Japans Postwar Economic Development - Coursework Example

 Japan’s postwar economic development Introduction The rapid economic development that Japan achieved after the Second World War has been a great wonder to the global world and since then the Japan model of development has become much discussed and researched upon. The primary objective of this paper is to make a scientific approach to the systematic economic strategy that led the postwar Japan out of the perils of the disastrous effects of the war to be one of the most powerful economies of the world. The paper also tries to analyze how unique was the Japan model of economic development and how its growth differs from other capitalist countries’. Although there are different opinions about the fiscal policies that it has been following, this paper would make a positive evaluation of Japan’s economic past. Taking in to account the extraordinary economic growth that the nation has accomplished one can state that the nation’s transformation process was highly appreciable and unparallel to any other nations since the Second World War. As Duss rightly puts it, ‘The Japanese model of economic growth’ has become one of the most discussed topics among scholars and public officials (Duus, 1998, p.17). The postwar miracle The economic growth of Japan after the World War II is often termed as a postwar miracle. Number of factors could be considered as the contributing forces behind the miracle including the United States’ investment. One can notice that it was the innovative economic policy of Japanese government on international trade and industry that paved the way for the nation’s rapid industrial and economic growth. The commercial and financial burden caused by the war remained a threat to Japan’s economy. Inflation, poverty, unemployment and related miseries reached their peak soon after the Second World War. The American government under the supervision of the allied powers played a pivotal role in Japan’s economic recovery. The SCAP (Supreme commander of the allied powers) official with an intention to prevent militarism as well as communism undertook the developmental programs. Military aggression in the Korean cape also boosted the economy in 1950 because the US government contributed huge amount of special procurements for the nation. Today, Japan has become a potential competitor to USA and China with regard to the export of consumer goods and industrial products, and has proved to be one of the leading industrial powers among world nations. Governmental Economic Reforms The initial target of postwar Japan was to enhance its production capabilities and become a self sufficient economy in order to compete with the west. Though the American aid boosted Japan in the initial stage of recovery, the US withheld the payments by the end of Korean War. It was by the late 1960s Japan surprisingly emerged from the recession and peril and rose to be a model economy. As part of its economic reforms, the Japanese government encouraged the growth of private sector in the country by enforcing relevant regulations and focusing on trade expansion. Government also provided low interest loans to enhance the different private and corporate sectors to promote economic growth. This emphasis on the private sector of the nation resulted in higher rate of GDP for the nation. As Maciamo points out Japan’s GNP was US$14,2billion, half of West Germany, 3x less than Britain and only 4.2% of the US economy in 1951. However, by 1975 the GDP rate of the nation was double of the UK’s and in 1980 it reached US$1040billion i.e. 40% of the US economy (Maciamo). The defining features of Japan as a model (1950-1980). During the three decades between 1950and 1980 Japan had undergone profound transformation from rural to urban and agricultural to industrial economy. The Ministry of Internal Trade and Industry (MITI) played the most important role in the economic growth of the country. The industrial revolution that spread to the various parts of the world had a particular growth in Japan. The urban and industrial transformation was highly dramatic and the concentration of population and industry in major metropolitan areas also was one of the outstanding features of the changed scenario. Meanwhile Japan promoted its own strong localized industrial belt. The rapid growth in the urban population, the interconnected changes in the professional structure and the amazing industrial growth with its urban human force made Japan a model economy. The period between 1950 and 1980 in the economic history of Japan is known as ‘Golden Sixties’ which literally witnessed the economic miracle. The government under the leader ship of Ikeda introduced an income doubling plan, reducing the taxes and interest rates. The government also improved its investments on the infrastructural areas like railway, roads, airports, and highways. The liberalization of trade, adequate internal market regulations, international alliance for exports and integrating Japan by joining the GATT, the IMF, and the OECD all were the courageous economic reformations that Ikeda introduced. How do they fit for a system? The postwar Japan has invited a reconsideration of the role of government in economic policy. In a sense, Japan has less self-reliance in the market mechanism than other countries. Unlike the other countries Japan has not changed its economic policies very often. Textile industry can be a better example. Japan had a relational obligatory business heritage. The role of entrepreneurship in fashioning markets never existed before. Though Consumer goods markets experienced tough competition in Japan the trade intermediates always maintained good relationship in which goodwill is expected to be the important aspect. The per capita income of people of Japan has been experiencing an extraordinary growth rate for