The Modernization and the Act of Industrialization of Japan - Essay Example

? Industrial Revolution: Meiji Era (1868-1912) History and Political Science Outline page Introduction…………………………………………………………………….3 Creation of industrial infrastructure……………………………………………4 State owned enterprises……………………………………………………….8 Acquiring technology………………………………………………………….11 Privatization of state owned industries…………………………………………14 Conclusion …………………………………………………………………….18 Introduction The modernization and the act of industrialization of Japan began during the era starting after the 1868’s Meiji Restoration1. During the early stages of converting the nation into an industrialized one, the government and the policy makers took several measures and created several policies to cultivate the industry. The government industrialized the nation with the assistance of investing in enterprises owned by the state, development of the infrastructure for industries and obtained technology, machinery form developed nations such as European countries and privatization of industries. Japan's isolation from other parts of the world did not begin industrialization as early as the other western European countries. The Japanese government by that time tried to resist western influence in trade, and until 1853, they closed their trading boarders and ports for any trading activity with foreigners. They engaged in no foreign contact unless it was decidedly necessary and the laws forbade any Japanese civilian to travel. Japanese government also ensured that there was only one seaport open to trade with any western nation. The port of Nagasaki was the connection point for any trading activity with the western countries especially the Dutch and Chinese ships.2 In 1853, the president of America at that time sent the American commando, Mathew Perry, with a fleet of steam-powered ships (the back ships) to force a trade treaty with Japan and open the Japanese ports and boarders to trade with other parts of the world. Captain Perry gave the Japanese government one year of decision-making, and when he returned in 1954, the Japanese signed the treaty under the influence of force and opened their gates to the world trading. This was an indication of how the Japanese were weak in both economy and military.3 Creation of industrial infrastructure The Japanese realized that they needed a strong modern military to avoid intimidation by any foreign nation. However, the old rule of Tokugawa did not share the view modernizing their weapons and military. In 1968, the old Tokugawa government collapsed, and marked the beginning of the Meiji era when the Japanese begun serious consideration of modernization. However, the military modernization and arsenal buildup could not come alone; it included the industrialization and industrial buildup of Japan and its principal cities2. Even though, there were several oppositions against industrialization, the Meija government proceeded with the modernization process. The government begun with sponsoring the telegraph system that connected the greatest cities in Japan, then they built roads and, shipyards rail network. The Meiji government also facilitated the building of mines, textile industries, munitions factories, experimental factories and agricultural stations. The leaders reloaded their efforts of military modernization including compulsory military service for all men, establishment of small standing army and a large reserve army system to boost their national security. They also engaged in foreign military education and consultation from studying foreign military, using foreign military advisors and sending cadets abroad Europe and America to study military education4. The Meiji government’s chief aim was to restore Japanese isolation, but still maintain their contact with the west. However, as time passed by, the aim of restoration diverted to a different goal and the Japanese Meiji government was willing to establish a stronger and more industrialized nation and to have concrete military force by any means. It was necessary for the Japanese to adopt and apply more ideas of western industrialization to achieve their goal of industrialization. They achieved their goal 61 years later after the Meiji uprising, by 1929 when Japan came into the radar of world’s most industrial powers 4. The industrial policy created during the Meiji era was recognized as the industrial developmental policies, and these policies focused on four main areas: improvement of infrastructure related to industries, creation of organizations and facilities owned and controlled by the state and financing, supporting acquiring of technology from foreign nations and privatization of industries5. The Meiji government kick started its modernization agenda by the industrial development on industrial infrastructure of railroads, financial institutions and maritime transport. The chief result of modernization in Japan came out clearly by 1929 when Japan appeared in the radar of the most industrialized countries in the world. The industrial policy that the Japanese government developed was a terminology of their own forming that was not to be found in any western economic terminologies. They were the policies that sought to protect the domestic industries while developing strategic industries and adjusting economic structure in response to any anticipated economic change for the national interest6. The industrial policies that the Meiji government implemented for improved industrialization and modernization included mobility of labor and compulsory education for all Japanese citizens for development of literate labor force. They also introduced and integrated foreign industrial technology, fiscal taxation reform for government’s revenue and the industrial policy of subsidizing key industries and seeking foreign technicians to run the key industries for improved work out put. The infrastructure policy system that involved the development of a railroad system, telegraph and postal communications supplemented