Financial Globalization and the Opening of the Japanese Economy

James P. Malcolm

• Publisher: Routledge
• Year: 2013
• ISBN:
  9781136855023
• Edition: 1
• Topic: Social Sciences
• Subtopic: Ethnic Studies
• Index: Social Sciences

This book investigates recent changes in Japan's financial system and looks at the implications for Japan's particularistic model of political economy. Drawing on the latest theoretical research, it seeks to determine how Japan's experience resembles patterns which many scholars in the West have associated with financial globalization as a powerful force for conveyance.
The book sets out the background and examines the progression of financial deregulation in Japan, culminating in the Big Bang programme of financial reform set in motion in November 1996. It analyses developments in the financial sector to gauge the extent to which Japanese financial institutions are falling into line with emerging norms of organization and strategic management. It also examines the implications for the corporate and household sectors stemming from the government and financial sectors' partial embrace of financial globalization.

Part One

Financial Globalisation in Theory and Practice

Chapter 1

Beyond Partisan Agendas

Introduction

This chapter sets out to establish an understanding of financial globalisation both in theory and in practice. It draws on work from a variety of disciplines to create a holistic picture of financial globalisation.

The first section reviews the current state of the economic globalisation debate and makes use of a foundational conception of globalisation to get beyond the intransigence of much recent work in the field. It argues that the term globalisation is applicable to recent developments in the economic sphere, and highlights the way in which the process has progressed in the context of new technological possibilities via a complex dynamic of deregulation and competitive innovation. The second section proceeds to analyse developments in the financial sector in order to construct an empirical picture of the mechanics and current state of financial globalisation. Key deregulatory moments and competitive innovations are reviewed and quantitative indicators of current levels of integration are surveyed. The third section explores the implications for institutional convergence. Recent developments in the regulatory regimes, financial systems and social structures of advanced capitalist states are examined. Evidence of institutional structures becoming more similar in significant and unprecedented ways is unearthed.

1.1 THE POLITICAL ECONOMY OF ECONOMIC GLOBALISATION

A properly conceived notion of globalisation can provide a valid and useful framework for examining contemporary developments in the economic sphere. The staleness of much of the current debate on globalisation can be circumvented by employing a back-to-basics working definition of the concept. This, in turn, can provide a means of reconciling many competing observations about economic globalisation.

(i) An Intransigent Debate

The economic globalisation debate is in deadlock. Rodrik has described it as ‘a dialogue of the deaf’ (1997, p. 20), and there are at least three reasons as to why contributors do not hear each other. First, participants appear disinterested in establishing foundations for the debate. A lack of general agreement on even the most basic point of reference – namely, a minimal definition of globalisation – is the foremost impediment to real dialogue. To the extent that contributors insist on asserting, explicitly or implicitly, arbitrary definitions to bolster preconceived theses, they argue at cross purposes. However, as the next section shows, a very adequate, broad and nontotalising framework of reference already exists. It can be speculated that participants do not avail themselves of this aid out of ignorance/laziness, or wariness that it would lead them closer to those they oppose than they wish to be, a consideration which might lessen the force of their platform. Unfortunately, of the few that have grounded their work in such foundations, a failure to make this explicit has encouraged reviewers to brush away their efforts as lightly as the ungrounded efforts of others.¹

Second, participants tend to oversimplify the field in their eagerness to carve out a space for their own contribution to the debate. Reducing the field to nice, neat and oversimplified taxonomies from which one can proceed by a banal form of dialectical method is poor scholarship. But in this case, failing to engage with the debate in its complex totality exacerbates the existing impasse in dialogue since opponents’ positions are parodied to the point of absurdity. Ironically, it is the Critical Theorists and others on the Left who, for all their avowed metatheoretical consciousness and rejection of reductionism, tend to be most culpable.² Through their critiques, Ohmae’s (1990) Borderless World has attained a status in political science out of all proportion to its status as a popular work by a Japanese management theorist written in hyperbolic tone. In many cases, such potshots across disciplinary (and national) boundaries serve no purpose other than to detract from an author’s failure to engage with the more complex and topical real ‘meat’ of the debate. By contrast, many on the Right tend to avoid this trap only by default, largely ignoring the fact that globalisation is a contested concept at all. In both respects, Cox’s (1981) observations about theoretical perspective – in particular, the distinctions he draws between ‘problem-solving theory’ and ‘critical theory’ mentioned in the introduction to this book – shed light on why this may occur.

