government through fiscal responsibility. Some of the tenets of SAP include national currency devaluation, full trade liberalization, contractionary fiscal policy, market-determined exchange rate, and removal of all excise taxes. Using the neoclassical model as a point of reference, the market mechanism is supposed to ensure efficiency in resource allocation and promote growth with no disequilibrium or imbalances in the economy. SAP recommendations fall under this model, and if participating countries loyally implement these policies, then the free market would ensure growth and development for them. This is consistent with the World Trade Organization (WTO) ideology, whose philosophy is based on requiring member countries to use trade policies that are nondiscriminatory and allow trade flows in the host market (World Development Report, 1997). CARICOM as participating members of the GATT/ WTO have been encouraged to seek assistance from the IMF. But the feasibility of SAP for countries adopting it leaves much to be desired. The economic benefits of adjustment in most cases have been modest or lacking(2). Studies have also indicated that very few reform programs have actually achieved the targeted growth rate, increased per capita income in the export sector, improved current accounts balances and external debt (Ravenhill, 1988; Mosley and Smith, 1989). The question becomes why are developing countries interested in the adjustment program? Countries seeking assistance from World Bank/IMF had to go through this program if they intend to promote growth and development through export led growth and external aid. Many of the Less Developed Countries (LCD's) as well as CARICOM countries that adapt SAP are usually small and poor, and the implementation of SAP has become a nightmare for them due to the austerity measures imposed by the World Bank/IMF. The economic hardship in terms of declining real income due to devaluation has not only led to social problems but also raises other questions of tradeoff between human suffering and economic growth and development. The objective of SAP is to assist countries by providing loans that would translate from short term to medium term growth, and eventually promote long term sustainable growth and development. Under the program, trade liberalization was suppose to foster export-led growth for these countries by increasing export and discouraging import. The purpose of this paper is to theoretically analyze (using Stylized fact) the growth path and development of CARICOM countries that adapted SAP given the structure and nature of their economy. …

Brazil's New Capitalism

Abstract: In the past decade, Brazil has entered the first stages of a modern capitalist reorganization. Its economic transition has been gradual, but the country has avoided crippling setbacks. For many observers, Brazil seems finally to be pulling itself out of two frustrating decades of economic stagnation and political turmoil. Not all observers accept these changes with unalloyed enthusiasm, however. The political left abhors what it portrays as an alienating, neoliberal destruction of Brazil's national development by international finance capitalism. But regardless of their preferences, everyone agrees that change is finally happening. As economic historian Ricardo Bielchowsky put it, Brazil's new economic model is radically different from its predecessor. In the new economy, investors have the freedom to make their own investment choices based on market changes. Of course, whether investors will use their new freedom to allocate resources

Protecting the Old in a Young Economy: Old Age Insurance in the West Bank and Gaza Strip

Abstract: Taking the West Bank and Gaza Strip as a reference point, this paper looks at social protection in developing economies, which are beset by economic stagnation, widespread poverty and unemployment. If the main breadwinner dies, is unable to work or is an older person, these factors are prime causes of absolute poverty. This is hardly surprising, since private and public systems of social security are totally inadequate in this area in particular. Current thinking on social security suggests that what is needed is the rapid introduction of a comprehensive system of retirement provision, comprising a mandatory capital-funded insurance component, with defined contributions, administered on a decentralized basis; and a state-administered pay-as-you-go basic insurance component with lump-sum transfers to safeguard the poorest. A system of this kind works to prevent poverty in old age by redistributing funds from some individuals to others and ensuring an income for life, and it represents a compromise between a fair return on what people have contributed and a fair distribution over society as a whole. It is thus a major force for stability in society.

Overcoming the Transformation Crisis — Selected Issues and Policy Options in Russia

Abstract: During the last fifteen years Russia has changed profoundly. It is no longer a dictatorship ruled by a single party. It has neither an official ideology nor censorship. The society has opened up to the rest of the world and a pluralism of views and ways of life prevails. All of this was unthinkable during Soviet socialism. The Russian economy has also changed. It has transformed from central management to something that might be called a market economy. But this is a very peculiar market economy. The economic stagnation which became visible a quarter of a century ago had changed into s steep production decline which still continues. At the same time inequality has increased, and mass poverty has become a fact. Russia’s economic decline is - if one abstracts from the other, even more unfortunate former Soviet republics - almost unprecedented in recent economic history. More surprisingly, it has taken place in a country that is best endowed with natural resources, and also has a relatively well educated labor force and rich industrial and technological traditions. Russia’s twentieth century is indeed packed with unique developments: the collapse of an empire, revolution and civil war, famine, forced industrialization, collectivization, establishment of dictatorship and mass terror, another devastating war, collapse of the system and now economic decline. For Russia, it seems, it is entirely normal to be abnormal, and one should ask whether the future also has unexpected surprises in store.

