Abstract
The crisis of Japan’s political economy raises the question of how it has dealt with the restructuring of its peripheral industrial regions, and the degree to which it has embraced neoliberal policies. I argue that the spread of neoliberalism in Japan has been uneven, shaped by local settings and adopted only selectively. To make this case, the article focuses on restructuring in Muroran City (2010 population, 94,600), a city of steel and heavy industry that lies on the southern coast of Hokkaido. I examine the changing fortunes of Muroran over the 1985-2010 period based upon a number of site visits made in the last 25 years or so. Set against contemporary industrial restructuring in Japan, the article evaluates the actions of the city’s major employer (Nippon Steel Corporation), central government ministries, and programs of the City of Muroran. The results show that despite the rise of the neoliberal rhetoric in Japan, restructuring in Muroran reflected a commitment to manufacturing and the local workforce by corporate as well as central and local governments.
Globalization has continued to damage traditional industrial cities and regions in Western Europe and North America (Cooke 1995b; Crump and Merrett 1998; Dixon, Otsuka, and Abe 2011; Hassink and Shin 2005). As noted by Cooke (1995a, p. 231), “The rust belts of Europe and North America are at the forefront of a global competitive struggle to retain jobs and invest in the face of an economic challenge the like of which Western economies have never before experienced.” 1 Japan too has had its rustbelts and these have not been immune from competitive pressures acting through the global economy. 2 Since the mid-1970s, competition from Asia-Pacific countries, as well as from Europe and North America, has led to shifts in Japan’s industrial structure—from mass production to knowledge-intensive flexible production, and from manufacturing to services (Mizuno 2005; Whittaker and Cole 2006). These new trajectories have been accompanied by several sectoral and geographical impacts; one of which has been the so-called “hollowing out” of traditional smokestack industries, and another is the decline of jobs in structurally weak peripheral regions (Edgington 1994; Hill and Fujita 1993b). In addition, Japan’s postbubble economic recession, which lasted from the early-1990s until the mid-2000s, further disadvantaged industrial communities (Bailey, Coffey, and Tomlinson 2007; Edgington 1997).
The emergence of rustbelt communities in Japan raises intriguing questions as to how this country has dealt with issues of local economic development and restructuring. Indeed, the nature and pattern of Japan’s industrial and regional transformation provides the opportunity to gain critical and substantial insights into the effects of globalization and economic change on a distinctive urban and economic system. In this regard, neoliberal ideologies that champion market-driven outcomes have dominated policy discourse and policy formulation in many parts of the world for at least three decades. The neoliberal tenets of deregulation, privatization, and economic liberalization have been influential particularly in reshaping cities and industrial regions, leading to the notion of urban neoliberalism (Brenner 2002; Brenner and Theodore 2002; Hackworth 2007; Hudson 2010a, 2010b). The timing, pace, and impact of these policy developments have, however, varied between and within societies (Harvey 2005). For instance, analysis of urban and regional strategies in Europe indicates that neoliberalization (the process of introducing neoliberal policies) has produced varieties of urban neoliberalism rather than one hegemonic form of capitalism (Birch and Mykhnenko 2009; Gonzales 2011). What then of Japan? There is now a research focus on neoliberalism in the countries of East Asia, and a growing understanding of the processes and factors that shape exactly how neoliberal ideology, policies, and practices penetrate countries such as Japan in a variety of fields, including regional development policies (Beeson 2007; Park, Hill, and Saito 2012). This study aims to shed light on the ways in which neoliberalism is understood and experienced in Japan, a nation that has been shaped by a strong developmentalist ideology. It is hypothesized that the spread of neoliberalism in Japan has been shaped by local settings and it has only been adopted selectively.
This study explores these issues through an examination of the peripheral town of Muroran (1995 population, 109,800; 2010 population, 94,600) located on the island of Hokkaido, Japan’s northernmost prefecture (see Figure 1). Davies (1995, p. 5) noted that Hokkaido is likely the most unusual member of the developed world’s rustbelts: “With its rolling hills and spacious cities it is the antithesis of Japan’s economic core in neighbouring Honshu Island.” Set in the attractive coastal landscape of Volcano Bay and Uchiura Bay, and backed by its own mountain ski fields, Muroran may have little in common with the old mining towns of Pennsylvania, USA, or with traditional manufacturing centers in Northern England. Nonetheless, Muroran is a prime example of a Japanese corporate castle town (Hill and Fujita 1993a) dominated by a few companies specializing in steel and heavy industry. Established at the end of the nineteenth century, it developed as Hokkaido’s only iron and steel town and blossomed during Japan’s post-1945 period of high economic growth. Following the 1970s oil shocks, Muroran underwent dramatic structural change and decline, which was further exacerbated by the economic impact of endaka (the strong currency crisis of 1985-1986 that caused a loss of export competitiveness), and the country’s overall slow growth in the 1990s and early-2000s known as the lost decade. 3 In the last 25 years or so, Muroran’s change in fortune has been conspicuous within Japan as it endured the largest decrease in net population between 1985 and 1995 for cities more than 100,000 population size, both in absolute (−26.4 thousand) and percentage terms (−19.4%). Indeed, since the 1960s, Muroran has lost more than 40% of its resident population (City of Muroran 2011; Management and Coordination Agency various years).
Location map of Muroran, Muroran harbor, and major industrial sites.
Using the case of Muroran, I consider how Japanese corporations and governments have mediated globalizing forces and how this has led to distinctive outcomes for this industrial city that fit poorly with western models of neoliberalism. I trace the city’s growth and decline and then examine the efforts to revive its industrial base during the 1990s and 2000s. The key issues addressed in this article are the particular institutional structures that influenced its economic change and renewal between 1985 and 2010. These include the role of the central government and its relationship with the local municipality, and the steps taken by the city’s major corporate employers, particularly the degree to which they demonstrated community loyalty. Although Japan is in the process of realignment of its particular brand of capitalism, the developmental state, I argue that urban and industrial change continues to be embedded in distinctive economic and political processes that remain at the heart of this transformation process. It is not self-evident that neoliberalism as a discourse has been the dominating process in Muroran’s restructuring.
The article proceeds in the following way. To place this study in context, the subsequent section first highlights particular features of Japan’s developmental state and then examines the degree to which neoliberal ideology has influenced urban and industrial policies. This is followed by a short history of Muroran and an account of its contemporary problems, especially since the oil shocks of the 1970s, the endaka (high yen) period of the 1980s and the recession of the 1990s. A third section focuses upon the steps taken by the major actors involved in Muroran’s economic revival, and the concrete role played by the central state, local government, small and large firms, and labor unions, as well as the interaction between them. A final section draws conclusions from this analysis, particularly how the outcomes in Muroran illustrate why neoliberalism has not become hegemonic in Japan as well as providing expectations for this city in the years to come. I also address how the Japanese urban experience can be located or conceptualized within a comparative framework.
Japan, the Neoliberal Turn and Urban-Industrial Policies
Features of the Developmental State
Japan presents an interesting test case to study the impact of neoliberal policies on regional restructuring. Due to the recent crisis of its political economy, it has needed to cope more effectively with increasingly globalized monetary, trade, and production systems. However, Japan’s distinctive political, economic, and business culture has not only tempered policy changes and specific outcomes but also blunted the influence of Anglo-American neoliberalism (Shaede and Grimes 2003; Vogel 2006). In this regard, Streek and Yamamura (2003) signaled Japan (and Germany) as a nonliberal state that presents stark alternatives to the logic of western liberal capitalism. Consequently, before examining recent institutional changes and the relative strength of neoliberal ideology in Japan, let us briefly review the core features of the Japanese model.
