Theory of Modernization/Industrialization
Between Liberalism and Developmentalism
Kiichiro Yagi (Kyoto
After a decade of economic stagnation, it is now in vogue among
economists to say that the economic system of Japan suffers from an
“institutional fatigue”. This expression, however, assumes that the unique
institutional arrangement of the Japanese economy once had an age when it
functioned well. The precise diagnosis and prescript of this “fatigue”
differs in each case, particularly by the range of time that the observer
adopts. Debates on the origin of Japan’s post-war economic regime are also
related to this problem (Noguchi 1995, Okazaki and Okuno 1993). Beside the
protection and control of partitioned industries by the government (gyokai),
the customary framework of lifetime employment, closed long-term
supplier-customer relations (keiretsu),
and the so-called ‘main bank’ system are the targets of criticism.
Furthermore, the literature that applies the concept of ‘developmentalism’
to the industrialization of Japan (Murakami 1992(1996), Yagi 2000a) adopts a
time span of over one century for consideration. The pro-developmentalism
literature emphasized that the wisely chosen intervention of the government
could promote economic development in East-Asian countries. From this viewpoint,
the Meiji-government also falls within the group of ‘developmentalist
states’ along with the Showa-government.
Nationalistic Response of a Meiji Liberal
What I now discuss in this paper is the intellectual
background behind the economic policy that was prevalent up to the end of
Japan’s high-growth era. As Bai Gao put it, “The practice of managed economy
was not only influenced by foreign economic ideas, but also supported by the
long tradition of state intervention in Japanese economic thinking after the
Meiji Restoration.”(Gao 1994: 116)
in using such series of words as ‘managed economy’, ‘state intervention’
and ‘developmentalism’, one has to switch the misconception that economic
liberalism was essentially foreign to the economic thought of modern Japan.
It was the Western economic liberalism that awakened the Japanese who had been
long accustomed to living passively under feudal control. One of the most
important origins of Japanese developmentalism was the pragmatic response of
Japanese liberals who realized the gap between advanced Western nations and
their own. The forerunner of this movement was Fukuzawa Yukichi (1835-1901),
champion of Meiji enlightenment and a great liberal as well. Deeply impressed by
the basic teaching of the Western political economy, Fukuzawa stressed the
independence of individuals and advocated a new moral on the principle of
reciprocity that was open to free competition. However, he also realized that a
predetermined harmony could not emerge automatically in international trade
relations where there existed a discrepancy between the strong and the weak
nations, or more precisely, the advanced and the delayed nations.
In contrast to a straightforward liberal such as
Taguchi Ukichi (1855-1905), Fukuzawa supported the restrictive policy of
residential zone for foreign merchants in Japan and suggested a protective
policy in international trade.
In An Outline of a Theory of Civilization (Bunmeiron
no gairyaku) he declared, “Independence of the nation is the purpose. Our
present civilization is the means to attain it.”(Fukuzawa 1958-64: vol. 4,
p.209) However, from a global viewpoint, Fukuzawa did not regard the quest for
national independence itself as a ‘public cause’. That is only a ‘private
cause’ of a late-starting nation. “What I expressed by ‘our present
civilization’ is not the true civilization. My intention is to establish first
independence of our nation, leaving the rest for the task of the second step,
and to expect future progress. So long as we limit our discussion in this range,
the national independence is by itself the civilization. Without civilization,
we cannot maintain our national independence.” (p.209f.) For Fukuzawa, it was
this quest for the independence of the nation that could encourage the Japanese
to avoid servility and to demand equality in their transaction with Westerns.
Instead of the harmonious teaching of economic law
that is valid everywhere at any time, a natural course of the development of the
‘civilization’ emerged as the main topic of the Outline. Fukuzawa discerned the essence and the appearance of the
‘civilization’ and defined the former as the “progress of the intelligence
and virtue of the people” (p. 40). He contended that in order to catch up to
the advanced nations the Japanese had to begin with “difficult tasks” of
acquiring the sense of independence before indulging themselves in the
attraction of Western products. It was his conviction that ‘civilization’
was the universal course of development among nations, so long as they did not
lose their sense of independence.
Fukuzawa’s recasting of the Western liberal
economic thought into the real situation in Japan reminds us of Friedrich
List’s criticism against the ‘cosmopolitan’ economics of A. Smith and J.
B. Say. “The strategic view of the economy” (Gao 1997: 24) is common to the
understanding of the economy of both scholars. As List wrote, “History is not
without examples of entire nations having perished, because they knew not and
seized not the critical moment for the solution of the great problem of securing
their moral, economical, and political independence, by the establishment of
manufacturing industry, and the formation of a powerful class of manufacturers
and tradesmen”(List 1974: 82), by his school, Keio Gijuku, as well as his
widely-read publications, Fukuzawa strove to create the ‘middle class’ who
could lead the Japanese economy on the base of their intellectual forces. In his
view, the growth of the ‘middle class’ would bring a balance of power in the
relations between the government and the people. Under the principle of division
of labor, the government was entrusted to form legislations and policies for the
sake of nation and the private sector would support it by their cooperation and
their own initiatives.
