Japan & State Impulse: Part 3

Part 1.

Part 2.

From Catastrophe to Recovery

In 1945 Japan suffers the bad luck it had escaped a century before: it iwas invaded by a foreign power, the same one that had forced it, from 1853 on, to open itself to the world. For the first time in history, the country was defeated and foreigners occupied its territory. This was a terrible trial for a people that thought themselves “chosen by God” and that was educated in the myth of the invulnerability of its territory and army.

In 1945, Japan was a materially ruined State. 50 percent of its urban zones were completely destroyed, its economy was paralyzed, its communications network pulverized and its industrial apparatus in shambles. From that date on a new political regimen was instated. The Emperor kept a symbolic role but renounced the “divinity” of his person. A new Constitution came about, but this time it was not created by the Japanese aristocracy but rather by the technicians of the foreign State that had defeated Japan. With the arrival of the supreme commander of the Allied Forces, on August 30th of 1945, and the signing of the unconditional surrender of Japan, in the ironclad Missouri, on September 2nd, Japan officially accepted the inevitable: the complete loss of its political sovereignty. General Douglas Mac Arthur would govern Japan as a true “viceroy”. Meticulously following the plan of invasion hammered out in Washington, Mac Arthur immediately commenced the task of restoring the country “to the bosom of civilized families”, a metaphor equal to undoing the work of the Meiji Revolution, meaning, dismantling the Japanese industrial apparatus.[9]

The task of democratizing Japan included total deindustrialization, leaving only those indispensable industries standing to guarantee the feeding of the population. In November 1945 General Mac Arthur gave precise instructions to Prime Minister Kijuro Shidehara in order to proceed with the carrying out of five fundamental reforms: the establishment of electoral suffrage, the beginning of liberal education, the consecration of the right of workers to have their own organizations, the abolition of the autocratic regime and the democratization of the economy. Between 1946 and 1947 several legal texts were made public for the industrial dismantling and the elimination of the zaibatsu upon which the industrialization had been built, considered by the invaders to be capitalistic concentrations that were too important. The democratization of Japan included the purging of the zaibatsuin its plans of occupancy. The proprietary families of these trusts were persecuted before the war. Some of their members found themselves individually reached by the purge and were taken to the courts. What’s more, the reorganization of the fiscal system was targeted toward limiting and even liquidating their fortunes.

Likewise, to conclude the destruction of the war apparatus of Nippon, the supreme commander of the Allied Forces began to carry out a policy of atonement destined to make Japan take responsibility for the damages caused in Asia by its terrible aggressions. The atonement policy included the disbanding of a large part of the steel and iron industry and the chemical industry and its transport to the countries that had been harmed by Japan.[10]

From 1945 to 1947 an extraordinary shortage of food was brought on in Japan. More than five million people were left without work and an important rate of inflation devastated the country. Japan was rapidly becoming a deindustrialized country and, as a logical consequence, a sub-developed country.11 Nevertheless, history offered Japan a second chance. In 1948 the international situation changed rapidly and radically. In China, the armies of Chiang Kai-Shek were defeated by the communist forces lead by Mao Zedong. In the Korean Peninsula, that had been a Japanese colony, to the south the Republic of Korea and to the north the People’s Democratic Republic of Korea are formed. In 1949 the People’s Republic of China is constituted and in 1950 the Korean War broke out. Given the new international panorama, the United States found itself forced to “rebuild” Japan as a bastion against the Soviet Union and China. The Allied Forces then turned one-hundred and eighty degrees in their occupancy policy, abandoning the initial purpose of deindustrializing Japan. As a consequence of this change in occupancy policy, the Japanese economy was reborn like the phoenix.

“From the beginning of the hostilities of the Korean War, the North American forces (forces of the United Nations) sent numerous requests of armaments, vehicle replacement parts and other military provisions to Japanese companies” (Morishima, 1977: 202). Japanese economy thus began to rebuild itself through an unexpected state impulse.