Hackworth (2007) noted that neoliberalism emerged originally in response to Keynesian liberalism in Anglo-American societies, and Keynesian liberalism itself was a response to classical economic liberalism before that. By contrast, Japan’s historical precedents were from the state theory known as developmentalism that followed a very different logic. As a late-industrializing nation attempting to catch up with more advanced capitalist powers, Japanese industrialization was guided by a political ideology that celebrated collective mobilization and state-guided markets in the national interest. Indeed, developmentalism rejects the self-regulating market ideal and noninterventionalist state, calling instead for cooperative relations among government, business, and labor within a framework of an active developmental state (Johnson 1982, 1995). For the purposes of this study, the following characteristics of developmental capitalism in Japan are pertinent to the Muroran case study.
To begin with, Japan has had a long tradition of industrial policy and network capitalism in which informal relations between public and private sectors played a critical role in strategic investment and economic policy. Industrialization was the development state’s highest priority, and industrial policies its primary means for achieving economic goals. In the case of the steel industry, its history reflects the original development by the government and its eventual transfer to the private sector (Hasegawa 1996). In the post-1945 period, the Japanese government worked with both regional and local levels to set long-term development goals, and used industrial policies and its powers over capital allocation to protect domestic manufacturing, develop strategic production, and adjust the economic structure to changes in the world economy (Kerrick 1991). In Vestal’s (1993) opinion, the (former) Ministry of International Trade and Industry (MITI) protected many of Japan’s smokestack industries (e.g., steel and shipbuilding) from sudden dislocation due to the forces of global competition, and consequently the regions in which they were located. 4
Second, as argued by Calder (1991), direct compensation for economic and regional losers has been a standard tactic in Japan for justifying the developmental state and the centralization of political power. Concerning the resolution of regional disparities and the concentration of wealth in the largest metropolitan centers (Tokyo, Osaka, and Nagoya), three policy tools were mobilized: public works projects for peripheral regions, financial transfers to local governments, and a strong regional planning system (Saito 2012). In this regard, public works created a vital means of employment in provincial cities and prefectures where the economy lagged behind more advanced industrial regions. Indeed, local governments were responsible for spending a high proportion of Japan’s national budget for public works (e.g., roads and harbors), and their major source of revenue was an elaborate system of tax transfers from the central government, which on a per capita basis favored the more peripheral regions of Japan such as Hokkaido (Edgington 2004; Hill and Fujita 2000). In addition, a series of comprehensive national development plans were drawn up since the 1960s to create a balanced regional structure and to place limits on economic competition between localities (Tanimura and Edgington 2001).
Third, although the Japanese government never developed a Keynesian welfare state, large corporations have been involved in a system of enterprise welfarism (R. Hall 1988; Pempel 1982). Japan is well known as a stakeholder model of corporate governance, where employee interests play a predominant role (Dore 2000). Hill and Fujita (1993b) argued that Japan’s corporate welfarism was nowhere more apparent than “corporate castle towns,” such as Muroran, where large companies provided extensive social benefits and services to core employees, such as housing and health facilities, and in turn this cemented worker loyalty to firms. 5 Wiltshire (1992, 1995) pointed out that during times of structural decline in traditional industries, there was a moral and legal onus on the large Japanese employers to protect their core workforce. In most of the postwar period, this was done by transferring employees out of obsolete locations to other parts of the corporate organization, or onto the payrolls of affiliated companies within the same keiretsu (enterprise group) networks. Whenever this approach was feasible, there was a complementary obligation on the part of employees to consent to being moved. Company unions generally supported these kinds of transfers, preferring them to outright redundancies (Chira 1987).
Finally, to help develop urban infrastructure and facilities, distinctive arrangements were put in place at the local level called third-sector private–public partnerships (Johnson 1978; Yoshitake 1973). These constituted special corporations having both municipal and private-sector financing, and were set up to develop new transportation systems, undertake redevelopment projects, as well as comanage public services such as telecommunications (Bongenaar 2001; Kitajima 1998). While they were often criticized for poor economic management, third-sector compacts with local businesses did not led to the ruinous situation of interurban competition for investment reported by Peck (1995) in the United Kingdom and the United States.
These features of the developmental state signal the institutional context in which Japanese regional and industrial restructuring has sit and which neoliberalism has had to negotiate. This is not to say that Japanese capitalism is unique. For instance, Nordic countries and Germany have had roughly similar welfare programs as Japan that reflects cooperation between employer associations, labor unions, and the state (see Dore 2000; Streek and Yamamura 2003). Some European countries have had similarly strong regional planning institutions (Kreukels, Salet, and Thornley 2003). What is important is that the case of Japan illustrates diversity in the practices of capitalism and processes of modernization that shape restructuring in the era of intensified globalization (P. A. Hall and Soskice 2001).
Has Japan Been Neoliberalized?
Although the success of developmentalism and a high growth economy until the 1980s helps explains Japan’s initial resistance to neoliberalism, the neoliberal political project has become more influential within Japan over the last three decades. Yet, how strong an influence it has played is a matter for some debate. Some commentators argued that the crisis of the developmental state has pressed the government to move various urban and regional policies toward a neoliberal direction (Forrest and Hirayama 2009; Hirayama 2010; Saito 2012; Shibata 2008), although Fujita (2011) and Fujita and Hill (2012) by contrast contended that Japan appears to be moving along a postdevelopmentalist trajectory that largely continues past institutions of the developmental state (see also Suehiro 2009).
The background to this vigorous debate is the knowledge that since the late-1970s cities and industrial restructuring have been at the forefront of neoliberal policy prescriptions in many other countries. This has been distinguished by a substantial retreat by central government from regional planning programs and fiscal transfers to disadvantaged regions (Held 1991; Peck and Tickell 1994; Rodwin and Sazanami 1989, 1990). Core companies in industrial towns have no longer been committed to their particular locales as traditional patterns of organizing local economies, involving Fordist-style mass production together with hub-and-spoke systems of supply firms, have broken down (Piore and Sabel 1984). Commentating on the changes brought about through economic restructuring, Bluestone and Harrison (1982), Trachte and Ross (1985), and Safford (2009) have highlighted the plight of company towns in the United States during the downsizing of key firms in the 1970s and 1980s. In the United Kingdom, Hudson (1989) studied the combined impact of the early-1980s international recession and the neoliberal policies of Prime Minister Thatcher (1979-1990) on North East England. These were expressed in widespread closures and substantial job shedding in traditional coal, steel, and chemical industries, as well as the privatization of formerly nationalized sectors. Inward foreign investment by Japanese automobile factories and the growth of service industries could not completely renew this region’s economic structure. Hudson and Sadler (1989) described similar changes in French steel towns and in other European countries.
It would be easy to suggest that Japan has somehow absorbed the same turn in ideology. But as an increasingly large number of geographers and social scientists have argued, this would be misleading. Neoliberalism, as with many other political ideologies, is a highly contingent process that manifests itself and is experienced differently across space. Indeed, the geography of neoliberalization—or the spread of neoliberal principles, policies, and practices among areas of the world—is more complicated than the idea of neoliberalism (Brenner and Theodore 2002; Peck and Tickell 2002; Springer 2010). As Japan is a distinctive “variant of capitalism” with a strong institutional frame then it is likely that the spread of neoliberalism in Japan has been uneven and only selectively introduced into particular settings. A lack of space prevents a full discussion of various changes in industrial and urban governance in Japan during recent years, but the following are the most important for our purposes.
