Modern Times: The World From the Twenties to the Nineties (143 page)

What the constitutional reforms essentially did was to persuade the Japanese that the state existed for its citizens, and not vice-versa. It laid the foundations of a new and healthy individualism by encouraging the emergence, as an alternative centre of loyalty to the state, of the family and of the many Japanese institutions which embody the family metaphor. As in post-war Germany and Italy, the family, both in its biological and its extended forms, provided the natural antidote to the totalitarian infection. This was assisted by a highly effective land reform, which gave freehold tenure to 4
.7
million tenant farmers and raised the proportion of owner-farmed land to over 90 per cent. Local government reform completed the process of creating strong, democratic, property-owning local communities, as in Christian Democrat West Europe.
⁷⁵
The independence of the judiciary and an American-style Supreme Court underwrote individual property rights and civil liberties at the expense of the state and the collective.
⁷⁶
On these foundations was raised an exceptionally stable parliamentary structure, run by a liberal-conservative alliance (eventually called the Liberal Democratic Party), whose internal factions, modelled on extended families, provided flexibility and change, but whose external unity gave the country’s economy a consistent free enterprise framework. The Liberal Democrats thus provided the same cohesion as the Christian Democrats in Germany and Italy, and the Gaullist-Independents in Fifth Republic France. The parallel went further. MacArthur’s postwar purges made possible the emergence of an elderly political genius who, like Adenauer, de Gasperi and de Gaulle, had been in opposition under the pre-war regime. Yoshida Shigeru was a former diplomat and thus from the background closest to Anglo-Saxon traditions of democracy and the rule of law. He was sixty-seven when he became Prime Minister in 1946 and held the job with brilliant tenacity for nearly nine years, as one observer put it ‘like a veteran
bonsai
[plum tree], of some antiquity, on whose gnarled branches white blossoms flower year by year’.
⁷⁷
He carried the new system through from adolescence to maturity, and by the time he retired in 1954 the pattern of stability was set not only for the 1950s but for the next quarter-century and beyond.

As a result, Japan had completed its post-war reconstruction by 1953, only four years after Germany, and then embarked on a twenty-year period of growth which averaged 9
.7
per cent annually. This was nearly twice the rate of any other major industrial nation in the post-war period. The only true comparison is with the spectacular growth of the American economy in the forty years up to
1929.
⁷⁸
The ‘miracle’ was based on the car, with the growth of passenger car production in the intense period 1966–72 at the astonishing rate of nearly 29 per cent a year, with Japanese car ownership rising by a third annually.
⁷⁹
Between the end of the 1950s and the end of the 1970s, Japanese car production increased one hundred times, reaching over 10 million in 1979, roughly the American total, and overtaking it decisively in the early 1980s. Of this production about half was exported. From cars the Japanese spread over virtually the whole range of consumer goods. In 1979 they became the world’s leading watch producer, with 60 million (50 million for Switzerland). They ousted America as the leading producer of radios in the 1960s, and of television sets in the 1970s, the same decade they took the lead from Germany in camera production. During the 1970s, Japan’s
per capita
industrial production equalled America’s and in certain important respects she became the world’s leading industrial power. In 1978 she had an industrial trade surplus of $76 billion (against a US industrial trade deficit of $5 billion). By the end of the decade she had a steel capacity as big as America’s and almost as big as the entire EEC. In the 1980s, in many fields, Japan overtook the United States and European producers in quality too, particularly in high-technology areas such as jets, machine-tools, robots, semi-conductors, calculators and copiers, computers and telecommunications, advanced energy-systems, including nuclear power, and rocketry. By 1980 her investment was twice America’s
per capita
, and in some years during the 1980s exceeded it in absolute terms.
⁸⁰

