![]() Callahan, “The Metamorphosis of an Industry,” Automotive Industries (June 1983), 16. Its top automaker, Toyota, had perfected its management of material to the point that its inventory costs were only a tenth of General Motors’. Cole and Taizo Yakushiji, “The American and Japanese Auto Industries in Transition: Report of the Joint U.S.-Japan Automotive Study,” University of Michigan Center for Japanese Studies (1984), 37. BackgroundĪfter four decades of aggressive public support from its Ministry of International Trade and Industry (MITI)-direct subsidies, tax breaks, cheap loans, and information-sharing-Japan had built an automotive juggernaut by the 1970s with the world’s most efficient production processes and its highest-quality cars. ![]() Today, Honda and Toyota have among the highest domestic content of cars sold in America. $25+ billion in foreign capital investment (2022 dollars).Within a decade, the import quota generated: Once assembly moved onshore, Japanese firms had incentives to onshore the rest of their value chain-production, research, and design-and they’ve chosen to continue their American investments long after the import quota was lifted. Production is a function of past policy and investment choices. Trade barriers create new incentives for investment.Cars made in America were exempt from the import quota, which led Japanese automakers to invest in U.S.-based assembly facilities. Rather than fostering sclerosis and cronyism, the import quota encouraged innovation, spurred investment, and boosted long-term production. Blunt constraints that set market boundaries, while encouraging competition therein, help to ensure that capitalism’s power is serving the national interest. Only when American policymakers stepped in did the domestic manufacturing base improve and grow.īounded markets channel investment and competition in the national interest. America’s open market did not foster more resilient, productive, or innovative firms it exposed them to near-fatal import competition. The Japanese auto industry, insulated from foreign competition and subsidized by the state, was not a catastrophic failure, but a global leader in quality and innovation. Active efforts by policymakers are supposed to backfire. According to market fundamentalists, free markets are supposed to create incentives and competitive pressures that spur productivity and innovation. International economic competition defies free-market dogma. President Ronald Reagan negotiated a quota on Japanese imports that stemmed competition for four years, bought Detroit time to retool, and spurred massive foreign investment in a new manufacturing base in the South that created hundreds of thousands of American jobs. Without the time and resources to retool, American automakers risked bankruptcy and mass layoffs. After decades of intensive state support, Japanese firms had developed the world’s most efficient production processes and made the highest-quality cars. In 1980, Japanese automakers were trouncing Detroit’s “Big Three” in the American car market.
0 Comments
Leave a Reply. |