We have so far summarized the pragmatic economic
thinking of Fukuzawa. By his theory of ‘civilization’, Fukuzawa provided the
Japanese with the perspective that would conciliate the antagonism between
liberalism and interventionism with a time span. It is interesting that this
trait survived for a century in Japan and molded the economic policy in her
post-1945 industrial state.
From Social Policy to Social Economics
the search for the appropriate politico-economic system for the
late-industrializing nation, Japan found her model in Germany, which had been
united under the Prussian hegemony in nearly the same period with that of
What the Japanese learned from the German model was the concept of
administrative bureaucracy as well as that of social policy. German influence in
economics was so strong that the first academic association of Japanese
economists (The Association for the Study of Social Policy: Shakai
seisaku gakkai) was formed around the previous turn of the century as a
miniature replica of the German Association for Social Policy.
Though economists as well as administrators who gathered in this Association did
not admit that their nation already suffered from serious social problems such
as the spread of urban misery and labor unrest, they were convinced that apt
preventive intervention of the government could mitigate serious social problems
that accompanies with the industrialization (Pyle 1974). The initiative of the
government (or administrative bureaucracy) was taken for granted in the
discussion in the first decade of this Association.
It was in the ninety-twenties and the thirties that
Japanese economists acquired a wide social perspective, which enabled them to
deal with social problems beyond the narrow scope of the government control. The
influence of Marxism in this intellectual shift was apparent, since it was Marx
that denied the autonomy of the state and found the moving force of the history
in the relations and struggles of the economic classes. The Association was to
dissolve in 1924 due to the ever-widening discrepancies among members. While the
senior generation (Kanai Noburu, Matsuzaki Kuranosuke) of the Association
adhered to the authoritarian state policy, middle and younger scholars (Takano
Iwasaburo, Fukuda Tokuzo, Kawakami Hajime, Ouchi Hyoue) positively responded to
the emergence of labor movement and tried to integrate the element of social
autonomy into social policy. However, the latter was also divided between
pro-Marxists and anti-Marxists. While Takano remained an academic social-liberal
who was sympathetic to Marxian economics, Kawakami became a devoted communist
after a decade’s disarray to find a new principle of social policy. Contrary
to them, Fukuda was a very lively Marx-critic whose understanding of Marxian
theory often surpassed his Marxian opponents.
Fukuda Tokuzo (1874-1930) studied economics under
Karl Bücher and Lujo Brentano. Brentano’s position of a liberal social
reformer was that which Fukuda maintained up to the end of his life. Fukuda
opposed the Marxian concept of ‘social democracy’ on the basis that the
dominance of one particular class contradicts the universal principle of
democracy. This rejection of the partiality is also seen in his proposal of
‘right to live’ as the basic principle of the new social policy. Fukuda
integrated union movements and labors disputes into his welfare economics, on
the grounds that they could promote the remedy of disadvantages felt by workers
and thus increase the welfare of the society as a whole.
“In today’s economic life, what prevents from the coercion of labor on the negligence of wishes and interests of workers and countervails the effect of spoiling national distribution of income and increasing its fluctuation cannot be found other than the welfare struggle, or labor movement and labor dispute as welfare struggle. …What makes today’s social policy and social autonomy to perform their own mission is the powerful labor movements behind the scene. What stimulates this performance is the labor dispute seen as welfare struggle.”(Fukuda 1922:203-205)
The German Historical School in economics could
not satisfy Fukuda’s interest in theory. He adopted Alfred Marshall’s Principles
of Economics as the model of ‘pricing economics’, but he intended to
build a ‘welfare economics’ by extending the modern economic analysis to
address socio-economical development. In his concept of ‘welfare economics’,
labor movements and labor disputes were considered as constructive elements of
the economic society in the sense that they not only establish the consciousness
of the ‘right to live’ but also promote the social institutions. It was the
new version of ‘social policy’ in which ‘the society’ and not ‘the
state’ regained the autonomy of institutional development.
It is apparent that Fukuda wished to provide his
alternative to the Marxian economics by his ‘welfare economics’. However,
his ‘welfare economics’ had to remained as a mere torso by his rather early
death. It was another Marx-critic, Takata Yasuma (1883-1972),
who paid effort to integrate social elements into economic theory. Takata was a
theoretical economist who was rather remote from real policy issues. He was one
of the first economists who introduced the system of general equilibrium in
Japan as the framework of economic theory. However, as an exceptional economist
who started his academic career as a theoretical sociologist, he was not content
in refining economic theory by merely a mathematical system of equations. We can
read Takata’s ‘power theory of economics’ as an attempt to establish a
‘social economics’, which could cope with social development that was
accompanied to the industrialization.
