The Internationalization of Japan

Glenn D. Hook, Michael Weiner, Glenn D. Hook, Michael Weiner

• Publisher: Routledge
• Year: 2013
• ISBN:
  9781135035372
• Edition: 1
• Topic: Economia
• Subtopic: Teoria economica

The Internationalization of Japan provides the English-speaking reader with the opportunity to hear what some of Japan's leading social scientists and other commentators have to say about the internationalization of their country as well as their country's impact overseas.
The topic is of extreme importance now as the international community demands a greater Japanese contribution to international society as well as changes in Japan to facilitate foreign access. The book discusses the internationalization of politics, economy and society. Topics of special interest include the internationalization of Japanese capital, the response of Japanese society to foreign workers, local level initiatives for internationalization and the internationalization of education.
To place the internationalization of Japan in comparative perspective there are chapters on Britain and the United States from a leading British and a leading American political scientist respectively. These two and the editors aside, all the contributors are highly regarded Japanese scholars or commentators.

Part I

Comparison: Britain and the United States

Chapter 1

Internationalization and the national economy

The British case

Andrew Gamble

HEGEMONY AND INTERNATIONALIZATION

The capitalist world system that has emerged since the sixteenth century has been responsible for an unprecedented rise in output and productivity, as well as a progressive increase in the interdependence of all regions and nations. This process is reflected in repeated pressures towards the widening and deepening of the global division of labour, and the increasing complexity of the networks of production, trade and finance.

This world system, however, is a political system as well as an economic system. Its most important political agents are the nation states. The differing capacities of these states and the competition between them are a major source of the dynamism and unpredictability of the system. As Immanuel Wallerstein describes it: ‘Its life is made up of conflicting forces which hold it together by tension, and tear it apart as each group seeks eternally to remould it to its advantage’.¹

As a world economy, the world system displays a trend towards ever greater cohesion and interdependence. As a world polity, it remains highly fragmented. The world system has never been transformed into a political empire. Its unity has been economic rather than political. The technological dynamism of this world system has ensured that no state has been able to stand outside indefinitely. Every state has tried to influence the terms of its participation by competing with other states for territory, resources and population. States seek to maintain whatever comparative advantages their national economies enjoy, and where they cannot, they seek to protect their citizens from the consequences.

Competition between states in the world system has aided its expansion and led to a highly unequal distribution of resources and income within it. The hierarchy of states has not remained constant, however. States have risen and fallen. Those states that achieve dominance in one period frequently lose it in the next as rivals emerge to challenge them.

The integration and complexity of the world system has increased, in particular as a result of industrialization. But nation states remain the seat of decision-making and the focus of legitimacy. International institutions have been slow to develop, and have never kept pace with economic integration. This lack of balance has frequently been a source of instability. The need for political institutions to create and maintain the conditions for international economic order has come to be widely recognized. The world market, no less than a national market, requires a central public authority. The establishment of international rules, institutions and norms of behaviour have slowly evolved. Progress has been swiftest when one of the leading states in the world system has become so dominant that it has been able to exercise ‘hegemony’ over the other leading states, without ever being in a position to absorb them politically.

Hegemony arises when one state achieves clear economic supremacy over all others. No second power or combination of powers is able to challenge its economic supremacy effectively. This supremacy is manifested in production (technological lead), in commerce (share of world trade) and in finance (international credit). The leading power enjoys supremacy in all three areas and it attempts to consolidate this transient advantage by political, military and ideological means. As the hegemonic power, a state is able not merely to secure its own interests more effectively, but also comes to assume state functions for the whole world system, acting as though it were the central public authority for the world economy.

Yet hegemony is immensely fragile. The position of the hegemonic state is quickly undermined, in part because of the possession of hegemony itself. The economic supremacy of one state, and the stable conditions in the world market which this ensures, spurs the development of rivals from among the other leading states, or stimulates the emergence of new states from the periphery. These challengers may try to create protected spheres of interest and dare the hegemonic power to use military force to prevent them.

A second problem is the effect which the possession of hegemony has upon the hegemonic power. There are some major costs to be borne. The source of these extra burdens is the difficulty of simultaneously maintaining a world role and preserving relative economic efficiency. The hegemonic power typically experiences a significant diversion of the energies of its citizens into non-productive activities; the pressure for internal redistribution results in wage levels considerably above its competitors; consumption receives a higher priority than investment; and a high value for the national currency is sought in order to minimize the cost of funding the military and diplomatic commitments inherent in world role and foreign investment. What are neglected are the supply side conditions for achieving rapid economic growth.

This theme has been recently explored by Paul Kennedy.² He argues that states which have become ‘great powers’ exhibit similar patterns in their development. There is a trade-off between military security and economic security. Great powers repeatedly fail to maintain a balance between the two and are eventually eclipsed by rising powers which are more single-minded in the pursuit of economic success.

