Does the Japanese state deserve most of the credit for Japan's development - Essay Example

Does the Japanese deserve most of the credit for Japans development? During Japans postwar economic miracle, it was the Japanese that deserves most of the credit for successful industrial development. The states use of industrial policy was the single most important cause of the transformation and growth of the economy. All factors, including external environment, political leadership, and the role played by the private sector, are insignificant when compared to industrial policy. Without the industry-specific interventionist policies followed by the MITI, the economy would not have develop0ed at the pace or in the direction it ultimately did.” Does the Japanese state deserve most of the credit for Japans successful post-war industrial and economic development? The position of this paper on the question is negative but it acknowledges that there are good reasons for answering the question affirmatively. At the outset, those who answered the question affirmatively can point out that the roots of Japans successful post-war industrialization and economic development can be traced to efforts of the Japanese state as early as the period of the restoration of imperial rule in Japan. Prior to the restoration of Japanese imperial rule, the Tokugawa Shogunate after its experience with Commodore Matthew Perrys gunboat diplomacy in 1853 had accepted many unequal treaties leading to dissatisfaction among the countrys samurais and feudal clans (JMFA 17). For example, Japanese tariff rates were kept low and a system of extraterritoriality was established (Pyle 65). Restoration of imperial rule through the installation of the political rule of Emperor Meiji became the rallying point of a significant portion of the countrys ruling elite and leading warlords in expressing opposition to foreign encroachments (JMFA 10). Upon installation in 1868, Emperor Meiji led the nation in taking the path of learning from the west, promoting political participation through deliberative assemblies, and taking the preliminary path to free enterprise. Upon assumption to power, Emperor Meiji, at 16 years old (perhaps with political and intellectual support from the countrys elite), established his government based on an imperial oath to five articles (JMFA 15). Three of the five articles or imperial oaths of Emperor Meiji are as follows: 1) establishment of deliberative assemblies and consultation of the population on “all matters” through public discussions; 2) greater liberties for individuals to “pursue” their own callings; and 3) a statement of intent to seek knowledge throughout the world to modernize Japan (Morton & Olenik 148). Thus, Japanese imperial rule planted the fundamental seeds for the adoption in Japan of western-style capitalism, western technology, and participative monarchy or parliament that is similar in some respects with the democratic parliaments or monarchies of Europe. Sometime in the late 1800s, the Japanese government sent Councilor Hirobumi Ito to Europe to study constitutional systems and this prepared Japanese society to establish constitutional politics in Japan (JMFA 27, Pyle 84-85). Councilor Hirobumi Ito drew up the Constitution of the Japanese empire in 1888 which was promulgated in 1889 (JMFA 27). From thereon, Japan became a constitutional monarchy or, in sum, a government ruled by law. Japan became militaristic in early part of the 20th century but it was a government operating according to the rule of law. Governments based on a rule of law rather than of caprices and whims are important for capitalism to survive. Operation according to rules allows free enterprise planning according to law and operation of the business game according to law where the environment is predictable because the environment, particularly business environment, is operating according to rules. This is similar to a game wherein there is a possibility of winning if all parties play according to rules. Without a rule of law, the possibility of winning is not conceivable because the results of the game can always be changed according to whims and caprice. In contrast, where rules are clear, actors can make plans for their enterprise according to the rules, and winning from the “game” is possible provided each one follows the rules of the “game.” Thus, in through this simple analogy, it can be argued that the Japanese government can take the main credit for building an environment that is conducive for business and free enterprise. It is on this foundation that the success of Japans post-war industrialization was built. Japan is one of countries of Asia that started early in modernizing their banks. As early as 1872, Emperor Meiji established four