June 2007

Economic Development of Japan
How Japan Globalized in the 19th Century

Farmers

RickshaKenichi Ohno (VDF/GRIPS））
Osaka Spinning Company

Meiji Japan (1868-1912)
A Unique Latecomer
History of peripheral society should be analyzed asinteraction between internal and external forces.
Japanese history was cumulative and evolutionary
thanks to the right distance from civilization (China).
When Japan began integration in the mid 19th century,it already had sufficient adaptive power.
Japan absorbed Western technology and systems
selectively and under its own initiative.
Japan’s industrialization also nurtured the monozukuri(manufacturing) spirit.

1June 2007

History: Evolution vs. Repetition
High technology& civil society
Industrialrevolution
Rise of commerce &merchant classFeudalism
Fights amonglocal powers

External stimuli

Centralizeddynasty)eo-patrimonialstate?

Dynasty A Dynasty B Dynasty C Dynasty D Colonialism

X

XX

XX

Destruction

Japan’s Multi-layered Identity

P.4

先史時代の日本
Pre-historic
Japan

Rice cultivation
Buddhism, China
Heian & Samurai
CultureGuns & Christianity
Edo Culture
Western influence)ote: Colored areas indicate
external impacts

2June 2007

II. Samurai’s RuleI. Emperor’s Rule

1603

III. Modern-ization

X

PP.16-17
IV. Postwar

1867
Rapidrecoveryandgrowth)ARA
Centraliz
ation

MEIJI
Westerniz
ation,
industriali
zation,militariliza
tion

EDOHEIA)
× 645
Clanfights

Taika
Reform)obles,
Decentralization

KAMAKURA
MUROMACHI
SE)GOKU

Internalwars,
dynamic& fluidsociety

Hunting &gathering

Tokugawa
Shogunate
Peace,
isolation,conserva
tive classsociety

xxxx

xxxx

Chinese culture &Rice
Buddhism political system

WEST: guns &Christianity

WARxxx
WEST!!!

US occupation
1945-52

Dr. Tadao Umesao’s View of the World
Eurasian Continent

P.9Russia
The

Western
MeditterraEurope(UK)nean andIslamicStatesDry Area China Japan

India

3

June 2007

Integration Viewed from Outside

P.5

WTO, WB, IMF, FTAs, G8, USA…

Existing World System
Democracy, market economy, industry,technology, life style …

Dynamism for change (+)

Latecomer country

Integration risks (-)

Integration Viewed from Inside

P.6

Imported fromoutside by:“Translative adaptation”（Prof. Keiji Maegawa, Tsukuba Univ.)

ForeignSystems

Invasion
Migration
Trade and FDI
ODAInt’l organizations

Conflicts andadjustmentsGovernment
must manage

Base SocietyInternal systemic evolution4June 2007

Evolution of Peripheral SocietyInteraction between Internal and External Forces

Foreignsystems

Base society

Period of internalization& stability

Period of adjustment& rapid change

Failed adjustment:social instability, economiccrisis, foreign dominance, etc.

External stimuli
Failed adjustment

K. Marx: Historical Materialism• History proceeds inevitably through material conflicts
and class struggle• Production force and production relation: rise in theformer creates friction with the latter, which leads todialectic solution.
Superstructure(politics, culture,science, ideology, etc)

Socialism!

PF ↔ PR

Infrastructure

Capitalism
Feudalism

Slavery
Primitivesociety

Das Kapital,
3 volumes, 1867-94

5

June 2007

J. Schumpeter: Rise & Fall of Capitalism• Capitalism is driven by entrepreneurs who perform
innovations• The success of capitalism produces new problems,
attitudes and mechanisms that lead to its fall

Capitalism!
Entrepreneurs
with newcombinations

Dynamism
driven bycreativedestruction

Mature technology,
equity over growth,bureaucracy, large
public sector, etc.

Bankers who
supply credit

Theory of EconomicDevelopment, 1912

“Socialism”(welfare state)

Capitalism, Socialism,Democracy, 1942

Cumulative history, Edo achievements,
national unity and nationalism

Japan’s economic growth was driven mainly by private
dynamism while policy was also helpful
Private-sector dynamismand entrepreneurship(primary force)

Policy support(supplementary)

P.56
Rapidindustrialization
especially in
Meiji period &post WW2 period
Policy was generally
successful despite criticisms:--Power monopoly by a small
group of politicians--Privatization scandal, 1881--Excessively pro-West--Unfair by today’s standard

6June 2007

Edo Period (1603-1867)

P.23Pre-conditions for Industrial Take-off•••••••

Political unity and stability
Agricultural development
Development of transportation and nationally unified markets
Rise of commerce, finance and wealthy merchant class
Rise of pre-modern manufacturing
Industrial promotion by local governments
High level of education
Samurai police and merchants
City girls

Daimyo in his castle

Rich Merchants from Edo Period (Gosho)
Mitsui Family

Sumitomo Family-17c From Matsuzaka-Kimono trade & money exchange inEdo, Kyoto, Osaka – huge success-16c Adopt Western copper refining,copper trade (Kyoto)-17c Move to Osaka-Besshi Copper Mine (under Bakufu’scommission)<Transition to Meiji>Manager: Rizaemon Minomura-Cope with bakufu policy
to protect Mitsui business-Support and work withnew government-Internal reform:
from gosho to zaibatsu-1876 Establish Mitsui Bank & Mitsui
Trading Company<Transition to Meiji>Manager: Saihei Hirose-Avoiding gov’t confiscation-Introducing Western mining
technology to renovate Besshi-Business diversification