Kennedy argues that in the long run political and military power depend on economic strength. The dilemma for the governments of great powers is that they must simultaneously provide three things: arms spending to maintain military security; goods and services to satisfy the needs and demands of their citizens; and a policy framework which promotes the investment necessary to ensure sustained growth. If growth is not rapid enough, the government cannot pay for the levels of military and personal consumption that are politically necessary, and even more seriously, it risks a relative decline which will undermine both military and economic security in the future.

As a result, periods of hegemony in the world system tend to be shortlived. More common are periods of conflict, in which a former hegemonic power may be declining or a new hegemonic power rising, or in which there is no clear pattern at all. The absence of a hegemonic power does not mean, however, that there is any less need for the political functions that such a hegemonic power typically undertakes.

One of the problems in using the concept of hegemony in the world system is that the theory has been constructed on very few historical cases. Only three periods of hegemony are normally identified: Holland, 1620–72; Britain, 1815–73; and the United States, 1945–73. These three periods of hegemony occurred at very different stages in the development of the world system. The contrasts between them are likely to be as instructive as the similarities. Yet even though the occurrence of hegemony is rare, the study of these periods can give insights into the way the world system has evolved and how it might evolve in the future.

Britain is the classic example of a state which first achieved and then lost its position of hegemony.³ The interaction between the domestic and global aspects of internationalization is particularly evident. Britain was the first country to accept fully the logic of internationalization both for its foreign economic policy and for internal social organization. In the period of its decline, Britain sought to use its powers to resist that logic and defend its privileged position. In the transition since the 1960s to the post-imperial phase of its development, the British state has begun to accept that logic once more and increasingly seeks to modernize within its constraints.

BRITAIN AS A HEGEMONIC POWER

Britain emerged as the hegemonic power in the world system after 1815. It had established a clear dominance over all its rivals in finance, commerce and industry. London was now the undisputed centre of the world’s financial and commercial system, and this supremacy was further enhanced during the period of British hegemony. By 1870 the London capital market was twice as large as all the capital markets of its rivals combined. Sterling was established as the leading international currency and this brought further prosperity to the flourishing financial and commercial sector.

The view that Britain first enjoyed an export surplus on its manufacturing trade in the first half of the nineteenth century which it then used to finance foreign investments and develop a powerful financial sector has been discredited.⁴ British commercial supremacy did not depend on a surplus of manufacturing exports. The invisible service exports provided the surplus from the outset. Despite the advent of modern industry, Britain remained above all a commercial power. The new wealth and opportunities which industry provided were fully exploited, but within the framework of the network of relations which Britain had already established in the world system.

The development of industry did make one major change. It allowed much greater specialization in the division of labour within the world system. The chance was seized and self-sufficiency in agriculture was abandoned between 1820 and 1850. The number of Britons fed on foreign wheat rose from 611,437 between 1811–20 to 3,451,608 between 1841–50.⁵

The commitment to free trade followed a commercial rather than an industrial logic. British prosperity and the feeding of its growing population came to depend on the maintenance of the network of trading relationships which now covered the whole world: its centre was London. Britain’s interest in preserving the free movement of goods, capital and labour in this world economy emerged when British manufacturing industries had a clear technological lead over all others. But it did not diminish when this lead began to vanish. The maintenance of an open world economy remained a vital British interest.

Britain’s position in the world system was, as a result, significantly different from that of the United States or Germany. Both the United States and Germany aspired to world power on the strength of their industrial manufacturing base. They pursued a policy of building up an export surplus, but trade was never a necessity for them in the way it was for Britain. For them, a policy of autarky in many sectors and strictly regulated trade was also feasible. Britain’s hegemony required a permanent deficit on its visible trade which both stimulated economic development in other parts of the world economy and gave rise to increasing demand for British services – banking, shipping and insurance. This made the British national interest ever more closely involved with maintaining the openness of the world system.

The hegemony of the United States, by contrast, required some means to offset the huge American export surplus, which reflected the overwhelming industrial and technological dominance the American economy had acquired by 1945. The solution was found through the granting of credits and by increases in American foreign investment and overseas military spending.

Two further contrasts between Britain and the United States as hegemonic powers should be noted. Both exercised great power in the world system because of their dominant market position. But in addition to this informal empire, Britain had also acquired a large formal empire during its rise to hegemony, and greatly added to it between 1815 and 1918. British commitment to universalism and to the preservation of the open world economy was qualified by the alternative attractions of protecting a sphere of interest within the world economy. These attractions grew once Britain was faced with rivals claiming spheres of interest of their own. The existence of the British empire made Britain’s world position last much longer than it would otherwise have done, but it also made Britain less credible as an advocate of the conditions for international economic order. The United States was never inhibited in quite the same way.

The two powers were also very different in respect of the military underpinning of their hegemony. The Pax Britannica required a naval budget of only £8 million.⁶ The Pax Americana has seen the construction of an extensive system of overseas military bases, made necessary by the failure to incorporate the Soviet Union within the framework of the new world economy after 1945. It has meant that American hegemony has been exercised through political and military means to a greater extent than was the case with Britain.

