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Social Capital and Economic Governance: Japan, the US and Germany. Jeffrey Broadbent Department of Sociology University of Minnesota, USA. Overview of talk. I. Economic Governance and Growth Governance=State-Society Relationship II. Methods: Policy Network Survey

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social capital and economic governance japan the us and germany

Social Capital andEconomic Governance:Japan, the US and Germany

Jeffrey Broadbent

Department of Sociology

University of Minnesota, USA

overview of talk
Overview of talk
  • I. Economic Governance and Growth
    • Governance=State-Society Relationship
  • II. Methods:
    • Policy Network Survey
    • Labor Policy “Domain”
  • III. Findings
    • Comparing network patterns
    • Power in policy-making
  • IV. Discussion: theoretical implication
  • V. Conclusion: Social Capital, State and Growth
theories models of economic governance
Theories/Models of Economic Governance
  • Weak-state Market Capitalism
  • “Washington Consensus” (US)
  • Strong-State Administered Economy (China)
  • Problems of transition-”shock” or slow?
  • Social corporatism: state-capital-labor
  • Tripartite policy-making (Germany)
  • East Asian “economic miracles” (Japan)
  • Puzzle of East Asian growth
  • Led to theory of Developmental state.
big questions governance
Big Questions—”Governance”
  • Is there “one best way” of
  • relationship between:
  • State and business?
  • State and wider society?
  • One best balance of freedom and order?
  • Competition and regulation?
  • Or does what is “best”
  • For a given country and time period
  • Require building on “what is there” --
  • The existing institutions, society and culture?
example east asian growth
Example--East Asian Growth
  • Challenged US global economic dominance
  • Confounded neo-classical economic theory:
  • East Asia: lots of workers,
  • but little capital, land or resources.
  • Why East Asian “economic miracle?”
  • Challenged weak-state market-led theory.
  • Not strong state-administered economy.
  • A form of corporatism?
  • Raised questions about “best” governance.
east asian developmental state
East Asian Developmental State
  • Basic Idea:
  • State is autonomous – not corrupt.
  • And embedded, in networks with business.
  • State ministries “guide” businesses
  • Toward national economic goals
  • While retaining “enough” competition.
  • Variants: Japan, South Korea, Malaysia, Singapore
  • More state-led than social corporatism
  • But less that state-centralized economy
difficulties developmental state model
Difficulties--Developmental State Model
  • Japan example:
  • Until 1990 Japan succeeded.
  • But 1992-present -- “lost decade.”
  • Cannot restructure economy
  • Supports ailing firms
  • Bad-loan problem (near 100% of GDP)
  • If government can “guide” businesses,
  • why was Ministry of Finance not able to
  • guide banks to stop making risky loans?
varieties of mechanism
Varieties of “Mechanism”
  • to explain Development State governance
  • State-rule approach
    • Johnson, MITI & the Economic Miracle
    • State control of currency exchange
  • Cultural approach
    • Okimoto, Between MITI & the Market
    • “Habits of compliance to state”
  • Neo-institutional approach
    • Evans, Embedded Autonomy
    • “State uses existing networks”
    • A form of “social capital”
social capital networks
Social Capital Networks
  • Traditional capital – land, labor, money.
  • Factors of growth and power
  • Social capital– personal relations that
  • Bring about trust or assurance in the other.
  • Facilitates communication and cooperation
  • Can also be exclusive, only for “members”
  • Example: voluntary associations (Putnam)
  • Affected by cultural and social patterns.
this research project
This Research Project
  • Investigate the presence and effect
  • of social capital networks
  • on information flow, political support
  • And state role in the economy
  • in three types of political-economies:
    • Weak state market-economy (USA)
    • Social corporatism (Germany)
    • Developmental state (Japan)
  • Do they differ in social capital?
  • If so, Why? Rules, social patterns, culture?
ii methods data source
II. Methods – data source
  • Policy network survey:
    • Japan, United States, Germany
  • Labor policy “domain” in mid to late 1980s
  • Respondents: all organizations in domain.
    • government agencies;
    • business & labor associations;
    • political parties;
    • civil society groups,
  • About 120 in each national case.
  • Knoke, et al. Comparing Policy Networks
survey questions
Survey Questions
  • Three networks among organizations:
    • Transfer of public political support
    • Transfer of vital information about politics
    • Expectation of reciprocity--long-term mutual-aid (a form of social capital)
  • Reputation for influence
  • Organizational data (membership, etc.)
question expected reciprocity er
Question -- Expected Reciprocity (ER)
  • “Sometimes in politics, another organization will ask yours for political support, and even though your organization has no direct interest in the issue, you will give it. Then you will feel that you can expect a return of that support sometime in the future. Check off all organizations with which your organization has such a relationship.”
thinking like a network
Thinking like a Network
  • Holistic qualities of networks
    • Density (% of all possible connections)
    • Reachability (% of all possible actors)
    • Path distance (average # of links)
    • Pattern
  • Qualities not reducible to members
  • Members distinct positions in diverse networks
  • Distinct networks in tension within polity.
iii findings
III. Findings
  • Comparison of three networks
  • Social Capital Networks
  • Measured by Expected Reciprocity (ER)
  • Visual image of ER networks:
  • US, Germany and Japan
  • Quickly shows differences
us sc network properties
US SC Network Properties
  • Small social capital sector in whole polity
  • Low density, low reachability (27/117)
  • Only labor unions & public interest groups
  • Overlap with political support networks
  • Has intuitive plausibiity
  • Echoes the core strategy of labor: solidarity
  • Lack of social capital in whole polity
  • Reflects individualism (rational opportunism)
  • of typical U.S. actors
german er network properties
German ER Network Properties
  • Scattered around polity
  • Low density, low reachability (29/126)
  • Ruling party linked to welfare associations
  • “Upper” house of provincial gov’ts (laender)
  • Constitution requires “cooperative relationship”
  • Hypothesis: Reflects “rule of law” culture,
  • Multiple party representation and coalitions,
  • And strong social welfare institutions
the butterfly state labor policy domain

