Fable of the Keiretsu

Now that the Thanksgiving holiday week has given us a chance to take a deep breath, catch up on piled-up work, and prepare for the last week of classes, I want to report on a marvelous book that a group of us have just read -- Yoshiro Miwa and Mark Ramseyer, The Fable of the Keiretsu: Urban Legends of the Japanese Economy (University of Chicago Press, 2006).  The Asian Program in Law, Politics, and Society; the Illinois Program in Law and Business Policy; and the Illinois Program in Law and Economics purchased copies of the book for all interested faculty and graduate students and invited Professor Ramseyer to come to the University of Illinois College of Law to discuss the book with us. 

The thrust of the book is that our belief that the Japanese business community consists of a few tightly knit family of companies that, although in different lines of business, do the bulk of their business with one another; that there is a "main bank" associated with each of these families of companies and that the bank controls much of the financing and governance of the family -- all of that is factually incorrect.  Indeed, Miwa and Ramseyer demonstrate that the myth of the keiretsu was developed by a Marxist think tank in the 1950s and took hold thereafter.  Their explanation as to why something that is so palpably wrong could be so widely believed to be true is that there are relatively few economists in the West who read Japanese and can do original archival work on the Japanese economy (and, therefore, simply take translated material about the Japanese economy as true) and that until relatively recently the bulk of Japanese university economists have been Marxists, inclined to believe that monopoly capitalism is alive and well in Japan.  Another factor that Professor Ramseyer cited for believing in this mythical form of horizontal and vertical organization is that most Westerners believe that Japan is essentially different from the West, that the usual rules of microeconomics do not necessarily apply to Japan because the culture is so different from ours.  Professor Ramseyer does not believe in this "essential difference" argument; indeed, much of his academic work about Japan has consisted of showing that actors in the Japanese economy behave in accord with the same economic rules as everyone else on the planet. 

TSU