Itoh (2005) argued that the first challenge to Japan’s developmental state model started in the early-1980s in the wake of stagflation caused by the oil crises of 1973 and 1978. Neoliberalism in Japan took the form initially of administrative reform beginning during the regime of Prime Minister Suzuki (1980-1982). His successor, Yasahiro Nakasone (1982-1987) created a Second Administrative Reform Council and, inspired by the policies of Margaret Thatcher in the United Kingdom and Ronald Reagan (1981-1989) in the United States, the Council presented a reform package that proposed the privatization of government-run corporations, such as Japan National Railways, and a series of streamlining measures to restructure the government bureaucracy. This orientation was developed further by the Maekawa Report prepared by Haru Maekawa (1987), the then president of the Bank of Japan, which recommended development of policies based on market principles, including deregulation and more liberalization of the Japanese domestic market to imports from overseas. Later, during the 1980s, the Nakasone government initiated planning deregulation of private-sector urban development (the so-called minkatsu policy) using the ability of private enterprises, which was often regarded as the equivalent to the smaller government, deregulation, privatization, and public–private partnership policies initiated under the neoliberal Thatcher and Reagan regimes (Hayakawa and Hirayama 1991).
As the 1990s began, it became quickly evident that the bubble boom (1986-1990) had been the zenith of Japanese developmentalism. Despite increasingly large injections of deficit-financed fiscal stimuli, the economy remained mired in a prolonged recession, and the public mood changed from one of great confidence to one of uncertainty and pessimism (T. Ito, Patrick, and Weinstein 2005). In 1996, Prime Minister Ryutaro Hashimoto (1996-1998) tried to make further structural reforms in the economy, but was soon confronted by opposition from those who had a considerable stake in the existing system, including political and bureaucratic control over Japan’s large public works budgets, often known as the iron triangle of networks between business and bureaucratic elites, and political leaders of the Liberal Democratic Party (LDP) that effectively ruled Japan almost continuously for nearly 54 years from its founding in 1955 until its defeat in the 2009 election (Feldhoff 2007; Krauss and Pekkanen 2010). Indeed, calls for reform had been a constant of Japanese politics for the previous two decades, but their outcomes had always been manipulated, frustrated, or denied (Edgington 2003). In particular, the government never retreated from supporting manufacturing. Above all, while many formal industrial programs receded after the 1980s, MITI enacted the Basic Law for Promoting Monozukuri Foundation Technology in 1998 (Hiraoka 2009). 6 Its purpose was to reverse the trend of deindustrialization and hollowing out of production that Japan had began to experience by reaffirming the country’s strengths in manufacturing. This laid the foundation for the revival of major industries during the next decade such as steel, automobiles, and electronics.
It was in this context that Junichiro Koizumi became prime minister in 2001 and initiated a series of structural reform policies (kozo kaikaku) that signaled his commitment to radical change, especially to breaking the power structure based on the iron triangle. His government tackled a wide range of issues, from the banking sector and its accumulation of nonperforming loans, deregulation of labor markets, the privatization of postal services, and promotion of foreign direct investment. Koizumi’s structural reforms took direct aim at the compensation-type policies that had benefited special interests in the past, particularly through cuts to local highway and road construction and the privatization of four highway-related public corporations (Sakakibara 2003).
In terms of urban and regional policies, the post-2001 changes in policy direction can be summarized as a partial withdrawal by the national government together with a shift of responsibility toward the market and local governments. In particular, reduction in public works projects and the decentralization of public finance were key items on the Koizumi reform agenda. He called his plan the trinity reform because it sought to redress the fiscal power imbalance between central and local governments with three changes. Specifically, some central government tax sources were transferred to local governments, and localities were given more autonomy over what to tax. In addition, local subsidies from the central government were cut, and the system of revenue sharing through the local allocation tax was remodeled (Saito 2012). 7
With the transition of Japanese from mass production to flexible specialization, the powerful Ministry of Economy, Trade and Industry (METI) also shifted its approach to industrial policy at this time and in 2001 launched an industrial cluster program that recognized the need for peripheral regions to shift their focus from branch plant functions to become seedbeds for innovation. The national Ministry of Education, Culture, Sports, Science and Technology (MEXT) followed with a similar knowledge cluster initiative the subsequent year. Both programs acknowledged that local governments required more control over public investment and service provision, a key neoliberal belief (Fujita and Hill 2012). In a similar vein, and as part of the government’s move to implement deregulation, Koizumi’s cabinet in 2003 established a program of special zones for regulatory reform (Yashiro 2005). These were aimed at scrapping regulations in designated areas and promoting specific economic activities where the usual restrictions over activities would not apply, for instance port-side distribution zones, biotechnology promotion districts, information technology, and international education zones. As applying for the special zones were based entirely on local government initiative, the policy was seen as stimulating competition between municipalities to invite private firms to launch new business activities (Charbit 2009). But by the mid-2000s, only a small minority of municipalities had initiated special zones, accounting for approximately 10% of the total (Yashiro 2005).
Finally, in 2005, the National Land Sustainability Act replaced the National Development Act, and the existing national comprehensive planning system was abolished. The new system has a two-layered planning system comprising a National Plan and several Regional Plans (Saito 2012). Interestingly, for the Muroran case study, the Hokkaido Comprehensive Development Plan remained as a separate legal plan, based on Hokkaido’s history as a frontier region of Japan developed directly by the central government. Consequently, the Hokkaido Regional Development Bureau of the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) continued to have a strong influence on public construction projects in Hokkaido (Hokkaido Bureau, MLIT 2008). 8
Beyond these changes to national planning, finance, and industrial frameworks, much commentary on urban neoliberalism in Japan has focused on the central government’s encouragement of private funds to improve urban areas through revitalization under the national Urban Renaissance Headquarters, set up directly under the Prime Minister’s office in 2001. Similar to earlier deregulation approaches, local governments could request the Headquarters to designate parts of their cities as a special urban revitalization area and then receive government funding. Using this regeneration package, a developer could shorten the time needed for the standard planning process from 30 months down to 6 months by omitting standard planning procedures such as public hearings. Each designated area had a special city plan specifying land uses, floor-area ratios, height limits, and so on. Ordinary building and urban planning standards, such as plot-ratio controls, were not applied in these exceptional zones (see Hirayama 2009). In practice, the central areas of Tokyo benefited most, together with a small number of other major cities such as Osaka, Nagoya, Fukuoka, and Sapporo. 9 Very few cases of deregulation measures were observed in regional towns and cities, simply because they did not have enough demand to use the bonus floor-area ratio or other deregulation measures. 10
Summing up the Koizumi years (2001-2006), Mulgan (2002, 2011) noted that despite Koizumi’s reform rhetoric and policy achievements, fundamental changes in Japan’s political economy have not occurred. Administrative reforms failed to weaken the power of the bureaucracy in policy making or the centralism of state administration. The iron triangle of big business, big politics, and big bureaucracy might not be what it once was, but it had not completely disappeared, and was still capable of frustrating reformist efforts. In short, many Japanese benefited from the old order and resisted the untried and potentially disruptive neoliberal model. In particular, the highly centralized nature of the public finance system, including investment programs, specific tax revenues, and special accounts earmarked for construction purposes, remained virtually unchallenged. Feldhoff (2002) also argued that the iron triangle has not yet in fact vanished and that the construction interest group lobbying for public infrastructure spending was still intense and effective. Despite a widespread acknowledgment that radical reform was urgently needed, and despite a proactive, proreform administration, Japan presents a case where economic reform has been attempted or initiated but the process remained “superficial, partial, incomplete and unconsolidated” (Mulgan 2002, p. 238).
