Japanese Economic Development

Theory and practice

Penny Francks

• Publisher: Routledge
• Year: 2015
• eBook ISBN: 9781317811398
• Edition: 3
• Topic: Economics
• Subtopic: Development Economics
• Index: Economics

This fully revised and updated third edition of Japanese Economic Development looks at Japan's economic history from the nineteenth century through to World War II, recasting analysis of Japan's economic past in the light fresh theoretical perspectives in the study of economic history and development.

Francks draws out the historical roots of the institutions and practices on which Japan's post-war economic miracle was based and provides a comparative framework within which the Japanese case can be understood and related to development in the rest of the world.

New features for this edition include:

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• textboxes summarising key concepts

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• expanded coverage of the early-modern economy, the 'traditional sector', and the international context of Japanese growth

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• an increased number of case studies

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• fully up-dated references, glossary and bibliography.

Taking a thematic approach, this textbook demonstrates how studying the first example of Asian industrialisation can provide the basis for an alternative, non-western narrative of development. As it such is an important resource for undergraduate and postgraduate courses on the Japanese economy, as well as comparative economic development and economic history more generally.

Map 1 Japan, including major cities

Map 2 North East Asia at the time of the Japanese empire

1 General introduction

DOI: 10.4324/9781315816692-1

Why are some nations rich and others poor? Why is it that, if you were born in Japan or the UK, your chance of leading a comfortable, long and fulfilled life in a society with some power to influence events in the world has been so much higher than it would have been had you been born in Haiti or Sierra Leone? The question of the determinants of the ‘wealth of nations’ has of course vexed thinkers at least since Adam Smith. However, in the decades after the Second World War the salience of the issue of development and underdevelopment for the world’s political economy had become such that a whole new body of theory and practice, aimed at understanding and, if possible, alleviating the consequences of ‘unequal development’, had come into being. It was in this context that the original edition of this book was written in an attempt to use the tools of development economics to understand better how Japan had become an advanced industrial society and what implications that understanding had for the rest of the developing world.

Since then, the issues with which students and practitioners of economic development need to deal have become less straightforward and Japan’s relevance to them has shifted in various ways. As the Third World has diversified to include once unthought-of examples of rapid industrialisation, it is no longer possible to deal simply in terms of a dichotomy between developed and underdeveloped, with a clearly defined path between them. Japan’s position as the first country outside Europe and North America to achieve industrialisation – a process begun well before the Second World War but completed with the ‘economic miracle’ of the post-war decades – of course remains. However, in Japan’s wake, others have followed a variety of routes towards industrial status, and Japanese development has had to be reinterpreted as not so much a model of ‘catching up’ with the West as a pioneering demonstration of a new path towards a different form of industrial economy.

Meanwhile, economic historians, though sometimes using their knowledge to create models of industrialisation as it had occurred at particular times and in particular places, were rarely explicitly concerned with the counter-factual question of why development did not happen elsewhere. In recent years, however, this has begun to change with the rise of global and comparative history and the growing interest in the question of the nature of the industrial revolution and the factors determining why it occurred where and when it did. The wider relevance of this was picked up by Kenneth Pomeranz in his seminal book The Great Divergence (Pomeranz 2000), which specifically asked and attempted to answer the question of why the industrial revolution took place in Britain and not China (or elsewhere in Asia). There followed a flowering of research into ‘divergences’, which has revealed both the existence of widespread pre-industrial growth outside Europe and the contingent nature of the economic conditions that gave rise to the particular pattern of manufacturing growth that has come to be labelled ‘the industrial revolution’.

In this new context, the Japanese case represents, in many ways, the cross-over point between the approaches of development theorists and those of economic historians. In development studies, what had once been seen as the ‘Japanese model’ of ‘catch-up’ industrialisation increasingly came to be treated as the basis for Japan’s lead role in the wider success story of late twentieth-century East Asia. For economic historians, more and more evidence pointed to a long stage of pre-industrial development not unlike China’s (if not reaching quite the same level) that nonetheless enabled Japan, unlike China, to make the leap into modern industrialisation in the nineteenth century, and thereafter to follow a distinctive path, as regards technology and industrial institutions, that broke the Great Divergence rules. The ‘unique’ Japanese institutions and practices that this process seemed to involve had become by the 1980s not only ‘flavour-of-the-month’ in advanced-country management theory, but also prototypes of the business networks and employment forms within which the skilled and intensive labour of East Asians had created the new ‘workshop of the world’. The ‘Japanese model’ had metamorphosed into what economic historians were to label the ‘labour-intensive path’, now held to explain the eventual diffusion of industrialisation through much of the region and beyond.¹

