The Basis of Japan's Economic Growth - Essay Example

Economic growth Name Institution 1. What was the basis of Japan's economic growth in the post-WWII period? The post-WWII period of Japan’s economic growth was seen as a way of catch-up to other industrialized nations such as the United States. During this time of economic boom in Japan, the country became the second-largest economy in the world after the US. This period was termed as Japanese economic miracle as Japan witnessed a period of economic growth after it had struggled during the World War II. Various macroeconomic factors such as high investment ratios, mobilization of savings, improved technological advancements; flexible labor supply as well as other favorable conditions was the basis of Japan’s economic recovery (Endo, Delbridge & Morris, 2015). In addition to this, Japan received aid and support from the U.S. but mainly, the period of economic boom was engineered by economic interventionism of the Japanese government. Japan converted much of the technology they were using after the war to peaceful economic development. For instance, machine guns were turned to sewing machines and the optical weapon factories started producing cameras and binoculars. The nation was now committed to meet economic and industrial developments. Their products were quality, and they could trade free with internationals (Lockwood, 2015). The economic growth was achieved via a combination of various aspects of financial planning, injection of new strategic industries in the economy and ensuring the protection of the different strategic industries as well as the introduction of strategic sectors. Japan and West Germany benefited from the cold war shortly after the end of the World War II as the US established a significant presence in Japan in a bid to slow the expansion of the Soviet influence in the Pacific. The US was also afraid of the unhappy and poor Japanese population was turning to communism after the depletion of the World War II, a condition that could have made them vulnerable to allowing the Soviet Union to control the Pacific. Japan benefited from low prices of resources for industrial development such as oil from the US (Welfield, 2013). The Japanese economic policy, through the Ministry of International Trade and Industry, spurred the economic miracle by enhancing the cooperation of manufacturers, distributors, suppliers, and banks in tightly knit groups (keiretsu) as well as with government bureaucrats. The corporations and the highly unionized blue-collar factories were also guaranteed a lifetime employment (Shūshin koyō) in an endeavor of speeding up economic growth in Japan. Banks could loan investors to drive the economic growth, and also household savings started increasing from the 1950s. These banks were financed by the government and the Bank of Japan (Lockwood, 2015). There also existed a welfare society in Japan that comprises cartels of medium sized companies to prevent them from bankruptcy, a step that maintains individuals employed. The government then could use the money it had saved to inject in the industrial development (in the form of loans) rather than spending on welfare. However, many part-time workers did not enjoy the workplace benefits and had less pay. Women were most affected. This forced the big companies like Sony and Toyota to be contracted to work for the small businesses to reduce the costs of production and catapult the profit margins in the respective companies (Welfield, 2013). 2. Discuss the factors which led to the rise of the 'Asian Tigers' in the 1970s and 1980s. For the past three decades or so, the four Asian Tigers have been the fastest growing nations and other emerging countries have been copying to adopt their economic model. The primary factors behind their economic boom and stability are high rates of savings, high investment types, factor productivity macro discipline, and outward orientation among others (Arora & Ratnasiri, 2015). Using Singapore as a point of reference, for instance, its economy surged at a remarkable 8.5% in the stated above period per annum (3 times that of US) and its per capita income grew at 6.6% with a rough double each decade. This led to a consequent rise in population from 27% to about 51%. The following are the factors that engineered the robust growth of the 'Asian Tigers' in the 1970s and 1980s. Skilled labor force The nations at this time were poor and had cheap excess labor that could be absorbed in the intensive industries. The excess labor was transformed to a productive input in the workforce via radical educational reforms. Such step elevated the competitiveness of the labor and at the same time making it cheap. All children attended elementary education as well as a compulsory high school education. The administration also used the substantial amount of money to improve the college and university system (Page, 2016). Flying Geese Hypothesis The countries in the East Asia aligned themselves behind the countries that were industrialized in order of the wild geese flying pattern. Japan was the leading goose in the pattern followed by the four Tigers followed by others. The “flying geese” hypothesis predicts that as the costs of labor surge in one economy, firms have the tendency of relocating their investments to the less developed countries to take advantage of the lower wage rates. This led to the four tigers absorbing Japanese investments in the two decades following the rocketing of the production cost in Japan. Taiwan, for instance, adopted the Japanese economic model of economic development after the World War II majorly in Taiwanese agriculture (Page, 2016). Outward oriented strategies/policies There was the much greater openness that saw double growth in both exports and imports in a similar manner as the way it happened in the Latin America. These Asian economies maintained a much high exports and imports ratio to GDP. For instance, openness in Hong Kong and Singapore was achieved by ending all restrictions on imports and freeing therein of the export sector. Trade barriers that existed in the 1970s were gradually reduced in a bid to favor exporters through improved exchange rate policies. There were export incentives as well as selective tariff protection and lending to consumers to offer cheap finances to the industrial sector. There was an extensive consultation between bureaucrats and business, companies, individuals and industry groupings (Gereffi & Wyman, 2014). Capital accumulation There were high savings and investment rates, not only physical capital. The high savings rate led to high domestic investment rates in Taiwan for instance. The addition of educational reforms in the labor force added to capital reproductively. This was achieved through the adoption of foreign technology and knowledge. These endeavors o accumulating capital through technological overhauls in the industrial sector was significant to the Asian tiger’s economic growth (Page, 2016). Slow growth rates of population Slow population growth rates played a vital role in reducing the sizes of families; that is the dependency ratios, accumulating household and government savings, creating educated labor force, raising wages of the workforce, and maintaining an impressive growth of investments in manufacturing technology (Welfield, 2013). There were family planning programs which were adopted by the Asian Tigers in 1965 and led to the decline in fertility. When public education was emphasized, the number of women in the workforce increased, and also in the education sector leading to delayed marriages. Later in 1995, the average fertility level was two children per family (couple). Such smaller families slowed growth in the number of school-age children, lowered the ratio of dependents to the working age adults as well as reducing the rate of labor force growth (Arora & Ratnasiri, 2015). Other factors included knowledge-based economy, efficient and stringent public policies, political stability (high military rule), pegging performance to milestones and Quality and standardization of goods to compete globally. Reference Arora, R. U., & Ratnasiri, S. (2015). Recent growth experiences of Asian tigers: where does India stand?. International Journal of Social Economics,42 (2), 143-162. Endo, T., Delbridge, R., & Morris, J. (2015). Does Japan still matter? Past tendencies and future opportunities in the study of Japanese firms.International Journal of Management Reviews, 17(1), 101-123. Gereffi, G., & Wyman, D. L. (Eds.). (2014). Manufacturing miracles: paths of industrialization in Latin America and East Asia. Princeton: Princeton University Press. Lockwood, W. W. (2015). Economic development of Japan. Princeton: Princeton University Press. Page, J. (2016). The East Asian miracle and development policy: A twenty-year retrospective. In Japan’s Development Assistance (pp. 105-119). London: Palgrave Macmillan UK. Welfield, J. (2013). An Empire in Eclipse: Japan in the Post-war American Alliance System: A Study in the Interraction of Domestic Politics and Foreign Policy. A&C Black. Read More