This broad discussion of actual existing neoliberalism (Brenner and Theodore 2002) in Japan sets the scene for a closer examination of how these features played out in Muroran during the last 25 years. 11 Muroran is not Tokyo and adds to the debate over the degree to which Japan has adopted the neoliberal model in its urban-industry policy sphere. Indeed, it is an open empirical question as to how Japanese cities outside of Tokyo have adapted to the crisis of developmentalism, and it is likely that there are different models of urban governance within Japan as different regions selectively adopted neoliberal ideas. As a steel town, it shows the link between this city and early developmental state philosophy in Japan. The nature and pattern of examining neoliberalism up close or as it actually happens (ibid.) in a peripheral industrial region provides an opportunity to gain critical and substantial insights and changes from the 1980s to the lost decade of the 1990s and the Koizumi years of the 2000s on a traditional old economy city. The Muroran case study is therefore a useful tool through which to understand the wider processes of whether and how neoliberalism has entered Japan.
Following Jessop, Peck, and Tickell (1999), I focus on both the agents involved in the restructuring of Muroran as well as the structures in which they operate. The methodology involved in-depth interviews with a variety of informants over a 25-year period to assess various mechanisms of change. 12 To understand how the Japanese system mediated urban restructuring at Muroran, the following sections examine a number of corporate and government interventions. These include the ways in which core companies have addressed reductions in the workforce, and also the regulatory and budgetary role played by central government ministries as well as affiliated authorities such as the Hokkaido Development Agency. First, I will explain the important role played by Muroran at the start of the Japanese steel industry. The subsequent section covers the industrial history of Muroran. Special attention is given to the involvement of the national government and core enterprises in shaping the economic fortunes of this city together with the dynamic interplay between global and local forces. Besides interviews with central government officials, information was collected from a variety of local players, specifically the City of Muroran, local managers of the Muroran Nippon Steel Works, and local academic commentators involved in regional development planning at the Muroran Institute of Technology (MIT).
Muroran’s Early History and Growth
The growth of modern industry in Muroran commenced with Japan’s Meiji Restoration in 1868, and the settlement of the local Wanishi village by the Kakuda Clan from Sendai in Japan’s main island of Honshu (City of Muroran 1980a, 1980b). The city’s early beginnings were associated closely with the national government’s policies to strengthen Japan’s military power, encourage the growth of basic industries, and develop Hokkaido as a frontier territory (Samuels 1994). Muroran port was officially opened in 1872 and commenced operations as a coal transshipment harbor, followed in 1906 as a location for a steel plant using Hokkaido’s coal as an energy source. At this time, two major companies generated production in the city. First was the Hokkaido Coal and Railroad Company, which established the Wanishi Steel Works (later restructured as Nippon Steel’s Muroran Works). 13 Second, under a domestic weapons production policy, an international joint venture with British firms in 1911 created a specialty steel casting plant, Japan Steel Works (Nihon Seiko-sho). This latter firm was designed to make iron armor and heavy guns for the Japanese navy’s warships and steel products for the National Rail Board, obtaining all of its pig iron directly from the Muroran Steel Works (Yonekura 1994). These two factories were therefore the very first to take advantage of Muroran’s port and access to Hokkaido’s coal supplies, as well as the right to use iron ore and sand produced at Abuta township lying further along Volcano Bay.
At the time of World War 1 (1914-1918), both companies enjoyed extraordinary growth, so that from this period the preindustrial village became a thriving “corporate castle town,” although one supported materially by the military budgets of the central government. As both factories were constructed in what (at that time) was perceived as an isolated location, workers were brought in from Honshu by labor brokers to live in barrack-like dormitories built by the companies themselves (K. Ito and Ota 1980). Muroran became known as the “city of iron,” with company housing comprising the majority of the local population (City of Muroran 1980a, 1980b). In line with other industrial towns of that period, the city government had relatively little power compared with local industries and the central government. Until 1928, the Muroran Steel Works even held the rights over major local rivers to supply its own water for industrial uses and for its employees’ domestic use. In the interwar years, Muroran was expanded physically, especially the port, and adjoining land sold to industry. This proved attractive to firms from outside, so that in 1935, the Narazaki Shipbuilding Co. Ltd. began operations in Muroran, and in 1937 the Hakodate Dock Co. Ltd. also commenced operations. Local government was reorganized, and the City of Muroran was established in 1922. In 1939, the MIT opened, and by the outbreak of Japan’s involvement in World War II (in 1941), the population exceeded 100,000 (Hokkaido Development Bureau et al. 1992a).
In the immediate postwar years, both Nippon Steel’s Muroran Works and the Japan Steel Works changed their manufacturing output from government munitions toward a range of steel products to meet a new demand from the growing private sector (Nippon Steel Corporation [NSC] 1986). The City of Muroran also changed its role, as it was given more autonomy than in the past, and made its own plans for economic expansion and diversification by reclaiming further tracts of land in the harbor. In this way, it attracted new manufacturing investments by smokestack industries such as Nittetsu Cement Corporation, which began local branch operations in 1955 (City of Muroran 1980a). Following additional reclamation projects, the City sold land to an oil company, Nippon Petroleum Company, in 1956. The high economic growth during these years caused a dramatic increase in the domestic markets for Muroran’s companies and also their clusters of small-scale subcontracting firms. This high rate of economic expansion led the Hokkaido Development Authority to provide special infrastructure such as highways and port infrastructure. The City also contributed a range of new public works and facilities, including the Hakudo-dai Newtown project to accommodate workers and their families (ibid.).
Muroran’s peak population level was recorded at around 183,600 in 1968 (City of Muroran 1989), and at the end of this unprecedented period of growth, the city displayed three distinctive characteristics. The first was that its economic structure was quite different from the rest of Hokkaido, with manufacturing running much higher than the regional average at around 30% of the city’s economic output (Hokkaido Development Bureau et al. 1992a). A second characteristic was the dominance of the six major companies involved in iron and steel, shipping, cement, or oil, which during the mid-1970s accounted for around one-quarter of all employment in Muroran and a vast area of the city’s waterfront (Figure 1). Their dominance in the city’s manufacturing sector was even more marked, and by the 1980s, they made up 84% of the industrial workforce and 93% of industrial production value (ibid.). A third characteristic was that the headquarters of these companies and their labor unions were all located in Tokyo, and that each had factories in other places throughout Japan. Consequently, the role of their branch plant activities in Muroran was decided in the national capital, not Muroran itself, and corporate planning took into account a much wider strategy based upon changes in national and international markets. In fact, the city’s dependency upon smokestack industries with far-away headquarters proved critical during the following period.
Muroran in Crisis (1970s and 1980s)
Post-Oil Shock Decline
The 1973-1974 and 1979 oil shocks dealt a major blow to further growth in Muroran by lowering world demand for Japanese steel and shipbuilding and generating excess domestic capacity for heavy industrial products due to lower rates of growth (Uekusa 1988). Indeed, the subsequent corporate downsizing of the heavy industry sector in Japan had an immediate impact on Muroran leading to falling employment in all the key companies in the city (Table 1). The subsequent narrative focuses on the rationalization plans of Nippon Steel Corporation (hereafter NSC), which formulated its first major post-war restructuring plan just prior to these events in 1969. At the national level, this plan projected massive investment in energy savings and quality improvements along with a downsizing of its blast furnace capacity and dramatic reduction in its workforce to increase productivity (Hokkaido Development Bureau et al. 1992a). In the event, crude steel production between 1978 and 1984 was reduced throughout NSC’s Japanese steel-making networks by about one-quarter, several strip mills and blast furnaces were closed, and total employment was cut by roughly 30% (Yonekura 1994).
