Comparative Assessment of Bailout Politics in the U.S. and Japan: Industrial Policy on Manufacturing Industries

In my research paper, I examined the Obama administration’s financial supports for General Motors, and analyzed whether Japan could apply some lessons to save national electronic industries to recover from hollowing out of economy. I concluded that although U.S. economy did not recover as much as expected, the financial support to GM and Chrysler was a right decision because their bankruptcy would have caused immediate job losses, brought negative effects on even foreign US Auto makers and, moreover, Obama got some political advantages as he maintained his presidency. However, I also suggested that programs to support small or start-up companies are more important to bring innovations and economic growth in the future because industrial structure and technology keep changing and developing.

To bring the conclusion, I looked over several statistics, such as the unemployment rate segmented by industries and the approval rate of the administration; however, referring the idea of Innovator’s Dilemma was the most interesting. This is the theory that describes the reasons why some good enterprises happen to fail despite their massive investments in R&D, explained in the book, The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail by Clayton M. Christensen. In the book, he explains that great companies respond to the majority of customers to sustain large market share and do not fully respond to what small undeveloped markets want because it would not be profitable comparing with the current profits. However, the new technology which the small number of customers seeks could be the destructive innovation that can cause great firms to fail. I thought this theory could be applied to the cases of the governments. In other words, Obama made right decisions to respond to the majority of the U.S. citizens, however, the trends of industrial structure change made his action less effective. This is the reason why I proposed government to support small and startup businesses more.

In my first draft, I mentioned that Japanese government should support small and startup businesses instead of giving supports to manufacturing industries, but I did not do very good job with explaining what Japanese government (the Abe administration) should do to gain political popularity like the case of Obama, therefore, I will try to strengthen my conclusion to connect the analysis of each case.

Looking forward to seeing you all in the Spring conference!

Mutsumi Yoshikawa
Ritsumeikan University

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