How Japan advanced its economy on the path to modern economic growth in less than 40 years following the end of World War II
--BY RAJENDRA PRASAD KOIRALA
Japan's transformation into a major economic force in less than 40 years following the end of World War II has been a somewhat exceptional outlier in the history of contemporary economics. Before the defeat in 1945, Japan's whole strength was devoted to winning the war and creating havoc in the process. Many of the industrial and commercial structures, along with the equipment they housed, had been destroyed, and a lot of the equipment that had previously been utilised to produce goods for the civilian market had been scrapped to make metal for explosives.
The Japanese people, who survived the war, were met upon their return to their nation with turmoil, famine, and unemployment as a result of the concentration of power used in the war. Even though companies and infrastructure were left in ruins and waste, Japan was able to rebuild its economy from scratch by drawing on its prior economic experience and learning from the rest of the globe.
We must take into account Japan's economic growth and history from the late 1800s to the early 1900s if we are to comprehend its post-war economic progress. Due to Japan's historical isolation from the rest of the world, a vast gap emerged between the Western powers and Japan at the beginning of modern economic growth when it became an open economy in the late 1800s. However, the agricultural technology created during the Tokugawa Period and the central government's implementation of a number of modernisation programs during the Meiji Period helped Japan close the gap. This made it easier for Japan to acquire western technologies and ideas.
Beginning in the middle of the 1880s, Japan was able to advance the economy on the path to modern economic growth thanks to the legacy of the Tokugawa Period and the early Meiji Period's development of the economic growth foundations.
Since Japan was densely populated and had limited natural resources, it had to rely on trade to meet its fundamental requirements. By 1900, Japan was prepared to expand its empire on a bigger scale. Japan had clearly developed into one of the most powerful nations, both militarily and economically, and its fundamental building blocks for expansion were in place prior to the end of World War II. The foundation and know-how for the economic miracle that followed the devastation in 1945 were laid by these extraordinary post-war accomplishments.
Miraculous Economic Changes
The improvement and practical application of imported technologies and technological know-how was one way that the Japanese used their distinct trait to boost the economy. The Japanese were among the finest at accomplishing this and frequently claimed that the country had developed relatively little original technology. But by merging a number of imported technologies, Japan developed new technology such as low-cost mass manufacturing techniques.
The most crucial thing to understand regarding technology import into Japan is that it was only combined with indigenous innovation that it was able to transform into industrial strength. Because the development of technology in one area encouraged the growth of many other industries, Japan's technological advancements made a significant contribution to its economic expansion.
For instance, Japan's steel industry was able to successfully raise the quality of the special steel used in automobiles, and the automobile industry also developed into a sector that was able to compete in international markets for the first time as a result of technological advancements in the manufacturing of parts. A similar development was seen in shipbuilding as well, and many other industries were expanding practically proportionately. The development of even more productive methods of growth was sparked by technological advancements and adjustments, and this pattern enabled the Japanese economy to compete on the world stage.
The astounding economic expansion in Japan was also a result of a shifting business environment. The key event that made it possible for Japanese businesses to shift and become more flexible was the disintegration of the zaibatsu. The trend of owner-managers ended in the first change which involved a total change in management.
The stability of labour-management relations was another aspect of business that Japanese changed. The union's proactive involvement and management's support of the lifetime employment structure helped to forge the union between labour and management. In exchange for a beneficial system, the company unions showed their allegiance and made it simpler to govern the workforce.
Politics as a Driver of Growth
Although the Japanese people's efforts were primarily responsible for the country's rapid economic growth, this does not mean that economic planning and policies had no part in the process. The Japanese political system, therefore, played a significant part in its development as well. The policy-making bodies meticulously outlined the policies and plans to safeguard and sustain the expansion. Mainly, two main policies were behind Japan's quick turnaround. The Yoshida Doctrine was the initial strategy which helped Japan's post-war economy to revive.
This strategy was created by Prime Minister Yoshida Shigeru who is frequently referred to as the founder of the modern Japanese economy during the early stages of the Korean War. The goal of the programme was to save money on military expenditures by relying on the US army for protection while establishing economic development and reconstruction as the country's immediate priority. This enormous cut in military spending enabled Japan to concentrate all of its resources - both financial and human - on rebuilding the country's economy which has been a major factor in the country's quick post-war recovery.
Additionally, this strategy is the foundation of Japan's current diplomatic identity and promotes a pacifistic, non-military posture for the country. Ikeda, who is regarded as the key player in Japan's explosive growth, also put the Yoshida Doctrine and the Income Doubling Plan into effect in 1960. The goal of the plan, as its name suggests, was to significantly increase the amount of investments made by the central government to both private and public companies between 1961 and 1970 in order to double the income earned by Japanese employees and establish a high-quality of living. It was also intended to increase trade with other nations in order to successfully accomplish the plan's goal.
However, because of the plan's intense industrialisation, a serious pollution problem arose that had to be addressed in the years that followed. Heavy industrialisation did not cause many problems, but it did considerable help to Japan's second half of rapid expansion which had an average growth rate of 10.8% in the late 1960s and led to the country's GDP overtaking the rest of the globe by 1968. Another political aspect that significantly influenced the expansion was the role played by the Ministry of International Trade and Industry (MITI) in addition to the policies and economic plans put out by the country's authorities. The rapid rise of Japan's industrial sector was largely the result of MITI which was thought to be the most powerful government agency at the time.
The Path to Consistent Growth
Since Japan had relied on the availability of oil to fuel its economic expansion, the 1973 oil crisis had a significant impact on the nation's expanding economy. Japan had a brief recession as a result of the economy's spiralling inflation and problems with unemployment. By enforcing strict monetary regulations, the Japanese government was able to control the economy and accomplish another successful economic recovery. Due to the government's prompt action and advanced technology, the economy stabilised during the oil crisis. The surge in exports of goods like electronics, automobiles, and other goods, which rose far more quickly than imports, was crucial to the recovery. Japan's expanding trade surplus had become a major global concern by 1977.
To sum up, the ability of the Japanese people to successfully combine all the knowledge and skills acquired from other countries and then improve those skills to fit their own system was the most significant factor that enabled Japan's amazing economic growth which was somewhat an exception to modern economic history. The underlying elements for growth had been set up long before World War II began. Therefore, the economic miracle was not merely the result of reform measures performed during the occupation of American forces. The driving forces behind the growth are particular and dependent on each of the policies and strategies created during the expansion process.
(The author is a PhD scholar. He can be reached at [email protected].)