the other industrial policies4. The infrastructure development kick jumped modernization process of the country. The Meiji government restructured the existing industrial facilities. Japan had to improve their transport and communication system to ensure successful restructuring of the industrial system, they therefore, begun with the development and building of a railroad system and telegraph system for transportation and communication respectively. They also improved their shipping sector to encourage trade with foreign countries and increase transportation of goods and services from and to the western countries. The improved shipping system would also encourage improved trade with western countries since the industrialization demanded high consumption of the western industrial finished goods. They were also able to transport work force from the western countries7. The developed telegraph system built and connected to all major cities in Japan improved the communication system after the transfer of the capital city of Japan from Kyoto to Tokyo by the Meiji government. Tokyo was a connection point and a significant industrial and education center. The telegraph enhanced communication from all corners of the country and fastened information transfer. The building of railroad transport saw an improved transport throughout Japan. The first railway in Japan was laid in 1872 between Tokyo and Yokohama. Within a short period, the train was able to carry two million people a year. The trains enabled easy transportation of goods between radical Japanese cities and from production areas of raw materials to the manufacturing factories. The railroad system improved trade and consumer outreach all through Japan. Apart from the Meiji government’s campaign of improved network of transportation in both rail and maritime it also encouraged the incorporation of private sector investment8. The government also established and improved the existing financial institutions for efficient handling of the government revenue. Japan desperately required a strong financial system to handle the revenue and control the national economic system. They resolved to use the foreign personnel to handle their desperate situation and at the same time established financial schools and education institutions. In 1882, the government established the central bank, which was later given the name the Bank of Japan. They also established the Yokohama specie bank as a secondary institution to assist the central bank in trade and foreign exchange. Through the Bank of Japan, the government was able to unify the disorganized currency system of the country of the Eddo period9. In order to enhance the financial sector and commerce in the country, the Meiji government in 1894 established the agricultural and industrial banks to finance the farmers and manufactures. This further developed the financial institution and increased government revenue from taxes and economic control. In addition to the central bank and the agricultural banks, he Meiji government also approved the establishment of several other modern and financial institutions banks amounting to 153 throughout the nation10. The improved infrastructural sector in Japan contributed enormous benefits to the national economy as Japan abandoned the communism economic structure to adopt the capitalism system of the western states. The government opened the Japanese markets to foreign trade with the western countries and allowed the citizens to begin trading. As the private business ownership increased, the economy continued to grow at a greater speed. Nakamura in 1978 stated that 78.1% of the total investment in the financial sector came from the private investment in 1884 while in 1894 finance and maritime sectors of the economy constituted 77.1% of the private investment4. State owned enterprises of the Meiji government Upon realizing the benefits of capitalism in the economy, the Meiji government took a step to increase the government’s revenue, by creating more state owned organizations and enterprise. The enterprises fell on various industrial departments including steel, railroads, textile, shipbuilding, mining, telecommunication and postal services among others. The government realized that the development of these industries required large capital investment and that added to the risks associated with them, private companies shunned away from investing in them due to fear of the risk and incapacity of investing such large sums of capital3. The government therefore made a choice to establish these enterprises under state ownership and supervision, but for the service of the public. Examples of such enterprises included the Miike coalmine, Tomioka silk mill, Nagasaki and Hyogo shipyard, Japan railways, Yahata steel and Takashima coalmine among others3. Under the ministry of industry and the ministry of Domestic affairs, the government managed these enterprises and ensured their smooth and efficient running. This state owned enterprises become a model view for private enterprises that later entered the market for these industries. The Meiji government was the main manager of these industries from their conceptualization. However, government’s management could not go for long; as soon as the industries established, the government sold them to private ownership. The Meiji government sold the state owned enterprises at exceptionally low prices to some of the few trusted private firms with easy payment and low interests. The private companies that bought these government enterprises were either government officials or those closely related to government and called the political merchants3. The transfer of ownership of the state owned companies could be tied to several reasons. For one, the industrialization policy was only to lay a foundation for industrialization and growth of the industrial sector in Japan, that is, it was to be short term while the long-term expansion of the industrial sector must rely on private investment firms