The “Butterfly State” (labor policy domain)

In Japan,

the pattern of ER ties

takes the shape of a “butterfly.”

japan sc network properties
Japan SC Network Properties
  • Butterfly pattern in labor policy domain:
  • Two sectors (business and labor)
  • Corporatist (pyramidal) organization
  • Few direct cross sector connections
  • Government agencies in between
  • Network theory: “structural hole”
  • Gov’t bridge-keeper or broker role
  • Enhances government guidance power
  • Political parties on periphery of network
depth of networks
Depth of Networks
  • Distances in network are
  • Social distances, based on
  • Number of connections
  • And number of paths to reach.
  • Image is 2 dimensional projection
  • Of mulit-dimensional reality
  • Can show in 3 dimensions
  • To give better sense of complexity
  • Of the social reality
mage projection
Mage projection
  • Of Japan social capital network
inter network correlations
Inter-Network Correlations

SC=Social Capital Network

VI=Vital Information Network

PS=Political Support Network

ER3, etc.= a third party in common

network overlap tendency japan
Network Overlap Tendency--Japan







networks and political power
Networks and Political Power
  • Survey used measure of
  • “reputation for influence” (RI)
  • Asked all 120 expert respondents to
  • Check off all organizations they thought
  • “Especially influential in labor politics”
  • Total score (0 – 120) is influence measure.
basis in popular culture
Basis in Popular Culture?
  • Some argue Japan has:
  • Strong habits of obedience and trust
  • Toward government and people
  • But international surveys show this not true.
  • Lower trust toward major institutions
  • than found in Germany & US
inter elite networks
Inter-Elite Networks
  • Lack of trust in popular values
  • Indicates social capital networks
  • Not derive from embedded popular values.
  • Social capital networks inter-elite,
  • They cultivate in-group mutual trust.
  • And also channel important resources
  • That cascade down membership hierarchies.
  • Shows “duality” of social capital
butterfly pattern and power
Butterfly Pattern and Power
  • Guidance power of Japanese state
  • Depends not purely on culture
  • —habits of obedience--
  • But on “butterfly” pattern
  • of social capital network
  • Giving state role as broker
  • between two sectors.
  • This pattern also held for (then) MITI
  • between main business conglomerates

Butterfly not in all policy sectors

  • Not present in financial policy domain.
  • Corporation sector grow, more independent
  • No countervailing shareholder sector--
  • One wing and central body only.
  • As a result, despite many Old-Boy networks t
  • Ministry of Finance could not restrain banks
  • In late 1980s, banks made many bad loans
  • Brought on Japan’s “lost decade”
the end




The End

Lost a wing,

Where will the butterfly

Flutter down?