In the various challenges to British hegemony, the industrial and commercial challenges were the first to develop. The challenge to Britain’s financial supremacy came later. The commercial challenge was the one which worried political opinion in Britain the most. The open-door policy allowed foreign exporters to invade the British market, while British exporters had to sell over high tariff barriers in an increasing number of countries. The rising tide of protectionism was accompanied by a wave of new colonization.

Since Britain was unable to restore the conditions for an open world economy, it took steps to safeguard its position by enlarging its own direct sphere of interest. As Halford Mackinder explained:

Under a condition of universal free trade, the dream of the sixties of the last century, industrial life and empire might be dissociated, but when competing countries seek to monopolise markets by means of customs tariffs, even democracies are compelled to annex empires. In the last two generations … the object of vast British annexations has been to support a trade open to all the world.⁷

Britain at the turn of the century experienced a major debate on foreign economic policy centred on the rival attractions of the formal and informal empire. At the height of Britain’s hegemony in the 1840s, the claims of the formal empire were much diminished. The case for free-trade imperialism was succinctly stated in the debate on the repeal of the Corn Laws by one MP who argued for free trade because it meant that ‘foreign nations would become valuable colonies to us, without imposing on us the responsibility of governing them’.⁸

Britain’s case for free trade could also be put in terms more fitting for a hegemonic power. In a memorandum written in 1907, Sir Eyre Crowe argued:

Second only to the ideal of independence, nations have always cherished the right of free intercourse and trade in the world’s markets, and in proportion as England champions the principle of the largest measure of general freedom of commerce, she undoubtedly strengthens her hold on the interested friendship of other nations, at least to the extent of making them feel less apprehensive of naval supremacy in the hands of a free trade England than they would in the face of a predominant protectionist power.⁹

This policy came under fierce attack from those who wanted to see Britain develop the empire as its priority, whatever the consequence for the open world economy. They wanted naval supremacy in the hands of a protectionist England. Chamberlain and Milner spearheaded the assault on the policy of free trade. Milner declared:

Let us free ourselves from the insane delusion that a nation grows richer by buying outside its borders what it can produce within them. It is not a blessing when, in the blind worship of cheapness, we undermine our own industries. Now is the time to strike a blow to free ourselves from the shackles of an antique creed, to open the door which has been banged and barred against our fellow-countrymen in the Dominions.¹⁰

The conflict between free trade and tariff reform reflected the extent to which British governments had come to pursue incompatible aims. Protecting the British empire and preserving a balance of power in Europe meant preparing for war. Safeguarding the open world economy meant maintaining the peace. Only peace would ensure that world lines of communication were kept open, international contracts honoured and foreign investments secured. A Foreign Office memorandum of 1927 stated: ‘We have got all we want – perhaps more. Our sole object is to keep what we have and to live in peace’.¹¹ Such a policy implied that those powers who were not content with what they had would have to be appeased.

After 1918 there was increasing awareness that Britain itself could no longer sustain the conditions for economic order in the world system. Yet there was reluctance to abandon either the overextended British empire or Britain’s central role within the open world economy. In these circumstances, the attraction of closer collaboration with the United States grew. The idea of an Atlantic Union began to be discussed.

BRITAIN AND AMERICA

In 1940 Churchill declared:

These two great organisations of the English-speaking democracies, the British Empire and the United States, will have to be somewhat mixed up together in some of their affairs for mutual and general advantage. For my own part, looking out upon the future, I do not view the process with any misgivings. I could not stop it if I wished: no-one can stop it. Like the Mississippi, it just keeps rolling along. Let it roll. Let it roll on full flood, inexorable, irresistible, benignant, to broader lands and better days.¹²

Britain’s hegemony had lasted from 1815 to 1870. In the last decades of the nineteenth century, Britain faced a rising industrial and military challenge from new rivals, particularly from Germany and the United States. Both resorted to policies to protect their new industries from British competition and both contested the inclusion of so much of the world in Britain’s sphere of interest, whether as colonies or through the commercial and financial links Britain has established with them. Both also tried (with increasing success) to exploit the British policy of allowing open access to its markets. The British press became greatly alarmed by the success of American and German competition. The first great bout of introspection about economic decline was soon under way.¹³

The challenge to British power meant that either Britain had to come to terms with its new rivals or it had to fight them. If appeasement was chosen, a significant surrender of British power would be necessary. A negotiated balance of power and division of the world between spheres of interest would be very different from an undisputed hegemony, arising from supremacy in the world market. Using force, however, to resist the challenge and the re-ordering of world power would carry heavy risks and might ultimately weaken rather than strengthen Britain’s position, even if Britain emerged as victor in the short run.

The arguments for appeasement of the new industrial and military rivals Britain faced by 1900 were persuasive. Yet appeasement could only be viable if the rivals...