Changes in international competitiveness since World War II have favored Germany and Japan over France, the United States, and Britain. This applies to competitiveness in general, but is examined here in three specific industries: steel, automobiles, and semiconductors. Explanations of changes in competitiveness often focus on economic and cultural variables, but an examination of the three industries shows that a better explanation can be found in the way in which each country organizes its state and society. State–societal arrangements influence competitiveness mainly through their impact on the speed of diffusion of new technologies. The disparate cases of Germany (strong business and labor, weak government) and Japan (strong business and government, weak labor) suggest that there is more than one path to competitiveness. The literature on competitiveness has focused too much on Japan, and therefore on state industrial policies, as the key to increasing competitiveness. The German case shows that increased competitiveness is possible with a relatively weak state, but only if there is a major commitment to upgrading the skill levels of the workforce.

INTRODUCTION

The main argument of this chapter and the larger research project from which it springs is that variation in state–societal arrangements is a key to explaining changes in the relative international competitiveness of the five largest capitalist countries since World War II. The reason that statesocietal arrangements matter is that they can accelerate or impede the development and diffusion of technological innovations that are crucial for competitiveness (see Figure 6.1).