For 40 years, the United States and Japan have operated under a model of shareholder‑centric capitalism that prioritizes short‑term investor returns over long‑term national strength. Its strategic cost has gone largely unexamined. By rewarding offshoring, labor arbitrage, and financial extraction, this model has hollowed out industrial foundations, driven extreme inequality, and accelerated the rise of the most capable adversary of our century.
Shareholder primacy encouraged firms to move production abroad, hollowing out domestic manufacturing and eroding the skilled workforce required for advanced industries. In doing so, it transferred know‑how, capital, and production ecosystems to China, while exacerbating domestic inequality.
Western and Japanese companies built supply chains, trained workforces, and created industrial capacity that became central to China’s technological ascent. The semiconductor industry is a clear example: decades of offshoring allowed China to absorb tooling expertise, scale fabrication capacity, and build a domestic ecosystem that now challenges global supply‑chain stability. No foreign competitor could have engineered a more advantageous outcome.
Despite this, no major think tank has provided a full accounting of how these choices reshaped the global balance of power or what they mean for national security.
Shareholders head to the venue of Sharp’s annual general shareholders’ meeting. (June 2025, Sakai City, Osaka)
Undermining Stability, Trust
The AI era raises the stakes dramatically. Artificial intelligence depends on long‑term investment, stable workforces, resilient supply chains, and social stability. Rising inequality erodes the social cohesion and institutional trust that advanced economies need to compete in the AI era. It requires institutional trust inside firms and the ability to adapt to technological change without destabilizing society.
These are precisely the capacities that shareholder capitalism undermines. The United States cannot compete in the AI century with an economic model built for quarterly earnings.
Some promote “stakeholder capitalism” as a solution. But this is a cosmetic reform. It changes the vocabulary, not the power structure.
Rethinking Economic Architecture the AI Era
As long as outside investors dominate corporate governance while fiduciary duty, capital‑market pressures, and activist‑investor incentives remain unchanged, the system continues to reward short‑term extraction over long‑term capability. Stakeholder language does not rebuild industrial capacity, restore workforce stability, or reduce dependence on geopolitical rivals.
What is needed is a new framework: a national economy strategy that treats economic governance as a core component of national power.
Prime Minister Sanae Takaichi on November 21 after a Cabinet decicision on comprehensive economic measures. (©Sankei by Ataru Haruna)
Such a strategy would prioritize long‑term productive capability, strategic sectors, workforce development, and institutional coordination over financial efficiency alone. Japan’s postwar experience with resilient developmental capitalism offers useful lessons. Both the US and Japan must rethink the architecture of their economies if they hope to maintain strategic autonomy and advantage in the AI era.
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Author: Yozo Naotsuka
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