The Jyokou Aishi Story:
An Inconvenient Truth under the Light of General Equilibrium Analysis
Aoyama Gakuin University	 

AKIBA Katsuhiko

Two seemingly disparate stylized facts exist in Japan’s early development period of the 1920s:
real wages increasing despite the then WW I depression and the steel industry as engine for
economic development diminishing. A simple two-sector general equilibrium model a laHecksher-Ohlin-Stolper-Samuelson (HOSS) is used to interpret these ‘observational premises’(Basmann, 1975). We show that if output decreases in the (capital-intensive) steel industry andincreases in the other textile industry, the real wages tend to increase. Japan’s experiences in theearly 1920s and our related empirically interpreted theory may be of particular relevance to thecontemporary economic developments in Asia.
Key Words: Jyokou Aishi, Japan’s economic history and development, capital-labor ratio,
general equilibrium theory
JEL Classification Numbers: econ history (N3), econ development (O1), general equilibriumtheory (D5)Correspondences to:akibakatsuhiko@gmail.com

The Jyokou Aishi Story:
An Inconvenient Truth under the Light of General Equilibrium Analysis
Aoyama Gakuin University	 I.

AKIBA Katsuhiko

Introduction
In 1925, Wakizou Hosoi (Japanese male worker, 1897-1925) published a bookentitled Jyokou Aishi. Jyokou means female textile workers, and Aishi means pathetic life.
Therefore, Jyokou Aishi means the miserable life of female textile workers.
The book, if interpreted in terms of economic history, reported the exploitation oflabor in effect by capital, and slammed Jokou’s low-wage as discriminatory. Jyokou Aishi
remains as a classic in print, has been a textbook example of how Japan achieved economic
development, and has become synonymous with modern poor female workers. In the preface ofhis book the author Hosoi, a male textile worker himself, mentions that he also worked as amere ‘piece of common slaves’.
The book was very popular and available at school libraries in this writer’s youngster
days. He would since be kept convinced the Japanese workers in the 1920s had lower
disposable income as wages, and capitalists, by contrast, during the same decade had strictly
higher income as interests or returns on capital.
In the preface of Hosoi’s book the following is also mentioned: ‘I’d say the actual
situation of Japanese workers must be much/profoundly severer than the situation I am in’. This
seems to be a symbolic testimony of the then Japanese sentiment on presumably poor andmiserable workers, especially female ones.
Amazingly, the then Japanese workers in the 1920’s supposedly poor and miserable
were in fact richer than capitalists! Even if wages kept going down with consumer prices then,real wages need not go down. If that was the case, then it may not be so surprising. But what
actually was happening was that even nominal wages were rising when consumer price indexes
were declining! See Table 1, and Table 2 below.
[Table 1 here]
Nominal or real wages aside, what happened to relative factor prices? To answer thismore relevant question let us now consider the ratio of nominal wages to interests in the 1920s.
It is easily obtained by dividing the nominal wage rates w by the nominal interest r as shown by
Table 2.
[Table 2 here]
In short, the Japanese workers in the recession after World War I may have beenricher and presumably luckier indeed than the so-called capitalists. It is evident from theobservation that the ratio of wage to rental income in the factor market increased in the 1920s
despite the deep recession that Japan was undergoing. The objective of this paper is to present
rationale for those surprising observational premises aforementioned.
We focus attention on the following statement. Japanese economic historian Jyurou

