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Short Economic History of Modern Japan
Discussing the process of economic development in Japan, this book covers the period from when Japan first entered upon her career of Westernization to the beginning of the war with China in 1937. The main emphasis is on industrial and financial development and organization and on economic policy. Among the industries discussed are agriculture, textiles, steel and shipping.
A comprehensive glossary and bibliography are included and much of the statistical information is tabulated for ease of reading.
A comprehensive glossary and bibliography are included and much of the statistical information is tabulated for ease of reading.
- GenresJapan
202 pages, Hardcover
First published January 1, 1946
About the author
G.C. Allen
30 books12 followersGeorge Cyril Allen, who published under the name G.C. Allen, was a British economist who specialized in Japanese and British industrial policy.
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November 14, 2021
Professor Allen explores Japan’s modern development by dissecting key sectors of the economy. He breaks with traditional assumptions in the dismal science by applying contextual insights to labour mobility and the economy’s structure as Japan undergoes industrialisation.
Allen shows that over the Meiji era there is no clear demarcation between advances in agriculture and industrialisation. Instead, farmers typically expanded work into industrial products and took a second wage to supplement farm labour. For its part, the state’s development contributions were: employment (especially for the idle and discontented samurai class), introducing management practices, encouraging guild and business cartels (to impose standard uniformity and increase bargaining power), and incentivising import substitution (easing trade and investment pressures while also alleviating regional unemployment unrest).
Japan achieved its development objectives through ‘economic use of capital’, a lack of protective tariffs, and capitalising on fortuitously-timed sources of external demand. Allen’s economic use of capital finds expression through small public investments and minor technical method improvements. Incremental technology development and targeted spending left more cash for foreign industry imports. The lack of protective tariffs in the late nineteenth-century meant that foreign competition instilled a semblance of market discipline. Finally, robust external demand (especially silk) meant Japan was able to acquire ample foreign exchange, preventing the need for overseas borrowing and according exposure to currency volatility.
Allen describes Japan's development policy as the government encouraging expansionist business cycles which are then forcefully arrested in times of distress through checks on demand and investment. He notes alignment here with Professor Shinohara’s “long swing” analysis.
Japan’s modern economic history is divided into four stages:
- Early twentieth-century import surpluses impeding investment and therefore economic development,
- WWI export surplus leading to rapid industrialisation,
- Contraction due to collapsed demand during 1923-32, and
- Preparation for war in 1932-36 through increased public spending (especially in Manchuria) which enlarged the industrial base.
The most important thread for Allen’s argument is the Zaibatsu grasping the commanding heights of Japan’s economy. He shows how in the late nineteenth-century, monetary policy seeking to equalise money and specie (through contracting the paper money supply) lead to a fall in prices. Additional tax obligations imposed meant that peasants and the industrial sector sold land, often very cheaply, to meet their liabilities. The land sales were snapped up by large interests, leading to industry consolidation and in turn increasing industrial businesses size. Secondary sector consolidation enabled the Zaibatsu to strengthen their position as vital actors for Japan’s industrialisation.
The state viewed the Zaibatsu as the best conduit for national economic development. Japan’s middle class were too few in number and broadly lacked the training and expertise to meet development imperatives. The Zaibatsu, however, had historically managed daimyo revenues, and were practiced in large scale banking and commerce. These business groups were called upon to serve the state’s industrialisation objectives. The Zaibatsu were rewarded with access to discounted property, valuable contacts, and opportunity to underwrite government loans.
Soaring Zaibatsu profits enabled political influence. The business groups’ power increased to such heights that by the dusk of the Taisho period in the late 1920s, the Zaibatsu were no longer passive recipients of policy and could instead shape government policy to their wishes. The four largest trading conglomerates — Mitsui, Mitsubishi, Yasuda and Sumitomo — had interests spanning heavy industry (mining, metals, cement, mechanical engineering, shipping, glass), light industry (textiles and paper) and finance (banking and insurance). With their broad and integrated businesses, contemporaries started drawing parallels with the daimyo-concentrated production that characterised the later Tokugawa era. It wasn’t until the allied occupation government post-WWII that the Zaibatsu were completely toppled from their seat adjacent the Diet.
Professor Allen’s scholarship is an insightful introduction to Japan’s recent economic history. His talking through national account and industry production numbers are easily skimmed to prevent tedium, as Allen possesses the unfortunate talent of belabouring a point. Assertions about superior technology bringing production increases needn’t be substantiated with detailed figures in every single instance. We could all do without several pages on the ratio of narrow-power looms to wide-power looms and their attendant cotton yard output. Perhaps academic publishers were more demanding in Allen’s day, though I suspect the detail is a product of the author’s personality. The section on Japan’s silk industry was fascinating, however. A phrase I never thought I’d utter. The noble Professor has further entrenched an increasing conviction that the best economic analysis is either disaggregated commerce or philosophy à la Smith or Hayek. His overview is pleasingly lacking esoteric economic jargon that is often pompously deployed to disguise ignorance.
