Blinded by the Glare
IRWIN, DOUGLAS A.
Blinded by the Glare Looking at the Sun: The Rise of the New East Asian Economic and Political Systems By James Fallows Pantheon. 517pp. $25.00. Reviewed by Douglas A. Irwin Associate Professor...
...April...
...He does not confront the core issue: pinpointing the conditions under which a "made" winner actually provides advantages, and where they ac?crue...
...In 1985, the price of 256K DRAMS was falling through the floor...
...In con?trast, he praises the 19th-century econo?mist Friedrich List for focusing on na?tional development...
...But the author himself??unwittingly???provides the enlightening facts...
...His amusing vi?gnettes, personal anecdotes and passages of recent history coalesce into a brief, well-guided introduction to the region...
...itself is still seen as a "winner" by others...
...What is mysterious is how Fallows missed this widely reported se?quence of events despite his obviously extensive research...
...What is worse, for all of the big-think economic theory Fallows calls forth in belittling the "Anglo-American system of politics and economics," his sweeping broadsides betray a serious lack of fa?miliarity with some basics...
...com?panies, forced a cut in Japan's supply, per?haps even facilitating collusion among its producers...
...115 1 Total Free Distribution (Sum of I5d and I5e) Average no copies each issue dur?ing preceding 12 months, 685 Actual no copies of single issue published nearest to filing date...
...But he ignores the current changing landscape resulting from fractures in the Liberal Democratic Party, the group that, until recently, had monopolized power in one form or another since the War...
...In his opening chapter, an analysis of the American semiconductor industry's decline in the '80s (partially reversed in the '90s), Fallows attempts to illustrate the shortcomings of the dominant eco?nomic thinking...
...220.1 Total (sum of I5g, 15h(I) and 15h(2)) Average no copies each issue during preceding 12 months...
...If owned by a partnership or other unincorporated firm, its names and address, as well as that of each indi?vidual, must be given...
...But in what sense do strong industries necessarily make them "win?ners...
...A Hewlett-Packard study in the early 1980s found that U.S.-made versions had a failure rate six times higher than the Japanese chips...
...Fallows also suggests that when it comes to international competition, the visible hand is the key factor...
...But this has never been the point of eco?nomics, and besides, in many respects the U.S...
...275 Seventh Avenue, New York...
...Kelley, in its series "Re?prints of Economic Classics"), and for only $45...
...is declining rela?tive to Japan, and that Americans may eventually lose control of their destiny, is evident...
...has a very hard time accounting for the larger rises and falls in world affairs...
...First, he has the date completely wrong...
...industry did not entirely fail (witness the success of American microprocessor pro?ducers), though it did cede one piece of the pie to Japanese manufacturers??low-prof-it, high-volume, commodity memory chips known as DRAMS...
...Fallows' discussion of politics at times seems dated, perhaps a reflection of his having left Japan in 1989...
...indeed, could not??have failed...
...But he seems unaware of the Economics 101 distinction between a reduction in supply that drives up prices (a shift in the supply curve), which is the situation before him, and the model of higher prices that bring about additional supply (a movement along the supply curve...
...Barbara Shapiro, Business Manager...
...Average no copies each issue during preceding 12 months, 8.785 Actual no of single issue published nearest to filing date...
...In whose ser?vice was this achieved...
...To illustrate the Ger?man author's supposed neglect, Fallows recounts his five-year struggle to find List's books in the United States, and his joy at finally encountering them, for $75 apiece, in a shop outside of Tokyo...
...Spoiled Average no copies each issue during preceding 12 months, 255 Actual no...
...Yet as John Maynard Keynes once put it, "The theory of economics does not furnish a body of settled con?clusions immediately applicable to poli?cy...
...Actual no copies of single issue published nearest to filing dale, 455 c Free Distribution Outside the Mail (Carriers or Other Means...
...has become an outpost for Japa?nese "screwdriver" plants that merely as?semble imported components...
...July, August & September 5 Number of issues published annually 16 6. An?nual subscnpnon price S34.00 7. Complete mailing address of known office of publication (not punter): 275 Seventh Avenue, New York...
...Nevertheless, he is alto?gether unduly pessimistic...
...Per?haps he should have consulted a few "An?glo-American" economists, for List is alive and in print on our side of the Pacif?ic (from A.M...
...Secretary, 275 Seventh Avenue, New York...
...He usefully reviews the impact the country's prewar history and postwar occupation have had on its economic and political culture...
...Average no copies each is?sue during preceding 12 months...
...The grossest inaccuracies in Fallows' semiconductor chapter are his claims that the price of 256K memory chips began to rise "mysteriously" in 1985, and that the "exact causes of the DRAM shortage are still hotly debated...
...Fallows does convincingly demonstrate that exposure to the West's power politics has led East Asian nations to stress, above all, avoidance of outside domination...