The Organization and Observation of Elections in Federal Ethiopia: Retrospect and Prospect

Abstract: In several strands of political theory, multi-party elections are considered as a prerequisite for real and effective democracy: in order to let the people exercise choice between programmes and candidates without the outcome being a foregone conclusion. In Africa, multi-party elections are seen by the Western donor community and the UN as one of the most important ingredients of the political democratization process in Africa, and international election observers have been a familiar part of the political landscape in countries perceived as carrying a promise of democratization. Ethiopia has been one of these countries. Both for economic and political reasons, it has been, and still is, a popular country with the Western donor community (the EU, the USA, and also the World Bank) on a continent which has seen the so-called ‘third wave’ of democratization run into the sands of neo-autocracy and economic stagnation (cf. Lemarchand 1993; Ihonvbere 1996).

Institutions, Restructuring, and Macroeconomic Performance

Abstract: The core mechanism that drives economic growth in modern market economies is the massive ongoing restructuring and factor reallocation by which new technologies replace the old. This process of Schumpeterian ‘creative destruction’ permeates major aspects of macroeconomic performance — not only long-run growth, but also economic fluctuations and the functioning of factor markets. At the microeconomic level, restructuring demands innumerable decisions to create or destroy production units. The efficiency of those decisions hinges on the existence of sound institutions that provide a proper transactional framework. Failure along this dimension can have dire macroeconomic consequences. By limiting the economy’s ability to tap new technological opportunities and adapt to a changing environment, institutional failure can result in dysfunctional factor markets, economic stagnation, and exposure to deep crises.

Population and sustainable development: The critical role of good governance

Abstract: Many articles in the popular press and in academic journals decry the doomed state of our planet. In one recent journalistic account, “The Ends of the Earth”, the author (Kaplan, 1997) journeyed to see for himself “the corrosive effects of overpopulation and environmental degradation in the Third World”. What he found, not surprisingly, was consistent with what he had expected, based on the oft-cited statistical indicators of development - or more accurately, of the malaise of development - decay, disorder and depression. Similar indicators suggest that the news from the Pacific is not good either. Demographic trends particularly are invoked as harbingers of doom for these island countries and territories. The well-rehearsed scenario is a future condemned by overpopulation of under-resourced towns and depopulation of the outer islands; by agricultural communities beggared by the pressure of numbers, the degradation of their environmental resources, and the loss of their most productive members; by the inability of basic education and health services to make headway against the growing numbers of potential clients; and by economic stagnation that is deepened by the emigration of talent and the absence of jobs for the remnant of a low-skilled labour force (see, for example, Cole, 1993).

privatization in latin America: the other side of the story

Abstract: In line with the current global trends, most Latin American countries have adopted promarket reforms, including privatization, deregulation, and liberalization, under the auspices of various market-friendly regimes and international financial agencies. They carried out privatization exercises based on the rationales that privatization would enhance competitiveness and efficiency, overcome economic stagnation and fiscal crisis, eradicate poverty and unemployment, reduce external debt, and increase foreign investment. In opposition to these rationales, however, the actual socioeconomic conditions in most Latin American countries have hardly improved, and in many cases, the situation has worsened. This article attempts to offer a more critical account of the outcomes of privatization by evaluating the trends of economic realities in Latin American countries before and after privatization programs were adopted. It is found that except for a few cases, most Latin American economies have not performed well duri...

An input output analysis of structural change in apartheid era South Africa: 1975-93

Abstract: This paper examines the sources of structural changes in output growth of South Africa's economy over 1975-93 using a decomposition method within the inputoutput (IO) framework. The model uses four comparable IO tables for 1975, 1981, 1988, and 1993 as the main data sources and accounts for output changes from a demand side perspective. It decomposes output growth into private consumption, government consumption, investment and export components and also measures the impact of import substitution and changes in intermediate input use (as indicated by changes in IO coefficients). It is found that before 1981, overall output growth was multi-components driven with all the above components contributing positively to economic growth. However, the collapse of investment demand is by far the single largest factor contributing to the economic stagnation that categorises the post 1981 period. Whilst the efficiency of factor utilisation remains an issue for further research, a significant rise in the IO coefficient share during the entire 1975-93 period indicates a deepening interdependence between industrial sectors over this period. However, analysis by subperiods suggests that after 1981, both the mining and manufacturing sectors failed to sustain their role as engines of economic growth.

