Economic Growth in Japan and the USSR

Angus Maddison

• Publisher: Taylor & Francis
• Year: 2013
• Print ISBN: 9780415607773
• eBook ISBN: 9781136618673
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

In terms of output, the USSR and Japan account for one-fifth of the world's economy, occupying second and third places behind the United States. Japan has the world's fastest growth of per capita income and the USSR has not lagged far behind. But a century ago they were static feudal societies. This study analyzes the policies which enabled them to transform their economies adn to catch up with the developed world.

The strategies of the two nations adopted have been very different: Japan has maintained small farms and factories, developed a labor-intensive technology, and has successfully penetrated the world export markets. The USSR, on the other hand, has created giant farms and factories adn remained fairly isolated from world trade. Since 1945 teh USSR has devoted one-eighth of her resources to military purposes, Japan practically nothing.

In Economic Growth in Japan and the USSR, Angus Maddison offers a comparative analysis of the growth experience of these two countries that greatly enlarges our knowledge of the development process. A better understanding of their past experience can be particularly illuminating and relevant for economic policy in developing countries today. This classic text was first published in 1969.

Part I

JAPAN

Chapter 1

Tokugawa Japan—A Fossilized and Closed Society

Modern Japanese growth started with the Meiji restoration of 1868 when feudalism was abolished and the Tokugawa Shogunate was deposed after more than 260 years of power. As Tokugawa society had many unique features, it is useful to examine its character in some detail.

Before 1853, Japan had lived in very isolated fashion. For more than two centuries foreigners had not been allowed to live in Japan and the government had cut off trade, foreign travel and study abroad. The government eliminated Christianity, which was introduced briefly by St Francis Xavier in the sixteenth century. The only Western contact in the Tokugawa period was with the Dutch, who had a trading post in the extreme South of Japan–on the island of Deshima in Nagasaki harbour–to which they could send a ship once a year from Indonesia. Trading contact with China was almost equally exiguous. To enforce this seclusion, Japanese were forbidden to build ships with a carrying capacity above 75 tons. However, Tokugawa Japan was by no means a primitive society. The government was efficient with a strong central power, and there was no significant internal warfare. The economy supported 35 million people with less fertile land than the UK, which had a population only a fifth of the size at the outset of its industrial revolution. Rice yields were higher then than they are in several Asian countries today.¹ It was an old and highly sophisticated civilization whose idiosyncrasies, tastes and productive system had not been disturbed by colonialism and which had not even been invaded for 1,200 years. Urban society had some of the colour and gaiety of Restoration England, and though life was hard for the mass of the people, standards of hygiene and aesthetic sensitivity were superior to those in Europe, and there was a graceful hedonism in the pattern of life and religion. Western (Dutch) learning had penetrated in the fields of medicine and science, and there was probably a higher degree of literacy in early nineteenth century Japan than in Western Europe. At the time of the Meiji Restoration 40 to 50 per cent of boys, and perhaps 15 per cent of girls were getting some formal schooling outside their homes.¹

Until November 1867, the Tokugawa family, who had originally been court officials, were the real rulers of Japan and ran their government (bakufu) from Edo (Tokyo) whilst the emperor lived in Kyoto. The Tokugawa Shogun owned about a quarter of the land, and the rest was split between 270 lords (daimyo).² The expenses of the feudal lords were enhanced by the fact that they were compelled to maintain an alternate residence in the capital city and spend part of the year there. Their families were kept in Edo as hostages when the daimyo returned to their domains (han). This annual movement involved many people and absorbed considerable resources. The lords lived in castle towns in which they had to support about 400,000 warriors (samurai)³ whose military functions had decayed with the elimination of internal warfare. The samurai were largely a parasitic class forbidden to participate in agriculture or commerce, though they did serve as feudal administrators. The military strength and temporal power of the monasteries had been eliminated in the sixteenth century in Japan, and religious groups were relatively less important in number than in feudal Europe or modern India. The ruling classes amounted in total to about two million people including their families.¹ Samurai households included 5 to 6 per cent of the population, i.e. about five times the proportional size of the degree-holding gentry who were the ruling class in China, and about ten times as large proportionately as the French nobility and gentry at the time of the Revolution.² In addition there was a prosperous merchant class (chonin) in the cities.