...East Asia is not a threat, a group of "winners" aiming to trample its competitors...
...These countries have "suc?ceeded" and are "winners," he maintains, precisely because they have eschewed the rigid Western "rules" that dictate how economies are "supposed to work" and tell us that consumer welfare "should be" their goal...
...1,230 2. Paid or Requested Mail Subscriptions (Include Advertisers' Proof Copies/Exchange Copies...
...President...
...We should share his wonder at the region's dynamism, though, for therein lie manifold econom?ic opportunities that are not to be missed...
...Inc., 275 Seventh Avenue, New York New York 10001: Shelley Appleton...
...that the American elite in academia, government and business self-censor critical remarks about Japan lest they preclude future profitable relationships...
...Beneath all the ups and downs of high-tech competition," he writes, "one difference between the Japanese and American industries matters more than anything else: the Japanese compa?nies had more money...
...copies each issue during preceding 12 months, 10.060 Actual no copies of single issue published near?est to filing date, 9,735 d. Free Distribution by Mail, (Samples...
...And after all, has a lack of money been the fundamental problem at, say, IBM...
...Actual no copies of single issue published nearest to filing date...
...Adam Smith himself said that defense is more important than opulence...
...1994 15 Extent and nature of circulation a Total no copies (Net Press Run) Aver?age no, copies each issue during preceding 12 months, 11,650 Actual no copies of single issue published nearest to filing date, 10.645 b Paid and or Requested Circulation 1. Sales Through Dealers and Corners...
...A rapid expansion of Japan's consumer electronics industry prompted a similar effort in its semicon?ductor component sector...
...Several of his rec?ommendations are sound??for instance, his urging greater emphasis on education and a shift in the tax burden from savings to consumption...
...Statement of Ownership, Management and Circulation (Required by 39 USC 36S5) I Tule of Publication The New Leader...
...Americans, he contends, are unable to ac?cept that the more an Asian nation has rejected Western ideals concerning indi?vidual rights and free markets, the greater has been its growth and development...
...copies each issue during proeeding 12 months, 94th Actual no copies of smglcissTiepublishednearesiwfilingdaie.yj''^ 16 Tins State?ment of Ownership will be printed in the October 10...
...New York, New York 1000I Editor...
...It is a method rather than a doctrine, an apparatus of the mind, a technique of thinking...
...Drawing on experiences in Malaysia, Thailand, Korea, Indonesia, and Myanmar??countries we often hear of but know relatively little about??he paints an in?sightful picture of their current conditions and future prospects...
...To avoid retribu?tive tariffs, Japan signed a trade agree?ment the following year setting minimum prices for its exported chips...
...In the light of all this, is Japan's success really so inexplicable...
...If not owned by a corporation, the names and addresses of the individual owners, must be given...
...The more prosperous an econo?my is in Asia, he observes, "the more like?ly it is to have a rigged, anticonsumer, high-price retail system...
...New York 10001...
...Economists cannot malign that choice...
...The most instructive and enjoyable parts of Looking at the Sun are Fallows' reflections on his four-year stint in Asia...
...American Labor Conference on International Affairs...
...issue of tins pub?lication...
...650 Actual no copies of single issue published nearest to filing date...
...17 1 certify that all information furnished on this form is true and complete...
...copies of single issue published nrest to filing date...
...275 Seventh Avenue...
...Prices rose simply because Wash?ington, acting on behalf of the U.S...
...Throughout Looking at the Sun, Fal?lows' fear that the U.S...
...Myron Kolatch, 275 Seventh Avenue, New York New York 10001 Managing Editor None 10 Owner 1110 Owned by a corporation, its name and address must be stated and also immediately the milled lately thereafter I the names and addresses of stockholders owning or holding I percent or more of to?tal amount of stock...
...Faced with the plummeting value of semicon?ductors in 1985, American manufactur?ers accused Japan of "dumping" them onto the world market...
...a year later they were down to near?ly S2...
...Second, there is neither mystery nor debate surrounding the increase...
...10.645 Percent Paid and'or Requested Circulation 115c/15g 8 100) Average no...
...Fallows concludes that Americans must reduce their dependence on Japan (leaving unmentioned Japan's reliance on its biggest customer...
...Complimentary, and Other Free)' Average no copies each issue during preceding 12 months, 560...
...At the end of "84, they sold for $14 each...
...The fact that Japan is comparatively poor by Western standards of household consumption is relegated to a few brief re?marks in the book's Introduction: "homes were usually unheated," "modern plumb?ing was rare," "most of our neighbors had no cars," "the average Japanese family did not own a [clothes] drying machine ."Al?though Fallows seems to disparage the traditional economic emphasis on con?sumer welfare, he never raises the ques?tion of whether the Japanese industrial juggernaut was worth the cost to the soci?ety as a whole once the country's political autonomy was secured...
