Veblen's Theories of "Latecomer Advantage" and "The Machine Process": Relevancy for Flexible Production
Ozawa, Seiji, Journal of Economic Issues
In particular reference to the rise of Germany (Veblen  1939) and Japan (Veblen  1945), Thorstein Veblen expounded the theory of latecomer advantage and emphasized the special leg-ups a latecomer country may enjoy in catching up in the "Modern Industrial System," a new stage of capitalism revolutionalized by the "machine process" (1904). The machine process leads to a mechanistic/rational division of workmen's jobs into standardized units of operations, a division of labor that facilitates efficiency while necessitating coordinations of the sequential phases of production and inter-unit exchanges. In other words, specialization leads to the requirement of "interstitial coordination" throughout the "concatenation of industries." At the same time, the Modern Industrial System, though "extraordinarily productive," dehumanizes the work process of production and results in "the alienation between the two classes, the workman and their owners" (Veblen  1939).
The purpose of this paper is to point out that the adversary industrial relations (class struggle) Veblen lamented relates to the paradigm of Fordist/Taylorist mass production which replaced that of craft production in the early twentieth century and that the new paradigm of flexible production originating in postwar Japan addresses the issue of job fragmentation, thereby ameliorating the dilemma of assembly-based manufacturing between productive efficiency and worker alienation. The origination of flexible production in postwar Japan demonstrates one notable "institutional" form of latecomer advantage that was created and capitalized on in dealing with both the interstitial coordination mandate and the job fragmentation effect of the Modern Industrial System.
Explaining the benefits Germany enjoyed as a latecomer, Veblen mainly emphasized the fact that late starters are in a position to adopt the latest cutting-edge technology while early starters are stuck with older and obsolete technology ( 1939). The primary example used was the narrow-gauge rails England initially introduced versus the more efficient broad-gauge rails adopted later by Germany. Thus, it was in physical technical characteristics that the major source of latecomer advantages was found for Germany. On the other hand, in the case of latecomer Japan, Veblen stressed not only a technological gap, which provides a borrowable stock of knowledge so as to benefit from "the usufruct of the modern state of science and the industrial arts" (1945) but also Japan's "chivalric honor" tradition or "feudalistic fealty" work ethic--or what he encapsulated as "the Spirit of Old Japan." (1) An intangible human-related factor is thus added as another variable for latecomer Japan. And as seen below, those socio-cultural (anthropo-institutional) factors in "the Spirit of Old Japan" are crucial in understanding why flexible production originated in postwar Japan.
What Veblen was unable to foresee, however, was the machine process and the principle of interstitial coordination, when combined with "the Spirit of Old Japan," would create an opportunity for latecomer Japan not merely to borrow from the stock of knowledge existing in the advanced West but also, and more importantly, to initiate a revolutionary manufacturing innovation of its own.
The Curse--and the Opportunity--of Standardization
First of all, Veblen lamented the replacement of workmen's skills by the routinized and standardized mechanistic processes of production:
Under the new order the first requisite of ordinary productive industry is no longer the workman and his manual skill, but rather the mechanical equipment and the standardized processes in which the mechanical equipment is engaged. And the latter day industrial equipment and process embodies not the manual skill, dexterity and judgment of an individual workman.... Under the new order of things the mechanical equipment--the "industrial plant"--takes the initiative, sets the pace, and turns the workman to account in the carrying-on of those standardized processes of production that embody this mechanistic state of the industrial arts. …