and companies. Second, maybe the government was at a brink of financial problems due to the general modernization expenditure, suppressing rebellion cost, the large number of state owned enterprises were not profitable since they were still at infancy of the increase requirement of funds by the government for expansion of the naval force4. After the sale of the state owned enterprises, the Meiji government indirectly begun controlling and managing the industries. It supervised their performance and controlled their growth and investment policies. These companies later grew into famous and largest firms in Japan, and they were key contributors to Japan’s industrialization. Example of the enterprises that the government sold includes the Nagasaki shipyard, Takamisha coalmine and the Mitsubishi Zabatsu. Through the national Bank system, previously established by the government, the Meiji government was able to regulate its industrial growth. The regulation was effected through tariffs, tax policy and subsidies. The Meiji government established indirect economic control and offered technological advice to the now private companies11. The selling of the government enterprises had greater effects in japans economic growth. The selling of the non-military industrial firms to private ownership, the government remained in a better position to handle any economic difficulty like inflation since the government was now able to save its revenue and not use it in business buildup. Second, the government was able to concentrate on military industries buildup that increase government spending. Some companies whose ownership were transferred from government to private and that had weak or few competitors become monopolies in the market called Zaibatsu, for example, Mitsubishi, Mitsui, Yasuda and Sumitomo companies. An alliance between business and government or the subordination of the business by the government interests also become a significant result of privatization12. Acquiring Technology After establishment and privatization of industries, the Meiji government realized the need for technological personnel and skills to help manage the industries. In order to attain a remarkable industrial and economic parity with the west and improve her industrialization the government embarked on the search and acquisition of technology and machinery from foreign countries., To achieve this, the government employed many engineers from United States and Europe to assist the Japanese engineers in building the factories, telecommunication system and the railroad system. This employment of foreigners was a contrast of Edo government who allowed no foreigner in Japan13. The government also imported foreign technologies and machines and offered them to the private firms in a lease structure. The leasing of the industries was notable for the government to remain as the sole supervisor of the development and innovation structure. It also gave the private sector opportunity to compete that resulted to more technological innovations. Spearheaded by the ministry of public works, the government imported personnel, machinery and technology in the departments of architecture, civil engineering, railroad building, mining, telegraphy, textiles, construction industry, metallurgy and general engineering among others. They also sought foreign advice and employed foreign consultants in these sectors to ensure smooth running of industrialization and integration of modernity into the traditional Japan14. The Meiji government took a different turn to foreign technology as compared to the Edo government. Japan sought to imitate the foreign technology as a strategy to match the western economic powers from production to consumption. For example, the Japanese imitated and produced copies of western ships and steam driven engines based on the already written Dutch texts on western technology. However, because they could not match their technologies, they had to employ the personnel form the west to help in building better warships. They also imported the expertise in usage of these imported materials. Nagasaki naval center for training was established as a training center for the first Japanese crew for western battle style with support from five navy personnel form Dutch government15. The Meiji government hired foreigners based on two structures. The first structure of hiring consisted of hiring larger number of foreign employees together with local workers. The foreigners worked as supervisors for each department or sector assigned to them. In doing so, these industries or departments were able to produce and use the exact imitation of the foreign technology. It was necessary for foreigners to come from the same country as the technology or machinery to encourage efficiency. Secondly, an industry would hire a limited number of foreign personnel to act as consultant engineers for planning, designing, or for advance skills in an area of technology16. In order to boost its technological skill, Japan ensured that its citizens received the best technological education as a good strategy to the creation of a labor force that could make use of the new technologies. Apart from the compulsory elementary education for the Japanese citizens, the Meiji government also sent thousands of the students to foreign countries to get the advanced engineering and technological education. The government sent students to America and Europe to gain the western education. The Meiji era study travel sent students to Europe and the United States on study missions and observations. The benefits of overseas experience helped in shaping the attitude towards western systems and technologies and education in particular. Most of the technological education systems leaned towards innovation17. Two valuable lessons are derivable from Japanese state-centered approach to technology and innovation. One is that the Meiji government had no vision of modernization, but realized its importance as soon as they visualized it. They learned