As a sociologist, Takata had already established his
own theoretical system, when he shifted his research interest to economics. His
sociology begins with the ‘desire to power’ as the original propensity of a
person. In the interrelations of persons who always strive to surpass others, a
sociological division of labor that accompanies the formation of social classes
will emerge. Thus the ‘social density’ of the populations determines the
‘quantitative-qualitative composition of a society’, under which social
relationship among social classes develops. All of the juridical and political
institutions, economic institutions, as well as norms and ideas are the outcomes
of this historical process of societal development. These sociological relations
filtered even the technology and productive powers. In this sense, the
‘economy’ is not the independent substructure as the Marxian materialistic
view of the history supposes. Takata named this view of the history as the
‘sociological view of the history’.
In his view, every economic behavior of individuals
is influenced by hidden sociological factors. He stressed the change in economic
behavior of workers by the social consciousness and its effect on wage
“Once the supply price comes to our discussion, …. we cannot regard it as determined by the (dis)utility of labor to workers. Ultimately saying, what determines this, and what influences on that ‘resistance’ of workers, is nowhere to be seen out of the social powers of workers. The social power of an individual is determined not by individual efforts but by his position in the composition of the society as a whole. Individuals translate their social positions according to individual conditions into the behavior of ‘resistance’. Under economic conditions this ‘resistance’ has the form of the claim of a certain supply price of labor.” (Takata 1935: 36 )
This awakening of the social power of workers is a
part of the historical process of modernization, since in the traditional
society a passive obedience under the dominant social powers of the mightier
excludes the rational action of a person itself. Takata thought that the
capitalist market economy had loosened the traditional ties of the society and
had promoted the growth of selfish transactions among individuals. In other
words, the element of the Gesellschaft
prevails over that of Gemeinschaft.
But he could not be so optimistic to predict the harmony in the future of the
“Rationalism is continuously strengthened by capitalism itself. In addition, factors that induce the conflict between classes increase. The growing rationalism strives to eliminate the irrationality that increases in the social organizations. While only the tendency towards integration and affinity between classes can moderate this effort, the opposite tendency towards antagonism only prevails, that rationalism dares to reduce the irrational factors on the level of social organization as possible as it can. (Takata 1935: 217 )
In this sentence, it is not clear what Takata had in
mind when he wrote ‘that rationalism’ as reformative element of the society.
This could be interpreted as the socialistic rationalization that would mold the
whole society under its canon, or bureaucratic rationalization that would
control every elements of a society under its administrative rationality.
Further, it could also be the immanent tendency of rationalization that would
eliminate the personal motivation, which so far was the driving force of
Origins of three Post-war Economic Advisors
the history of Japanese economic policy, the years immediately after 1945 were
marked by the active participation of economists in the policy making process.
Politicians and bureaucrats who lost the frame of reference were willing to
listen to the opinion of economists. However, most of them lost influence on the
economic policy after the ‘Dodge Line’ and the ‘reverse course’ around
1950. In this period when the agricultural and labor reforms came to the end,
the ministerial bureaucracy regained its power. The Economic Stabilizing Bureau
that was the citadel of the non-bureaucrat economists was downgraded by Prime
Minister Yoshida’s antipathy to the idea of economic planning. From the few
economists whose influence survived after 1950, we will deal with three
economists, Arisawa Hiromi (1896-1988), Nakayama Ichiro (1898-1981), and Tohata
Seiichi (1899-1983), who were often called ‘gosanke’
(the trio: three large clans in the Edo period that possessed the rank of
advisory status to the Tokugawa Shogunate), since they continuously occupied
influential positions in various administrative and advisory committees.
three studied in Germany in the late years of the short-lived Weimarer Republic.
Firstly, Arisawa studied in Berlin in 1926 to 1928. Around the same years Tohata
and Nakayama studied in Bonn under Joseph Schumpeter from 1927-29. We will now
have a look at their views of modernization/industrialization, referring to
their German origins.
In the preface to the Inflation and Socialization (Infureeshon
to shakaika) that was published in the autumn of 1948, Arisawa added there
I arrived at Berlin in the early spring of 1926. At that time, the world economy was in the period of relative stability. German economy that muddled through two years’ stabilization crisis following the catastrophic inflation was moving gradually to prosperity.
The politico-economical process of the German Republic then was quiet in a sense and no serious problems were on the surface. As post-war issues such as the democratic revolution, socialization movement, inflation, and reparation were solved for the present; the rail for the German economy was fixed already. In 1925, the German Communist Party determined its New Directions in September, and the National League of German Industry proclaimed the Program of German Industry. After some delay, Socialdemocrats adopted the Keele Program at the plenary congress in May 1927. Both of the labor parties and associations of capitalists prepared for developing their movements with new directions under the changed situation.
