Betting on the Farm

Institutional Change in Japanese Agriculture

Patricia L. Maclachlan, Kay Shimizu

• Publisher: Cornell University Press
• Year: 2022
• Print ISBN: 9781501762123
• eBook ISBN: 9781501762130
• Topic: History
• Subtopic: Japanese History
• Index: History

Japan Agricultural Cooperatives (JA), a nationwide network of farm cooperatives, is under increasing pressure to expand farmer incomes by adapting coop strategies to changing market incentives. Some coops have adapted more successfully than others. In Betting on the Farm, Patricia L. Maclachlan and Kay Shimizu attribute these differences to three sets of local variables: resource endowments and product-specific market conditions, coop leadership, and the organization of farmer-members behind new coop strategies.

Using in-depth case studies and profiles of different types of farmers, Betting on the Farm also explores the evolution of the formal and informal institutional foundations of postwar agriculture; the electoral sources of JA's influence; the interactive effects of economic liberalization and demographic pressures (an aging farm population and acute shortage of farm successors) on the propensity for change within the farm sector; and the diversification of Japan's traditional farm households and the implications for farmer ties with JA.

1 ADAPTING TO THE MARKET

Institutional Change in Japan Agricultural Cooperatives (JA)

Japan Agricultural Cooperatives (JA),¹ a massive network of agricultural enterprises ostensibly owned and operated by and for their farmer-members, has long been a powerful fixture in the Japanese farm sector. For generations, leaders in the JA system pressured local co-ops to operate as passive cogs in a large agricultural machine that channeled minimally processed rice and other raw products into the system’s distribution networks and JA’s farm-input and other services to local farmers. For as long as this arrangement ensured producers a position in the middle class, few resisted JA’s one-size-fits-all services and high commissions. But as rural populations shrink and age, as agricultural markets liberalize and the demand for rice decreases, as domestic food supply chains grow more diversified and competitive, and as farm incomes decline, JA’s traditional approach to agricultural production is losing credibility.

In response, a small but increasing number of Japan’s 652 local cooperatives are breaking out of the traditional JA mold and embracing more profit-oriented business models designed to put more money in the pockets of farmers.² JA Echizen Takefu is at the cutting edge of this trend. Under the able leadership of Tomita Takashi, a former stockbroker, the Fukui Prefecture co-op has professionalized its management team and expanded its organization by establishing subsidiaries, one of which manufactures low-priced fertilizers for the co-op.³ It was one of the first co-ops in the country to sell rice grown with low levels of agricultural chemicals and to differentiate rice prices according to finely graded product “taste scores” (shokumichi). It defies JA’s middlemen and distribution channels by negotiating face-to-face with independent farm suppliers and selling its products directly to consumers.⁴ And Takefu is venturing into risky niche consumer markets; its high-priced, brand-name Princess Shikibu rice, for example, has gained a foothold in Japan’s already saturated rice market. To an economist, Takefu’s efforts to run itself like a business are a rational response to changes in consumer demand and other market forces. But when compared to JA tradition, they are nothing short of radical.

While Takefu and other local co-ops strive to adapt to changing market forces and in ways that serve the financial interests of their farmer-members, far more co-ops seem stuck in the JA traditions—even at the expense of shrinking farmer incomes. For many years, this is what JA’s national leaders have seemed to prefer, as evidenced by their willingness to retaliate against “upstart” co-ops by withholding essential services. Indeed, fear of censure from JA’s prefectural and national leaders is so pervasive that many co-op officials who flock to Takefu’s facilities for inspection tours refuse to reveal their identities.⁵ Put simply, as some co-ops attempt to chart a new, more market-conforming approach to agricultural cooperation, many more are entrenched in a status quo that JA leaders seem determined to defend.

What explains these divergent behaviors within JA? Why have JA organizations been changing more at the local level than at the national level? Why do some local co-ops behave like for-profit corporations, while others do not? How, finally, does reform unfold at the local level?