socio culture and butterfly
Socio-culture and Butterfly
  • High density and inclusiveness of
  • Of social capital ties in Japan
  • Stable pattern of vertical ties to third parties
  • Family (ie) (Nakane Chie, Vertical Society)
  • Peak associations negotiate policy
  • Village model of decision-making (mura)
  • Butterfly pattern negotiates class tensions
  • With personal relationships
us individualism and market
US: Individualism and market
  • US weak-state market-led model
  • fits with information flow network-
  • rapid immediate one-step flow.
  • and weak social capital network—
  • lack of “sticky” relational commitments
  • Permits constantly shifting alliances
  • Among business and political interests
germany law and institutions
Germany: Law and Institutions
  • Very “solid” labor and welfare institutions
  • Built like Mercedes cars-- to last.
  • But organize labor market too rigidly
  • To respond best to rapid technology change.
  • Importance of law and order in German culture
  • Transition from state to social corporatism
  • Now slowly to more market-led organization
institutional echoing
Institutional “Echoing”
  • Basic values and relational patterns
  • Affect possibilities of formal institutions
  • What types will function most effectively
  • For public goods outcomes
  • In a given society and nation.
not automatic
Not automatic
  • Socio-cultural levels not
  • entirely self-organizing (auto-poetic)
  • But also not entirely
  • imposed by authorities.
  • Network patterns (and values, schema)
  • Provide embedded rules and resources
steering and design
“Steering” and Design
  • Intentional actors can use
  • Embedded socio-cultural qualities
  • To build institutions
  • Example-Japanese officials “built”
  • labor and business corporatist organization
  • Using indigenous embedded models
  • To “tame” 1950s surge of union growth
  • And steer society toward maximal productivity.
tensions between networks
Tensions between Networks
  • Networks as meso-level patterns
  • Different networks can have different
  • Patterns and included actors
  • These can be in tension, cross-purposes
  • Whole system not “integrated” like body
  • How to have “creative tension”?


Social Network Patterns

  • Interaction between culture, social relational patterns and “objective” political-economic structures varies by nation/society


Society 1

Society 2

To build most effective institutions
  • For public goods production,
  • And for private goods production,
  • Institutional creators need to
  • Pay attention to indigenous
  • Embedded social patterns
  • To work with them positively
  • To create empowering institutions
v conclusions
V. Conclusions
  • A. Given the critique and revision of the idea of NC in this paper, and the findings from research, what remains of the idea of “national character?”
  • Cultural and NC boundaries (however measured) not necessarily contiguous with national boundaries: can overflow, and can pluralize (and can do both).
  • However, continuing importance of culture/character is obvious. Just its degree of overlap with “nation” and with “society” is variable. (Example of Magyar ethnic group).
  • Same type of variation also true for social relational patterns, styles and connective networks.
  • PE styles are also subject to the same variations.
  • Cross-national variation in degree of overlap, overflow and pluralization of the three spheres (c, s and pe) seems worth taking notice of as a possible principle affecting macro-variation in national behavior of various sorts.
  • Origins of this cross-national variation lies in historical paths – buildup and transition process of nationally institutionalized cultural and social relational patterns and character, interacting with p.e. opportunities.
  • Need to pay attention to these factors in giving advice on pathways of institutional change. The failure of the “shock therapy” in Russia (advice given by some prominent American economists) as a terrible example.

Theories of Economic Development (2)

  • Changing economic theory
    • Relational equilibrium (Nash)
  • Socio-cultural elements
    • Rules in formal institutions (North)
    • Social relational networks
    • Culture (continual reincarnation)
    • Rethinking the state--governance
comparing policy networks
Comparing Policy Networks
  • Social relational network:
  • Expected Reciprocity (ER), as defined, indicates a long-term social relationship
  • (This can be either social capital or embedded)
  • Social commodity exchange networks:
  • Vital information -- “non-depleting” distributable commodity (giving it out not reduce your stock)
  • Political support -- “depleting” distributable commodity (giving it out depletes your stock).
  • VI or RS not require a long-term social relationship
  • Other important networks not directly measured: “payoff” networks, idea networks, moral or normative leader or modeling networks . . .
key question of network analysis
Key question of network analysis
  • relevant to the present inquiry—do the nodes (as “actors” exercising “agency” determine the shape and quality of influential networks (the Western presumption), or do the network patterns have some autonomy and determine the role and presentation of self (perhaps even core identities and values) of the node (“network member”) (as implied by Japan NC model)?
what is the basis of persuasion
What is the basis of persuasion?
  • If posit two rational “actors,”
    • Expectation of good results?
    • punishment?
    • reciprocity?
  • If posit “culture” or “social relationship” as defining motives,
    • Trust of ministry?
    • Legitimacy of ministry?
    • Social capital?
    • Embeddedness?
iii c trust in japan
III. C. Trust in Japan
  • Given the density and inclusiveness of expected reciprocity ties,
  • We would expect higher levels of generalized trust toward other people and toward institutions
  • And higher levels of community organizational participation
  • in Japan than in US
trust toward own countrymen
Trust toward own countrymen

Source: World Values Survey 1991