The industrial development in Japan after World War II - Essay Example

Running Head: The Economy of Japan The Industrial Development in Japan after World War II of Abstract Japan is said to be the principal trading and technologically manufacturing country of the world. Prior to the world war II Japan was the center of an empire that at times included Taiwan, Korea, Manchuria, much of eastern China, southern Sakhalin Island, and the Marshall and Mariana islands of the southwest Pacific Ocean. Today, following concessions of territory at the end of the war, Japan has been greatly reduced in size but much developed economically as compared to prewar Japan. This paper intends to analyze the economy with a particular focus on industrial sector of Japan after World War II, causes and consequences of this speedy development. The Economic Development in Japan after World War II The Economy of Japan: Background After the Meiji Restoration of 1868, the new government launched a determined drive to establish a modern industrial economy anchored in Western science and technology. Modern systems of education and banking were created. The government financed and operated new manufacturing, mining, and transportation ventures, and as they became commercially viable it sold them to private interests. Continued government support led to the development after the 1890s of large-scale, family-based enterprises (zaibatsu) in banking, transportation, and heavy industries related to armament production. Vigorous private initiative prompted consumer industries such as textiles. During the 1920s and 1930s, Japan's industries grew steadily in variety and technical maturity. Manufactured goods such as cement, steel, bicycles, simple industrial machinery, chemical fertilizers, and processed foods gained in importance. Electric power generation also increased sharply during this period. Notwithstanding these developments, the Japanese economy on the eve of World War II was still backward in many respects. Sophisticated machinery, chemicals, and refined metals had to be imported. Less than one fifth of the labor force was employed in manufacturing, while agriculture still claimed nearly half. (Reischauer and Jansen, 1995) Impacts of World War At the end of World War II, Japan lay in ruins. Two million of its people had died in the war, a third of them civilians. Air raids had devastated its cities, and at least 13 million Japanese were homeless. Industry was at a standstill, and even farm output had declined. Many Japanese wore rags and were half-starved. All were mentally and physically exhausted. For the first time in its history, Japan was a conquered nation occupied by a foreign power. Nowadays, we can see a novel Japan excruciating with energy and ambitions. Its economy is counted among the top most economies of the world. The population has become affluent and the country's main islands are connected together with a network of tunnels and bridges bullet trains keep on running at a speed of around 195 kilometers per hour. Prosperity created new challenges, however. The price for Japan's success included explosive urban growth and overcrowding, water and air pollution, and damage to many of the nation's scenic treasures. Hills were hacked down for factory sites or home-sites, while mountains were defaced by highways to accommodate city tourists. For a time, Mount Fuji, Japan's highest mountain peak almost disappeared from sight because of smog created by factories and cars. Today, that smog is gone, thanks to some of the world's most rigorous standards for auto emissions and industrial air pollution. In other areas, Japan still struggles to balance development with environmental protection. It was once predicted that Japan would become the world's largest economy by 2000, but the picture has changed dramatically. Japan's real-estate and stock markets collapsed in 1989-92, beginning the longest recession since World War II. The economy remains weak despite tax cuts and massive government spending. Yet export-oriented Japan still runs a huge trade surplus, sparking charges that some of its success has come at the expense of its trading partners and convincing many Japanese that increased international cooperation is Japan's main hope for future growth. Japan was taking a much more active role in world affairs especially in Asia, where it remained a dominant force. (Suzuki, 1989) Factors in Postwar Development The rapid pace of Japan's postwar development can best be explained by noting the stage of development that the economy had reached. An industrializing economy under primarily private control and on its way to industrial maturity has a certain built-in momentum that is hard to contain. The population has not lost the hard-work ethic and the thrift-mindedness of traditional society. The absence of well-developed social welfare systems keeps people's savings rates high, generating a large supply of funds that can be used to finance investment in new plant, equipment, and technology. Such investment improves labor productivity and reduces production costs, raising people's earnings and increasing their demand for products. Serious supply bottlenecks do not develop as long as a reservoir of untapped labor exists in rural areas. In addition, a set of fortuitous circumstances greatly aided Japan's postwar development. The Korean War injected very badly needed foreign exchange amounting to $4 billion between 1952 and 1956 into the Japanese economy at a critical point in its development. The U.S.