Competition and the Development of the Internet in Japan

Robert Delamar


Academic writers observing the spectacular rise and fall of the Japanese economy since 1945 have attempted to pinpoint the source within the famously opaque Japanese political system that bears the primary responsibility for this economic ascendence and decline. Within the short life-cycle of the Japanese Internet boom of the late 1990's, one can observe a vignette of the broader debate. Chalmers Johnson first identified a tightly controlled economy, "guided" by the Japanese bureaucracy as the source of the Japanese economic miracle. Subsequent writers have argued the opposite, that any credit for the Japanese economic miracle can be attributed to a competitive economy that somehow managed to flourish despite the best efforts of the bureaucracy to suppress it, and futher, that bureaucracy and lack of transparency within the Japanese political system, is primarily responsible for Japan's current economic woes. This paper argues that bureaucratic efforts, mirroring Chalmers Johnson's "developmental state" were partly responsible for Japan lagging far behind its industrial neighbours in economic development associated with the growth of the Internet until 1999. It was only in the latter half of the 1990's, when a concerted effort was mounted to deregulate the telecommunications industry, did the development of the Internet (and the associated economic benefits that flowed therefrom) take off in Japan. Thus, the development of the Internet economy in Japan seems to mirror the arguments of the pro-competition academic writers in the broader debate about the political source of the rise and fall of the Japanese economy. Competition and deregulation helped to spur the development of the Internet in Japan in the latter half of the 1990's. Bureaucracy had inhibited its development until then.

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