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World War II : American occupation of Japan Japanese economic miracle
World War II Aftermath: Japanese Economic Miracle
Figure 1.--After World War II, socialism had gained great curency not only in Europe, but in the developing world which rapidly moved toward decolonization. The only success stories, however, were countries that employed capitalism like devestated Germany and Japan as well as the United States. Those countries employing socialism like Britain, Argentina, the Soviet Union, and Eastern Europe under Soviet control languished as would most of the newly independent countries. The Japanese Economic Miracle was particularly note worthy. Japanese industrial cities were left vast mounds of glowing cinders. Yet under American tutalidge within in less than a decade the Japanese were more prosperous than before the War and beginning and industrial export campaign that wold take on the giants of American nd European industry. One of the many factors that mae this possible was a fine public education system.
The Japanese economic recovery after World War II has like the comparable recovery in Germany been described a nothing short of a miracle. Like the German Economic Miracle a completely devestated country over the space of a very few years trnsformed into an economic powerhouse. Observers at the time looking at Japan's flattened cities thought that it would take a generation to recover. In fact, it took less than aecade for Japan to become more prosperous than it was before the War, destroying the militarist beliefs that the country required colonies and apensive military establishment to obtain needed raw materials. Economists point to a range of factors explaining Japan's economic recovery. Fundamentally it amounts to the power of free market capitalism to unleash the capabilities of the Japanese people. The Japanese Government backed by the American occupation authorities prevented the Communists from taking power. And the American occupation in sharp contrast to Japanese occupation regimes operated to found both capitalustas wll as democratic institutions rather than punishing economic reparations. The Americans fiorbade Japan from military expanion while guarantteing security, while art the same time releaving the Japanese Government from costly expenditures. Instead, recovering Japanes Japanese industries on consumer products. The powerful zaibatsus helped finance the recovery. And the Japanese people tolerated great sacrifices while the recovery took hold. While images of Japan devestated cities suggest total destruction, they are in mute testimony to the fact that a country's true power is not in buildings and machinery, but in the character and capability of its people. While the building were destoyed in an acopolyspe of fire, the people survived. Despite atomic attacks, the Japanese actually sufferdcless than the people they had occupied. And the Japanse people with a high quality education system fired by free market capitalism very quickly rebuilt their county and launched upon an amazing economic expansion. Interesting, Japanese economists poinr to a little known American, W. Edwards Deming, as instrumental in their success.
To understand Japan's remarkable recovery aftr World War II, one must first understand how Japan became Asia's first indutrial nation. There were a range of factors involved. Here are some of them:
1. Excellent education standards. Japan was the first Asian country to build a European-style education system.
2. Cultural factors, especially a strong work ethic.
3. Political stability.
4. Demographics
5. Commitment to market capitalism
6. Government support for industry. Japanese leaders recognized that to avoid European domination, they would have to indutrilize.
7. Savings rates. While Japan's cities and industrial plant were destroyed by World War II. All of these factors survived the bombing and were available to rebuild the economy. While the Meiji restoration pursued a moderization effort, it left in place a virtually feudal social structure. The War and the American occupation renoved the final barriers to building a thorougly modern nation and economy.
The result of Japan's colonial goals was first a long-drawn out war in China and then unable to defeat China, the Japanese military decided to attack the United states. Japan had built a sizeable industrial establishmednt. It was the only industrialized country in Asia. The primary Japanese goal was the resources of the Southern Resource Zone--especially oil. These resources were needed to supply the factories of the Home Islands. World War II even more than World War I would prove to be an industrial war. The Japanese industrial and scientific establishment was dwarfed by that of America. So much so that to modern observers, the Japanese decision to go to war seems incomprehensible. Japan's industrial capacity enabled it to defeat Chinese armies. Somehow the Japanese were convinced that their warrior spirit would triumph over American industrial superiority. The result was the bloody Pacific war and national disaster. The Japanese military made the decesion to go to war when they thought NAZI Germany was about to defeat the Soviet Union and the triumphant NAZIs would force the United States to direct most of its military effort on Germany. This of course was a huge miscalulation. And even before America's huge industriasl production began to reach the Pacific, The U.S. Pacific Fleet forced the Imperial Navy to withdraw to their secure bases. American shipyards created a huge new fleet that Japanese industry could not begin to match. And the American submarine campaign set about destroying the Maru fkeet that was transporting raw materials and food to Japan. Thus while Japan seized a huge empire, it proved of little benefit to the Japanese war economy. The War was mostly fought far from Japan itself. The Japanese people, however, began to feel the effects of the war when shortages began to develop, Not only werre the Japasbnese unavle to fully supply factories with raw materials, but food became increasingly difficult to obrain. The conscription of workers meant that more and more fasctories had to be run with school girls. Then the American strategic bombing began to devestate the industrial cities of Japan. Thus before the two atomic bombs were dropped, industrial Japan ceased to exist.