This large-scale transformation of the theoretical and practical context within which Japan’s historical experience of development needs to be viewed has necessarily shifted the emphasis among the questions and issues to which it might be relevant. For the dominant schools of thought within development studies over much of the post-war period, the key factor conditioning the experience of the developing world was the prior existence of already-developed countries. At the extreme, it was argued that the forces generated by the developed capitalist ‘centre’ of the world economy made long-term successful economic development in the Third World ‘periphery’ all but impossible. But more broadly, across the spectrum of development studies, the choice of issues and theoretical stance tended to be predicated on the assumption that the major problems and potentials facing developing countries arose from their relationships with the industrialised economies. It was this that made essential state intervention to regulate dealings with the outside world and to protect and plan for the growth of infant industries in the face of developed-country competition; it was the structure of the world economy, shaped by advanced countries’ reliance on the products and markets of their former colonies, that determined the cultivation patterns and institutional organisation of Third World agriculture, and it was in the advanced industrial sectors of the developed world that there lay the technical and organisational keys which could unlock the productivity of Third World labour.

As a result, the body of development theory, as it had emerged by the mid-1970s, seemed to have little relevance to study of the economic history of those countries that had industrialised before the nations of the world could clearly be divided into the developed and the underdeveloped. Of the then industrialised countries, two, though, could be picked out as having begun and successfully pursued a process of economic development in a world already so divided. One of these was the Soviet Union, which, despite its untypical size and resource base and the European roots of much of its culture and political organisation, served as perhaps the single most important development model for much of the Third World after the Second World War; the other was Japan.

Nonetheless, it required the Japanese economic miracle of the late 1950s and 1960s to alert mainstream scholars and students of development to the significance of Japan’s economic past. By that time, the tools of non-Marxist analysis of development had been substantially refined and it was these that were utilised to construct the ‘Japanese model’ of economic development. This depended heavily on ‘dual economy’ theories of industrialisation, derived from what was seen as European experience, which portrayed development as essentially a process of inter-sectoral (agriculture–industry) movement of labour and capital. Japan was a key example used by Fei and Ranis (1964), for example, in the construction of their famous two-sector model, and studies of inter-sectoral movements of labour and capital, and of the means whereby ‘surplus labour’ was utilised, dominated the work of those who began, in the 1960s, to apply ‘modern’ methods of economic analysis to Japan’s past.² The relevance of development theory to Japan, and of Japan to development theory, was widely accepted in these kinds of study and in work on Japan’s ‘modernisation’ more broadly.

From an academic development studies point of view, therefore, Japan represented a relevant example of a developing country as it had come to be defined, that is as an economy changing within a world in which industrialised countries already existed, with all that that implied as to the functions of the state, the potential of imported industrial technology, the role of agricultural resources and so on. Outside the academic world, too, and especially with its emergence in the 1960s as a major economic power, Japan began to appear as a potent and significant model to the governments and peoples of a number of developing nations.³ Here Japan’s appeal lay less in the timing and economic nature of its development process and more in its characteristics as an Asian nation. It was the first country to break the Western monopoly on successful long-term industrialisation, the first rice-cultivating society to become industrialised and of course a nation with Chinese-based cultural, philosophical and social traditions which apparently bore much closer resemblance to those prevailing elsewhere in Asia than did those of Europe. The specifically ‘Japanese’ characteristics of Japan’s industrialisation thus began to receive much more attention as offering perhaps a different model of development in areas such as industrial organisation and the functions of the state, and one more appropriate than that based on Western theory and practice.

Since those times, however, the world has changed. In development studies, the confident belief in development planning and modelling has been undermined, at first by the doubts raised by structuralist, neo-Marxist and dependency-school theorists as to the possibility of real development within the present structures of the world economy, and then by disillusion with the powers of the state to intervene to promote development and the consequent revival of ‘neo-classical’ and ‘neo-liberal’ approaches. Meanwhile, the increasingly divergent experiences of individual developing countries, highlighted by the success of the ‘miracle’ economies of post-war East Asia, cast doubt on the validity of many general development models. Furthermore, as Japan emerged as an economic superpower with its political and economic feet firmly planted in the camp of the Western industrialised world, its role in the Third World became less that of model and more that of aid donor, foreign investor and progenitor of multinational companies, resembling much more closely that accorded to the developed countries of the West.