Hashimoto (1996, p.32) stated that the rise in relative wage was made possible because thelabor-intensive industry had a comparative advantage after WW I. As asserted by this historian,historical facts remain as follows.
In one example, the output of textiles such as raw silk increased after World War I.
See Table 3 below.
[Table 3 here]
According to another Japanese economic historian Takafusa Nakamura (1993, p. 105) the mostpowerful industry at that time was the textile centering on the production of cotton and silk, andan increasing number of firms entered in the textile industry. That industry had a low barrier toentry and strong domestic demand in the 1920s.
For another example, the output of iron ore in the main islands of Japan decreased
after WW I. See Table 4 below.
[Table 4 here]
All these data and the presumably miserable states of workers during this particularperiod appear surprising and hard to understand, to this writer at least, thereby calling forinterpretation. The prime objective of this paper therefore is to apply ‘empirically interpreted
theory’ (Basmann, 1975) to the observational premises aforementioned. In particular we do thiswithin the confines of the two-sector model of general equilibrium a la classic HOSS theory
while following (Ohta, 2012). We show in particular that if output in the capital-intensive goods
sector declines and output in the labor-intensive goods sector increases, the ratio of nominal
wage rates to nominal rental rates necessarily increases.
The rest of this paper proceeds as follows. Section 2 presents the basic assumptionsof the proposed model. Section 3 presents our analysis and related findings of particular interest.
Section 4 concludes with some remarks on possible ferment germ or Biblical ‘mustard seeds’ ofJapan’s early economic development.
II.

The Model
The 2x2 general equilibrium model is predicted upon the following assumptions:1) There exist two aggregate sectors of production: a capital-intensive goods sector,

called C-sector and the other good/labor-intensive goods sectors, called O-sector.
2) The heavy industry such as steel belongs to the C-sector, and the light industry
such as textile belongs to the O-sector.
3) Two factors of production, say, capital K and labor L, exist and are used for
production of the two goods: C and O.
4) Both endowments of capital K and labor L are given.
5) L units of labor and K units of capital are fully employed for the economy.
6) The economy is competitive everywhere so both product and input markets arecharacterized by MUC/MUO = PC/PO, where MUi is the marginal utility, Pi price, respectively, ofi (= C, O); and MPL / MPK = w / r, where and MPj is the marginal productivity of j (=L, K), ineach sector i, w is the rate of wage, and r is the rate of interest everywhere in either labor orcapital markets.
7) The production functions in the two sectors are of constant-returns-to-scale.
8) The marginal rate of technical substitution of capital for labor MRTS = −dK/dLin each sector of production decreases as the amount of labor increases.
9) The utility function U as a social welfare function depends only on C and O,
which is strictly quasi-concave.
10) The marginal rate of substitution of C for O MRS = −(dC/dO)U=constant isdiminishing.
11) The marginal rate of transformation O into C for the society MRT =−(dC/dO)(K.L)=constant is increasing.
The assumptions above depict a contract curve CC in the Edgeworth Box Diagram EBD and a
production possibility set PPS as below along with relevant/representative iso-utility andiso-quant curves.
[Figure here]
It goes without saying that the final general equilibrium condition of MRS = MRT isrequired to identify both optimum product mix and factor allocation on PPF and CC curves.
III.

Analysis
We are now in position to examine the model set forth above for the purpose of ourpresent inquiry.
Claim: If output in the steel industry declines and output in the textile industry increases, theratio of wage rate to rental rate increases.
Proof:By Assumption 2) the steel industry belongs to the capital-intensive C-sector, and the textile
industry belongs to the other good/labor-intensive O-sector. By Assumption 6), MPL / MPK = w /r, where w is the rate of wage and r is the rate of interest. These two assumptions combinedwith Assumptions 4), 5), 7) and 8) yield a concave (instead of convex) CC curve to slope
upward as depicted above. The CC curve in turn combined with the rest of Assumptions 3), 4),5) and 11) then yields a concave downward curve of PPF, also depicted above.
Given these CC and PPF, if output in the steel industry declines and output in thetextile industry increases, the white circle point on the contract curve CC must move andrelocate toward southwest along the same contract curve CC. If the white circle point moves
like that, the slope of a tangent w / r becomes steeper.
(Q.E.D)
IV.