Making Dr. Alexander Conrady, the historian who had once worked at the archive of the SPD as a tutor, I at once began the research of the politico-economical process of the republic. Naturally, I had to study the process since the cease of fire in details. Why the socialization movement that had once been enthusiastically demanded by the mass and seemed irresistible, disappeared like a bubble? In Hilferding’s words, why the revolution turned out to be a mere wage struggle? Crisis and catastrophe attacked German capitalism repeatedly and its life came sometimes nearly to an end. Still it revived like a phoenix out of the ashes. Studying the process I was caught by a melancholy. Dr. Conrady told me cool, “The matter was over in the confusion and errors.”
At that time I had never dreamt that my own nation would follow the same destiny after two decades. I found myself amid the same situation and problems that I studied twenty years ago in Berlin. The international environment of Japan was totally different from the German case. The economic distress was severer. From this very reason I thought that the reconstruction of Japanese economy and the solution of the inflation should be based on the socialization and that the radical democratization should not be reduced to the wage struggle. After the lapse of twenty-two months from the end of the war, I have to think that the history has repeated twice. Dr. Conrady’s words appear now again on my mouth.
The course of the reconstruction of the Japanese economy was about to fix its direction. Now it cannot be changed by anyone. A period in the postwar is about to be over. We will face a new situation and new problems in the coming stage. Therefore, the direction of our movement must change. We have to reflect deeply what we have to do in the new stage. (Arisawa 1948: 1-3)
This was written soon after the failure of the
nationalization plan of the coal mines in 1947. This was the public promise that
the Socialists made at the second election and won the largest mandate in the
Diet. The original plan admitted workers’ participation in every stage of the
management of the nationalized mines. However, Katayama’s coalition cabinet
could only pass a mutilated bill in the Diet, which was to be repealed in a few
years. Arisawa was not a neutral observer in this matter, because he was the
head of the Special Working Committee for the Coal Mining that was established
in November 1946 which proposed ‘priority production’ to the then Yoshida
cabinet. In January 1946, Arisawa published his idea of ‘priority
production’ (keisha seisan) of coal
mining to resume the ‘reproduction process’ of Japanese economy in a journal
article. In it he predicted the ‘transformation’ from capitalism to
socialism in the worker-led reconstruction process of the industry: “What does
it mean that we have the unemployed with working will and the workers who could
not eat despite of their work? They move rapidly to the conscious political
sabotage of labor. It’s meaning is clear: The refusal of work under the
capitalist production. Thus the transitional period contains ‘transformational
period’”.(Arisawa 1948: 31-32)
In Pre-war years, Arisawa belonged to a group of
those Marxian economists, ‘Rono-ha’,
who were critical to the Russian-oriented Communist Party Japan. After his
arrest in 1938, he was expelled from his chair of statistics at the University
of Tokyo and survived the war years by participating in several research
In the four books he managed to publish under his own name before his arrest, Planning
Industrial Mobilization (Sangyo doin
keikaku)(1934), Japan under the
Managed Economy (Keizai toseika no
Nihon) (1937), War and Economy (Senso to keizai) (1937), and The
Industrial Control of Japan (Nihon
kogyo tosei-ron) (1937), he developed his theory of the managed economy that
was based on the Marxian as well as German monopoly theories. In the
introduction of the direct control of the investment of the monopolized
industry, he recognized the element that changed the nature of cartel as a
concentration of capital interest. In his view the managed economy involved an
anti-capitalistic (socialistic) element that transferred the control of
production from capitalists’ hands to the government.
Arisawa collaborated secretly in drafting the ‘economic new order’ of the
economic department of the Showa Research Association (Showa Kenkyukai).
This department called for the separation between ownership and management and
the reorganization of capitalist firms into cooperative production units. This
coincides with Arisawa’s theory of the managed economy that the
production-oriented socialization could overcome the vested interest of monopoly
capitals. It is a delicate question whether he favored bureaucratic command
economy as was conceived by the ‘new bureaucrats’. Nakamura (1974) compared
the original concept of the reform of the Showa Research Organization with the
‘economic new order’ that was designed by the ‘new bureaucrats’. The
former stressed the ‘control from inside’ based on the production principle,
while the latter aimed an extensive mobilization that could serve the demand of
The term of ‘socialization’ seems to have
disappeared from his writing after the collapse of the Katayama cabinet and the
Dodge Line. Instead he emerged as the supporter of modernization of industry.
In the economic policy debate in the fifties, his name appears again in
combination with the theory of ‘dual structure’ of Japanese economy. The
origin of this theory was also traced back to his research in the Japanese
industry in the 1930s. He found the sharp contrast and subtle inter-relations of
the large-sized industry and the small- and medium-sized industry. In his
finding, Japanese industries had attained the stage of efficient large-sized
plants occupied her production center. The reason of the survival of immense
numbers of inefficient small-sized industry lay in the abundance of the cheap
labor. (Arisawa 1937) In this sense, gap between both was a structural problem
as well as a labor problem. In his analysis of the controlled economy, Arisawa
maintained that the organization of the small- and medium-sized industry could
contribute in increasing the efficiency and rationality as well as independence
against the monopoly power of the large capital. Such a structural gap is also
to be seen between the modern industrial sector and the agriculture sector that
reserved huge amounts of under-employed labor forces. From this viewpoint the
employment problem could not be solved without the solution of these structural
productivity gaps. The term, ‘dual structure’, was used in the Economic
White Paper (Keizai Hakusho) of
1957. In the White Paper, a prospect
to solve the ‘dual structure’ by a continuous economic growth was provided.