Restoring the legitimacy of Japanese business in the post-bubble era: can good economics make good ethics easier?

Abstract: In the post-war period the legitimacy of Japanese business was largely based on its superior economic performance While scandals were not unknown, they were overlooked as long as the economy “delivered the goods” In the post-bubble economy Japanese business is facing a crisis of confidence, as a seemingly endless series of scandals continues during a period of prolonged economic stagnation and uncertainty

Protecting the Old in a Young Economy: Old Age Insurance in the West Bank and Gaza Strip

Abstract: Taking the West Bank and Gaza Strip as a reference point, this paper looks at social protection in developing economies, which are beset by economic stagnation, widespread poverty and unemployment. If the main breadwinner dies, is unable to work or is an older person, these factors are prime causes of absolute poverty. This is hardly surprising, since private and public systems of social security are totally inadequate in this area in particular. Current thinking on social security suggests that what is needed is the rapid introduction of a comprehensive system of retirement provision, comprising a mandatory capital-funded insurance component, with defined contributions, administered on a decentralized basis; and a state-administered pay-as-you-go basic insurance component with lump-sum transfers to safeguard the poorest. A system of this kind works to prevent poverty in old age by redistributing funds from some individuals to others and ensuring an income for life, and it represents a compromise between a fair return on what people have contributed and a fair distribution over society as a whole. It is thus a major force for stability in society.

Changing Dimensions of Malaysian Trade: Beyond Laissez Faire and Dirigiste Approaches

Abstract: The debate on the role of trade in the process of industrial development in developing countries has a long history. For many years developing economies were faced with the grim prospect of facing continued economic stagnation as characterized by Africa and Latin America. It gave rise to a plethora of inward-oriented prescriptions from trade pessimists who have often argued that the capacity of developing economies to grow through export-orientation is limited because of the slow growth in world demand for their exports and the tendency of the terms of trade to disfavour them (Nurkse, 1959; Prebisch, 1959, 1983; Singer, 1950; Stewart, 1976; Lewis, 1980). Such a view was echoed by the Secretary General of the United Nations Committee for Trade and Development (UNCTAD) who maintained the developing countries did not share in three decades of post-war prosperity because of the “existence of basic weaknesses in the mechanisms that link the economies of the two groups of countries” (UNCTAD, 1977: 8-9)

Public Technology Procurement: The Case of Digital Switching Systems in Greece

Abstract: Greece is one of the less favoured member states of the European Union. After a period of very high industrial growth in the ‘60s and early ’70s and two decades of economic stagnation accompanied in many cases by de-industrialisation, Greece saw its competitiveness eroding and trust relations among major actors in economic life deteriorating. Economic recovery did not start until 1996, and was based on strict macroeconomic policies to cope with the Maastricht criteria.

A New Beginning: Recasting the U.S.-Japan Economic Relationship

Abstract: The time is ripe for a bold new initiative to recast the U.S.-Japan economic relationship for the 21st century. A new Japan is emerging. Foreign investment is on the rise. Tokyo is deregulating and restructuring its economy. A new generation of entrepreneurs and venture capitalists has emerged. But a more vibrant, sustainable Japanese economy is threatened by the crushing weight of Japans mounting public debt, the burden of its aging and shrinking population and the cumulative toll of years of economic stagnation. New governments in Washington and Tokyo have a unique opportunity to reinvigorate the U.S.-Japan relationship and to accelerate the pace and redirect the nature of change in the Japanese economy by creating a U.S.-Japan " open marketplace" --free of tariffs, with minimal regulatory impediments and an increasing freedom to do business--by the year 2010. This effort would include harmonization and mutual recognition of domestic regulations, meaningful enforcement of competition policy, deeper restructuring of the Japanese economy, and a dramatic increase in Japanese imports and greater acceptance of foreign investment. In this effort, the United States must assert its economic self-interest through new structural and sectoral trade initiatives and stepped up multilateral market-opening pressure through cases brought to the World Trade Organization. A New Beginning: Recasting the U.S.-Japan Economic Relationship, by Bruce Stokes, is a road map for U.S.-Japan economic relations in the 21st century.