Remarks
The contemporary Japanese public appears to be still under the impression thatJapanese workers in the 1920s had unambiguously lower disposable incomes as wages thancapitalists’ counterpart income as interest earnings with higher levels. However, on the contrary,
they in fact had enjoyed higher disposable incomes as wages than the then capitalists did astheir counterpart rental income. The life of capitalists and workers would be rugged under therecession. But, the life of capitalists should have been distinctively more miserable than textile
workers and the other sector workers, all the more if otherwise protected by regulations, unions,or even other social mores.
If these stylized facts are surprising, our simple theoretical model may sounds moreparadoxical than surprising. It shows that if output in the capital-intensive goods sector declines
and output in the labor-intensive goods sector increases, then capital-labor ratios in both sectors
rise, and the ratio of wage rate to rental rate must increase accordingly. This two-foldproposition in effect requires, however, a proviso that production technologies remainunchanged.
To end this paper, we report a recent case. As reported by Reuters, textile workers in
Bangladesh organized demonstrations for higher wages in 2013. Bangladeshi economy may bewalking a similar road as Japan did. In 1920s, female textile worker Jyokou also went onstrikes.
TablesTable 1
Declining trend in the consumer price index after WW I
Year yPrices p

1919

138

1920

144

1921

y/y

Year yPrices py/y

1925

132

1%

5%

1926

126

-5%

132

-8%

1927

124

-2%

1922

130

-2%

1928

119

-4%

1923

129

-1%

1929

116

-2%

1924

130

1%

1930

104

-10%

Unit: 1934-1936 prices averaged/normalized to 100
Source: Ohkawa et al. (1966, p. 135) estimated.
Table 2
Relative wages increasing despite the then depressionYearNominal Rate of Interest r

Nominal Wages ww/r

1918

91

166

1.82

1922

131

348

2.66

1926

125

364

2.91

1930

93

327

3.52

1934

78

307

3.94

Unit: 1910-1914 prices averaged/normalized 100
Source: Okazaki (1993, p. 21) estimated data on wage and interest.
Table 3
Output of raw silk increasing after WW I

Year

OutputYear

Output1917

5317568

1924

7577170

1918

5795542

1925

8284317

1919

6359761

1926

9101310

1920

5833854

1927

9880306

1921

6238796

1928

10584232

1922

6397704

1929

11292399

1923

6756040

1930

11365026

Unit: Kan (=3.75kg)
Source: Estimated by Ministry of Agriculture and Forestry (1933, p. 60)
Table 4
Output of iron ore decreasing after WW IYear

OutputYear

Output1917

267594

1924

57922

1918

378114

1925

75765

1919

3629491926

1304201920

314858

1927

159005

1921

86977

1928

157706

1922

39744

1929

177556

1923

55174

1930

245991

Unit: Ton
Source: Estimated by Mine Office of Department of Commerce and Industry (1935, p. 1)
Figure

C*0O

U*

CC
O*K

C0C

LO

(a) CC and an Optimal Allocation of Inputs(b) PPF and an Optimal Mix of Outputs

Figure	  EBD and PPS

Figure (a) shows that both capital K and labor L are efficiently allocated between thetwo sectors in the productions of C* and O*. Figure (b) shows that the consumers maximize
utility U* by choosing their (national) optimal bundle (C*, O*).
References
Basmann, R. L. (1975) “Modern Logic and the Supposititious Weakness of the
Empirical Foundations of Economic Science,” Schweiz. Zeitschrift fur Volkswirtschaft undStatistik, Heft 2.
Hashimoto, J. (1996) “Senkanki [An Interwar Period]”, Nihon Keizai Jiten[Japanese Economy Encyclopedia], Tokyo: Nikkei Inc.
Hosoi, Wakizou (1925) Jyokou Aishi [The Miserable Life of Female TextileWorkers], Tokyo: Kaizousya.
Mine Office of Department of Commerce and Industry (1935) Seitetsugyou
Sankousiryou: Syouwa Gonen Tyousa [Reference Material of the Steel Industry: Researched inJune 1930], Tokyo: Nihon Tekkou Kyoukai.
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