Climate Converts: Institutional Redeployment, Industrial Policy, and Public Investment in Energy in Japan

By Hughes, Llewelyn | Journal of East Asian Studies, January-April 2012 | Go to article overview

Climate Converts: Institutional Redeployment, Industrial Policy, and Public Investment in Energy in Japan


Hughes, Llewelyn, Journal of East Asian Studies


A large literature in political economy argues that governments in the advanced industrialized states retrenched from the application of industrial policy while resisting pressure to reform in a limited number of sectors. In this article, I argue that retrenchment and resistance do not fully describe the range of choices made by governments. Through an analysis of investment in energy policy in Japan, I show that in addition to retrenching from industrial policies and resisting pressure to reduce industrial targeting, domestic actors have retained and redeployed state functions in public policy areas unaffected by the causes of liberalization.

KEYWORDS: Japan, political economy, industrial policy, energy, climate change, institutions, liberalization

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A LARGE LITERATURE IN POLITICAL ECONOMY PROPOSES THAT GOVERNMENTS in the advanced industrialized states have transformed themselves from active participants to passive regulators of economic markets (Simmons, Dobbin, and Garrett 2006). This "secular expansion of market relations inside and across the borders of national political-economic systems" contrasts with the previous orthodoxy, in which sectoral intervention with the goal of promoting economic growth was considered a core role of the state (Streeck and Thelen 2004, 2; Shonfield 1966).

Debate over the causes and implications of this change is mirrored in scholarship on Japan. Japan is the canonical example of a developmental state, yet liberalization also emerged as an important theme in Japanese politics (Woo-Cumings 1999). In particular, Japan's entrance into international institutions, pressure from the United States, and lobbying from domestic firms are identified as important causes of economic liberalization in Japan. These three pressures, it is argued, led the state to retrench from sectoral targeting in manufacturing.

In many areas, government and socioeconomic actors accepted--or even actively promoted--economic liberalization. In others they resisted liberalization, shielding declining industries from international competition (Katz 1988). This is most evident in the agricultural sector, where barriers to trade and investment have fallen more slowly than in manufacturing (Davis 2003). Taken together, the Japanese government is argued to have engaged in a process of managed globalization in which it has reduced government intervention in manufacturing while continuing to protect a limited number of sectors (Schaede and Grimes 2003).

In this article, I argue that the constraints liberalization placed on domestic actors were more fragmented than proposed by the retrenchment and resistance hypotheses. Through an analysis of investment in energy policy in Japan, I show that retrenchment and resistance did not exhaust the range of choices available to domestic actors; in addition to retrenching from the use of industrial policies or resisting pressure to reduce industrial targeting, they retained and redeployed state functions to the energy sector, which was substantially unaffected by the mechanisms driving liberalization.

The analysis proceeds as follows. I begin by discussing theories of economic liberalization, with reference to the most important mechanisms identified as undermining industrial policy in Japan. I then introduce the concept of redeployment, contrast it with retrenchment and resistance, and introduce legal, budgetary, and employee-level data to demonstrate the redeployment of state resources to manage energy security and environmental externalities and increasingly to promote sectoral employment and growth. I conclude with a discussion of the findings and their implications for our understanding of the relationship between state-market relations in Japan.

Existing Literature on Economic Liberalization

There is a growing consensus in comparative political economy that governments across the advanced industrialized states retrenched from the application of sectorally targeted policies while resisting change in a more limited number of sectors (Campbell 2004, 125-127).

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Climate Converts: Institutional Redeployment, Industrial Policy, and Public Investment in Energy in Japan
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