There are several ways around this dilemma, but most are less than satisfactory. Jones (1995) stresses the complexity of the concept of globalisation as a multilayered and multilevel process which can be easily misconstrued by the unwary. He shows that it cannot be captured adequately by parsimonious approaches which tend to be excessively ‘rationalistic’ or by unduly optimistic approaches which tend to be ‘functionalistic’. Instead, he suggests that a ‘constructivist’ or ‘structurationist’ approach is better but, by failing to conceptually differentiate globalisation from interdependence, his framework for analysis can only be applied to globalisation as a rhetorical critique. Hirst and Thompson seek to dodge the problem of reductionism by admitting up-front their strategy of interrogating ‘an extreme and one-sided ideal type’ of the globalisation thesis (1996, p. 7). Out of their concern that the rhetoric of globalisation may destroy the political will to seek a means to maintain output, employment and social equality in advanced countries to the detriment of long-term economic performance, they imply that this is a legitimate way to illuminate a more complex reality (pp. 15–16; see also Hirst 1997, p. 410). However, their effort is contrived since it involves assembling considerable empirical and intellectual resources to overwhelm what they themselves recognised was only ever a straw man. Others, mostly older and (presumably) wiser scholars, tend not to get involved in the debate at all. Rather, they forge ahead with their own projects which sooner or later become recognised according to the merit they deserve (e.g. Susan Strange and Phil Cerny).

Third, the sheer size of the topic tends to magnify and entrench the repercussions of the first two obstacles. The pool of empirical data from which researchers can draw evidence is bottomless; even without resorting to misrepresentation it is possible to fortify almost any reading of globalisation. Thus, it is not so much that ‘globalisation becomes a “horse for every course”’ (Amoore et al. 1997, p. 182), but rather that globalisation becomes a course for every horse. Each author is able to heighten and lower the hurdles and construct the track in such a way as to predetermine the outcome of the race for whichever ‘horses’ he/she chooses to mount. Of course, it is to be expected that scholars in a range of fields will approach globalisation from different disciplinary angles, using different tools, and subject to various professional and personal interests and agendas. But to the extent that these considerations are not recognised, commentators who seek to reduce the field to a single dimension and make direct comparisons about the truth-value content of one approach versus another court reductionism in their efforts.

Yet this is not to suggest that one cannot legitimately divide up the field in order to make it navigable. A sensitive approach can discern, for instance, a spectrum of understandings of globalisation from ‘malign’ to ‘benign’ (Jones 1997, p. 50), on which some, but by no means everybody’s, readings can be plotted. At the malign extreme fall those of the far Right as well as Left: for example, the outspoken American broadcaster Chuck Harder, who has condemned globalisation as ‘TREASON’ (cited in Rupert 1997, p. 110, 113), and Gills, who in a recent editorial of a New Political Economy special issue on globalisation outlines their mission to ‘expose the “litany of sins” of globalisation discourse’ (NPE 2:1, 1997, p. 12).³ Both examples ultimately reject the concept: Harder dismisses it summarily as ‘globaloney’, and the various NPE contributors conclude that it is too misleading a concept to be of any analytical or explanatory value (see also Marshall 1996, p. 214). Other popular ways of dividing up the field are between those who offer ‘stronger’ or ‘weaker’ versions of the thesis (e.g. Weiss 1997, pp. 5–6); between accounts which are based in conservatism and liberalism (e.g. Scholte 1996, pp. 49–53); and between those who support an extreme version of the globalisation thesis, the ‘hyper-globalisation school’, and those who reject the term categorically, the ‘globalisation skeptics’ (Perraton et al. 1997, pp. 257–8). As most of these divisions remain unqualified – little attempt is made to account for the variety of contributors’ viewpoints which do not fit neatly into such simple taxonomies (see again work by Strange and Cerny, among others) – they can serve only as a broad and introductory framework for orientation, and must be discarded as soon as they begin to hinder rather than help our understanding of the field.

(ii) Invoking Precursor and Postmodern Theories of Globalisation

For all its torpid postmodern jargon, a now substantial body of literature in Sociology which theorises globalisation itself offers a highly practical and ready-made touchstone for the economic globalisation debate. It provides for a nontotalising working definition of the concept. Such an exercise has more than semantic significance. By measuring contemporary economic developments against a theoretical structure which can highlight and systematise potentially new and significant changes, a nuanced understanding of globalisation promises to provide a new perspective on the state of late-modern capitalism.

In his literature review of precursor and postmodern theories of globalisation, Waters (1995) shows how theorisation of the social and political implications of modern supranational economic issues developed, for much of the Twentieth Century, within the field of international relations (IR). Reflecting the classical debates of the discipline,⁴ three precursor theories emerged – American Functionalism, World Capitalism, and Transnationalisation – tracing their genealogies back to the work of Durkheim (1984), Marx (1977) and Weber (1978), respectively. From a realist perspective, Bell (1976) stressed the emergence of competing ‘postindustrial societies’; from a Marxist perspective, Sklair (1991) emphasised the role of transnational corporations (TNCs) in promoting the emergence of a new capitalist class; and from a liberal perspective, Rosenau (1980) pointed to how the spread of transnational economic relations heightened patterns of interdependence. Recently, this embryonic issue-area has been revolutionised by the emergence from other disciplines, principally Sociology, of various full-blown conceptualisations of globalisation. These have not rendered earlier approaches in IR obsolete, but they have paved the way for convergence in the way in which Western social science understands the direction in which late-modern capitalism is heading. The following brief synopsis of the contributions of five key figures in this debate demonstrates this by highlighting areas of general consensus.