Japan’s rate of economic growth slowed a little in the 1980s but it continued to make spectacular advances in the financial sector. It weathered the stock market crash of October 1987 with remarkable aplomb and within a year had pushed the United States into second place as the world’s largest banking nation. Right through the decade it maintained the largest trading surplus. It bought heavily into the United States economy, by taking up huge quantities of American Treasury bonds and making it possible for the United States to run a large and growing budget deficit throughout the period, and by investing in, or taking over, American businesses, thus enabling the US to run a large and continuing deficit on visible trade. It also invested heavily in such territories as Australia, source of many of its raw materials, to the point where this former British political colony was in danger of becoming a Japanese economic colony. It also invested heavily in Britain, as a means of sliding under the European Community’s tariff barriers. This took a variety of forms. On 12 November 1981, for instance, one of Japan’s leading car-makers, Honda, signed an agreement with British Leyland,
last of the major independent British car firms, to develop a joint product for the 1990s, involving the mass production of matching components in both countries. On 8 September 1986, to give a second example, another major Japanese manufacturer, Nissan, opened a new £430 million car plant near Sunderland, in northern England, with a production capacity of 100,000 a year. By the early 1990s, the Japanese possessed not only by far the world’s biggest investment portfolio but one, in relative size and influence, which compared with Britain’s in the period up to 1914. Japan’s success, and the inability of Western producers to penetrate far into Japan’s own market, aroused accusations of unfair trading practices, particularly in the United States Congress and from the European Community. In some cases Japan accepted voluntary quotas on its manufacturing exports, and it showed its nervousness over the issue in March 1991 when, in a self-denying ordinance, it forbade Japanese contractors to bid for work in restoring Kuwait, where the United States and Britain, having done the lion’s share in liberating the country, were expecting the lion’s share of the post-war reconstruction business. By this stage Japan had easily overtaken the Soviet Union as the world’s second largest economy, and it continued to invest heavily in high technology, new equipment and, not least, in education and training. By the late 1980s, 93 per cent of Japanese children were attending secondary school up to the age of eighteen, and well over a third were going on to higher education, up to the age of twenty-one or twenty-two, at one or other of Japan’s 1,000-plus universities and colleges, the vast majority of which were privately maintained.

There was nothing miraculous about this miracle. It was a straightforward case of Adam Smith economics, with no more than a touch of Keynesianism. A high percentage of fixed capital formation, very little of it in non-productive investment. Moderate taxation. Low defence and government spending. A very high rate of personal saving, efficiently channelled into industry through the banking system. Shrewd import of foreign technology under licence. Very fast replacement rate of existing plant, made possible by remarkable wage restraint, with productivity running well ahead of wages. Labour was plentiful because of contraction in the agricultural sector, and exceptionally well-educated and skilled because Japan (and the Asian market states generally) geared the educational expansion noted already closely to industrial needs and not to social science ideologies. Indeed, the East Asian market states were the only ones to gain economically from the revolution in higher education of the 1960s, which in Europe and North America proved such a handicap. It is true that Japan benefited substantially
from the windfalls of first the Korean then the Vietnam wars. But all the other factors were of her own making. The Japanese government provided a degree of external protection and export support. But its chief contribution was to erect a framework of intense internal competition, on an Adam Smith model, and a climate of benevolence towards business.
⁸¹