The Six Key Companies in Muroran City.
Source: City of Muroran, Economics and Labor Section, unpublished data.
Note: NSC = Nippon Steel Corporation.
Includes workers “on loan” or dispatched to other companies in Muroran.
NSC Muroran’s formal employment dropped sharply in 2002 due to termination of links with “on loan” employees.
Narazaki Shipbuilding Co. Ltd. was restructured into two companies in 2003, one dealing with bridges and one with shipbuilding. The employment for 2005 includes both companies. This company was renamed Narazaki Seisakusyo. Shipbuilding section was absorbed into Hakodate Dock Co. Ltd. in 2009.
The particular outcome for NSC’s Muroran Works involved decommissioning three blast furnaces from 1975 to 1982 and the conversion of its operations to that of a specialty steel supplier. 14 Local jobs at the Muroran plant fell along with production levels throughout this period. Despite severe cutbacks, the process of labor adjustment itself raised little controversy among the company’s union. In the main, this was because NSC did their utmost to minimize layoffs, relying instead on reducing the hires of new workers, the attrition of older workers through retirements, and massive transfers of blue-collar labor to other NSC locations in Japan (interview with G. Yoshida, Senior Manager, Production and Technical Control Division, NSC Muroran Works, Muroran, July 1992). Typically, labor union and management negotiations were carried out in the Tokyo corporate headquarters, far from Muroran with no input from local managers, the local workers, or the city government. The steel workers union, the Tekko Roren (Federation of Iron and Steel Workers Union), also based in Tokyo, was an accomplice in this overall strategy, knowing that planned workforce reduction at Muroran through relocation would not directly affect the overall number of its existing members, even though some individual workers would have to accept transfers to other NSC operations such as in Chiba, near Tokyo, and to Nagoya (ibid.).
The national government also intervened, and in 1978, Muroran was declared one of a number of Specific Recession Areas by MITI (Hokkaido Development Bureau 1992a). 15 In the five years or so after the first oil shock, NSC proceeded to downsize capacity at its Muroran plant and relocate its workforce using a variety of central government support programs that subsidized the transfer of workers. These included low-interest loans or other financial support given to the company under special legislation designed to maintain the jobs of workers in industrial cities at peripheral areas in Japan (Edgington 1997).
Steel production in Japan was cut significantly once more following the dramatic appreciation of the yen in 1985 (endaka), which caused a decline in the sector’s export competitiveness and increased competition with foreign steel producers (especially South Korea) for Japan’s domestic market. NSC made its fourth plan in a series of rationalization programs in 1987, again involving further restructuring and downsizing of both plants and workforce. 16 At that time, NSC announced plans to close five of its oldest blast furnaces in Japan (including the single remaining furnace at Muroran) and to concentrate operations at its most modern facilities in Tokyo (Chiba) and Nagoya, and also at Oita in the southern island of Kyushu (Toriumi 1987).
The transfer of many more Muroran workers to Tokyo and Nagoya took place thereafter and this impact was again “softened” with appropriate incentives by NSC, such as housing allowances and education assistance for children of workers affected. Nonetheless, many of the employees involved went alone as tanshin funin, or “bachelor employees,” leaving behind their family members in Muroran (see Bassani 2007). As before, the steel workers union accepted the fourth plan with few conditions, adopting a rather compliant attitude toward workforce reductions and increases in permanent transfers from outlying locations such as Muroran. In part, this reflected a realistic assessment by the union that mobility, welcome by workers or not, was part of the price that had to be paid for long-term security of employment (interview with G. Sato, Research Officer, Japan Iron and Steel Federation, Tokyo, July 1992). This was particularly so given the bleak long-term prospects for the Muroran Works compared with many other locations in the NSC network (Wiltshire 1995). Altogether, the removal of employees from the NSC Muroran Works under various corporate plans led to local employment levels falling from around 7,000 in 1975 to just over 3,000 in 1990 (Figure 2).
Population levels and employment levels in major employees, 1970-2010.
Other core enterprises in Muroran were also affected by the oil shock and endaka-induced recessions. For instance, the city was jolted further when another major employer, Japan Steel Works, announced in 1986 that it planned to reduce immediately its 2,600 strong workforce by 1,000 employees or so (Takasugi 1987). Muroran’s other major industrial firms, Narazaki Shipbuilding Co. Ltd. and Hakodate Dock Co. Ltd., were also affected by the worldwide shipbuilding recession, forcing them to carry out cutbacks, dismissals, and to sell off facilities. In addition, Nippon Seikyu Seisei (Nippon Petroleum Refinery Company) and Nittetsu Cement made reductions in their workforce throughout the 1980s (City of Muroran 1992a).
The situation facing the city’s many subcontractor firms was even bleaker. Data collected by Muroran City showed that the number of subcontractors in the local steel and shipbuilding industries declined from 163 firms with 8,110 employees in 1978 to 111 firms with 4,454 employees in 1988. Some of the larger firms tried to duplicate NSC’s example by implementing their own transfers and voluntary retirements, and by seeking other ways of absorbing surplus workers. But without access to the scale of capital reserves available to Nippon Steel, these measures were inevitably less successful, and resource often had to be made to outright redundancies (interview with M. Kobayashi, Economic and Labour Section, City of Muroran, July 1995).
The overall impact of this restructuring on the City was devastating and its ability to raise its own taxes changed abruptly, requiring additional central government subsidies. After 1985, the city’s population declined further along with employment levels in the major enterprises, brought on through the forced relocations of workers and their families, as well as a drift of young people graduating from high school into Sapporo (the regional capital of Hokkaido) and elsewhere (see Figure 2). This shift brought with it an inevitable sense of economic insecurity, especially among local shopkeepers. Unemployment in the city stood at just 2.1% in 1973, but increased over the next 15 years to 7.5%, which was more than twice the Japanese average (City of Muroran 1989). Unemployment dropped in the following years but climbed to back to 7.5% in 2005 (Table 2).
Unemployment Rate of Muroran, Hokkaido, and Japan, 1980-2010 (%).
Source: Data provided by the City of Muroran.
Perhaps the biggest problem in Muroran during the late-1980s was the uncertainty over the plans by NSC to close its last remaining blast furnace. The threat of closure was a powerful symbol of industrial crisis in the city, for should it occur, it would involve the immediate reduction of another 1,250 workers or so, either through relocation or by other forms of attrition. As noted earlier, the city government could not enter into direct negotiations with local management at the NSC Muroran Works. City officials expressed frustration over their inability to discover the timing of any additional job cuts, and also apprehension over what might happen to the enormous 700 ha. NSC site. In many ways, the factory site dominated and also blighted the city’s waterfront as well as Muroran’s image to the outside world (see Figure 1). But, if the last furnace were to close then some of this industrial land could be released for alternative uses, which potentially could contribute to a new economic base for the city (interview with T. Takeda, Department of Planning, City of Muroran, June 1989). The sense of despair in the city at that time is captured well by the journalist Singo Takasugi (1987, p. 23) in the following passage written after visiting the local firm, Japan Steel Works (called here “Nikko Muroran”):
I climbed a hill, I looked over Nikko Muroran and the harbor. Around me I saw a school and small houses, barrack-like row houses inhabited by Nikko Muroran workers. Old wooden company houses stand empty, their windows boarded up. Vacant lots dot the city.
