Term Paper: Economic Miracle Post War

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Economic Miracle: Japan 1946-1973

Japan lies in the Eastern Coast of Asia between the Pacific Ocean and the Sea of Japan (Ministry of Foreign Affairs 2007). Its total land area is roughly 378,000 square kilometers. It consists of Hokkaido in the North, Honshu at the center, and Shikoku and Kyushu in the South (Ministry of Foreign Affairs). Japan at present competes for world leadership in terms of GDP per capita and wage per hour with the United States (Luu et al. 1996). In comparison, Japan's GNP at about $34,000 is higher than the U.S.A.'s only $25,000. Japan's wage per hour is roughly $16 compared to only $12 of the U.S. These figures demonstrate that Japan is 35-45% ahead of the U.S.A. (Luu et al.). This is Japan economy today.

Between 1941 and 1945, World War II raged and ended with Japan's surrender and a shattered economy (Ministry of Foreign Affairs 2007). It was occupied by the Allied Powers up to 1952 when it was reduced to the status of a "less-developed" country. Its per capita consumption was roughly a fifth of that of the U.S.A. In the two succeeding decades, Japan entered an annual growth rate of 8%, raising it from the "less-developed" to a "developed" status in the postwar era. This was the result of a set of developments, which included high rates of personal savings and private-sector facilities investment, a labor force with a strong work ethic, a sufficient supply of cheap oil, innovative technology, and an effective government intervention in private-sector industries. Japan became a major beneficiary of the principles of free trade promoted by the International Monetary Fund and the General Agreement on Tariffs and Trade.

Its economy grew to become the second largest to that of the U.S. In 1968. Between 1950 and 1970, its city population increased from 38% to 72%, especially in the industrial work sector. Its exports grew at 18.4% on the average per year in the 60s. After the mid-60s, Japan realized a current balance surplus each year, except immediately after the 1973 oil crisis. But its overall economic growth continued as a result of strong private-sector facilities investment, drawn from high personal savings ratio in addition to significant changes in Japan's industrial structure. The economy veered its focus from agriculture and light manufacturing to heavy industry. In time, iron and steel, shipbuilding, machine tools, motor vehicles and electronic devices dominated its industrial sector (Ministry of Foreign Affairs).

The factors that made Japan an enduring economic miracle were categorizes into its government, a protected economy and external assistance (Luu et al. 1996). During the Meiji era, the centralized government moved into the fiscal and military side. It first improved the railways and the postal services, which, in turn, helped the shipping industry. It likewise boosted the development of rural industries. Then the Meiji government established model industries, such as textile and glass, which stimulated the industrialization process. The Liberal Democratic Party stirred private businesses until the government made it a national priority to raise the national economy. The Ministry for International Trade and Industry or MITI was a government association, which fixed production targets, future economic plans and handled all of Japan's economic problems. The MITI also set up scientific and management towns for the improvement of production and educational programs and developed management skills necessary for modernizing the economy. In these two periods, the government of Japan invested a lot of money and effort in communication, skills and education, such as the construction of universities. Business organizations hired students from famous universities and retirees as consultants on plans for constructing strategies and decision-making function (Luu et al.).

Another factor was Japan's protected economy. As far back as in the 20s, it enjoyed a dual economy wherein and modern manufacturers co-existed with small factories (Luu et al. 1996). Small businesses produced what large businesses needed and delivered these products through a "just-in-time" system. In the postwar period, government policy protected the domestic market. (Luu et al.).

The phenomenal economic growth of Japan was also enhanced by external assistance (Luu et al. 1996). Its past model was to borrow from the government and apply the borrowing to the base of society. But because of scarce resources, not all the problems could be solved internally. Japan had to draw from outside help. It had to secure raw materials from its colonial empire or from other countries through its profits from trade and exports. It purchased industrial technology from Western Europe. It also obtained capital from the Korean War, which further enhanced the economy. The Japanese people's unified character and viewpoint also contributed much to the success of the economy. They saw individuals as groups and believed that the individual should sacrifice for the good of the group. They were willing to work for no pay in the scientific town of MITI. They also forged wholesome interpersonal relationships. They believed that there should be closed relationship between the economy and politics. As a result, business organizations and political organizations mushroomed, especially in Tokyo, where they interacted. Thus, internal factors merged with external factors in creating Japan's economy. These internal factors were appropriate government policy and the right or homogeneous nature of the people. And the external factors were the assistance and opportunities from the rest of the world (Luu et al.).

But the one factor, which stood out in the growth of Japan's economy, especially in the rural areas, was the Land Reform of 1946-47 (Bernier 1980). It completely wiped out the landlord-tenant class relations, which was a main feature of the country since the late Edo period in 1600 to 1868. It was imposed on the government by the Supreme Command of Allied Powers or SCAP. It drew from the premise that landlordism was a major cause of jingoistic and militaristic tendencies, which characterized the Japanese society in the 30s and the 40s. It was designed to decimate rural radicalism, then an important aspect of agrarian Japan in the 20s and the 30s. Rural peasants were miserable under the landlord system. This system was, in turn, a major source of social unrest and which could be used to support left-wing groups. The elimination of these socialist tendencies in the rural areas called for the return of the land to the tillers. The majority of farmers had to become small property owners. The emergence of a rural middle class could evolve into a conservative political force to keep Japan from falling for communism (Bernier).

The Land Reform initiative of 1946-47 proved successful at least in translating the peasantry into a conservative bloc (Bernier 1980). Since 1948, the countryside overwhelmingly voted for right-of-center political parties. The Reform, however, failed to form the desired "middle class" of farmers. The Reform did not provide for equal landholdings. In 1950, 73% of all farm households owned less than one hectare of arable land. Since 1955, Japanese agriculture had to endure the pressure of rapid economic growth in the form of heavy and chemical industries, which were dominated by monopolist capitalists. Throughout the 20th century, the rural population of Japan decreased in proportion to its total population. From 60% in the 1900s, it went down to 48% in 1950, 31% in 1965, and 19.9% in 1977. This rural population grew from 26 to 37 million between 1900 and 1950, but sharply decreased to 22.5 million in 1977. Due to the destruction of homes and industrial establishments in the cities and the repatriation of Japanese soldiers and former colonists, the rural population grew in 1950. The average annual decrease in the 22-year period between 1955 and 1977 remained at 2% and reached nearly 8% since 1968. It was different for the population actively engaged in agriculture. The 1955 proportion was nearly equal to that of the 1920s. The farm population decreased to about 12 million or 30% in 1960 and to 6.2 million or 11.5% in 1977. The annual rate of decrease stood at about 3% from 1955 to 1977. This downward trend in the active farming population was considered partly as a continuation of the trend already apparent during the late Edo period. This increase in the proportion of non-agricultural to farm labor appeared to have been due to the influx from over-populated rural areas. The trend did not only extract excess farm population but also taken much-needed labor from the farms. It transformed cultivators into low-paid workers in factories, the construction industry and the services sector. The merging of agriculture and the capitalist economy pushed Japan into a new phase (Bernier).

The type and behavior of government was the primary factor to the successful evolution and establishment of Japanese economy. Prime Minister Tanaka Kakuei's Basic Economic and Social Plan of February 1973 projected that the country would enjoy continued high growth rates for 1973-77 (Ministry of Foreign Affairs 2007). However, the domestic macroeconomic policy had then resulted in a rapid increase in money supply, which stirred speculation in the real-estate and domestic commodity markets. At the time, Japan… [END OF PREVIEW]

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