He also assumed an important role in the ‘energy
revolution’ in Japan. Though he was deeply involved with coal mining from the
post-war years, he realized the necessity of transition to petroleum and
endeavored to persuade coal miners to adopt the rationalization scheme. The move
to the imported petroleum was all the more advantageous for Japanese industry to
reduce the high manufacturing cost that hindered the export of Japanese products
in those years. When the rationalization bill passed the Diet in 1962, Arisawa
watched the last protest march of miners organized by the Union of Coal Miners
that had once the reputation of the strongest labor union in Japan. In 1970s he
further supported the use of nuclear energy as a member of the Energy Committee
of the Government. In this time frame, the
focus on efficiency had totally replaced that of ‘socialization’.
Nakayama and Tohata
Nakayama was one of the pioneers of mathematical
economics in Japan. His Pure Economics
(Junsui keizai-gaku) (1933) was the
standard textbook with which a generation of Japanese economists learned the
essence of the general equilibrium theory. In post-war years, Nakayama served
long as a learned member of the Central Labor Relations Committee and was its
chairman when the strike at the Miike Coalmine broke out in 1960. His
recommendation of settlement put to end one of the severest labor disputes in
the postwar Japanese industrial relations.
was an agricultural economist who introduced the modernization principle into
the agricultural economics in Japan, therefore going against the traditional
approach that stressed the strenuous work of small farmers. In the postwar
years, he served as director of National Research Institute of Agricultural
Economics and the Institute of Developing Economies besides many activities in
the various administration councils. At the time when Nakayama was dealing with
the Miike labor dispute, Tohata was in charge of the report on structural policy
in agriculture, which became the core of the Basic Law of Agriculture of 1961.
economists studied in Germany in the same period under the same teacher. First
Nakayama came to Bonn in 1927, following the suggestion of his mentor, Fukuda
Tokuzo to study under Joseph A. Schumpeter (1883-1950). However he had to wait
one year before Schumpeter came back from his stay at the Harvard University.
The next year, Tohata joined Nakayama at Schumpeter’s seminar. They admired
Schumpeter up to the end of their lives and translated most of Schumpeter’s
works into Japanese.
It was Tohata’s Development
Process of Agriculture in Japan (Nihon
nogyo no tenkai katei)(1936) that applied Schumpeter’s concepts of the
‘entrepreneur’ and ‘economic development’ as a creative response to the
changing environment to Japanese reality. In this book Tohata regarded small
farmers and landowners in Japanese agriculture as ‘passive economic
subjects’ and asked who was the true ‘mover’ of the agricultural
development. He found the answer in the market-creative function of the
manufacturer of agricultural products and in the organizational function of the
government. Manufactures of non-rice products introduced innovations to the
agriculture via the market, especially in fruits and field crops. The government
established experimental stations and assisted agricultural associations, thus
exerting the function of ‘entrepreneurship’ in agriculture. The reason that
so many small rice producers remained ‘passive subjects’ lies in their lack
of marketing experience under the tenant system as well as in the relative
scarcity of land and capital in relation to the rural population. This situation
made Japanese agriculture fall far behind manufacturing industries as well as
forming its backwardness in the national economy. In the postwar period, he
organized several joint researches into the under-employment or
excess-population that made the marginal productivity of labor in the
agricultural sector considerably lower than the wage level in the manufacturing
Paradoxically enough, Tohata first discovered the
modernizing factor of the agriculture in the structural change under the
“The current task of the control of
agriculture can be expressed in another way, i.e. the path of the small farming
in the age of a rapid heavy industrialization of the nation. The problem is the
more urgent than in the case of gradual industrialization. The problem emerged
in the front as the conscious process of planned change, not as a spontaneous
economic process. The prospering heavy industry deprives the agriculture of
considerable amount of its population by the increase in employment eternally.
In this sense, the decrease in the relative share of the agricultural population
is inevitable. So long as the domestic agriculture has to maintain its
production volume, the increase in the labor productivity must be realized. The
demand of the agricultural instruments that are needed for this increase creates
the market for the heavy industry. Further, the increase of the cattle in
agriculture, that is also the means of the raise in labor productivity, has the
economic support from the changing demand of food in the heavily industrialized
nation. These interrelations are seen usually at least. The economic
construction that Japan is now performing under the war, too, goes along this
direction. If it be true, we can conclude that the present agricultural control
is creating a new bright dimension.” (Published originally in
The shrinkage of industrial production in the postwar
years temporarily reversed this move of population. Also the parasite landowner
and the natural rent that had so far distanced tenant farmers from the market
vanished. The price-supporting system of main products provided Japanese farmers
with a safety net; the expansion of agricultural financing supplemented the lack
of capital. These were the preconditions for the modernization of agriculture.