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In addressing these and related questions, this book pushes institutional analysis in new directions. For in addition to exploring why and how institutional change occurs, ours may very well be the first major study to systematically explain variations of change among otherwise similar units of analysis. In so doing, we make careful conceptual distinctions among institutions as rules of the game, both formal and informal, organizations, and strategies. While our primary objective is to explain variations in strategies across different co-ops, we also emphasize the dynamic interaction among all four types of institutions during the reform process. To do this, we bring a mix of qualitative and quantitative methodologies to our analysis, including scores of interviews with a variety of stakeholders and policy makers and the statistical analysis of an original data set of 105 local agricultural cooperatives in six prefectures—an unusually large sample of isomorphic units of analysis for the purposes of analyzing institutional transformation.

As we answer our questions, we take a fresh look at the conditions for change among co-ops and in the Japanese agricultural sector more broadly. First, we explore the effects on formal and informal rules, organizations, and strategies of two sets of slow-moving structural changes that challenge many countries today: market liberalization and demographic decline and aging. There is no shortage of academic analyses of the impact of market transformations or demographic change on the modern Japanese political economy,⁶ but we still know very little about the interactive effects of these two processes and their impact on institutional change. With its gradually liberalizing markets and oldest population in the world, Japan is an optimal laboratory for examining these interactions. And the Japanese farm sector, where the population is shrinking and aging at rates much faster than the national average, offers us a unique setting for exploring these processes up close.

Second, we reassess the impact of Japanese government policies on the propensity for change among co-ops and their farmer-members. While scholars are often correct to criticize policy makers for not doing enough to resolve the many challenges confronting the Japanese farm sector,⁷ we emphasize how even small-scale government adjustments to the formal rules that buttress farming and agricultural cooperation can generate incentives for cultivators and co-ops to reform their organizational structures and business strategies in ways that conform to changing market signals.⁸ There may be no deregulatory “big bangs” in Japanese agriculture comparable to Prime Minister Hashimoto Ryūtarō’s (1996–1998) dramatic deregulation of the financial sector during the 1990s, but the cumulative effects of the government’s piecemeal reforms over time can be quite transformative. Indeed, we make the case that years of small-scale policy reforms have unleashed grassroots support for further change in the farm sector that will likely gain momentum regardless of future levels of government engagement.

Third, while other analyses of co-op reform tend to focus on important incentives generated by legal and policy developments at the national level,⁹ our exploration of cross–co-op variations in strategic change also includes close attention to local variables.¹⁰ From area-specific natural resource endowments to the presence of local agents of change and the ways in which farmers organize themselves (or not) behind new strategies, these local variables generate many of the opportunities for and limits to—and there are many of them—co-op reform. Microlevel analysis also enables us to understand exactly how the slow-moving demographic and economic changes noted above combine with local opportunities and constraints to produce the distinctive outcomes of a co-op’s reform process.

Our focus on the local conditions of co-op change also positions us to demonstrate how the achievements of reformist farmers and co-ops are helping to push JA’s notoriously stubborn national organizations to provide a more conducive environment for reform throughout the co-op network. That one of the wellsprings of reform within the broader JA system is local has important implications for the future of change not only for JA itself but also for the farm sector more generally.¹¹

Although Betting on the Farm is primarily a book about institutional reform in Japan, it should also be of interest to development scholars. But while most development studies tend to explore change in developing economies,¹² the story of Japanese co-op reform can be read as a case study of the limited opportunities and many challenges confronting institutional transformation in mature economic systems, where institutions are relatively stable and the stakeholders numerous. It is our hope, moreover, that our emphasis on agricultural cooperatives will be relevant to scholars of change in well-established labor unions, professional organizations, and other “self-organized enterprises” and their associated federations.¹³

Our study should also interest readers concerned with business and agricultural economics, not least by poking holes in the conventional wisdom that Japanese agriculture is nothing but a declining industry. To be sure, agricultural, forestry, and fisheries products contributed just 1.2 percent to Japanese GDP in 2017, which is less than the Organisation for Economic Co-operation and Development (OECD) average of 1.5 percent.¹⁴ And it cannot be denied that the farm sector faces a precarious future as it grapples with deepening economic and demographic challenges. But in our fixation on what ails Japanese agriculture, we overlook the scope and significance of the changes that have already occurred, as well as the potential for more change in the future. Some farmers and co-ops are venturing down rapidly diversifying food supply chains, creating value-added opportunities both for themselves and for domestic food processors and retailers, and in so doing, transforming the way food travels from farm to table. Cashing in on Japan’s reputation for producing high-quality food, some are even participating in global food supply chains by learning how to export—a dramatic change from a generation ago when “adapting to globalization” meant little more than blocking food imports.¹⁵ Again, we demonstrate how these bold new farmer and co-op strategies reflect broad economic and demographic pressures, new legal and regulatory incentives, and a variety of local variables. When all is said and done, some farmers and co-ops are becoming more competitive not only because they must but also because they can.

