The Political Economy of Japan Bradley M. RICHARDSON

conditions and to flexibly produce different products to take advantage of market"niches" of varying kinds (81). Elsewhere in the economy, small supplier firms aresaid to serve as a cushion to large firms by allowing the larger firms to reduce laborcosts. This is often said to be the practice in such assembly dominated industries asautomobiles. In some cases small supplier firms are said to also absorb the effects ofeconomic downturns, albeit this is recognized to occur at considerable social cost(82).e) Rapid postwar economic growth in the industrialized world plus aninternational commitment to free trade also facilitated Japanese growth in the 1950sand 1960s. Japan's growth in the entire postwar era depended on her ability to sellsufficient amounts of products abroad to pay for raw material imports needed for agrowing economy. A free trade regime made this possible. Also, while Japan's earlypostwar growth reflected the pull of internal demand for industrial equipment andconsumer durables, in some later years exports were the locomotive of growth (83).This was the case during the sustained domestic recessions of the 1970s (84).f) Japan's dynamic growth may in some areas also reflect the Japanesegovernment's limited direct ownership role in the economy compared with postwarEurope. All of Japan's telecommunications and the major international Japanese aircarrier were government owned until the privatization of the mid-1980s. So was muchof the Japanese railway system. All long-distance lines were publicly owned,although there were private rail and subway operations in the largest cities. Butcomparability with Europe stops at this point. Unlike the French government, Japanhad no nationalized banks. Nor did Japan's government own or managemanufacturing and production facilities in economic sectors such as iron and steel,electric power, petroleum refining and automobiles, whereas one or another of theseindustries was wholly or partly publicly owned and operated at some time in postwarFrance, Britain, Germany and Italy (85). The modest direct role of the Japanese stateis not well appreciated abroad, where a much more substantial level of governmentintervention is usually assumed to exist.Levels of government ownership were thus limited in Japan compared withother major economies (86). (The United States is an exception, and Japan lookedsomewhat more like a typical European government until recently. But the UnitedStates is a notable outlier among advanced nations on the dimension of publicownership). After the mid-1980s the Japanese government's direct role in theeconomy was further limited by privatization of the national railways, Japan Air Linesand Nippon Telephone and Telegraph. (The government still owns major portions ofthe stock in the divested companies. Complete de facto separation has been slowdue to lack of market interest in the privatized firms' stocks. Still, the management ofthe firms, their relationships with labor and their ties with other firms are radicallydifferent from before privatization.) Finally, while the Japanese government has