by doing as their technicians and engineers would later do since they had the flexibility of ideology. Two, the government did not have to rely on new ideas to adopt the technologies even though they always stressed on innovation. They imitated the western technology and struggled to go beyond the western powers using the western personnel. Most importantly, Japanese achievement in technology and innovation relied on wide spread of technological adoption from companies to craft-workshops almost all over the country18. In addition, it is critical to note that the technological developments and innovations in Japan during the Meiji era had little connection to the adoption of the advanced western technologies. Much of the innovations ware not imported but ware rather incremental for pre-existing techniques. Even though, Japanese imported much of their large company technology from the west, they did no abandon the development of their rural industries and agriculture including cotton production and regional commerce. The rise of the domain monopolies was also significant to the technological increase in Japan. They also developed a lot more intermediate industries and technologies that fitted in their economic structure and upgraded the indigenous technological skills. The intermediate technologies and upgrading of the traditional techniques were not part of the government’s technological policy, but were rational responses by the Japanese to imported technology and new markets19. Privatization of industries During the period of 1910, government had played the main role of industrializing the nation and after 1910; the private sector ensured the continuation of this role (Tang 2007). By the beginning if 1920s the Meiji government’s policies on industrialization focused on the development and improvement of the infrastructural requirements of industries, increasing the production capacity, establishing state owned enterprises, acquisition, and adoption of foreign machinery and technology. However, even after all the government effort; it is necessary to note that the economic development in Japan was private firms driven. The Meiji government adopted full western liberal capitalism structure of economy and the Japanese government stayed out of the regulation of trade and market activities making private business involvement free from government influence20. As a way of jumpstarting the liberalization process of the market, the Meiji government begun by privatizing the state owned enterprises. The privatized enterprises were subject to frame, management and administration systems of the public firms. The main aim of privatizing the state enterprises was to have assurance of resources for government revenue21. However, Japan had more benefits of privatizing the state owned enterprises far more than just assurance of resources. It relieved the government of handling the non-military businesses and therefore the government could concentrate on military buildup. The government was also now able to concentrate on other state matters and at the same time monitor the development of industries for the better improvement of the economy22. The total privatized companies ranged to around 20 companies. The government privatized the companies at cheap prices to few trusted private companies and offered subsidies and low taxation to ensure that the now privately owned, but state managed companies continued to develop. During the privatization concentrated on assisting the small companies that were at their infancy stages. The government also provided property security rights and assurance against nationalization of the industries. To root-build the trust of the private owners, the government provided low wage policy, outlawed labor organizations and provided favorable legal climate for business operations. In addition to these, the Meiji government provided technical education and research, ensured the development of a strong currency and bank system, and destroyed the economic barriers. All these policies managed to transfer funds from the state to the citizens increasing the rate of savings hence facilitated the privatization process23. The privatized firms formed a substantial source of the state revenue. They also formed the problem of employment and brought about Good Corporation of public-private sectors. Through now the private firms, the government could be able to monitor the market conditions, control production and marketing of the produce. The government also imported foreign labor to assist in consultation and decision making to help the Japanese market reach par with the western markets. The privatization of state owned companies was also a significant source of innovation since it gave rise to competition in the market and the companies had to outdo one another in the competition to dominate or survive in the market24. Masahiro stated that the economy of Japan before the era of 1930s was similar to the economy of Anglo-Saxon, which was market economy. The supply and demand of products regulated the economy of Japan without government intervention. The privatization of state owned firms gave economic ownership to the individuals while the government only indirectly monitored the process. The rise in competition gave rise to business innovations and adoption of efficient technologies. Private business ownership also encouraged sufficient and efficient use of the available resources and led to the increased development of the indigenous industries25. The government had to review the labor management conditions to ensure a significantly leveled ground for players in the private market. The post-war labor conditions had poor and biased labor practices as seniority-based wage allocation, lifetime employment, biased promotion, enterprise unions and friendly labor management. During the period of 1919 to 1938, the labor conditions were exceedingly hostile, and a number of labor disputes occurred as the labor unions in the whole country organized workers in