the last century as a result of scientific, industrial, and sociological changes. Japan is an urban society where the agriculture sector consists only 4%of labor force. Among them many people enrich their income by part-time jobs in towns and cities. Japan’s industrialized, free market economy is particularly well-organized and competitive in areas associated with international trade but output is inferior in certain private areas such as agriculture, distribution and services. The postwar Japan emerged as a grown-up industrial economy with the help of excellent industrial management and techniques, well knowledgeable and productive work force. High savings and investment rates and concentrated back-up of industrial growth and foreign trade also fostered the economic growth. Japan is a country with inadequate natural resources, and it depends on trade to purchase raw materials for its economy. Japan’s long term economic projections gained wide appreciation and it has largely recovered from its worst period of recession since World War II. Imported energy was the only source for Japan to rely on. Since the oil shocks of the 1970s, Japan began to depend on other important energy sources such as coal, liquefied natural gas, nuclear power, and hydropower and thus Japan became one of the most energy-efficient developed economies in the world. Through the effective foreign policy Japan could ensure peace and prosperity to the Japanese people by working closely with the west. Japan became an active member of the United Nations since 1956 and established its diplomatic relations with many other independent nations (Japan (09/08). In short, Japan made use of all its characteristics to enrich its economy. Japan and other capitalist countries The driving force behind the great success of Japan has been a matter of research and investigation for many decades. With the traditional form of the international economic system, with tariff low, low level of tax trade barriers Japanese market have to be appreciated for its excellence (Saxenhouse). Political condition in the postwar Japan was worse. Corruption, crime, and black markets had conquered every area of social life. Japan's geographic isolation (it is an island nation) as well as its cultural isolation prevented the supports from nations like Korea and China, which they had occupied during the wartime. Japan’s success is primarily attributable to its own efficiencies of free markets and to the state’s strategic, systematic, and wide-ranging involvement in those markets. World has been curious to observe these paradigms by examining the Japanese development in its historical context. Experts indulged themselves in comprehensive surveys to learn the economic processes of postwar Japan to know how it embodied and enabled economic success. US per capita GNP in 1950 at the start of Korean War was more than 13 times of that of Japan but by 1960 it was only about six times greater. In 1965 US per capita GNP was slightly less than four times greater than Japan’s. In 1960 the cabinet decided on the income doubling plan as the part of the trade and foreign exchange liberalization and Japan joined the organization for Economic co-operation and development (OECD) in April 1964 and by 1995 the ratio of Japanese to US income was roughly 3:2. Manufacturing industries (primary, secondary, tertiary) brought about this growth in income mainly during the period of rapid economic growth. The industries in the manufacturing sector also had undergone many changes. The textile industry was the leading source which contributed more than 20%of income until 1950. More than 40% of total revenue produced by the manufacturing sector in the 1950s was from small industries such as food, textile, apparel, and wood industry and furniture products. The influence of the west caused a variety of structural changes during the period (Kohama 14-19). Political economy of postwar Japan The financial system that prevailed after the war was not actually a new one but only the continuation of the prewar financial setup with a slight changes made by the Allies in occupation. As Cargill and Royamma (1988) point out the conventional financial groups ‘zaibatsu’ were dissolved and the relation between the Bank of Japan and government was redefined. The Allies also imposed regulations to control the securities companies. The new policies helped the bank to establish the dominance in the flow of funds with special characteristics (Cargill, Hutchison, and Itō 29). Under a new financial system (Bretton Woods system) Japan maintained an exchange rate of 360 yen per dollar. The response of the new policy to the international developments was passive. Yet it had to remain at a fixed exchange rate. The discretionary power of the bank was limited and the flow of private capital was strictly regulated (Cargill, Hutchison, and Itō 29) Japan’s recovery and industrial growth was an unanticipated triumph which attracted the world nations’ attention toward the policies and strategies of Japanese business enterprises and their management. The structure of Japanese business reveals the difference between Japan and other Western capitalist countries in culture, tradition, management, labor relations and business organizations which definitely play a good role in Japanese success. As a result, ‘Japanese Management’ became a myth, a subject to study (Metzger-Court and Pascha p.263). Postwar Japan embodies the notion of planning Japan’s quest for a sovereign national defense system under American sponsorship has been the essence of its national security policy since the end of the War. This pursuit for the nation’s security intensified after the work ended in 1952. Japan’s open self-defense approach toward national security is the result of U.S. influence upon Japan. It can be assessed that Japan has learned the key concepts of homeland security from the United States; the U.S.