The only remaining problem, being the most critical for the development of the
entrepreneurship in agriculture was the size of cultivated land. So, Tohata
advocated the structural policy for agriculture through the promotion of
selective expansion. This implies promoting a leave from agriculture, meaning a
decrease of farming households, and the shift from rice and wheat to gardening
and husbandry. Though this was the main policy recommended by the Investigation
Council of Basic Problems of Agriculture of 1960, the Ministry of Agriculture
modified it with its protectionist position in the legislation and
implementation of the agricultural policy under the Basic Law of Agriculture
(1961). Intended selective expansion, too, was not fulfilled due to the increase
in the price of the land.
Nakayama was one of few economists that engaged in
the postwar economic policy with the background of modern theory. Though
economists of later generations might wonder how his economic theory and his
public activity are related, we should remember that he succeeded a
socio-economical perspective from his mentors, Fukuda and Schumpeter. As for the
structural gap and backwardness of Japanese economy, his opinion was not so far
from that of Arisawa. However, Nakayama and Arisawa showed a contrast in
stressing either trade or domestic development in the years around the recovery
Nakayama examined the tendencies and development of
international trade and found a solution for the problem of population in the
growth of industry via the promotion of trade. On the contrary, Arisawa was
inclined to stress the full use of domestic resources. He was concerned that a
revival of notorious export damping on the base of cheap labor as well as
limitation of the international market would slow the growth of Japan’s
economy. If we consider international relations in these years that have
hindered Japan from trading with China and the Soviet Union, his anxiety is to
some degree understandable. But in this debate it was Nakayama that was proven
to be more far-sighted.
Nakayama’s engagement in the labor politics reminds
us of his mentor, Fukuda’s welfare economics that integrated the class
struggle in the making of social policy.
Fukuda’s focus on the basic rights to welfare also seems to coincide with
Nakayama’s criterion of ‘living cost’ (seikatsu
kyu) in the wage negotiation. Nakayama avoided the Marxian flavored term
‘class struggle’ and insisted on using ‘industrial relations’ (Roushi kankei). He argued that the enterprise union of the postwar
Japan was a favorable condition to attain the consensus between management and
workers. In his view both unions and management are equal partners in wage
negotiations, as well as in daily operation where both have a common aim of
increase in productivity, which in turn would reap higher income. Though
Nakayama’s judgment in the labor dispute was sometimes taken as pro-labor, he
never approved the shop floor union activity that might bring confusion in the
production plans. His proposal of the settlement of the Miike labor dispute gave
virtually an end to the shop floor militancy in the private sector union
It was Nakayama who combined the movement of
productivity improvement with the promotion of joint labor-management
consultation. When its Japanese headquarters was established, he chaired its
regular committee for the joint consultation. In 1959 he argued that a doubling
of the salary could be realized on the ground of the increased labor
productivity. The Ikeda Cabinet that endeavored to dissipate the political
tension that had been caused by the revision of the Security Treaty with US in
1960 adopted this ‘dream’ in its new economic plan.
After Early Sixties
After his leave from the Central Labor Relations
Nakayama reflected on the past performance and future task of Japanese economic
is how we can have the social structure that fits to the high level of
industrialization. For this task, various efforts have been made in the postwar
Japan. That the solution of the dual structure was the necessary measure for the
correction of the distortion caused by the rapid growth has been at the focus of
discussions from the beginning. Several years have already passed since the
White Paper on Economy dealt with it. That the solution of the of the income
disparity was adopted as one of the main goals in the present income doubling
plan is together with the introduction of the minimum wage and extension of the
social security runs on the same line as the measure to eliminate the gap
between the production level and the living level. …
viewpoint of the construction of a society that fits the high level of
industrialization, these measures have great significance. If various
contradictions are the ultimate sources of the social tensions, the measure to
ease the social tension and to attain social stability as the basis of
industrialization must be first directed to the elimination of these objective
contradictions. It is admitted that the elimination of these contradictions,
thus the stabilization of the economic society from the structural viewpoint
provides us with important conditions to fill the vacancy of the lost traits of
However, this is
not enough. The ultimate support of the social structure is, needless to say,
the human morality, which is not reconstructed after the destruction of the
traits of traditional society. The postwar democracy supplied a new ground for
the reconstruction. But democracy as itself is an institutional arrangement to
attain political decisions. In Japan’s case, it had indeed a great effect in
eliminating old obstacles against growth, but it does not mean the completion of
the reconstruction. A societal vacuum that was born with the rapid
industrialization still remains. That the logic of the industrialization itself
is indifferent to the morality may bring forth a tragedy to the society.” (Nakayama 1972-73: vol. 15, pp. 21-22)
In the early 1960s when Nakayama wrote these
paragraphs, Japanese economy was passing the turning point in the labor market.
