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To begin with, Japan shifted from becoming a disunited polity ruled by many leaders to an almost centralized government run by Edo. Although Japan was still feudal, this feudal system was fairly standardized. The royal family and the court became increasingly powerful and these institutions were developed. The emperor gained a lot of power from the landowners during this period. Class differences were rigidly enforced. While we think of this as a bad thing today, at the time it helped create stability and allowed people to understand where they fit in and what role they should play within the polity of Japan.
Much of the key modernization of this period was economic, and the most important aspect of this was urbanization. Cities began to spring up in Japan, and regions became better defined by these urban centers. By the 1750s, both Kyoto and Osaka have nearly half a million people each. These new cities required the creation of road networks and the flourishing of trade and commerce. One of the staples of the Edo, the economy was rice, available to be grown and harvested by everyone. The daimyo collected his tax in the form of rice. The price of this commodity would fluctuate depending on the harvest and there was a sophisticated market in Edo to help offset price losses. And all of these things were regulated by an increasingly sophisticated bureaucracy. This bureaucracy was made possible by a rapid increase in the number of schools and the quality of education available. Confucianism was popular and students often came from the lower classes. These types of scholars in particular made good bureaucrats and were able to administer increasingly complex and sophisticated affairs.
Those who suggest that Edo was lacking in modernity may have made too much of a fetish of Meiji. The Meiji period was very self-congratulatory and looked back at the Edo period was a pleasant somewhat naïve era. This is far from the truth. All of the groundwork required for the huge leaps forward in the Meiji Restoration was accomplished during the Edo period.
Japan also became increasingly closed off from the rest of the world during this period. While its modernization might have proceeded more quickly had it embraced the world, it still found time to become unified and develop the right sort of institutions that would allow it to industrialize rapidly. It would be very hard to say that this Edo period was in any way a waste of time.
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