Recovery: Japanese Economic Miracle
The Japanese economic recovery after World War II has like the comparable recovery in Germany been described a nothing short of a miracle. Economic observers at the time looking at German and Jpanaese flattened cities thought that it would take a generation to recover. In fact, it took less than a decade for Japan to become more prosperous than it was before the War, destroying the militarist beliefs that the country required colonies and an expensive, aggresive military establishment to obtain needed raw materials. First of all both countries were successful before the War. The factories were destroyed (or in the case of Germany) carted off the the Soviet Union., but the human capital and technical expertise still existed. It is much easier to build a factory than to train a competent engineer or businessman.
Economists point to a range of factors explaining Japan's economic recovery. Fundamentally it amounts to the power of free market capitalism to unleash the capabilities of the Japanese people. The Japanese Government backed by the American occupation authorities prevented the Communists from taking power. And the American occupation in sharp contrast to Japanese occupation regimes operated to found both capitalustas wll as democratic institutions rather than punishing economic reparations. The Americans fiorbade Japan from military expanion while guarantteing security, while art the same time releaving the Japanese Government from costly expenditures. Instead, recovering Japanes Japanese industries on consumer products. The powerful zaibatsus helped finance the recovery. And the Japanese people tolerated great sacrifices while the recovery took hold. While images of Japan devestated cities suggest total destruction, they are in mute testimony to the fact that a country's true power is not in buildings and machinery, but in the character and capability of its people. While the building were destoyed in an acopolyspe of fire, the people survived. Despite atomic attacks, the Japanese actually sufferdcless than the people they had occupied. And the Japanse people with a high quality education system fired by free market capitalism very quickly rebuilt their county and launched upon an amazing economic expansion. Interesting, Japanese economists point to a little known American, W. Edwards Deming, as instrumental in their success.
Stagnation
Japan experienced economic stagnation (1990s). Japan beginning in the 1970s looked like it waa becoming the dominant economic powerhouse in the world. They were buying iconic land mnarks in America and outselling Detroit, not on price, but quqlity. Then the realestate and stock market plummeted. The Nikkei 225 reached over 38,900--clearly a bubble. It now has a hard time remaining above 10,000. The low was nearly 7,300 (2003). The GNP in Japan during 2010 was the same size it had been in 1995. (The U.S. economy grew 50 percent in the same period.) And what the Japanese once called the lost decade has become two lost decades. What has occurred in Japan is the result of failed government policy. Policy makers were unwilling to make pasinful decesions, fearing voter backlash. Their resonse was a series of 10 ecoiniomic stimulus packages. When the first oner failed, they simply tried another one. While this seems incomprehensible, there are American politicans and econmidts that favor the same perscription. The Japanese also reduced interest rates--to zero. And when when the economy seem to be recovering, the Governmernt enacted higher taxes which stopped the recovery cold (1997). Japan today is one of the most important industrial nations. There is extrodiry technical capability and scientific talent in Japan. The Japanese Government, however, continues to avoid difficult decesions to restructure the economy. And the failed stimulus packages has left the Japanese Government once of the most indebted in the world. The Government did not want to shake a system that was providing 'lifetime employment' to workers. As a result, the system of 'life-time employment' no longer exists. Today, over a third of Japanese workers are temporary employees. and Demographic trends are not favoravle to Japan. The aging population is creating major problems which the heavily indebted Government is going to find it very difficult to solve. And thus for 20 tears, the Bank of Japan (BOJ) has been at the center of a massive deflationary cycle that has severely crippled a once great economy.