-Japanese security arrangement gave Japan the benefit of external security without having to share much of its cost. The largest market for Japanese exports, the United States, was essentially free and open, enabling Japan to earn huge sums of foreign exchange. Advanced technology was readily available and at low costs from the United States and other industrially advanced countries. Raw materials, too, were available in abundance and, except for oil after the energy crises, at increasingly favorable terms. While all these factors provided Japan with a favorable environment for rapid economic growth in the postwar period, they could not have produced the spectacular development that occurred without the single-minded determination of the Japanese people to work hard and improve their standard of living. (Chikara and Lauter, 1990) Consequence of Economic Growth Although most segments of Japan's working population benefited from the prosperity, some gained more than others. The most troubling inequity arises from changes in the value of land. Steady and sharp rises in land prices in urban areas produced a number of billionaires among the privileged few who owned land, while the many millions who did not were victimized by steep rises in housing costs. The concentration of economic activities in major urban areas, particularly in Tokyo, was the primary cause not only of astronomically high land prices and housing costs but also of traffic congestion, long and tiring commutes, depopulation of rural areas, and environmental pollution. Owing to a combination of restrictive practices in both the public and private sectors, rapid rises in the value of the yen often failed to lower prices for Japanese consumers. For example, because of price supports paid to rice producers and restrictions on rice imports, rice cost five to six times the international market price. Also, electronic products produced in Japan were almost always higher in price within the country than when bought abroad. These anomalies could not exist under genuinely competitive market conditions, and the competitiveness of Japanese products in the global marketplace was made possible through heavy sacrifices by Japanese workers and consumers. Japan's successful export drive resulted in serious friction with its trading partners. Export surpluses arose partly because Japanese goods were sold abroad on their strengths in price and quality alone, whereas foreign goods faced strong resistance in Japan because of traditional values and customs. Export surpluses led to excess liquidity (money) and high yen values, which combined to help push Japanese investments abroad. When such investments are concentrated in time and within a particular country, they themselves can lead to friction. (Chikara and Lauter, 1990) Leading Industries The characteristics and trends of representative sectors of manufacturing must be viewed against the background of the changing economic conditions in and around Japan. As family incomes in Japan rise, demand for sophisticated and deluxe products rises faster than demand for simpler and more basic types of goods. For example, demand for electronic equipment rises faster than that for textiles and clothing, and within the latter category, demand for fashionable clothing rises faster than that for basic cotton goods. On the supply side, one must consider the changing cost conditions. Rising wages and higher energy and resource costs make labor-intensive and material-intensive goods increasingly more expensive to produce in Japan, while capital-intensive and technology-intensive products become relatively more advantageous to Japan. For technologically unsophisticated goods, the rising value of the yen makes domestic products less competitive relative to imports from the newly industrializing economies of other countries. (Chikara and Lauter, 1990) Industrial Zones Japan's three major industrial zones are called Keihin, Hanshin, and Chukyo. Together they account for a little over half of the nation's total industrial output. Keihin This region encompasses parts of the four prefectures (Tokyo, Kanagawa, Chiba, and Saitama) surrounding Tokyo Bay. The area is responsible for over a quarter of Japan's industrial output. Two fifths of this region's output is classified as machinery. Other major product categories are chemicals, metals, and foodstuffs. Huge chemical plants are located along the coast of Tokyo Bay. Large plants assembling motor vehicles, electrical and electronic products, and machine tools are located in the southwestern corner of this region, supported by many smaller manufacturers of component parts in the southern part of Tokyo. In the southeastern corner of Tokyo is a concentration of sundry-goods producers specializing in a large variety of consumer and fashion-related items. Hanshin Responsible for nearly 15% of the total industrial output of the country, this region covers the three prefectures of Osaka, Hyogo, and Wakayama surrounding Osaka Bay. The region's major product categories are metals, chemicals, textiles, and consumer electronics. The relative absence of motor-vehicle production in this area is conspicuous in contrast with the Keihin and Chukyo regions. Along the Osaka Bay coast near Sakai is a complex of more than 100 large-scale plants producing petrochemicals, steel, ships, and electric power. Chukyo Only slightly smaller in output than the Hanshin region, this area encompasses three prefectures (Aichi, Gifu, and Mie) of central Japan, centering on the city of Nagoya. Machinery accounts for nearly half of the region's output, with motor vehicles and related products occupying a central position in that category. This area is also known for its textiles and ceramics. Other Areas The other principal industrial areas of Japan are Setouchi (along the Inland Sea), Tokai (Shizuoka prefecture on the southern coast of