In order to provide the daimyo and samurai with an income the peasantry had to produce a large surplus above subsistence. The burden varied in different parts of the country but it is usually considered that they had to deliver an average of about 40 per cent of the nominal rice crop (rice providing the great bulk of agricultural output).³ In addition to the purely feudal obligations, some of the peasants also had to pay rents to landlords. These people were rural moneylenders who had acquired landownership by foreclosing on mortgages, by developing waste land or otherwise circumventing the feudal restrictions on land transfers. About a third of the land was cultivated by rent-paying tenants in Tokugawa times.

Most peasant families worked plots of less than one hectare, though there were some rich peasants in most villages with four or five hectares, and some very poor ones with only a quarter of a hectare. They were tied to the land and could not move around the country or change jobs. In theory, land could not be sold and the cropping pattern was often restricted. The bulk of the population lived very close to subsistence level. Except for chickens and eggs, livestock products were totally absent from the diet. Japanese houses were (and still are) made of wood and paper with no furniture and with heat only from a small charcoal brazier. Centuries of peaceful development with limited resources had produced frugal habits. The major check to population growth, apart from disease and frequent famines, was abortion in higher levels of society and infanticide (euphemistically called ‘thinning’) amongst the peasantry. The evidence suggests that these practices had kept the population fairly static from the beginning of the eighteenth to the mid-nineteenth century.¹ Thus the living standard of the peasantry may have been pushed closer to the physical limits of subsistence than was the case elsewhere in Asia, but the overall level of per capita output was probably above the Asian average.

The capital city, Edo, already had a population of 1·3 to 1·4 million in 1780 when it was probably the biggest city in the world.² Osaka and Kyoto were also large cities. The chief industrial products were textiles, pottery, lacquer ware, copper goods, paper, wax, tea, ink, fans, umbrellas, candles, charcoal, sake, bean paste, bamboo products, seaweed, and traditional drugs. These were made in both rural and urban areas, often in peasant homes. The financial system was highly developed by Asian standards and the market sector of the economy was relatively large. However, technology was isolated, most buildings were of wood, there was little construction of ships except for fishing, and wheeled vehicles were uncommon.

The police state atmosphere of the Tokugawa regime stunted growth by its internal restrictions as well as by its ban on foreign trade. There were restrictions on trade and travel within the country. There were local tolls on the movement of goods, passports were required for internal movement and each fief had its own currency which caused great confusion as well as profiting the exchange dealers of Osaka (in 1867 there were 1694 varieties of banknotes). Urban workshop production was subject to guild regulation. The choice of crop was often prescribed to farmers. Distinctions between social classes prevented people from changing their trade and greatly hindered social mobility, though rich merchants did manage to buy or marry their way into the samurai class. The government prescribed the style of clothing of the different classes, and only samurai were allowed to carry swords. They were also allowed to use them with impunity as a rebuke for insults from the lower classes. The merchants were considered the lowest social class. This was an obvious fiction and they could usually enforce their financial claims, but they nevertheless had to operate under fear of arbitrary extortions. At the bottom of the social scale were some outcasts, the eta, rather like the untouchables in India.

In the last half of the Tokugawa period the social and economic system was close to breakdown. The Shogun was usually in financial difficulties, the daimyo were indebted to merchants and the rice stipends of most samurai were below their nominal level. A considerable number of impoverished samurai (ronin) had abandoned their feudal loyalties and had taken jobs in cities or were bandits. There was an increasing number of peasant revolts. The merchant class was prosperous, but subject increasingly to financial levies. There were also major rivalries between the Shogun and some of the more powerful and distant daimyo. The intrusion of foreigners helped push this system to its breakdown. In 1853, the American navy under Commodore Perry forced an entry in Japan with its gunboats. The treaties of 1858 and 1866 exacted extra-territorial, legal and trading rights and restricted the commercial and fiscal autonomy of Japan. Concessions to the USA were extended to European powers including France, the UK, Russia and the Netherlands. The treaties forced Japan to open her economy to foreign trade and obliged her not to impose tariffs of more than 5 per cent. These concessions were bitterly resented by the Japanese, and the emperor refused to ratify the Shogun’s signature on the agreements. The opening of the economy to foreign trade caused great internal problems. Cotton spinning and weaving, and cotton and sugar production were badly hit by imports. The old silver: gold ratio of the Japanese coinage was a third of that in the outside world. There was therefore an immediate outflow of gold and the government had to debase the coinage with inflationary consequences. This external challenge revealed the backwardness of the Tokugawa feudal system vis-à-vis the West. Without a navy and with archaic military forces, Japan could not resist. The Japanese determined to preserve their independence by catching up with the West.

