> Actually if you follow James Fallow's argument, which I think is sound, the
> Koreans really aren't catching up tot he Japanese
>
> a) because the keiretsu model is less effective in a country with a small
> domestic demand base than a larger country like Japan.
I don't buy this. The keiretsu are essentially a way of socializing production by pooling financial resources across a wide array of industries; surpluses in one area compensate for deficits in others, and the credit rating of the whole network is more solid than any individual firm. I would argue, in fact, that Western Europe's tradition of state ownership and mixed public-private firms was in fact a modified version of keiretsu capitalism; i.e. the states of Belgium and Sweden served as the lenders of last resort and industrial financiers to their national industrial base, just like Sakura Bank provides lending to Mitsui firms, or BTM to Mitsubishi. Finally, the keiretsu model was export-led, not demand-led.
-- Dennis