-Japan security relationship evolved over time and later the nation developed its policies toward homeland security. Thus, Japan’s model of home land security and national defense system highlights how the other countries could adapt from the Japanese national defense model. The economic structure of the nation also deserves primary attention in this regard. The rapid expansion of the modern industrial sector and its rise to ascendancy over the traditional sector really paved way to the emergence of a miraculous economic structure. The economic structure of the nation was built on three tight sections. The first deals with infrastructure building in banking, railways, shipping, posts and telegraphs, electric power, and education; the next, shifts in agriculture and traditional industries that generated much of the overall output growth during this stage; and the third, the appearance of modern small industry like cotton and silk spinning in which government initiatives provided an early incentive but not so important as private projects, and the heavy and engineering industries, which depended on state support.. The country also focused on foreign trade, agriculture, heavy industry and machinery, textiles, and the replacement of traditional industries that manufactured consumer goods by small-scale industries that used electric power to make the same items. Fiscal and monetary policy and other simulative measures from 1950-1980 were moderate to embody the notion of economic planning. As in earlier days, involvement and management were key factors in development. Free market features boosted growth, but government guidance helped a complete understanding of the country's economic development a reality. Japan became a world economic power by taking a number of steps to overcome the challenges it faced during the wartime. It imported and then often enhanced foreign technology; it liberalized foreign exchange and trade adequately to gain way in into the world economic community. The Governmental policies toward the agrarian sector of the nation also are interesting. Only 15% of Japan's land is suitable for cultivation. Agricultural economy is highly protected by subsidies. Japan maintains an overall agricultural self-sufficiency rate of about 40% on fewer than 5.6 million cultivated hectares (14 million acres). It is the highest per hector yield in the world. In recent years, security issues and increasing support for the Self Defense Forces have become Japan’s special interested issues. Japan has proven its active role in disaster relief at the time of the 2004 Indian Ocean tsunami, and by giving its participation in peacekeeping operations such as in Cambodia in the early 1990s and Iraq in 2005-2006.The US Japan relationship has made Japan a major market for many U.S. products, including chemicals, pharmaceuticals, films and music, commercial aircraft, nonferrous metals, plastics, and medical and scientific supplies (Japan (09/08). Short comings of the Japan Model Industrial growth and development was the obvious strength of Japan for the past hundred years. Urbanization was a main feature. People from rural areas migrated to big cities for better life and for employment. All kinds of industries and businesses flourished during this period. The massive migration to urban areas made the cities especially Tokyo the largest urban population in the world, and the severe problems like congestion, commuting, accommodation and environmental threat have become major issues of concern which are to be dealt with effectively. The problems cannot be left to experts in the environmental sciences alone. It is obvious that Japanese political leaders, and the related administrative organs of government, are totally unable to fight with the massive amount of epidemic in the nation. Besides, too much emphasis on the industrial sector and urban population of the nation has adversely affected the agrarian economy and the rural population. Similarly, the nation is yet to explore the full potentiality of its human resources. Conclusion The question whether the Japan model of economic development can be applied to other nations is debatable. However, world nations have got a lot to learn from the nation’s model of development. No other country has ever resurrected from the great disaster that the nation was in after the Second World War. The nation’s emphasis on the private sector enterprises and promotion of industrialization and urbanization cannot be considered as a role model that could easily be followed by other nations. As mentioned above, the increasing rate of urbanization and industrialization have sidelined the agrarian economy of the nation and this gas very adversely affected the natural resources and environmental balance. However, Japan’s economic growth stands out as a unique phenomenon which has resulted from clear cut economic planning and far fetched developmental visions. Works Cited Duus, Peter. The Cambridge History of Japan. Cambridge University Press, 1988. Maciamo. Japan Reference: Japan's postwar economic miracle (1950-1990). Japan Reference, 2004. 3 February 2009. Japan (09/08). Bureau of East Asian and Pacific: U.S Department of State, 2008. 3 February 2009. Saxonhouse, Gary R. “What does Japanese Trade Structure Tell Us about Japanese Trade Policy?” The Journal of Economic Perspectives 7. 3 (Summer 1993): 21-43. 3 February 2009. Kohama, Hirohisa. Industrial Development in Postwar Japan. Illustrated Edition: Routledge, 2007. Cargill, Thomas F., Hutchison, Michael M., and Takatoshi Itō. The Political Economy of Japanese Monetary Policy. Illustrated Edition: MIT Press, 1997. Metzger-Court, Sarah and Pascha, Werner. Japan's Socio-economic Evolution: Continuity and Change. Routledge, 1996. . 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