Agents in the Restructuring of Muroran (1990s and 2000s)
Private-Sector Corporations
In the event, and after careful examining the negative impact closing down its last remaining blast furnace at Muroran, NSC changed its mind (The Nikkei Weekly 1991). One senior manager at NSC headquarters in Tokyo put it as follows: “This area (Muroran) cooperated with us for more than 100 years. It would have been inexcusable for us just to quit the place” (interview with T. Yamamoto, Senior Manager, Corporate and Economic Research Division, Tokyo, July 1992). Notwithstanding these noble sentiments, a more telling factor was that in 1990, the overall profits of the company revived due to a stronger than expected export income made that year (NSC 1991a, 1991b). A combination of higher exports and a rather weaker Japanese currency after 1989 led to NSC’s earnings to increase. Still, the “Muroran problem” (as it was referred to by senior NSC management) remained, and was characterized as a surplus manufacturing capacity and unused facilities leading to excess overhead costs and an inability to earn a surplus. This issue remained severe for NSC, especially the problem of how to “adjust” an estimated 2,000 excess workers remaining in the plant (interview with Yamamoto, op.cit.). Despite the difficulties involved operating the 100-year-old plant, NSC employed a three-part strategy to “saving Muroran” (see Figure 3).
Agents in the restructuring of Muroran.
First, at the beginning of the 1990s, NSC invested in its Muroran plant to increase productivity and to make it profitable again after years of losses, focusing on high-quality specialty steel, including such products as bars, wire rods, high carbon steels, stainless steels, and hot and rolled steels, products that saw their demand grow along with the Japanese automobile industry. Despite this, about 1,000 blue-collar workers and 400 white-collar workers were transferred in the following years to NSC suppliers or end users, mainly in Muroran or in other cities nearby (Hakodate and Tomakomai) (interview with Yoshida, op.cit.).
A second strategy was to shift other workers into “new enterprises.” NSC set these up locally from the late-1980s as part of a restructuring and diversification strategy. In fact, a large number of companies were eventually “spun-off” from the original Muroran Works, including Nihon Tokibetsu Kiku, specializing in machinery, and Hokkaido Tetsu, which manufactured pig iron. Other medium-scale enterprises were established targeted at specialized tasks, based on the existing factories skilled workforce, such as Nittetsu Hokkaido Control Systems that focused on electronic control equipment, and Nittetsu Engineering Company, which made custom-built engineering machinery (Table 3). Formerly, these comprised one or more sections of the Muroran Works and supported the company’s steel-making operations. After 1990, it was thought their potential markets could grow outside the steel industry, not only in Muroran but also throughout Japan. Hokkaido Enicom, another spin-off company focusing on software design reputedly became the largest computer software company in Hokkaido during the 1990s, and its blue-collar staff was retrained either by NSC or at the Hokkaido Prefectural School for Computer Training. Not surprisingly, many workers above 45 years found retraining difficult, and consequently a variety of “make-work” enterprises were set up, mainly in the service sector (e.g., restaurants and golf courses). NSC also tried to find new business enterprises for their workers who had special skills or hobbies such as growing flowers. In this regard, the company built a fruit and vegetable operation using hydroponic technology at the steel mill compound of 50 million yen (around US$500,000; interview with Yoshida, op.cit.). Further spin-off companies of NSC and the other “big six” enterprises in Muroran are shown in Table 3. Some of these reduced their employment over the following years or simply went out of business.
New Firms Founded by Nippon Steel and Other Key Muroran Companies (1985 Onward).
Source: City of Muroran, Economics and Labor Section, unpublished data.
Note: NSC = Nippon Steel Corporation; ( ) indicates NSC “loan” employees. X indicates no longer operating at this time.
Hokkaido Enicom was renamed Nittetsu Business Promote in 2004 and since 2008 was renamed Hokkaido NS Solutions.
Joint venture with NSC.
Despite these heroic measures, it was clear that the original Muroran Works still possessed a surplus of labor as well as unused facilities. Accordingly, a third NSC strategy was to invite other companies to Muroran to take advantage of its large site and skilled workforce, many from its own keiretsu network (see Table 4). In this regard, its largest success involved attracting the Mitsubishi Specialty Steel Company (Mitsubishi Seiko), a company unaffiliated with the NSC keiretsu. In 1991, Mitsubishi Seiko was invited to expand at Muroran when its own congested inner-city Tokyo plant (at Koto-ku) failed to keep pace with increasing demand for its “spring steel” products supplied to the automobile industry in nearby Tomakomai, lying just 50 km away from Muroran. This company invested subsequently in new plant at the Muroran site and agreed to collaborate with NSC to serve the business goals of both corporations. Mitsubishi Seiko brought not only about 450 of its own factory workers from Tokyo to Muroran (plus a number of subcontractors) but also assented to employ about 150 of NSC’s blue-collar employees. Besides sharing the remaining blast furnace and specialty steel output, the two companies invested in a new power plant together with a joint steel analysis and testing center, and in 1994, the Steel Bar Division of Mitsubishi Steel also transferred to Muroran City. The arrangements of these distinctive arrangements are indicated in Figure 4 and the employment levels of invited firms in Table 5. The physical arrangements at the Muroran Works site are shown in Figure 5. Apart from Mitsubishi Seiko, NSC also invited four other steel processing firms that used specialty steels onto its site. By the mid-1990s, these new companies comprised about 50% of the Muroran Works’ final output by value added (interview with M. Kobayashi, op.cit.). 17
Companies Invited to the Site of Nippon Steel Company Muroran Works.
Source: City of Muroran, Economics and Labor Section, unpublished data.
The Muroran specialty steel complex.
Joint Ventures Between NSC (Muroran Works) and Mitsubishi Steel Muroran.
Source: City of Muroran, Economics and Labor Section, unpublished data.
Note: NSC = Nippon Steel Corporation; n.a. = not applicable. X indicates no longer operating at this time.
NSC, 80% and Mitsubishi Steel, 20%.
NSC, 20%; Mitsubishi Steel, 70%; Mitsubishi Bank, 5%; and Mitsubishi Heavy Industries, 5%.
NSC, 48%; Daido Hokusan, 15%; and Mitsubishi Steel Muroran, 37%.
The Nippon Steel Muroran Works showing land occupied by various companies.
NSC local subcontractors and supplies also benefited from these moves, and by 1995, an estimated 3,800 subcontractor employees worked in the Muroran Works site, roughly the same number as in the mid-1980s (interview with M. Kobayashi, op.cit.). Taken as a whole, the former dominance of NSC over their business declined. Indeed, the more successful subcontractors expanded output by enlarging their clientele and focusing on original technologies (Kawato 2011).
