This week Stephen Harper stated emphatically that he does not want to own a car company. He just wants to do the right thing for the struggling industry.

 The question that immediately comes to mind is - should any government own the auto industry? What if governments were to select the winners and the losers in the economy?

 This would not be a radically new, untried move. It is what Japan did after the war, in the years of its spectacular growth and subsequent success. But this form of capitalism differs from the models that we know in the west.

 In the 1980s MIT economist Lester Thurow called the Japanese system of the time "communitarian capitalism." It has also been called "competitive communism."

 Japan's global leadership over many years in a cluster of important industries is credited to this government support. The Japanese government funded research projects aimed at selecting and developing economically competitive and viable industries. Emphasis was placed on accumulating all information necessary for attaining international competitive advantages in established and new industries.

 The studies were widely publicized and provided comprehensive information about markets and technology. But the information was available only in Japanese and therefore not immediately accessible to non-Japanese industry researchers.

 Many economists and other scholars have attributed Japan's miraculous post-war growth to its planned economy. This central planning had the distinct characteristic of suppressing individual freedoms; the nation's capital was regarded as a national resource to be used for national economic goals; the financial system was created to direct capital to establish superiority in a selected number of targeted industries.

 This seemed outrageous to many free-trade Japan critics but it worked for over three decades.

 The Japanese miracle seems to have ended in 1989, when the Japanese stock market collapsed. But the current North American dilemma about the auto industry and its government bailout seems to lead "back to the future."

 Are today's bailouts a signal that politicians will now determine the future of financial and industrial sectors, as they did in the Japanese model? If they do so, let's hope we don't face two subsequent decades of recession, as Japan has done.

posted on 05/19/09