Looking at the Sun by James M. Fallows

Looking at the Sun: The Rise of the New East Asian Economic and Political System by James M. Fallows (1995). Twenty years ago, journalist James Fallows spent more than five years in Asia collecting information and building a compelling case for how and why this area of the planet was growing so fast, especially in Japan. This is what this book is about.

Western civilization is based on the ideas of three people: I. Newton, A. Smith and JJ Rousseau. Modern science, free market economics and political theory are the product of these three people. However, Fallows argues that Asia has developed an alternative form of capitalism based not on Smith’s thinking but on the work of German economist Friedrich List.

The ways in which Western economy differs from List’s ideas are: (i) consumers versus producers, (ii) the free market versus government intervention, (ii) automatic growth versus deliberate development, and (iv) individuals against the nation. For example, the way in which (i) operates is the following. While in the West it is quite common to offer the consumer a wide variety of products at affordable prices, in Japan it is very common that prices of the same product are two or three times higher in Japan than abroad. The excess generated in domestic sales is used as a war chest to fight against its foreign competitors. Thus, for example, Hitachi would advise its sales representatives to bid 10% below competitors. If competitors re-quote, they bid again and the bidding ends when Hitachi wins. Using this strategy, Japanese companies become strong and push away their competitors from the game and in the end the Japanese would totally control the market. This is how the consumer  vs. producers operate, by making the producer stronger at the expense of the domestic consumer.

To illustrate how government intervention works, let’s use the Intel example. Intel in the US  invented flash memory technology in the 1980s, but back then because  they were unable to mass-produce this in the US, then they sought partnership with Japan. But the government did not allow Intel to operate in Japan unless they licensed its technology to them. These days, mostly Japanese brands manufacture flash drives.

This is a very good reading and it helped me to understand Japanese society more. I think my way of thinking of Japan has changed after reading this fantastic book

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