There are some writers who have stressed the evidence of economic progress in the Tokugawa period,¹ and who tend to blur the difference in pace which the Meiji reforms introduced. This line of thought has also been strengthened by the recent tendency to decry the growth achievements of the Meiji period.² Smith stresses the growth of urban centres, the extension of a market economy, use of wage labour, development of a handicraft industry, the establishment of Western industries by some of the han and technical improvements in agriculture such as the use of commercial fertilizer, wider variety of seeds, improved threshing techniques, irrigation and use of manuals of best practice techniques. This, of course, is evidence that Tokugawa society was not entirely static, but there can be no doubt whatever that its institutions greatly reduced the growth potential of Japan and that the Meiji reforms put the economy on quite a different growth path.³

¹ See Shigeru Ishikawa, ‘Conditions for Agricultural Development in Developing Asian Countries,’ Committee for Translation of Japanese Economic Studies, No. 42, International House, Tokyo (no date), who quotes lower figures for present yields in India, Pakistan, Burma, Thailand and the Philippines.

¹ See H. Rosovsky, ed., Industrialization in Two Systems, Wiley, London and New York, 1966, p. 105, who quotes R. P. Dore for these estimates.

² The number varied as families died out or fiefs were altered by the Shogun, see G. B. Sansom, Japan, A Short Cultural History, London and New York, 1962, p. 464.

³ There were 420,000 samurai at the end of the Tokugawa period, see G. B. Sansom, The Western World and Japan, London and New York, 1950, p. 235.

¹ Two million is the figure given by W. W. Lockwood, The Economic Development of Japan, Princeton, 1954. However, Irene B. Taeuber, The Population of Japan, Princeton, 1958, Oxford, 1966, p. 27, gives two alternative estimates of 1·2–1·8 million or of 3·8–4·0 million at the end of the Tokugawa era for the Shogunate, daimyo, samurai, and other military, including employees and dependents.

² See J. K. Fairbank, E. O. Reischauer and A. M. Craig, East Asia, the Modern Transformation, Boston and London, 1965, p. 185, who make the comparison with China and E. H. Norman, Japan’s Emergence as a Modern State, Institute of Pacific Relations, New York, 1940, p. 81, for the comparison with France.

³ Forty per cent is a figure quoted by several writers, but it has recently been argued by James Nakamura that official estimates of land area and yield were understated in Tokugawa times, and that the feudal levies did not amount to more than 20–30 per cent of agricultural output. As we mention below, Nakamura may be exaggerating the understatement. See J. I. Nakamura, ‘Meiji Land Reform, Redistribution of Income and Savings from Agriculture,’ Economic Development and Cultural Change, July, 1966.

¹ See I. B. Taeuber, op. cit., p. 22.

² See H. Rosovsky, Capital Formation in Japan 1860–1970, London and the Free Press of Glencoe, 1961, p. 66.

¹ e.g. T. C. Smith, Political Change and Industrial Development in Japan: Government Enterprise 1868–1880, Stanford, 1955, London, 1959, and The Agrarian Origins of Modern Japan, Stanford and London, 1959, and J. Hirschmeier, The Origins of Entrepreneurship in Meiji Japan, Harvard, 1964.

² e.g. J. I. Nakamura, Agricultural Production and the Economic Development of Jap...

Table of contents

• Cover Page
• Half Title Page
• Title Page
• Copyright Page
• Original Title Page
• Original Copyright Page
• Acknowledgements
• Contents
• Introduction
• Part I: Japan
• Part II: The Ussr
• Bibliography
• Appendices
• Index