different firms into hostile demands. The rise in labor disputes in the 1920s could be a result of the poor wartime employment policies of lifetime employment and seniority in wages and promotion26. Between 1874 and 1896, the Meiji government privatized several state owned companies in almost all sectors of the economy and the ones that it had previously established to support the economic growth. The privatized companies included the railroad privatization, sale of 12 mines, privatization of the Nagasaki shipyard and other shipyards and sale of four silk and cotton mills. When industries were privatized, the labor practices were quite strange, industries were financed by the organizations themselves and the government interference in industries had declined and were almost zeroed out. By 1920s, most firms in Japan financed themselves by means of equity market and the individual stockholders of the firms influenced the corporate governance compared to the 1930 firms whose finance was from bank loans. This was important because to control the private firms the post war government had to use the bank-loan financing for the private firms. Since the government was in indirect management of the privatized firms, the use of the banks was the simplest way to influence the management of these firms. The government maintained tight control of the banks in Japan and hence maintained its indirect management of the private firms that heavily depended on bank loans at that time as their source of finance27. Prior to 1930s, there was no organization in Japan performed the functions of postwar industrial association. However, this did not compromise the guilds and cartels in Japan during that period. The guilds and cartels existed but were government independent, and they performed their functions independently. Their functions included price fixing, quantity restrictions, outsider exclusion, lobbying and standard setting among others that was the similar case of the western economies28. The government did not give the cartels status of quasi-government agency, and they did not any way assist government in policy drafting or enforcing. Business organizations prior to 1930s were free of government control and that formed the main difference between them and post war industrial association an institution whose origin leans to postwar in the 1930s. That is, Japan’s 1920s economic system resembled the Anglo-Saxon based economy. The Meiji government relaxed its industrialization roles as liberal economic policies penetrated the Japan market. Policies like privatization marginalized governments contribution to economic control and the private sector become the foremost actor of industrialization and economic growth. To add on that the absence of bank-loan-based financing for firms and postwar industrial associations prior to 1930s shows marginalization of government on control of private sector that time29. Conclusion When Meiji government came into power they decided to take steps to modernize the nation. The various steps taken by the government includes the development of industrial infrastructure such as railroads, creation of government owned and controlled enterprises such as shipbuilding enterprises, support and facilitation acquisition of modern machinery and engineers from European nations and US and for this purpose they developed the Bank of Japan which was even controlled by the government. Lastly the government privatized the institutions which accelerated the speed at which industrialization took place in Japan (Sims 212). The industrialization in Japan sprung out from the beginning of the Meiji government era. Prior to the Meiji government, Japan was an enclosed country, out of bound for foreigners and the communist country whose wealth production and consumption was traditional and within the country. The Japanese believed in the traditional social cohesion, and no individual was allowed to travel outside Japan or use any foreign material in Japan soil. Even though, they were first resistant to foreign association, the Meiji governments welcome to the foreign was driven by the challenge in 1854 when Captain Perry from America forced a trade treaty with them30. The force of the treaty was a proof to the Japanese that they had a weak military base and was a kind of intimidation to the Meiji government. They therefore transformed the challenge into an opportunity for modernization and industrialization to reach the level of their western counterparts. They began their modernization by strongly built military. This was followed by a must elementary education and service to the nation before employment. Most Japanese students went abroad for study and observation tours to help in the adoption of the foreign economic system31. Works cited Nafziger, Estel W. 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"Rich nation, strong Army": national security and the technological transformation of Japan. Ithaca: Cornell University Press, 1996. Sasada, H. The evolution of the Japanese developmental state: institutions, interests, and ideas. London: Routledge, 2012. Sims, R. L. Japanese political history since the Meiji renovation, 1868-2000. New York: Palgrave, 2001. Morris-Suzuki, Tessa. The Technological Transformation of Japan: From the Seventeenth to the Twenty-First Century. Cambridge, Cambridge Univ. Press, 1996. Morris-Suzuki, Tessa. Re-inventing Japan: Nation, Culture, Identity. Armonk, N.Y: M.E. Sharpe, 1997. Tang, J. The role of financial conglomerates in industry formation evidence from early modern Japan. Washington, D.C.: Center for Economic Studies, U.S. Dept. of Commerce, Bureau of the Census, 2007. Nakamura, Kenta, and Hiroyuki Odagiri. "Rd Boundaries of the Firm: an Estimation of the Double-Hurdle Model on Commissioned Rd, Joint Rd, and Licensing in Japan." Economics of Innovation and New Technology. 14.7 (2005) Ramamurti, Ravi, and Raymond Vernon. Privatization and Control of State-Owned Enterprises. Washington, D.C: World Bank, 1991. Read More