In summary, NSC’s headquarters responded to the challenge of over capacity at Muroran by setting up a wide variety of new enterprises at its site and also elsewhere in the city. While many of these “new” firms were established specifically to create short-term employment opportunities for blue-collar workers, several had distinctly positive growth prospects such as software and information services. Analysis of employment levels of firms shown in Tables 3 to 5 indicates that they provided more than 3,400 jobs in 1995, including about 900 places for former NSC employees; yet by 2010, they recorded only around 65% of this number (2,170). Still, NSC had achieved its interim goal of providing new employment opportunities locally to absorb its core workforce and in the process made a significant contribution to the long-term diversification of Muroran’s industrial base, converting much of the steel work’s compound into a complex industrial estate. It brought to this task an extensive network of business contacts, shareholdings in other companies and other avenues of influence, as well as financial and managerial strengths and also its local resources base, including a multiskilled workforce and its position as the biggest landowner within Muroran. The challenge facing NSC, its subcontractors, and other firms in the Muroran Works site was how to convert the new enterprises into profit-making ventures.
National and City Government Intervention
In spite of the ingenious restructuring carried out by NSC and other companies, Muroran continued to lose employment and population throughout the 1990s and 2000s as its population plummeted from 136,200 in 1985 down to 109,800 in 1995 and 98,372 in 2005 (Statistics Bureau of Japan 2011). Concerned about the steady deterioration of the local economy, the City of Muroran in conjunction with the prefecture and central government initiated a range of bold economic development measures (shown in Table 6). These made use of infrastructure programs of various central ministries under their regular five-year expenditure plans (such as upgrading the regional road system) as well as local public works projects carried out by the City, the Hokkaido Prefecture Government, and the Hokkaido Development Agency. Taken as a whole, they amount to substantial public expenditure and reflect many of the distinctive characteristics of Japanese government approaches to local and regional planning mentioned earlier (see Figure 3).
Major Public-Sector Initiatives, 1985-2000.
Source: City of Muroran, Economics and Labor Section, unpublished data.
Note: MOC = Ministry of Construction; HDA = Hokkaido Development Agency; MOL = Ministry of Labour; n.a. = not applicable.
To begin with, the national government developed a wide range of support programs for Muroran as part of its assistance given to peripheral regions in Japan. For instance, the Ministry of Home Affairs’ transfer payments assisted the Muroran City government to maintain its level of services and infrastructure spending while local taxes plummeted in the 1980s and 1990s. On top of this, there were special funds set aside to promote public works spending in and around Muroran as part of special budgets for Hokkaido, which after more than a 100 years or more following settlement by the Japanese government, was still perceived as a developing region; for example, Hokkaido continued to be among the top recipients of public works budgets per capita (Yoshida 2000). Distinctive projects included the Swan (Hakucho) Bridge across the Muroran harbor (opened in 1998) and a network of regional expressways funded by the Hokkaido Development Agency under its Fifth Comprehensive Development Plan (1988-1998) (interview with S. Koiso, Senior Research Officer, Policy Division, Hokkaido Development Agency, Tokyo, June 1989). In the subsequent decade, new public works projects slowly dried up in line with budgetary restraint at the national level. Nonetheless, in 2001, Muroran was designated by the government as a regional polychlorinated biphenyl (PCB) waste treatment facility, and with the approval of the City, a recycling operation was constructed by the Japan Environmental Safety Corporation (JESCO), a government enterprise established under the auspices of the Ministry of Environment. This encouraged Nittetsu Cement and the Muroran Works of NSC to engage in recycling business activities through the utilization of their facilities such as coke ovens and furnaces (interview with M. Kobayashi, Economic and Labor Section, City of Muroran, July 2002). Plans for the new operation also attracted a local branch facility of the Tetsugen Corporation, with the goal of recycling local agricultural waste plastics to generate fuel products. The operational expenses and technical development to support environmental recycling programs for these and other firms in Muroran were assisted by the METI (Business Link Hokkaido 2003; Japan Society of Waste Management Experts 2003).
Other examples of national government funding for restructuring in Muroran included the Ministry of Labor’s payment of “labor adjustment subsidies” to the big six companies, such as NSC, which kept workers on its payroll even though their services were not required (Ikeya 1996). 18 Thus, when NSC moved workers from the Muroran site to other steel plants or to its suppliers in the 1980s, the Ministry subsidized wages for up to one year. The Ministry also extended subsidies for retraining programs and, due to the complex problems besetting Muroran, established a Vocational Training Centre in the city during 1992. To foster technological upgrading among local small- and medium-sized companies (called jiba sangyo), including traditional subcontractors and suppliers, MITI launched the “Muroran Techno Centre” in 1991 (its full title is the Muroran Advancement Centre of Industrial Technology and Management). The Techno Centre was organized as a third-sector project, with funds from the City of Muroran, MITI, and surrounding municipalities, as well as the six major companies. The Ministry of Education also supported this program by upgrading the local MIT, which commenced new courses such as biotechnology and information sciences allowing the MIT to participate in Hokkaido’s industry cluster programs supported by METI and MEXT during the 2000s (City of Muroran 1991; Hokkaido Development Bureau et al. 1992b; Northern Advancement Centre for Science and Technology 2006). Later, following the designation by the national government of Muroran in 2002 as a Monozukuri City (as part of its 80-year celebrations), the MIT established a Cooperative Research and Development Centre in 2005 to strengthen engineering technology transfer to local and regional firms, and to work with the Muroran Techno Centre (interview with Professor K. Saito, Department of Civil Engineering, MIT, July 2005). 19 In addition, the central government’s MLIT backed Muroran as part of a national network of “recycle ports” and eligible to receive special budget funds for dismantling ships through environmentally friendly procedures (MLIT 2008; Muroran Times 2009; interview with N. Sekikawa, Manager, Economic and Industry Section, City of Muroran, June 2010).
Second, the City of Muroran itself generated a wide range of infrastructure projects using public works subsidies from various national ministries. One such project, the Rainbow Project, resulted from a nationwide effort by the then Ministry of Construction to revitalize older inner-city commercial districts and provide apartment housing (City of Muroran 1994; Ministry of Construction 1993). Under this plan, a former Japan Rail goods yard was relocated to release land for housing, shopping complexes, and riverbank improvements (see Figure 1). Yet, another project initiated and implemented by the City with national subsidies, as well as private-sector involvement, comprised upgrading the port and redevelopment of the surrounding harbor area, helping to shift Muroran’s traditional industrial city image toward one focusing upon leisure and recreation. These projects were developed under third-sector arrangements, and included a harbor marina and waterfront tourist projects, together with a city “light up” program as part of the City’s Volcano Bay improvement plan (City of Muroran 1992b). 20 Together with other plans, these continued into the 2000s and were coordinated by the Mayor’s office (interview with Y. Tekiguchi, Deputy Director, Planning and Finance Section, City of Muroran, July 2002).
Finally, the city engaged in attracting a range of small- and medium-scale electrical- and machinery-based enterprises to its municipal Kagawa Industrial Park. These firms came either from the Keihin industrial region (centered on Tokyo–Yokohama) or from the Chukyo industrial region (centered on Nagoya) in Honshu. This effort complemented the endeavors of NSC to recruit firms to its own site (Ota 1992). The City targeted high-technology electronics companies that could take advantage of facilities at the MIT, or that in some way related to existing industrial operations and port facilities (interview with Y. Tekiguchi, op.cit.). By the mid-1990s the municipality could point to some success as it brought in about 35 companies, attracted by cheaper land and available labor. Together, they employed over 1,200 workers, about half the number at the Nippon Steel mill. Although these numbers remained steady, the rate of new firms attracted to Muroran declined through the slow growth years of the 1990s and recovery years of the 2000s; this despite attractive incentive schemes made available by the City, the Hokkaido Prefecture, as well as the Hokkaido Regional Bureau of the MLIT (interview with Y. Tajima, Manager, Muroran Techno Centre, June 2005). Indeed, Muroran’s industrial structure has barely diversified over the last 35 years as shown in Table 7. For instance, the percentage of industrial employment in the city’s “old” economic sectors (steel and chemicals) kept steady at around 60% or so. Conversely, the share of “new” economic sector (machinery) fell significantly since the mid-1990s.