Riding the wave of economic prosperity, industry and commerce in the
metropolitan area absorbed the latent labor forces that were so far conserved in
the traditional self- and family-employed sectors. The wage increased nearly ten
percent every year. In this stage of the economic development of Japan, Nakayama
anticipated new tasks that are not covered by the promotion of industries.
Ironically enough, nearly the same time, Nakayama and
Arisawa were involved the plan of ‘New Industrial Order’ conceived first by
the bureaucrats of the Ministry of Trade and Industry (MITI). When MITI
established the Council of Investigation into Industrial Structure in 1961 to
prepare the liberalization of foreign trade and money transfer. Nakayama was
nominated as the head of its General Committee. However, most serious debate was
done in the Subcommittee on Industrial Order that was chaired by Arisawa. It was
reported that the original plan of the Ministry that was strongly oriented to a
bureaucratic control was severely criticized by Arisawa and other members.
Integrating their criticism against the direct control of private enterprises,
the plan was modified into ‘the collaboration system of the government and the
private’.(Ohyama1996: 123-129) But members of the Subcommittee shared with the
bureaucrats of MITI the view of mitigating the monopoly regulation in order to
build strong firms that could cope with the international competition. However,
the Bill of the Special Measures Law for the Promotion of Designated Industries
which was the result of the discussion of the Council, could not pass the Diet.
The MITI abandoned the legislation of its industrial policy and since then
endeavored in elaborating informal
‘administrative guidance’ (gyosei
The tide was changing. The basic concept of economic
policy of the senior advisors (‘gosanke’)
was challenged by a younger generation of economists.
It was the great fusion in the steel and iron industry (1968) that provoked this
criticism. While the fusion represented the consensus of bureaucrats and
economists of the senior generation, a group of younger modern economists made
their objection in an impressive proclamation. This marked the end of the
intellectual hegemony of the ‘managed’ economic policy in the postwar
period. After three decades it is now rather difficult to understand the
historical significance of the economic policy in the two decades after 1945.
Arisawa’s hidden dream of ‘socialization’ was
replaced by the export-oriented oligarchy of big business. The intensification
of holding’s interest of farmers and politics of protectionism dissipated
Tohata’s vision of selective expansion.
Nakayama’s productivity oriented corporatism seemed to have survived a decade
more. However, after the oil crisis, unionism lost its concentration to
countervail the hegemony of the management.
was Murakami Yasusuke (Murakami 1992, vol. 2, p. 98) that made a brave
reappraisal of the industrial policy or more broadly of ‘developmentalism’.
Mentioning the contrast of the collapse of socialist planned economies and
growing Asian emerging economies, he suggested that debate between
‘developmentalism’ and liberalism would continue even after the retreat of
socialism as an alternative to the latter. Based on the experience of Japan and
other newly industrialized economies in Asia, Murakami concluded that the
‘developmentalism’ still retained its attractiveness to the nations who felt
themselves challenged by mighty competitors.
According to Murakami, the essential nature of industrialization lie in
the creation and growth of new industries that have the tendency of decreasing
cost. In industries with such traits, private firms are always endangered by the
risk of detrimental competition. On this ground Murakami vindicated the
intervention to support the industry in its early stage and to control the
degree of competition. He argued that the existence of the impartial and
competent bureaucracy is the inevitable condition for the success of industrial
policy. I criticized Murakami’s optimistic confidence in bureaucracy from the
viewpoint of the democratic ideal of civil society (Yagi 2000a). To me Murakami
seemed to ignore the inherent political and ideological tension of
‘developmentalism’ that is beyond the control of the most competent
bureaucracy. Since ‘developmentalism’ itself is born as a nationalistic
response to the international crisis, it is vulnerable to the wave of aggressive
nationalism or irrational fundamentalism. The historical process to the
Asia-Pacific War that the modern Japan plunged in is a clear evidence of this
sort of danger.
pointed three traits of ‘the trade version’ (i.e. post-1945 version) of
Japanese ‘developmentalism’ that it shares with its ‘military version’ (i.
e. pre-1945 version): ‘strategic view of economy’, ‘the anti-capitalist
orientation, marked by restraint of market competition, and the profit
principle’, and the role of ‘the state bureaucracy’ to organize the market
competition (Gao 1997: 29-33).