The international situation obliged the United States to promote, with urgency, “the resurrection” of the Nippon economy and for that it was necessary to suspend the policy of demilitarization and deindustrialization that it had applied until that moment. The United States then abandoned the objective of rebuilding Japan as an agrarian and semi-industrialized economy. A new plan was drawn up for the reconstruction of Japan that “consisted of creating an economy that could assume the mission of developing all of Southeast Asia and at the same time accumulate reserves capable of satisfying the urgent demands of supplies on behalf of the United States. It was a turn of one-hundred eighty degrees in the occupancy policy. According to the measures taken in the beginning, it would not be allowed for Japan to have a standard of living superior to any other country in Asia that it had harmed; as a consequence, all goods and equipment – with the exception of subsistence goods and equipment of capital- were handed over as a means of atonement, or goods for the allies, or goods for the countries that had suffered Japan’s aggression. In 1949 the atonement programs were consigned to archives” (Morishima, 1977: 204).

The policy of the dismantling of the zaibatsu – that had been a strong blow for the Japanese economy, disorganizing it on the plain of structures and depriving it of a business elite of renowned experience - was abandoned. In order to tackle the task of economically reviving Japan, Mac Arthur had no other remedy than to rely on the very businesspeople that he had persecuted before the courts of the purge shortly before. As a consequence of this oversized turn, the adopted economic policy turned out to be almost identical to that carried out during the Meiji Revolution.

An economy made up of large companies was resurrected. Starting in 1950 and for five years, Japanese companies grew rich thanks to the demand of military articles [the state impulse] for the Korean War. During the first few years the main items of this demand consisted of trucks, vehicle replacement parts, cotton fabric, but in 1952 the Allied barracks General authorized the manufacturing of armaments and this became the item mainly in demand. (Morishima, 1977: 204)

As was during the Meiji governments, Japan came back out of the pit thanks to state impulse. Six years after defeat, the production of steel, iron, textiles and the manufacturing of machinery surpassed, incredibly, pre-war levels. This time the state impulse had the name “special supplies”.12 Furthermore, as during the Meiji Revolution, in the decade of the 50’s “many of the gigantic installations that had belonged to the army and the marina, including the old shipyards, were sold off to private companies. Amongst those operations figured, for example, the transfer of fuel holdings, that the marina in Yokkaichi had, to the Mitsubishi Petrochemical Company; the holdings of the army in Iwakumi went to the Mitsui Petrochemical Company, and the workshops of Harima, belonging to the army arsenals in Osaka, went to Kobe Steelworks. In the Meiji period, the sale of state companies had determined the structure of the Meiji industrial world; no less decisive was the sale of old military assets after the war and their role in the subsequent development of the Japanese economy. The economy that was rebuilt was like the pre-war economy; government orientations were essential” (Morishima, 1977: 205).

The Ministry of International Trade and Industry & State Impulse Planning

From the Meiji era on until the Second World War, the Japanese State played a decisive role in industrial development. The State built and gave away factories and maintained them, through subsidies, when these, by some external conjuncture, were not profitable.

After the Second World War the Ministry of International Trade and Industry (MITI) re-edited the essence of the economic policy of the Meiji Revolution and Japan became an industrial power. The MITI was the general quarter and the engine of the country’s economy. It played the role of coordinator between businessmen and the political class. With a minimum budget, the MITI had a preponderant role in the reconstruction of the Japanese economy. It controlled numerous activities of production and commerce. Among the most important laws promoted by the ministry it is necessary to name the Law on Currency Exchange Control and International Business – of December 1st, 1949- that granted the MITI the right to control imports, as well as the Law on Foreign Investments –of May 10th, 1950- that empowered it as the virtual control over all capital, short- and long-term, that would come to the country. Furthermore, it was the officials of the MITI who contributed to the revision of the law against monopolies, meaning against the zaibatsu, introduced by the Allied forces of occupancy.13 Thanks to state impulse, planned from the Miti, Japan “grew between 1955 and 1969 around 10.37 percent annually” (Ohkawa and Rosovski, 1973: 27) and in 1968 it surpassed the Federal Republic of Germany, becoming the second world economy (Guillain, 1969).

The “Japanese miracle” was possible through state impulse and the establishment of a “planned market economy” (Bieda, 1970: 52).