Banking on Multinationals: Public Credit and the Export of Japanese Sunset Industries (review)

Mireya Solís effectively uses a study of Japanese policy on export financing to investigate the interaction among bureaucratic policy goals, political realities, and corporate strategic objectives. She asserts that the subsidies for investments by Japanese firms abroad were "part of a national economic strategy to secure its access to key natural resources and to facilitate industrial restructuring, as well as a political strategy to subsidize inefficient but politically powerful producers" (p. 1). It becomes clear as Solís develops her story that these strategies were pursued in a way that allowed the subsidies to be less inconsistent with policy effectiveness and economic efficiency than might be normally assumed. To use her words, "compensation and effi-ciency coexist closely" (p. 205). Although the theme is not emphasized in her political science approach, she also shows there can be less damage to competition than standard economic stories of subsidies might suggest. She backs up her theoretical arguments by presenting three industry studies (textiles, aluminum, and electronics) and tries to put the Japanese case in in-ternational comparative context.

The first chapter clearly states the results to come and shows the reader what theoretical areas will be considered. This is very well done and is a model for how such a volume should begin. The reader must understand why government financing would be more than subsidy, and Solís makes a strong case for the importance of imperfect financial markets as an effi-ciency rationale for government intervention. This lays the groundwork for her results on the efficacy of policy in the case studies, where firms in in-dustries such as consumer electronics (whose markets work better) find less need for government financing.

To understand her theoretical analysis, readers should have a basic history of multinational firm operations, and Solís provides that in chapter 2, where she emphasizes access to resources and the connection between trade and investment in the Japanese case. There is not much new here, and readers familiar with this business history can move on. The third chapter discusses the regulatory regime and the tension between the various bureaucratic actors. It shows how the tensions between the Ministry of Finance (MOF) and the Ministry of International Trade and Industry (MITI) slowed investment abroad. Even with all the exchange controls that Solís describes in some detail, Japanese firms already managed in the 1960s to make significant investments in resource development.

With this background on the regulatory actors and on multinational activity in place, chapter 4 moves to a discussion of the political system and its interactions with industry actors, and the analysis becomes more interesting. There is a concise discussion of the evolution of financing priorities for the Export Import Bank (EXIM), showing how investment financing gradually came to dominate. Investment priorities shifted from resource development (such as coal mines) to textile manufacturing to energy-intensive industries (such as aluminum smelting) and finally to small firms. This factual presentation gives the reader a solid base to digest the theory to come. The chapter shows how the increasing difficulties of the small and medium-sized enterprises allowed them more flexibility and fewer eco-nomic checks on the quality of the investments as the years went by. Politics pushed this along, and then competition between bureaucracies made all units, including EXIM, follow suit.

The next three chapters, the author's industry studies, form the core of the book and are its major contribution. By comparing results in three industries with different characteristics, the reader can see how industry, politics, and market characteristics influence the effectiveness of policy.

In textiles, a combination of policy and market conditions made the policy relatively successful. With competitive export markets in jeopardy for textile firms, all parties recognized the value of lower foreign costs for downstream (final product) textile manufacturing activity such as apparel. Firms that wanted to keep export markets had no...