International Economic Growth - Essay Example

Japanese Post-War Economic Miracle is the given to the historical phenomenon of Japan's record period of economic growth following World War II,spurred both by US investment, which has been made by the American government, under the auspices of the Supreme Commander of the Allied Powers, and Japanese government economic interventionism in particular through their Ministry of International Trade and Industry (Ellington, 2004). The situation in Japan in the first postwar years was more then just difficult. There was a total isolation from outer world. The state, which had lost during war almost 40 % of its wealth, which has haven't any raw material sources, was completely cut off exterior raw market. It has been destroyed about 30 % of basic industry equipment. After numerous bombing Nagasaki and Hiroshima has been almost purely ruinous. The capital of the country, Tokyo, has stayed in ruin. There has been demobilized about 9 million soldiers, moreover 1.5 million people has entered the country as refugees. The inflation has reached 5000 %. There has been overall shortage of goods and materials. There has been a great dearth. The value of the yen to the dollar has been constantly falling down that has evidenced that financial system of the state has been completely unsettled. Notwithstanding Japanese people has felt release with the end and war. The society has been full of optimistic expectations. Everybody has been equally poor, and everybody has had the same chances. They have started everything from the very beginning. The great role of Japan economics development has been played by Ministry of International Trade and Industry (MITI). It seems like no other governmental regulation or organization had more economic impact than this ministry. "The particular speed, form, and consequences of Japanese economic growth are not intelligible without reference to the contributions of MITI" (Johnson, 1982). The main achievement of Japan government that time has been an efficient cooperation between the Japanese government and private industry. The other scholar, David R. Henderson, considers that "MITI plans for industry growth, and sometimes gets other agencies to use their powers to carry out the plans, the extent of MITI's control, and of government control generally, has been greatly exaggerated". It should be mentioned that in period 1955 -1973, Japan government has had six different National Economic Plans. But without exception actual growth rates have exceeded those required to fulfill the plan's targets. This is evidence that the plans themselves were not responsible. The course that has been chosen for the state's development to some extent may seem paradoxical: To cut the program of industry funding in order to take inflation under control; To eliminate the dependence of enterprises development on external source of financing; To state fixed value of yen to a dollar. These sanctions have created severe conditions for those industry branches, which have been subsidized with the help of foreign or governmental sources of financing. The position has been more aggravated in result of division of such big monopolistic incorporations like "Mitsui", "Mitsubishi", and "Sumitomo". The point is that in result of such division there have been broken numerous connections with providers of raw products. In this sphere they have has to start everything from the very beginning too. The program of development, which taken a lot of companies over a rough road, has followed the aim to stop the hasty growth of prices. The numerous companies' bankruptcy has been seen as less harmful for the economy as engrossing inflation. Reduce of market for the goods resulted decrease. But there has been any assurance that Japan economics would stand the test of conjuncture degradation. The market changes resulted by the war in Korea has saved a lot of Japan companies. The boom has lasted for a year, and then another decline has come. The question of vital importance has become a long-term economics development, and its future orientation. There has been considered two variants: Formation of post-war economics by means of maximal development of export; Orientation on external market development. Among governmental and business community the first conception has overcame, though to put it into effect has not been easy. The main hardship has consisted in companies' being cut from the world market. They have not known the real demand for the goods; they have not had any information concerning the goods, which has been a subject of import in Japan. All this has made Japan companies to stand in a defensive with respect to foreign competitor. That time the export has been rather limited. They have delivered soft goods, fish tinned goods, and seafood to USA; textile and caustic soda to southeastern Asia. The first deals have practiced by means of correspondence. This has been the time of first steps in industry and trade. Then time has been ripe for race. The period from 1953 till 1960 has become time of economics reconstruction. The industry has exceeded the level of prewar production. It has been a success, but Japan goods except for textile, has still not been able to compete with the goods of western countries. In his book "A Short Economic History of Modern Japan" Allen writes, that "for economical production the metal and heavy engineering trades have needed more expensive capital equipment and more elaborate technical process than the textile industries, and the scarcity of capital "new" countries offers a handicap to development" (Allen, 1963) . The net cost of Japan products has been higher, and the quality lower. In connection with this the production of goods has been oriented generally on home market, which has promptly become full. This time it has not brought to decline. There have been put into practice an effective means, which afterwards has time and again helped over Japan business interests in various crisis situations. This means is structural changes and reorganization. Owing to this means there has come the prompt proliferation of competitive ability of Japan products. The lead between Japan and foreign companies in world market has melted day by day. There has happened the thing, which has been lately called Japan economic miracle. The Japan development in the period of high rate of increase to a large degree has been resulted by the inculcation of high tech of developed countries. That is the fact. The question is how this inculcation has been brought into effect How the small firm somewhere on Hokkaido or Kyushu could inculcate the high tech of the same small firm from Brussels or Chicago Whence Japan company has had an opportunity to get to know, where and which one technology has been used They have had to collect information about the best technologies in the world, to study commercial information, to become aware of juridical aspects of purchase, and aftermath of usage of such technical innovations. Technical consulting center discovered by Mitsui in 1960 has played the extremely important role. Beside from the main office in Tokyo the collection of technical information has been executed by the departments in New-York, London, and Dsseldorf. Later on such centers have been opened in Paris, Roma, and many other cities of USA. Specialist of these centers have been reading technical magazines, visiting patent libraries, opening up business relations with research institutes and universities, preparing the observation of technologies put in practices with respect to industry branches division. Japan companies has not have any problems in getting new technologies as they have been paying for them very good money. That is one of miracle's explanations. The next step they have made. They have selected the best from all produced in another countries. They have been selected the most efficient, the advanced. Who could have knew that the mountain country situated on islands, and not having roads would go into automotive industry. Any car needs steel; steel needs ore and carbon. A car is a synthesis of many industries: mechanical engineering and electronics, chemistry and oil processing. Notwithstanding today automotive industry is one of the leading industries of Japan economics. There are fives giants of Japan automotive industry such as "Toyota", "Nissan", "Mazda", "Honda", and "Mitsubishi", which combine thousands of average and small companies. Together with the sphere of sales, tire production, filling stations, and other car services there are more then 5 million people involved in this industry. The postwar reforms, which have been brought to effect by Japan government, have been turned out very successful. This has been resulted fist of all due to existence of powerful authority able to materialize reforms. Moreover, there have been no bribable officials able to carry theses reforms into practice in a good faith. In order to win in competitive contention of companies, and to raise their own standard of living Japan people has been working self-forgetfully (about 10 hours per day). There have been still a control of prices, and basic wealth distribution control. It has helped a prevention of people incoming difference break. The governmental low-rate of interest credits have been uppermost directed to reconstruction of key industry branches, and then to development of export production. They have emphasized on goods import, and high tech bringing into practice. One more important thing to explain the Japan postwar economic miracle is a high level of intellect and education amidst Japan workers and engineers. In order to conclude let us remember the words of Benigno Valds, who said: "Japan is a prime example of what the economics literature defines as a growth miracle, that is, an economy that experiences high rates of per capita income growth for a long, sustained period of time that enables it to move from being poor to being rich in only a few decades". List of References: 1. Allen, G.C. (1963). A Short Economic History of Modern Japan, 1867-1937. Frederick A. Praeger, Publisher, New York. 2. Ellington, L. (2004). Learning from the Japanese Economy. Japan Digest. 3. Johnson, C. (1982). MITI and the Japanese Miracle: The Growth of Industrial Policy, 1925-1975. Stanford: Stanford University Press. 4. Henderson, David R. (1983). The Myth of MITI. Fortune. August 8. 113-16. 5. Valds, B. (2003). An Application of Convergence Theory to Japan's Post-WWII Economic "Miracle". 6. Hunter, J. (1995). The Emergence of Modern Japan. Read More