Tuesday, September 30, 2008

Readings: Tag Murphy

"The lowering of capital costs to industry in Japan is a responsibility of the economic bureaucracy, not of the individual firm. This is in sharp contrast with the American experience, in which, with one glaring exception, the cost of capital to particular sectors of the American economy -- as opposed to a generalized concern about the level of interest rates -- is deemed the province of 'market forces.' The exception is the American housing industry, in which, from the 1930s to the early 1980s, an entire panoply of regulations, artificial interest rate controls, special classes of banks, and favorable tax treatment was employed to achieve the essentially political goal of bringing homeownership within reach of the American middle class. Two generations after the American housing and Japanese industrial policies were initiated, one country had the finest housing on earth and run-down plants suffering from inadequate investment. Meanwhile the citizens of the other country lived in 'rabbit hutches' -- the term used in a notorious European Community study -- and went to work in the world's most automated, well-equipped factories. That this should surprise anyone is itself puzzling."
R. Taggart Murphy, The Weight of the Yen (1997)

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