Emulating the rhetorical mastery frequently employed by the literati of country he so admires, Allen ends his 1946 publication on an elegiac note: ‘[Japan] possessed a resilient economy lacking the rigidities that had appeared in the western world. An immense field of industrial expansion lay before her; but she turned aside from it to pursue other ends.’
Allen shows that over the Meiji era there is no clear demarcation between advances in agriculture and industrialisation. Instead, farmers typically expanded work into industrial products and took a second wage to supplement farm labour. For its part, the state’s development contributions were: employment (especially for the idle and discontented samurai class), introducing management practices, encouraging guild and business cartels (to impose standard uniformity and increase bargaining power), and incentivising import substitution (easing trade and investment pressures while also alleviating regional unemployment unrest).
Japan achieved its development objectives through ‘economic use of capital’, a lack of protective tariffs, and capitalising on fortuitously-timed sources of external demand. Allen’s economic use of capital finds expression through small public investments and minor technical method improvements. Incremental technology development and targeted spending left more cash for foreign industry imports. The lack of protective tariffs in the late nineteenth-century meant that foreign competition instilled a semblance of market discipline. Finally, robust external demand (especially silk) meant Japan was able to acquire ample foreign exchange, preventing the need for overseas borrowing and according exposure to currency volatility.
Allen describes Japan's development policy as the government encouraging expansionist business cycles which are then forcefully arrested in times of distress through checks on demand and investment. He notes alignment here with Professor Shinohara’s “long swing” analysis.
Japan’s modern economic history is divided into four stages:
- Early twentieth-century import surpluses impeding investment and therefore economic development,
- WWI export surplus leading to rapid industrialisation,
- Contraction due to collapsed demand during 1923-32, and
- Preparation for war in 1932-36 through increased public spending (especially in Manchuria) which enlarged the industrial base.
The most important thread for Allen’s argument is the Zaibatsu grasping the commanding heights of Japan’s economy. He shows how in the late nineteenth-century, monetary policy seeking to equalise money and specie (through contracting the paper money supply) lead to a fall in prices. Additional tax obligations imposed meant that peasants and the industrial sector sold land, often very cheaply, to meet their liabilities. The land sales were snapped up by large interests, leading to industry consolidation and in turn increasing industrial businesses size. Secondary sector consolidation enabled the Zaibatsu to strengthen their position as vital actors for Japan’s industrialisation.
The state viewed the Zaibatsu as the best conduit for national economic development. Japan’s middle class were too few in number and broadly lacked the training and expertise to meet development imperatives. The Zaibatsu, however, had historically managed daimyo revenues, and were practiced in large scale banking and commerce. These business groups were called upon to serve the state’s industrialisation objectives. The Zaibatsu were rewarded with access to discounted property, valuable contacts, and opportunity to underwrite government loans.
Soaring Zaibatsu profits enabled political influence. The business groups’ power increased to such heights that by the dusk of the Taisho period in the late 1920s, the Zaibatsu were no longer passive recipients of policy and could instead shape government policy to their wishes. The four largest trading conglomerates — Mitsui, Mitsubishi, Yasuda and Sumitomo — had interests spanning heavy industry (mining, metals, cement, mechanical engineering, shipping, glass), light industry (textiles and paper) and finance (banking and insurance). With their broad and integrated businesses, contemporaries started drawing parallels with the daimyo-concentrated production that characterised the later Tokugawa era. It wasn’t until the allied occupation government post-WWII that the Zaibatsu were completely toppled from their seat adjacent the Diet.
Professor Allen’s scholarship is an insightful introduction to Japan’s recent economic history. His talking through national account and industry production numbers are easily skimmed to prevent tedium, as Allen possesses the unfortunate talent of belabouring a point. Assertions about superior technology bringing production increases needn’t be substantiated with detailed figures in every single instance. We could all do without several pages on the ratio of narrow-power looms to wide-power looms and their attendant cotton yard output. Perhaps academic publishers were more demanding in Allen’s day, though I suspect the detail is a product of the author’s personality. The section on Japan’s silk industry was fascinating, however. A phrase I never thought I’d utter. The noble Professor has further entrenched an increasing conviction that the best economic analysis is either disaggregated commerce or philosophy à la Smith or Hayek. His overview is pleasingly lacking esoteric economic jargon that is often pompously deployed to disguise ignorance.
Emulating the rhetorical mastery frequently employed by the literati of country he so admires, Allen ends his 1946 publication on an elegiac note: ‘[Japan] possessed a resilient economy lacking the rigidities that had appeared in the western world. An immense field of industrial expansion lay before her; but she turned aside from it to pursue other ends.’
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