However, although the new examples of miracle growth in East Asia may have achieved industrialisation more rapidly than did Japan, there seemed no doubt that their development processes were influenced by and related to Japan’s earlier experience and resembled it in important respects. It is in this context that the rise of global and comparative history has come to re-emphasise the significance of Japan’s historical development within the long-term pattern of industrialisation in the world. Japan may no longer be a model, but it clearly represents the exception that breaks the Great Divergence rule – hence revealing much about what that rule might be – and a key link between the industrialisation of the West and that of East Asia. As research has followed this line of thought – discovering the pre-industrial basis for Japanese development, investigating the distinctive forms of technology and institution that underlay industrial growth and in general revealing how Japan’s path resembled or differed from that followed in the industrialising West – the historical conditioning of diverse paths to industrialisation has become unmistakeable.

Nothing in all this has undermined the basic assumption of the previous editions of this book that Japan’s experience is as susceptible to economic analysis as any other country’s. In this new edition, the original theory- and topic-based structure has therefore been retained while Part 1 still offers a broadly chronological, macro-level account for those unfamiliar with the outlines of Japanese history. However, chapters and their contents have been reorganised to include much new material that reflects both the direction of research in Japanese economic history and its shifting frame of reference within the study of global and comparative development. The pre-industrial origins that laid the basis for subsequent growth receive much more attention, and the shift away from a focus on the ‘modern’ sector towards a recognition of the significant role and distinctive nature of other parts of the economy – already beginning to be apparent in the second edition – enables the book to reflect the growing acceptance of the idea that Japan pioneered an alternative, ‘labour-intensive’ path to industrialisation. Meanwhile, the text also now incorporates material from the rapidly growing literature on the part played by Japan’s pre-war empire in determining the policies and institutions that shaped the pattern of economic growth, and in general on the wider regional and global context within which Japan’s part in the diffusion of industrialisation to other parts of East Asia can be seen to have had its origins.

Nonetheless, the present edition retains the approach, based on the intersections between development theory and Japanese historical experience, utilised in its predecessors. Each of its three parts begins with an introduction to the theoretical and practical issues that have concerned development economists in its particular area before going on to look at the relevant Japanese evidence. Part 1 considers the interrelated issues of development strategy – particularly as regards economic relations with the outside world – and the role of the state in planning and directing development. For long it has been assumed and argued that Japan’s modernising, post-1868 governments played the central role in initiating industrialisation and supplying the conditions for economic growth. However, although much has been written about the role of the state in Japan’s development, much has also come to light to cast doubt on the degree of planning and the efficacy of the state’s actions in the Japanese case. Part 2 looks at the rural economy during the industrialisation process in the light of, on the one hand, the significance of long-term agricultural change and rural industrialisation for an understanding of the nature of Japan’s development and, on the other, the importance now given by development economists to rural development and to the analysis of ‘peasant’ farming. Finally, in Part 3 various aspects of the process of importing and adapting technology and industrial organisation are examined, and the emergence and developmental significance of a number of ‘peculiarly Japanese’ institutional phenomena are analysed.

Throughout, much of the focus is on the microeconomic level, and the reader will find that the broader description and analysis of Japanese development is interspersed with more detailed case-study material designed to illustrate the range and variety of experience among the institutions, social groups and individuals who constituted the actors in the play of economic forces. Hence, by means of the case-study material presented in the chapter annexes and the examples described in the text, it is possible to follow the story of Japan’s development at the level of individual industries – both those dominated by large-scale, ‘modern’ producers and those in which small-scale, ‘traditional’ businesses persisted and developed – within the broader context of growth and industrialisation. This, combined with new material on the consumption and material lives of the ordina...

Table of contents

• Cover
• Half Title Page
• Series Page
• Title Page
• Copyright Page
• Table of Contents
• List of boxes and tables
• Series editors’ foreword
• Preface
• Map 1: Japan, including major cities
• Map 2: North East Asia at the time of the Japanese empire
• 1 General introduction
• PART I Japan’s development path and the state
• PART II The rural economy in the development process
• PART III Industrialisation
• Guide to technical terms
• References
• Index