Konoike-Sake making, trading, loans to daimyo-No serious internal reform in Meiji-Failed to form zaibatsu (Sanwa Bank)

7June 2007PP.45-46

Yataro Iwasaki (1835-85)

Mitsubishi• Seisho from Tosa, founder of Mitsubishi Zaibatsu• Shipping company--grew fast with governmentsupport (receiving gov’t ships, contract for military transport)• Established Nippon Yusen (NYK Line), fierce battle withKyodo Unyu (anti-Mitsubushi company), 1883-85• Expanded to many areas: trade, banking, shipbuilding, coal,mining (later, more)
Mechanical factory in Nagasaki, ca 1885
Bakufu’s Steel Mill in Nagasaki, transferred to Mitsubishi in 1884

Eiichi Shibusawa (1840-1935)

P.46

From Saitama

Tomoatsu Godai (1836-1885)
From Satsuma

Super business promoters -- but they did not form zaibatsu-First, anti-bakufu fighter-Next, assistant to last shogun-Works vigorously for MOF(invited by Meiji Government)-Governor of First “National”
Bank”-Company builder and businesscoordinator, helping to create
500 new companies-Social contributions-Studies and builds human
network in Nagasaki-Visits UK; realizes need toindustrialize, writes report-In Osaka, helps to create
copper co., railroad, shippingco., rice & stock exchanges,
cham. of commerce, university,
test centers, trading center, etc-SOE privatization scandal

8June 2007

P.47

Rise and Fall of Merchants and Enterprises
Q: Who were the main drivers of Meiji industrialization?
A: All types of entrepreneurs including Edo gosho, Yokohama
merchants, Meiji zaibatsu, and company boom millionaires.
Persons

250
Millionaires of Edo period

New millionaires in company
boom period

200
New millionaires of Late Edo150► Japan’s industrial
revolution: from
1880s to 1900s

New millionaires
in early Meiji

1005001849

1864

1875

1888

1902

Source: Computed from Miyamoto (1999）, p.53. Each line shows how many of
the new millionaires emerging each period survived in later periods.

Toshimichi Okubo► Survival gamewas severe: manyentries, many exits► Japan-China War,Japan-Russia War
also acceleratedindustrialization(1830-1878)

PP.44-45

High Official Implementing Industrial Policy• Participated in Iwakura Mission (1871-73)
to observe Western technology & systems• Top-down promoter of technology importand industrialization• Minister of Finance; Minister of Internal Affairs• Policy measures:--Supporting businesses (Iwasaki, Godai) to promoteindustries and import substitution (shipping, etc)--Establishment of SOEs and research centers--Domestic industry exhibitions--Set up bureaucracy, police and local governments--Suppress Saigo Rebellion, send troops to Taiwan

9June 2007

PP.62-65

Technology Transfer

1. Foreign advisors (public and private sector)—salary too high
2. Engineering education (studying abroad, Institute ofTechnology; technical high schools)
3. Copy production, reverse engineering, technical cooperationagreements (esp. automobiles, electrical machinery); sogo shosha(trading companies) often intermediated such cooperation
Technical Experts

Private-sector experts, 1910Mining513 (18.0%)
Textile300 (10.6%)
Shipbuilding 250 (8.8%)
Power & gas 231 (8.1%)
Trading
186 (6.5%)
Railroad
149 (5.2%)
Food
149 (5.2%)
TOTAL
2,843 (100%)(Graduates of Technical Univs. & High Schools)

16000
14000
12000

Private sector
Public sector

10000
8000
6000
4000
2000
0
1880

1890

1900

1910

1920

P.64

Studying Abroad (Early Engineers)• First students: bakufu sent 7 students to Netherlands
in 1862 (naval training)• By 1880s, 80 Japanese studied engineering abroad(shipbuilding, mechanical, civil engineering, mining& metallurgy, military, chemistry)• Destination: UK (28), US (20), France (14), Germany(9), Netherlands (8)• They received top-class education and could easily
replace foreigners after coming back• They mostly worked in government (no privateindustries existed at first)—Ministry of Interior, MOF,Army, Navy, Ministry of Industry

10June 2007

P.64

Kobu Daigakko(Institute of Technology)• 1871 Koburyo of Ministry of Industry; 1877 Renamed
to Kobu Daigakko; 1886 Merged with Tokyo Imperial
University (under Ministry of Education)• First Principal: Prof. Henry Dyer (UK)• Theory and practice--preparatory course (2 years),
specialized studies (2 years), internship (2 years)• 8 courses: civil engineering, mechanical engineering,shipbuilding, telecommunication, chemistry,architecture, metallurgy, mining (classes in English)• Educating top-class engineers (import substitution)

PP.65, 179-181

Monozukuri (Manufacturing) Spirit• Mono means “thing” and zukuri (tsukuri) means “making” inindigenous Japanese language.
• It describes sincere attitude toward production with pride,skill and dedication. It is a way of pursuing innovation andperfection, disregarding short-term profit.
• Many of Japan’s excellent manufacturing firms were foundedby engineers full of monozukuri spirit.

Sakichi Toyota
1867-1930

Konosuke Matsushita
1894-1989

Soichiro Honda
1906-1991

Akio Morita(Sony’s co-founder)
1921-199911

June 2007

How about
Vietnam?
Vietnam’s history has been more disruptive with wars
and foreign invasion (too close to China?)
No super business leaders or large business groups.
Economic policies are not very good.
Worker quality is potentially good.
Vietnam’s development must rely heavily on FDI andODA (risk of losing one’s identity and control)Possibility of learning monozukuri spirit and becoming
Japan’s manufacturing partner?

12