Small firms, light industry and agriculture offered relatively low wages. Income per head was far higher in the great industrial centers than in the hinterland.
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The economic strains of emergent dualism were amplified by the slowing down of technological progress in the agricultural sector, which had exhaustively reaped the benefits due to regional diffusion from the Southwest to the Northeast of best practice Tokugawa rice cultivation. Tenants also found their interests disregarded by the national authorities in Tokyo, who were increasingly focused on supplying cheap foodstuffs to the burgeoning industrial belt by promoting agricultural production within the empire that it was assembling through military victories.
Japan secured Taiwan from China in , and formally brought Korea under its imperial rule in upon the heels of its successful war against Russia in Tenant unions reacted to this callous disrespect of their needs through violence. The relative decline of the United Kingdom as an economic power doomed a gold standard regime tied to the British pound. The United States was becoming a potential contender to the United Kingdom as the backer of a gold standard regime but its long history of high tariffs and isolationism deterred it from taking over leadership in promoting global trade openness.
Germany and the Soviet Union were increasingly becoming industrial and military giants on the Eurasian land mass committed to ideologies hostile to the liberal democracy championed by the United Kingdom and the United States. It was against this international backdrop that Japan began aggressively staking out its claim to being the dominant military power in East Asia and the Pacific, thereby bringing it into conflict with the United States and the United Kingdom in the Asian and Pacific theaters after the world slipped into global warfare in As Nakamura points out, a variety of Occupation-sponsored reforms transformed the institutional environment conditioning economic performance in Japan.
The major zaibatsu were liquidated by the Holding Company Liquidation Commission set up under the Occupation they were revamped as keiretsu corporate groups mainly tied together through cross-shareholding of stock in the aftermath of the Occupation ; land reform wiped out landlordism and gave a strong push to agricultural productivity through mechanization of rice cultivation; and collective bargaining, largely illegal under the Peace Preservation Act that was used to suppress union organizing during the interwar period, was given the imprimatur of constitutional legality.
In short, from a domestic point of view, the social capability for importing and adapting foreign technology was improved with the reforms in education and the fillip to competition given by the dissolution of the zaibatsu. Resolving tension between rural and urban Japan through land reform and the establishment of a rice price support program — that guaranteed farmers incomes comparable to blue collar industrial workers — also contributed to the social capacity to absorb foreign technology by suppressing the political divisions between metropolitan and hinterland Japan that plagued the nation during the interwar years.
The revamped international economic order contributed to the social capability of importing and adapting foreign technology. The instability of the s and s was replaced with replaced with a relatively predictable bipolar world in which the United States and the Soviet Union opposed each other in both geopolitical and ideological arenas. The United States became an architect of multilateral architecture designed to encourage trade through its sponsorship of the United Nations, the World Bank, the International Monetary Fund and the General Agreement on Tariffs and Trade the predecessor to the World Trade Organization.
American companies were encouraged to license technology to Japanese companies in the new international environment. Japan redirected its trade away from the areas that had been incorporated into the Japanese Empire before , and towards the huge and expanding American market. Especially striking in the Miracle Growth period was the remarkable increase in the rate of domestic fixed capital formation, the rise in the investment proportion being matched by a rising savings rate whose secular increase — especially that of private household savings — has been well documented and analyzed by Horioka While Japan continued to close the gap in income per capita between itself and the United States after the early s, most scholars believe that large Japanese manufacturing enterprises had by and large become internationally competitive by the early s.
In this sense it can be said that Japan had completed its nine decade long convergence to international competitiveness through industrialization by the early s. There is little doubt that the social capacity to import and adapt foreign technology was vastly improved in the aftermath of the Pacific War.
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Creating social consensus with Land Reform and agricultural subsidies reduced political divisiveness, extending compulsory education and breaking up the zaibatsu had a positive impact. There is no doubt that M. By intervening between Japanese firms and foreign companies, it acted as a single buyer of technology, playing off competing American and European enterprises in order to reduce the royalties Japanese concerns had to pay on technology licenses. By keeping domestic patent periods short, M. And in some cases — the experience of International Business Machines I.
How important industrial policy was for Miracle Growth remains controversial, however. The view of Johnson , who hails industrial policy as a pillar of the Japanese Development State government promoting economic growth through state policies has been criticized and revised by subsequent scholars.
The book by Uriu is a case in point. Furthering the internalization of labor markets — the premium wages and long-term employment guarantees largely restricted to white collar workers were extended to blue collar workers with the legalization of unions and collective bargaining after — also raised the social capability of adapting foreign technology. Internalizing labor created a highly flexible labor force in post Japan. Ironically, the concepts of just-in-time and quality control were originally developed in the United States, just-in-time methods being pioneered by supermarkets and quality control by efficiency experts like W.
Edwards Deming. Yet it was in Japan that these concepts were relentlessly pursued to revolutionize assembly line industries during the s and s.
Industrial Dualism in Japan: A Problem of Economic Growth and Structure Change / Edition 1
Miracle Growth was the completion of a protracted historical process involving enhancing human capital, massive accumulation of physical capital including infrastructure and private manufacturing capacity, the importation and adaptation of foreign technology, and the creation of scale economies, which took decades and decades to realize.
Dubbed a miracle, it is best seen as the reaping of a bountiful harvest whose seeds were painstakingly planted in the six decades between and In the course of the nine decades between the s and , Japan amassed and lost a sprawling empire, reorienting its trade and geopolitical stance through the twists and turns of history. While the ultimate sources of growth can be ferreted out through some form of statistical accounting, the specific way these sources were marshaled in practice is inseparable from the history of Japan itself and of the global environment within which it has realized its industrial destiny.
Estimates of Japanese income and output by sector, capital stock and labor force extend back to the s, a period when Japanese income per capita was low. As the reader will see, this discussion confirms the importance of factors discussed at the outset of this article.
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Attributing growth in national income in growth of inputs, the factors of production — capital and labor — and growth in output per unit of the two inputs combined total factor productivity along the following lines:. To be sure, the precise assumptions and techniques they use can be criticized. The precise numerical results they arrive at can be argued over. Trade openness is estimated by taking the ratio of total merchandise trade to national output, the latter defined as Gross Domestic Product G. For a detailed discussion of this index see United Nations Development Programme For , the figures on NHK subscribers are for television subscribers.
Industrial Dualism In Japan: A Problem Of Economic Growth And Structure Change:
The symbol n. Sources: The figures in this table are taken from various pages and tables in Japan Statistical Association , Maddison , Minami , and Ohkawa Flowing from this table are a number of points that bear lessons of the Denison and Chung decomposition. Another highlights improvements in the quality of the labor input. Yet another points to the overriding importance of domestic investment in manufacturing and the lesser significance of trade demand. A fourth group suggests that infrastructure has been important to economic growth and industrial expansion in Japan, as exemplified by the figures on electricity generating capacity and the mass diffusion of communications in the form of radio and television broadcasting.
Notable in Panels A and B of the table is that the gap between Japanese and American income per capita closed most decisively during the s, the s, and the s, precisely the periods when manufacturing expansion was the most vigorous. Equally noteworthy of the spurts of the s, s and the s is the overriding importance of gross domestic fixed capital formation, that is investment, for growth in demand.
By contrast, trade seems much less important to growth in demand during these critical decades, a point emphasized by both Minami and by Ohkawa and Rosovsky Rather, domestic capital investment seems to be the driving force behind aggregate demand expansion. The periods of especially intense capital formation were also the periods when manufacturing production soared.
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