First is Robertson (1992), who holds possibly the strongest claim to paternity of the concept of globalisation. For him, globalisation ‘refers to both the compression of the world and the intensification of consciousness of the world as a whole … both concrete global interdependence and consciousness of the global whole in the Twentieth Century’ (1992, p. 8). By pointing out how military/security issues today are redefined in terms of ‘world-order’, economic issues in terms of ‘world booms’ and ‘global recessions’, religious issues in terms of ecumenism, citizenship in terms of ‘human rights’, and environmental crises in terms of ‘saving the planet’, he shows that individual phenomenologies are increasingly addressed to the entire world rather than to the local or national level. Modernisation, he asserts, accelerates this inherent process, but what separates globalisation in the contemporary era from its earlier manifestations is its dialectical reflexivity. That is, people now conceptualise the world as a whole and so they reproduce it as a single unit. For Robertson, globalisation follows its own inexorable logic: by bringing differences into sharp contrast it provokes a response, but it is impossible to predict into what shape the single system will metamorphose.

Second is Giddens (1990), another sociologist and Robertson’s main rival for the mantle of parent of the concept. For him, globalisation represents a ‘radicalising of modernity’ characterised by ‘the distanction of time from space’ (1990, p. 64). Time and space become liberated from each other as a direct consequence of two ‘disembedding mechanisms’ of modernity: ‘symbolic tokens’ and ‘expert systems’. Money is the archetypal symbolic token because it can transfer value from context to context and thus make social relations possible across great expanses of time and space, while repositories of technical knowledge become expert systems which can be deployed across a wide range of actual (spatial) contexts. As a result of new technologies, social relations are freed increasingly to transcend their local contexts, although some are, of course, better placed to exploit opportunities than others. Thus, globalisation is full of contingency, and is likely to fragment just as it coordinates.

Third are Lash and Urry (1994), who also use the notion of time-space distanction, but draw more vivid conclusions. Whereas Giddens posits current transformations to be a continuation of modernity, they insist on postmodernism being understood as a fundamental disjuncture. They assert that the previous era of ‘organised capitalism’, in which production was tightly arranged in time and space by firms and states, is being progressively eroded by the increasing velocity of flows of information and goods, made possible by new technologies. For them, globalisation involves the ‘dematerialisation’ of objects which are reproduced symbolically as ‘a decentred set of economies of signs in space’ in a new world order (1994, p. 280).

Fourth is Harvey (1989), a geographer who adopts similar concepts, but argues that the objectification and universalisation of the concepts has allowed time to annihilate space. He argues that history proceeds by short and intense periods of technological change, such as the Industrial Revolution, which provide for ‘time-space compression’, effectively shortening the time needed to accomplish things and reducing the experiential distances between different points in space. He asserts that the Telecommunications Revolution, which he dates to around 1970, has substantially eroded spatial barriers and essentially transformed the world into a single field of action within which capitalism can operate.

Fifth is Beck (1992), a sociologist who places risk at the centre of his analysis of contemporary social change. He asserts that today most of the industrialised world lives in a ‘post-scarcity society’ in which our priorities must increasingly address the side effects of our own modernisation. New risks like radioactivity and global warming are qualitatively different from the hazards of the past in that often they are imperceptible to the senses and no longer tied to their local origins. Such risks globalise because they universalise and equalise, and both our realisation of their consequences and search for possible solutions reinforce our consciousness of the global whole.⁵

From this exercise it is possible to draw out, irrespective of numerous outstanding points of debate, a five-point canon of how globalisation is currently understood by its leading theorists.⁶

• Globalisation is at least contemporaneous with modernisation;

• It involves the systematic integration of social ties such that, in a fully globalised context, no given relationship or set of relationships can remain isolated or bounded since each is linked to all others and systematically affected by them;

• It describes a phenomenological process that alters the scaler appearance of the world measured in time and space, and this is at least partially a result of the application of new technologies;

• Its phenomenology is reflexive and self-fulfilling, as people individually and collecti...

Table of contents

• Cover
• Halftitle
• Title
• Copyright
• Dedication
• Contents
• List of Figures
• Preface
• Glossary
• Glossary of Frequently Used Japanese Terms
• Introduction
• Part One Financial Globalisation in Theory and Practice
• Part Two The Case of Japan
• Part Three Lessons for Global Theorists and ‘Japanologists’
• Epilogue Entering the Twenty-first Century: Beyond the Big Bang
• Notes
• Appendix 1 Moves to Break up the Ministry of Finance (1/94–9/98)
• Appendix 2 Economic Stimulus Measures (1/91–9/98)
• Bibliography
• Index