...New York 10001 8 Complete mailing address of headquarters or general business office of publisher (not printer) 275 Seventh Avenue, New York, New York 10001 9 Full names and complete mailing addresses of publisher, editor, and managing editor Publisher American Labor Conference on International Affairs...
...that the U.S...
...Essentially, the Japanese Trade Ministry imposed a "voluntary' export restraint on its semi?conductor firms??much as it had done earlier with automakers, and to similar effect...
...00286044 3. Date of Filing...
...11.650...
...September 30, 1994 4 Frequency of issue: Biweekly except monthly in January, February, March...
...His message, finally, is that unless we come to terms with the true sources of Asia's pros?perity, our own worldwide political and economic leadership will erode...
...Street Vendors and Counter Sales (Nol Mailed...
...What about Japan with its high-defini?tion television projects or Fifth Gener?ation computer program...
...New York 10001, Mitchel Levitas...
...Do not leave blank I Full name...
...Average no copies cash issue during preceding 12 months...
...Fallows exhausts the terms, as in Alexander Hamilton "lost" and Thomas Jefferson "won...
...A look at other government-tar?geted industries is instructive: Did Eu?rope make the Concorde a "winner...
...At bottom, Fallows seeks to reinforce the now standard worries expressed in books like Michael Crichton's Rising Sun: that Japan does not share its tech?nology or sell its advanced equipment to the United States in a timely manner...
...observers are naive to regard it through a lens of standard liberal theo?ries...
...It should be further noted that the U.S...
...Govern?ments may not have been able to 'pick' winners, but they seemed to be able to 'make' winners, to create advantages for themselves...
...Reviewed by Douglas A. Irwin Associate Professor of Business Economics, University of Chicago JAMES FALLOWS, one of this country's most thoughtful journalists, has written a provocative book on the politics and eco?nomics of East Asia, particularly Japan...
...Moreover, "economic-style reasoning...
...If the publication is published by a nonprofit orga?nization, us name and address must be staled...
...copies of single issue published nearest to filing date...
...2 Publication No...
...1.275 Actual no...
...May, June...
...In his view, "Anglo-American" principles constitute an inflex?ible "laissez-faire" dogma, a doctrine the governments of East Asia have conclu?sively refuted...
...Japanese firms spent more than their counterparts across the Pacific on equipment, research and de?velopment, and thus captured a growing share of the world market...
...High prices had always led to increased supply," he writes of the semiconductor shortage of the mid-1980s...
...Average no copies each issue during preceding l2 months, 125 Ac?tual no copies of single issue published nearest to filing dale...
...But he never attempts to explain why they had more...
...The slide, he says, is a "mystery," for "according to the ideas by which Americans explain the workings of the world, this industry should not...
...Average no...
...Prices finally leveled off in' 86 and only began to rise late in '87, picking up pace through '88...
...What does the word even mean in this context, and who has lost...
...Known bondholders, mortgagees and other security holders owning or holding 1 per cent or more of total amount of bonds, mortgages or other securities None 12 For completion by nonprofit organizations authorized to mail at special rales The purpose, function, and nonprofit status of this organization and the exempt status for Federal income lax purposes has not changed during preceding 12 months 13 Publication Name The New Leader 14 Issue Date for Circulation Data Below August 15-29...
...Some of his specific points are hard to dispute: namely, that the United States has consistently harbored an arrogant "conversion" mentality in the case of Ja?pan, and that attempts to invoke estab?lished Western ideals of polity and soci?ety are based upon "profound delusion and self-deception...
...Considering the political and intellectual attributes that define a coun?try, he frets that "economic textbooks can't really cope with this sense of being a 'successful' or 'winning' society...
...In this respect, Japan and company have been successful...
...120 (2) Return from News Agents...
...The shallowness of the author's eco?nomics is clearly revealed when he offers, without substantive elaboration, his own reason for Japan's semiconductor break?through...
...8.505 c Total Paid and or Requested Circu?lation (Sum of I5b(I) and I5b(2...
...The bulk of the book, though, is devot?ed to Japan...
...Fallows dismisses Adam Smith as the "father of laissez-faire economics," who wrote that "free competition is ultimately best for all participants"??two notions that will surprise anyone who has actual?ly read The Wealth of Nations...
...Here Fallows relies much less on his personal explorations in making his argument that the country has developed an economic and political perspective fun?damentally distinct from the West's, and that U.S...
...570 g. Total Distribution (Sum of 15c and 15f) Average number of copies each issue during preceding 12 months, 10.745 Ac?tual no copies of single issue published nearest to filing date, 10 305 h Copies Not Distributed (1) Office Use, Leftovers...
...The author's treatment of economics, however, frequently distorts reality and misleads the reader...
Vol. 77 • October 1994 • No. 10