These combinations seem to be very odd from the viewpoint of the
Anglo-Saxon concept of the ‘free market economy’. However, in recourse of
the Japanese social economics in the twenties and the thirties, and the
intellectual backgrounds of ‘gosanke’,
it becomes easier to grasp the nature of this odd combination. Fukuda and Takata
provided to later generations a sense of broad social perspective to understand
the socio-economic development of the late-industrializing nations. The ‘gosanke’
studied in Germany in relatively stable years in the late nineteen-twenties
after the failed attempts of the socialization. After realizing the same fate of
Japanese socialization, Arisawa seemed to have moved to the position that
capitalistic direction was the inevitable path of the reconstruction. But he
needs not to switch his orientation to the Anglo-Saxon type of free market
economy. He knew well of Hilferding’s theory of ‘organized capitalism’, on
which German socialists in the Weimar period continued their effort after
economic recovery in capitalist direction. To Tohata and Nakayama, Schumpeterian
concept of entrepreneurship belonged to their intellectual assets. Schumpeter
separated the function of entrepreneur strictly from the interest of
Not only the salaried managers but also the state can exert its entrepreneurship
in their own peculiar way. Furthermore, Schumpeter expected the dynamic
efficiency of big business on the grounds of integrating innovative activity
into the normal business organization. If we would mold a liberal on
Schumpeterian scheme, he/she would not be a fundamental liberal that advocates
private property and individual freedom as the only basis of entrepreneurship
but a functional liberal that admits the role of organization and government for
the lively exertion of the entrepreneurship. It is not an exaggeration to regard
the postwar Japanese system of ‘developmentalism’ as a version of
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Yamamuro, Shinichi(1984), The Age of Legislative Bureaucrats (Hosei kanryo no Jidai),
 I adopt Murakami’s use of ‘developmentalism’ that signifies a general attitude and politico-economic system of those developing nations to whom the state-lead industrialization has priority to the shaping of the society according to the liberal democratic ideals (Murakami 1992, vol.2, pp.5f.).
 I am afraid that my use of the term ‘mobilization’ in Yagi(2000a) also shares the same risk with Gao’s concept of the ‘managed economy’ (Gao 1997). In this paper I would like to locate Japanese economists’ peculiar position between liberalism and developmentalism.
 Kumagai (1998) describes the contrast of the two Meiji liberals. On Fukuzawa’s attitude to economics and liberalism, see also Sugiyama (1994) and Yagi (1999).
 Yamamuro (1984) described the process and the impact of this choice brilliantly, though his focus is on the law and political sciences.
 For the overview of the Japanese social policy school, see Fujii (1998).
 Recently some of Takata’s works were translated with the introduction of Morishima Michio (Takata 1995)(Takata and Schumpeter 1998).
 In my view on these economic advisors, I owe much from the collaboration in a joint research into Japanese economics after 1945. The result was published both in Japanese (Ikeo ed. 1999) and in English (Ikeo ed. 2000). I was also benefited by the discussion with Mr. Kim Soo-Il, MA , who was preparing his dissertation on a comparative analysis of economic reorganization concepts after 1945 in Germany and Japan.
 As for the situation of economists in the wartime, see Yagi (2000b).
 Almost all economists in the elder generation saw an inevitable tendency in the monopolization of industries. In Arisawa’s case, the concept of ‘socialization’ was the only feasible alternative to capitalist nature of the monopolization.
 See Sakai (1992), p. 139. On this research association see also Fletcher III（1982) and Yagi (1997).
 As for Arisawa’s influence on Socialists (JSP), see Nakakita (1998).
 As for the energy industry in the postwar Japan, see Samuels (1987). Samuels expressed the relation between government and business in Japan with the term of ‘reciprocal consent’.
 Cf. Ikeo (1998)(2000), Minoguchi (2000a), and Nishizawa (2000) on Nakayama’s economics, and Minoguchi (2000b) on Tohata.
 Tohata envisaged the possibility of the development of entrepreneurial activity in the concept of the separation of management and ownership that the economic reform plan of the Showa Research Association proposed. See Yagi (1997).
 Despite this divide in this dispute, Nakayama and Arisawa shared the same view of promotion of fusion to build up the competitive firms in the age of trade liberalization.
 See Inoue and Yagi (1998) about Fukuda’s welfare economics.
 Its most aggressive representative was Komiya Ryutaro. See in details in Noguchi (2000).
 In July 1999, a new Basic Law (The Basic Law on Food, Agriculture and Rural Areas) passed the Diet and replaced the old Basic Law of Agriculture. As the name of new law suggests, present agricultural policy does not focus solely on agriculture and farmers. The stable supply of domestic foods, multifaceted functions of cultivation, and community development in rural area are now under the coverage of new Basic Law.
 Hilferding and Schumpeter sat once at the same table of Socialization Committee in Berlin in 1919. Though Schumpeter’s accord with socialists ended soon, the diagnosis of the failed socialization was not so differentiated between Schumpeter and Hilferding. Both approved the economic reconstruction by the canon of capitalist economy, however they shared the view that ‘regulation’ and ‘organization’ is inseparable from modern economy. Despite criticism of Marxian concept of revolutionary move to socialism, Schumpeter approved the tendency of socialization of modern economic life, which would in his view ultimately transforms the present economic system to ‘socialism’. See, Swedberg (1991) and Schumpeter (1942).