Natural Selection and the Origin of economic Growth

Abstract: This research develops an evolutionary growth theory that captures the interplay between the evolution of mankind and economic growth since the emergence of the human species. This unified theory encompasses the observed evolution of population, technology and income per capita in the long transition from an epoch of Malthusian stagnation to sustained economic growth. The theory suggests that prolonged economic stagnation prior to the transition to sustained growth stimulated natural selection that shaped the evolution of the human species, whereas the evolution of the human species was the origin of the take-off from an epoch of stagnation to sustained growth.

The context of health sector reforms

Abstract: In Latin America health sector reforms have gone hand in hand with social and economic trends during the latter half of the 20th century and have reflected the particular concept of "development" that has been in vogue at different times Economic stagnation and increased social spending both hallmarks of the 1960s led to the decline of the "import substitution" development model which had prevailed since the beginning of the century and slowly gave way in the 1980s to the "globalization" model From the earlier model a transition took place toward a restructuring of production and a series of economic adjustment policies that led ironically to an increase in poverty in Latin America Implementation of the new model has occurred in two phases The first known as the "social reform" or "first generation" phase sprang from the notion that poverty is the sum of a number of material shortages that can be corrected through an equitable redistribution of a fixed volume of goods belonging to society This conceptual framework which was completely devoid of all historical linkages and separated from economic policy led to social policies whose entire purpose was to mitigate poverty through subsidies targeting the poorest persons in the society In the second phase of the globalization model which arose in the 1990s and became known as the "second generation" or "postadjustment" phase new economic rules came into play that were based primarily on international competition efficiency in production and openness and fairness in the capital markets And if during the initial stage the conceptual strategy behind all social policy was to fight poverty in the second stage the strategy became one of achieving equity which was no longer interpreted as the even distribution of a fixed volume of capital goods but as the sustained provision of greater and better opportunities for all Having grown accustomed to the protectionism inherent in the earlier development model Latin American societies today feel threatened by a new model that offers them no social safety net The feasibility of economic and social reform policies during the second phase which reflect the demands of a "globalized" world thus depends on the ability to overcome peoples lack of trust and to garner the support of a political social and institutional majority (authors)

The j apanese c risis - a c ase o f s trategic failure?

Abstract: This paper provides an alternative insight into Japan’s current economic problems. We concentrate upon the role played by the economy’s central actors, namely Japan’s transnational corporations. Since the early 1980’s, Japan’s transnationals have become dominant players in the global economy, and now have a higher rate of physical investment in new, overseas greenfield sites than their competitors. This has had detrimental consequences for Japan’s domestic economy, particularly for small firms who operate in keiretsu networks. This has led to concerns about the ‘hollowing out’ of Japan’s domestic industry raising the possibility of long-term industrial decline and ‘strategic failure’. Throughout the 1990’s, the Japanese economy has been plagued by a number of economic crises. The 1989 Tokyo stock market crash was subsequently followed by a collapse in property values (1991), recession (1991‐3), stagnant growth, a fiscal and financial crisis (1997) and recession again (1998‐9). For Japan, these problems of economic stagnation are a new, unwelcome experience. The post-war years have been an extremely successful period of economic growth for the Japanese economy. The foundations for this success were laid by the State pursuing a unique industrial strategy that not only complemented Japan’s co-operative style of industrial organisation, but also encouraged investment in ‘strategic’ industries and a nurturing of Japan’s small business sector. Indeed, during the 1970’s and 1980’s, Japan’s ‘Developmental State’ had become accepted as a role model for industrialisation and economic development ( Johnson, 1982). Although initially surprised by Japan’s recent decline, many Western commentators have tried to explain the crisis with the standard tools of economic analysis. Typically, the mainstream argument is that the high post-war growth rates of Japan (and her East Asian neighbours) were the result of a State sponsored high investment policy rather than improvements in productivity (Krugman, 1994). Hence, the slowdown of the 1990’s merely reflects one of the first rules of economics ‐ the law of diminishing returns. Since ( Japanese) businesses are no longer able to generate the high returns of the recent past, they have been unable to repay loans thus creating problems for the financial sector. In addition, because Japan is a highly regulated economy ‐ possibly