In exploring these issues, we also touch on the fate of the family farm. Until recently, farming in most countries was controlled by family farms and supported, in many cases, by agricultural cooperatives. But this model has come under threat—especially in developed countries—as markets liberalize and farm populations shrink. How can traditional family farms and co-ops ensure stable agricultural output and producer incomes when the number of farmers is declining and agricultural prices are more volatile? Some countries, including the United States, have met these challenges by corporatizing and expanding farm enterprises, including cooperatives. In Japan, however, a combination of precedent, politics, and geographic constraints has restrained the incorporation and expansion of many types of farm enterprises, thereby contributing to the continued predominance of small-scale family farms and traditional cooperatives. But Japanese co-ops are under no less pressure to change the way they do business than agricultural enterprises elsewhere. As we explore how Japanese farms and especially co-ops have made these adjustments, we illustrate the ways in which old economic institutions can adapt to new market incentives.

This is not to suggest that farmers’ and co-ops’ gradual embrace of freer markets symbolizes the beginnings of an inexorable march toward a neoliberal future and concomitant rejection of the sorts of institutional complementarities and communitarian values that have come to define Japan’s “coordinated market economy.”¹⁶ To be sure, some Japanese economists and even government officials would like to see exactly that. But while we emphasize the need for some degree of competitive market reforms for co-ops—and Japanese agriculture more generally—to survive into the future, we also recognize that the universal principles of agricultural cooperation and Japanese historical precedent have generated enduring expectations for co-ops to contribute to the well-being of struggling rural communities. Co-ops are not “corporations” in the narrow sense of the term. They are economic membership organizations that strive not only to advance the material well-being of their members but also to exercise stewardship over farmland and irrigation systems and contribute a range of collective goods to rural communities. How individual co-ops juggle the trade-offs between their economic and social missions as “rural revitalization” ascends to the top of the Japanese national agenda is an important underlying theme of this study.

Concepts and Theories

In our analysis of variations of reform within JA, we employ some of the concepts and insights of institutionalism theories.

At their most fundamental level, institutions are the enforceable “rules of the game in a society.”¹⁷ By defining and limiting “the set of choices of individuals,”¹⁸ institutions operate as abstract arenas of human interaction that incentivize cooperation and agency and constrain certain types of behavior.¹⁹ As such, institutions can both reflect and help entrench the distribution of power among actors in a corresponding environment.²⁰ Institutions are also “relatively enduring” and hence sources of stability and predictability in social life.²¹

There has long been a tendency in the social sciences to indiscriminately apply the term institution to a broad range of phenomena. This usage runs the risk of muddying the meaning of institutions and of the processes that contribute to their transformation. To minimize these pitfalls, we distinguish among four types of institutions in the political-economic context: formal and informal rules, organizations, and strategies.

Formal rules usually take the form of laws, regulations, and other types of codified constraints, while informal rules consist of norms, conventions and codes of conduct, mindsets or worldviews, and the like.²² Both types of rules function as constraints on human behavior but are enforced in different ways; while formal rules are subject to official enforcement by the state or other established authorities, informal rules are usually enforced by peer pressure or other manifestations of social expectation.²³ Formal and informal rules are interconnected in that norms and conventions can come to reflect the constraints and opportunities of formal rules over time. As Gretchen Helmke and Steven Levitsky argue, some info...

Table of contents

• List of Tables and Figures
• Preface
• List of Abbreviations
• Note on Transliteration
• 1. Adapting to the Market
• 2. The Postwar JA Model
• 3. Japan’s Changing Agricultural Landscape
• 4. Putting Farmers First
• 5. A Tale of Two Co-ops
• 6. JA’s Sanctuary
• 7. Abenomics, JA Self-Reform, and the Future of Agricultural Cooperatives in Japan
• Epilogue
• Notes
• Bibliography
• Index