I had the privilege of interviewing Dr Steven Vogel, Director of the Political Economy Program at the University of California, Berkeley. A scholar in his own right, he is also the son of the late Dr Ezra Vogel, whose landmark book Japan as Number One captured global attention at a time when Japan stood atop the economic world, feared for its industrial prowess and admired for its postwar transformation, and often referred to as the "Japanese Miracle."
Yet that miracle proved ever fragile. Following the collapse of the real estate bubble, Japan entered a prolonged period of stagnation. That period came to be known as the "lost 30 years" as its industrial policy-based economy was gradually dismantled under the pressures of market liberalization.
Today, Japan revisits the principles of its developmental legacy through renewed interest in public interest capitalism. Returning to Berkeley, I engaged Dr Steven Vogel in a dialogue on reform, resilience, his book, Marketcraft: How Governments Make Markets Work (Oxford University Press, 2018) and the possibilities of a more ethically grounded economic model.
Excerpts of the August 2025 interview follow.
Strategic Governance
How do you describe your concept of Marketcraft?
"Marketcraft" is fundamentally a conceptual book, not a normative one. It presents a particular way of analyzing market governance, but it does not propose specific policy solutions. Instead, it suggests that modern market systems do not spontaneously arise ー rather, they are crafted by governments. Therefore, marketcraft is a core function of government, like statecraft. I outline the policy implications in the final chapter of the book, stressing how misconceptions about the nature of markets and market governance have led to bad policies in both the United States and Japan.
Recently, I have been investigating "predistribution" as a framework for government policy, especially with regard to economic inequality. Predistribution policies seek to address inequalities in a more fundamental way than redistribution policies, which take resources from some and give them to others. Core predistribution policies include public investments, such as education and infrastructure, and marketcraft, such as antitrust policy and labor market regulation.
If Public Interest Capitalism is to address urgent social and geopolitical challenges, what would a fast-track reform agenda look like? Can grassroots movements, legislative reforms, legal restructuring, and institutional reinvention work in tandem?
The predistribution policy agenda will take a long time to have its full effect. However, there are many actions that can have an impact in the short term. For example, we could use progressive tax policy — including a wealth tax — to dramatically reduce economic inequality. In the United States, we could introduce universal health insurance and universal public preschool. We could ban certain types of junk fees, which banks and other businesses charge their customers. The government could negotiate with pharmaceutical companies to cut drug costs.
George Hara proposes taxing short-term investors while rewarding long-term stewardship. Do you support such structural incentives as a way to reorient corporate priorities toward sustainable value creation?
There are many things the government could do to encourage corporations to create value over the long term, rather than extract rents over the short term. One possibility would be a financial transaction tax that would disincentivize short-term trading. Another might be to require large corporations to have labor representatives and/or public interest representatives on their boards of directors.
Japan's Role and Ethical Leadership
From the Plaza Accord, Structural Impediments Initiative, IT Agreement, financial liberalization, to Haken deregulation — did cumulative political compromises erode Japan's strategic edge in manufacturing, social cohesion, and ethical leadership?
A key question one might ask about Japan over the past 35 years is: Has the Japanese economy stagnated because it failed to converge on the liberal market model of the United States? Or has it stagnated because it allowed its own institutional strengths to falter? I favor the latter interpretation, with some qualifications.
For one thing, I would not view Japan's economic performance as a complete failure, because it has managed to preserve high living standards, high health standards, low crime rates, and relatively high social stability. Let's compare Japan to the United States.
For example, the US economy has grown more rapidly than the Japanese economy over the past few decades. Yet the income of the average American has hardly risen at all during that period. That means those higher growth rates in the United States have really only benefited those at the top of the income spectrum.
With Japan investing in US legacy industries, should it use this moment to promote public interest capitalism? How might this ethos be embedded into policy, governance, or investment criteria?
I believe that Japan had a predistribution advantage in the early postwar period. The government made long-term investments in a public education system that provided a high baseline level of education to a very high percentage of the population.
For example, it invested in transport and other physical infrastructure throughout the country, not just in big cities. It protected farmers and small business owners so that they could maintain a stable middle-class living. And it cultivated a system of market governance in which corporations served a broad range of stakeholders — including workers, banks, business partners, and communities — rather than simply maximizing profits.
Japan has not destroyed this model completely. However, it began to undermine it in the 1980s with financial liberalization, labor reforms, a shift away from industrial policy, greater inequality in the education system, and a stronger focus on financial returns among corporations.
Labor, Precarity, and Civic Dignity
Is Haken (employment dispatch service) a symptom of shareholder capitalism's logic of expendability? How might ethical market governance restore labor dignity and reinstate civic trust?
Japan allowed companies to employ dispatch workers or agency temps in the late 1990s to help lower labor costs and enhance operational flexibility in the context of economic stagnation at the time.
This made some sense as a short-term adjustment strategy, but it had long-term negative effects — including increasing workforce precarity and undermining consumer confidence. It thereby extended economic weakness.
Japan's long-term employment system, often referred to as the lifetime employment system, gave permanent workers security and facilitated collaboration between management and labor. However, even at its best, the Japanese employment system was dualistic — offering job security for regular workers (most of whom were men) but not for non-regular workers (most of whom were women).
The Japanese government has made some progress in shifting from labor reforms designed to help companies toward labor reforms designed to help workers, but it should go much further in that direction.
Intellectual Lineage and Reform Legacy
Ezra Vogel praised Japan's coordinated capitalism and civic harmony in his book, Japan as Number One. In light of its pivot to shareholder norms, how do you interpret that legacy today? Can Japan once again serve as a model for middle powers confronting precarity and automation?
Japan boasts a remarkably orderly society in which trains run on time and the crime rate is low. I like to tell the story of one time when I went back to visit my old Japanese high school to give remarks at the school year's opening ceremony. Sitting next to me behind a curtain at the side of the stage was another speaker, the principal of a Chinese high school. We peered out at the students as they waited quietly for the ceremony to begin.
"This country really blows my mind," he remarked. "The students are all sitting quietly while they wait. If this were my school in China, the students would be screaming, yelling, throwing things at each other, and jumping up and down on the seats." I replied, "Don't feel bad. The students at any American school would be doing just the same."
To address your question: Yes, I think Japan still offers lessons for other countries. Japanese management and workers still collaborate better than their counterparts in many other nations. And Japanese government ministries maintain closer relationships with businesses, allowing them to implement industrial policies more effectively. While some of Japan's most valued institutions have atrophied, they still perform admirably in many areas.
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Interview by: Yozo Naotsuka