national banks in Tokyo and other cities of Japan (JMFA 44). As early as 1882, the Japanese government established a central banking institution---the Bank of Japan---to see to that the countrys financial institutions are functioning well. Further, as early as 1878, the Japanese government also established one of the first stock exchange in Asia---the Tokyo Stock Exchange (JMFA 46). All these are consistent with the view that the Japanese government has been a leading beacon in building up, strengthening, and consolidating free enterprise or capitalism in the country and, relatedly, in providing the fundamental impetus for industrialization and economic development. In the early Meiji era, the industries in existence were mere handicrafts and not industrial manufacture (JMFA 47). In 1877, however, the Japanese government established the Ministry of Industry to stimulate and guide industrial development (JMFA 48). In 1880, the government also organized and started the operation of an iron and steel industry. The ownership of the industry was later transferred to the private sector (JMFA 52). For Pyle, the beginnings of Japanese industrial policy can be traced to the 1870s and 1880s of Japan (101-102). In that industrial policy, the role of the state in the economy was heavily articulated (Pyle 101-102). Government promoted industries, particularly "mining, iron-making, railroad, and telegraph," (Pyle 101). The main features of the Japanese industrial policy involved active state leadership, import substitution, adoption of western technology, and promotion of exports (Pyle 102). In 1949, a successor to the role of the Japanese Ministry of Industry was the Ministry of International Trade and Industry (MITI). The MITI performed several roles for the Japanese government with the intention of boosting the Japanese economy. The MITI procured foreign exchange and ensure that foreign currencies were used for investments in heavy industries (Johnson 200). The MITI promoted a stress on heavy industries over light industries (Johnson 219). It organized oligopolies, cartels, and monopolies to exploit economies of scale and promote competitiveness (Johnson 206, 211).1 It promoted exports (Johnson 229). Sometime in the 1960s, the MITI performed the role of investment coordination done in "cooperative discussions groups" (Johnson 267). The MITI also provided "coordination" in investments, price setting and stabilization, and output targeting (Johnson 268-269). Further, we can argue that Johnsons own data indicate that the performance of the Japanese private business sector itself refutes the capability of the MITI to direct the economy. In 1956-60, planned annual economic growth rate was 5.0% but realized economic growth rate was a high 9.1% per annum. Planned annual economic growth rate was 6.5% from1958 to 1962 but realized economic growth rate was a high 10.1% per annum. In 1961-70, the MITI plan was an annual growth rate of 7.2% but the realized economic growth rate was 10.4% per annum. Clearly, the private sector has been outperforming the economic designs of the MITI and the data do not provide evidence that the plans of the MITI were influencing the performance of the private business sector. Of course, proponents of the view that the MITIs policies were making the Japanese business environment better can argue that the over performance of the private sector are accomplishments of the MITI. Unfortunately, however, the view does not seem logical because the trend was consistent over a decade. The more logical explanation is that private sector performance was independent of the actions of the MITI. Another way of interpreting the data is that private sector outperformed government targets by almost twice and, thus, the main credit should go to the private sector rather than to the government sector in building the post-war economy of Japan. Works Cited Bjorklund, Krister. Migration in the Interest of the Nation. Migration Institute: Siirtikausyysubtutuuit, 2007. 9 February 2010 Brown, Alexander David Brown. Meiji Japan: A Unique Technological Experience. Student Economic Review, 19 (2005): 71-83. Burkett, Paul and Martin Hart-Landsberg. "The Economic Crisis in Japan: Mainstream Perspectives and an Alternative View." Critical Asian Studies, 35.2 (2003): 339-372. Cargill, Thomas. "Monetary Policy, Deflation, and Economic History: Lessons for the Bank of Japan." Monetary and Economic Studies (Special Edition), February 2001. Dick, Andrew. Industrial Policy and Semi-conductors. Washington: AEI Press, 1995. JMFA (Japanese Ministry of Foreign Affairs). Japan in Transition. Tokyo: Ministry of Foreign Affairs, 1968. Johnson, Chalmers. MITI and the Japanese Miracle. Stanford: Stanford University Press, 1982. Kimura, Fukunari. "Japans Model of Economic Development." United Nations University Research Paper 2009/22 (2009). Kiyota, Kozo and Tetsuji Okazaki. Industrial Policy Cuts Two Ways: Evidence from Cotton Spinning Firms in Japan. CIRJE Discussion Paper F-563, 2009. Morck, Randall and Masao Nakamura. "Business Groups and the Big Push: Meiji Japans Mass Privatization and Subsequent Growth." Oxford University Press, 2007. Morton, W. Scott and J. Kenneth Olenik. Japan: Its History and Culture. New York: McGraw-Hill, 2005. Nolan, Marcus. "Industrial Policy, Innovation Policy, and Japanese Competitiveness." Peterson Institute Working Paper 07-4 (2007). Pyle, Kenneth. The Making of Modern Japan. 