What was unique to Japan, and perhaps her most creative contribution to the modern world, was the way in which business used the principle of anthropomorphism and the new anti-collective stress on the family, already mentioned, to humanize the industrial process and so reduce the destructive impact of class warfare. Trade unions were by no means inactive in Japan: there were, in fact, 34,000 of them by 1949.
⁸²
Nor were they unsuccessful. Plant bargaining and productivity improvements, with the pressure coming from fellow-workers rather than management, meant that Japanese wage-rates rose faster in real terms than those of any other major industrial country during the 1970s and 1980s, with the highest degree of job security and the lowest unemployment, an average of 2.6 per cent in the late 1980s. Equally important, by the 1970s Japan had achieved greater equality of income distribution than any other industrial economy and, with the possible exception of the Scandinavian economies, had moved further than other market economies to eliminate absolute poverty.
⁸³
But most Japanese firms supplemented the efforts of unions by enveloping the worker in a familial embrace which included housing, meals, medical care, ethical guidance, sport and holidays. The anthropomorphism extended to the product and even the customers. At the Kubota Iron and Machinery Works, for instance, the workers were taught to see their machines as mothers and fathers, engendering sons and daughters – the company’s finished products – which were then ‘married’ to customers, using salesmen as marriage-brokers. Kubota dealers then provided ‘postnatal aftercare’, to the satisfaction of both ‘bride’ and ‘bridegroom’. In the company’s chief product, a mechanical tiller, the casing of the machine was treated as the body, the engine as the heart. Visitors to the factory were ‘family relations’, ‘friends of the family’. The workers ran highly critical ‘self-improvement committees’ to promote productivity and sales, composed and calligraphed hortatory banners and were supplied with masses of production and investment figures on which to brood. They contributed enthusiastic poetry to the works magazine.
⁸⁴
The kind of collectivized production propaganda which failed so signally in Soviet Russia, and even in China where it was applied far more skilfully, worked in the non-totalitarian context of Japan, where it was given a human scale, a voluntary impulse and a familial imagery and, not least, was
seen to produce immediate and substantial gains in personal consumption.

The huge and sustained expansion of the Japanese economy was decisive in creating a dynamic market environment for the entire Pacific area. It acted both by direct stimulus and by example. The most striking example was South Korea. A World Bank team reported in 1977: ‘The sustained high rate of expansion in incomes over fifteen years has transformed Korea from one of the poorest developing countries, with heavy dependence on agriculture and weak balance of payments, to a semi-industrialized middle-income nation with an increasingly strong external payments position.
⁸⁵
Taiwan’s progress followed the same course. In 1949, when the now totally discredited
KMT
regime took over, the economy was substantially pre-industrial. The transformation, like Japan’s, began with a highly successful land reform, followed by a rapid rise in farmers’ incomes, creating a local market for new factories. Over 90 per cent of agricultural land passed into the hands of the farmers who tilled it. No-strike laws were agreed and enforced. Duty-free processing zones were created. At times in the 1970s and 1980s, exports rose to 90 per cent of
GNP
, the highest proportion in the world, and growth-rates occasionally hit the 12-per-cent mark. Thus, on top of a sound agricultural base, a complex industrial economy was created, revolving around shipbuilding, textiles, petrochemicals and electronic equipment.
⁸⁶
Hong Kong’s progress was, in some ways, even more impressive, since it had to absorb about 5 million refugees from mainland China, about five times the number of Palestinians the entire Arab world had failed to resettle. Here again, as in Taiwan and Japan, stability of government (provided by the Colonial Governor, advised by a local Legislative Council), and consistency of economic policy over forty years, provided the ideal hospitable environment for business, though in Hong Kong’s case the future, during the early 1990s, became overshadowed by the approaching merger with the Chinese Communist Republic, set for 1997.

Singapore, after some instability in the decade after 1945, at last found a solid government framework in 1959 under Lee Kuan Yew’s People’s Action Party which began as a socialist movement but soon became a passionate and masterful instrument of the market. As Lee put it, after two decades of successful wealth-creation: ‘The question was how to make a living … a matter of life and death for two million people … How this was to be achieved, by socialism or free enterprise, was a secondary matter. The answer turned out to be free enterprise, tempered with the socialist philosophy of equal opportunities for education, jobs, health and
housing.’
⁸⁷
In the 1980s, Lee was frequently accused in the Western media of authoritarianism, putting pressure on the courts and local newspapers, and bullying the (tiny) opposition. On the other hand, during his rule of over thirty years (he went into semi-retirement in 1991), he had some claim to be considered the most successful of all the post-war statesmen, in terms of the material benefits he conferred on his country and its people.