Changes in Muroran Industrial Structure, 1975-2010.
Source: Manufacturing Census, Japan; Establishment Census, Japan (various years).
Conclusion
The fate of older industrial plants and the rustbelts that depend on them has become tied up with the shifting alliances between major steel companies, the policies, and national states and the development trajectories of national economies in an increasingly interlinked globalizing economy. In the case of Muroran, there was little in the last 25 years or so that matched urban neoliberal policies or programs. Unlike the case in the United States or in the United Kingdom, neoliberalism has had to negotiate a strong developmental state rather than a Keynesian liberal regime. Indeed, the collaborative efforts of the Muroran City government, various national ministries and local manufacturers were crucial in reviving industry in this city. These partnerships that have formed provide a strong institutional base to facilitate appropriate programs and to boost production, especially by small- and medium-scale operations. It is also important to note that the Japanese unions were not antagonistic toward reforming this system and endorsed such reforms as were necessary to keep the local companies going.
In particular, NSC went to great lengths to create a viable industrial complex at the Muroran Works, partly due to its role as a national champion with “deep pockets,” in part also due to an “emotional” (amae) attachment to the city. NSC and the other large industrial corporations in the city felt impelled to “keep Muroran at work” rather than retreat from the community. The Muroran Works, at one time slated for closure, was given a second life as a manufacturer of specialty steel products. This adjustment paid off eventually as, prior to the global economic crisis that commenced in 2008, Muroran’s two major steel companies found new clients in China, particularly those associated with building of the 2008 Olympic Games (Kawato 2011). While this increased production dramatically, profit margins remained thin due to the high cost of local fabrication. Consequently, firms were unwilling to take on new workers. Figure 6 supports this view. Steel production recovered to roughly 80% of total manufacturing in 2007, and contributed to the highest manufacturing output for the city recorded since the mid-1980s. At the same time, however, the number of workers declined rapidly in this recovery period while the number of companies remained more or less the same. In sum, Muroran overcame economic hardship by downsizing the number of employees while improving the rate of productivity.
Changes in manufacturing in Muroran, 1971-2010.
Over the 25-year-study period, central government ministries also maintained their commitment to Muroran. Initially through providing a wide range of public works such as port and highway systems as part of its commitment to the Hokkaido region, this support included technical support for local industrial companies and labor training to sustain the city’s industrial base. Compared with reported changes in the governance of American and European industrial towns, government assistance avoided indiscriminate corporate bailouts, municipal handouts, or industrial import protection. The most recent program designating Muroran as a port for different forms of recycling indicates that the central state continues to back upgrading the city’s industrial activities through a nationwide policy framework.
Although essentially dependent upon central government funds, the City of Muroran has made a number of amenity improvements in conjunction with the private sector, and set about developing its own industrial estate to attract small firms. Although this shares some similarities with restructuring “rustbelts” in North America and Europe, the overall ethos was to upgrade the economic base of the city rather than bidding down the costs of conducting business. The local government joined with the private sector to run service sector operations in third-sector arrangements, where it could exercise strong oversight over their activities. The city was not attracted into speculative real estate projects, and the major downtown commercial redevelopment during the study period was organized by the City but with Ministry of Construction funding and control.
To return to our original question—To what degree has neoliberalism been introduced to Japanese industrial-urban planning? The answer appears to be upon where and when we direct our attention. The apparent deregulation and encouragement of private-sector investment in Tokyo notwithstanding, the case study of Muroran continues to manifest the basic features of a developmental state. Overall, while significant changes occurred after the early-1980s, Japan’s political economy remained developmentalist in its fundamental characteristics. 21 Even in the Koizumi era of the last decade, widespread neoliberalism was prevented by two alternative power structures—the LDP itself and the Japanese bureaucracy—and these were major factors stopping Koizumi from exercising strong and effective leadership and structural reforms (Mulgan 2002, 2011). Indeed, the most intriguing features of change in Muroran over the study period are neither neoliberal nor traditional developmental but indicate postdevelopmental trajectories—flexible production, new environmental and recycling enterprises, marinas, and whale watching. The rhetoric for neoliberal reform in Japan has not led to its application in Muroran due to policy makers and the major corporations placing a priority on preserving what they see as the core institutions of Japanese industrial capitalism and then building on those strengths. As argued by Fujita and Hill (2012), in a postdevelopmentalism era, bureaucratic ministries and firms have supported technological and environmental upgrading and quality of life. 22
The outcome of the deregulation and decentralization era of Koizumi appears to be a division of the country into “old regions” and “new regions.” Yashiro (2005) argued that municipalities now have a choice between depending heavily on public investment and central government support as they used to, or enhancing regulatory reform to attract private firms using special zones or other mechanisms set up after 2001. Although it is too early to prove this hypothesis, if he is correct then this would be an important step away from traditional policies that each region should develop equally in Japan and would stimulate change in the political structure through various forms of competition between local authorities.
For the future, Muroran will have to look for employment growth in small technology-based ventures or in the service sector. Disturbingly, the city’s population fell below 95,000 at the time of the 2010 Census, and in the same year, a key department store closed (Marui Muroran) (City of Muroran 2011). The percentage of people above 65 years was about 30%, far above the national average and increasing. Muroran has the second oldest age profile among cities in Hokkaido, next to Otaru. Nonetheless, these trends must be seen in the context of Japan’s more general natural decrease and aging of its population (Flucter 2005; Mantale, Rausch, and The Shrinking Regions Research Group 2011). As with other Japanese cities suffering from declining population levels, Muroran may have to amalgamate with adjoining municipalities, specifically Date city (2010 population, 36,283) and Noboribetsu city (51,540 population) (see Council of Local Authorities for International Relations [CLAIR] 2010).
This examination of Muroran has important implications for comparative urban research, in particular the use of the urban neoliberalism concept across national boundaries. Casual use of this term to describe urban and industrial policy agendas leads to conceptual stretching (see Mossberger and Stoker 2001). If neoliberalism is everywhere, then we will never be able to explain its relative strength in certain jurisdictions and why variations exist. For example, the recent collection of essays examining neoliberalism in East Asian urban and regional settings by Park, Hill, and Saito (2012) was divided on how strong the effect was, even within the same country. More rigorous definition of urban neoliberalism is necessary for researchers to better understand how this model has taken root. As indicated in this Japanese study, neoliberalism is also capable of fading or deteriorating. More careful research is needed therefore to compare the conditions under which urban neoliberalism has achieved traction and the conditions under which it maintains, dissolves, or transforms (see also Robinson 2011).
Footnotes
Acknowledgements
The author wishes to acknowledge the helpful executives of Nippon Steel Corporation (NSC), the officials of the City of Muroran, and officers of national government agencies who agreed to be interviewed and who provided information and other assistance. Special thanks goes to Professor Kazuo Saito, Muroran Institute of Technology (MIT). Eric Leinberger drew the figures. Minami Orihara helped with securing and translating Japanese materials. The author also acknowledges the helpful comments and insights provided by the editors and three anonymous referees.
Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: The article was prepared with funds from the Social Sciences and Humanities Research Council of Canada (SSHRC; Grant 410-2005-0050).