2nd Ed. Lexington and Toronto: D.C. Heath and Company, 1996. Savage-Morton, Michael. "MITI: Myths and Miracles." Access: History 1.2 (2001): 35-48. 9 February 2010 Takeda, Haruhito. "Lecture 16, Contemporary Economic History of Japan." PowerPoint Slide Presentation. University of Tokyo, 2004. 9 February 2010 Takeda, Haruhito. "Lecture 18, Contemporary Economic History of Japan." PowerPoint Slide Presentation. University of Tokyo, 2004. 9 February 2010 World Bank. The East Asian Miracle. New York: Oxford University Press, 1993. Whether Japans militarism in the 1930s and 40s were the result of economic downturn “Japan by the Taisho era had created strong indigenous democratic institution and was on the way to becoming institutions and was on the way to becoming a stable democracy. Furthermore, its foreign policy was cooperative and status quo-oriented. It is probable that Japan would have continued along this path had it not been for the economic downturn of the 1920s. It was the economic downturn that primarily accounts for the erosion of Japanese democracy, the rise of the militarists, and ultimately Japans aggression in the 1930s.” The period from 1912 to 1926 is known as the Taisho era in Japanese history. Let us examine the economic data of Japan from 1910 to 1940 of Cargill (139): Based on the figures above, it can be argued that life was becoming very difficult for the Japanese during the Taisho era because exports and private investments had dropped. However, other figures indicate the contrary. Brown reported that industrial growth rate was 5.41% per annum from 1908 to 1910, 7.85% from 1911 to 1920, 5.03% from 1921-1930, and 7.86% to 1931 to 1938 (77). The figures sum up to an average growth industrial growth of 6.71% between 1908 to 1938, indicating that there is no adequate evidence that there were serious economic difficulties during the global downturn in the 1930s. Further, labor productivity growth per annum was 3.85% from 1908 to 1910, 4.65% from 1911 to 1920, 4.1% from 1921 to 1930, and 4.69% from 1931 to 1938 (Brown 77). The figures sum up to an average of labor productivity growth of 4.4% per annum from 1908 to 1938. Again, using these figures, evidence is also inadequate to paint a picture of economic difficulties during the Taisho era. According to Brown, annual technical progress was 0.44% from 1908 to 1910, 1.55% from 1911 to 1920, 2.96% from 1921 to 1930, and 3.42% in 1931 to 1938. Based on these figures, average annual technical progress was 2.38% from 1908 to 1938 (77). Again, the figures suggest that the view the life was extremely difficult during the Taisho era has no adequate empirical support. Summing-up, if we use the figures of Brown, what is suggested is that there was continuous progress in Japan from 1908 to 1938, covering the Taisho era. Evidence appears inadequate to conclude that life for the Japanese was difficult during the Taisho period. Works Cited Bassino, Jean-Pascal. The First East Asian Economic Miracle: Wages and Welfare of Urban workers in East Asia and Europe, 1880-1938. Paper presented at the XIV International History Congress, Helsinki, Finland, 21-25 August 2006. Brown, Alexander David Brown. Meiji Japan: A Unique Technological Experience. Student Economic Review, 19 (2005): 71-83. Burkett, Paul and Martin Hart-Landsberg. "The Economic Crisis in Japan: Mainstream Perspectives and an Alternative View." Critical Asian Studies, 35.2 (2003): 339-372. JMFA (Japanese Ministry of Foreign Affairs). Japan in Transition. Tokyo: Ministry of Foreign Affairs, 1968. Pyle, Kenneth. The Making of Modern Japan. 2nd Ed. Lexington and Toronto: D.C. Heath and Company, 1996. Shizume, Masato. "Economic Developments and Monetary Responses in Interwar Japan: Evaluation Based on the Taylor Rule." Monetary and Economic Studies, October 2002. Takeda, Haruhito. "Lecture 16, Contemporary Economic History of Japan." PowerPoint Slide Presentation. University of Tokyo, 2004. 9 February 2010 Takeda, Haruhito. "Lecture 18, Contemporary Economic History of Japan." PowerPoint Slide Presentation. University of Tokyo, 2004. 9 February 2010 Read More