Honshu), Hokuriku (a four-prefecture strip on the Sea of Japan coast), and Kita Kyushu (the northern part of Kyushu). These four regions together comprise about one fifth of the country's total industrial output. (Dempster and Wass, 2003) Labor and Management About 30% of the workers in Japan are unionized. Unions are found primarily in the public sector and in large-scale private enterprises. A great majority of the unions are organized at the level of the enterprise or of its subordinate units, rather than at the level of an entire industry. Although most of these unions are affiliated with national federations of unions, the locus of union activities is at the company or plant level. Typically, union membership is automatic for all the regular employees of an enterprise, both blue- and white-collar workers, with the exception of managerial employees with the rank of section chief or above. Collective bargaining takes place between the enterprise or unit union and the management, within the overall framework of annual increases in the base pay agreed to in the annual shunto, or spring wage offensive, conducted at the national level by union federations. Great variations may exist among the unions with regard to final settlements. The enterprise unions actively participate in management through labor-management consulting committees. Normally, there exists little of the adversarial relationship found between labor and management in some other industrialized nations. (Chikara and Lauter, 1990) Challenges As an industrial giant, Japan faces many challenges. With few natural resources, it must depend on the outside world for the fuel and raw materials that its industries use. The shakiness of Japan's reliance on others was brought home in 1973, when the price of oil rocketed. Japan responded to the "oil shock" by developing alternative sources of energy, chiefly nuclear power. Japan also began moving away from "smokestack industries" that rely heavily on imported raw materials and fuel. Steel and shipbuilding, for example, are in decline. High-technology industries such as computers, microelectronics, and fiber optics, which have low material and energy costs, are on the rise. While Japan's dependence on foreign imports of raw materials and fuel has lessened, it is still huge. To pay for them, Japan exports manufactured products all over the world. It spends far less on other nations' goods than it earns from its exports a source of friction between Japan and many of its trading partners, who feel that this imbalance hurts their own industries. By 1998, faced with a prolonged recession and mounting regional economic woes, Japan was attempting to restructure its economy and increase consumer spending in the hopes of avoiding a world economic crisis. Another Western complaint is that Japanese taxes make it difficult for Western companies to sell their products in Japan. Actually, Japanese import tariffs are on a par with those of most industrial nations. Some Japanese suggest that Western companies would do better in Japan if their representatives spoke Japanese. Others sympathize with outsiders who find it hard to understand the way Japanese companies do business. Japanese companies tend to buy products and services mainly from companies with which they have had a long association. In such associations, personal friendship and trust are important, and such ties cannot be established quickly. (Aggarwal and Urata, 2002) Conclusion Japan's spectacular industrial growth can be attributed to a number of factors. For one thing, the country already possessed a skilled and educated workforce with long experience in industry. For another, the destruction of out-of-date factories during the war actually benefited Japan afterward. Japan's destroyed factories were replaced by brand-new ones that were often superior to their aging counterparts in the United States and Europe. Moreover, the task of security of Japan was taken up d by the United States, which lessened the load on Japan's economy for maintaining enormous military. The fragment of the zaibatsu Goliath, domestic-possessed trade unites positive struggle along with development. After the war trading barriers were reduced by the United States for trade between different countries and there was a positive development evident in international trade. Further opportunities rose as a result of free trade and Japan began to expand its exports. Some specific distinctiveness traits of its society have also contributed to this postwar accomplishment of Japan, predominantly the policy of lifetime service, which led to a faithful and well motivated workforce and ultimate quality products. During the 1990s and early 2000s, however, traditional employment patterns in Japan began to break down. Financial scandals, layoffs, and bankruptcies at big-name firms made employment in small and foreign firms more attractive. The number of university graduates joining small companies nearly doubled between 1991 and 1996, and the idea of switching jobs in mid-career became more acceptable. The prestige attached to jobs in the government bureaucracy declined along with the economy. References Aggarwal, V. K. & Urata, S. (2002) Winning in Asia, Japanese Style: Market and Nonmarket Strategies for Success, Palgrave Macmillan. Chikara, H., and Lauter, G. P. (1990) The Internationalization of the Japanese Economy, 2nd ed. Springer Dempster, P. & Wass, K. J. (2003) Japan Advances: A Geographical Study, Methuen. Reischauer, E. O. and Jansen, M. B. (1995) The Japanese today: change and continuity, Harvard University Press Suzuki, Y. (1989) Japan's Economic Performance and International Role, Columbia University Press 1989 Read More