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Growth vs. Economic Democracy in Japan—1945-1965

Published online by Cambridge University Press:  23 March 2011

Kozo Yamamura
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What has been happening to “Economic Democracy” in Japan within the past twenty years since the end of World War II? Has die emphasis upon rapid economic growth countered the measures intended by the Allied Occupation to ensure economic democracy?

The democratic economy the Supreme Command of the Allied Powers envisioned for Japan in the years 1946-1948 was to be free of highly concentrated economic power, either in the hands of Zaibatsu or of giant corporations, was to have an Anti-Monopoly Act to promote “the democratic and wholesome development of the national economy as well as to assure the interest of the general consumer,” and was to have a “just and equal” tax law to “democratize the Japanese economy.” A thorough-going land reform and legal bona fide trade union movement also was declared to be a necessary part of economic democracy. It was, in the words of the Zaibatsu Mission, to build “a strong middle class which can influence the course of policy.”

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Articles
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The Journal of Asian Studies , Volume 25 , Issue 4 , August 1966 , pp. 713 - 728
Copyright
Copyright © The Association for Asian Studies, Inc. 1966

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References

1 Fair Trade Commission of Japan, Showa 23-Nendo Kosei Torihikj Hokoku (The Annual Report of FTC, 1948) (Tokyo, 1948), p. 3.Google Scholar

2 Supreme Command of the Allied Powers, Report on Japanese Taxation by the Shoup Mission (Tokyo, 1949), Vol. I, p. ii.Google Scholar

3 FTC Annual Report of 1948, op. cit., p. 6.Google Scholar

4 Supreme Command of the Allied Powers, Mission and Accomplishments of the Supreme Commander of the Allied Powers in the Economic and Scientific Fields (Washington, D. C., 1951), p. 1.Google Scholar

5 One of die most recent books on the post-war Japanese economy is Allen's, G. C.Japan's Economic Expansion (Oxford University Press, 1965)Google Scholar which suggests its major concern in Japan's economic growtfi rather than its impact on what we call here economic democracy.

6 FTC, Fair Trade No. 3, p. 37. Dodge Line is a deflationary policy recommended by Mr. Joseph Dodge, financial advisor to GHQ—SCAP, to suppress the rampant post-war inflation.

7 Conditions to be met before “recession” and “rationalization” cartels are defined in FTC's By-Laws (Article 3:2). But these conditions were such that a wide latitude in interpretation was possible. Forecasting of the future demand, and the average cost of firms vis-à-vis the past and expected prices were key items to be considered based on the data presented by firms requesting these cartels. See FTC, Dokusen Kinshi-Ho Kankei-Ho [The Related Laws Concerning Anti-Monopoly Act] (Tokyo, 1962).Google Scholar

8 M.I.T.I., Sangyo Gorika Hakusho [The White Paper on Industry Rationalization] (Tokyo, 1957), p. 293Google Scholar. All dirough this article M.I.T.I. is used as a spokesman of the government view as usually is the case in regard to die anti-monopoly and other industrial policies.

9 Much of this observation is based on the transcripts of hearings held for the attempted 1958 amendment. The FTC kindly granted me permission to use their only copy of the transcript.

10 This is based on a mimeographed version of the bill made available to me by Mr. Misonou Hitoshi.

11 Rikuzo, Kodo, “A Proposal from the Industry,” in Sangyo Taiseino Saihcnsei [The Reorganization of Industrial Structure], Shunjusha, , ed. (Tokyo, 1963), p. 116.Google Scholar

12 Keidanren is the Japanese counterpart of National Association of Manufacturers and is politically much more potent than the NAM.

13 Kodo, ibid., p. 116.

14 Hiromi, Tsuchihara, “Views on Mitsubishi Merger,” Kosei Torihikf, February, 1962, p. 23.Google Scholar

15 Asahi (A daily newspaper published in Tokyo), June 1, 1965.

16 Asahi, May 31, 1965.

17 For data relating to the recent trend of reconcentration of market structure, see my comment, “Market Concentration in Post-War Japanese Growth: A Comment,” The Journal of Political Economy, published in October, 1965.Google Scholar

18 Kônosuke, Matsusta, “Ieyasu Tokugawa is too Ancient,” Bungei Shunjyû, September, 1965, p. 80.Google Scholar

19 Hideo, Matsukata, Scngo Nippon no Zcisei [The Post-War Tax System] (Tokyo, 1959), p. 85.Google Scholar

20 Japan Taxation Research Association, Zeisei Kenkyu Sankô Shiryo Shu [The Collected Data for Research in Taxation] (Tokyo, 1960), p. 83.Google Scholar

21 Haruo, Taniyama, Zàkinni Mesti o ireru [Dissection of the Tax System] (Tokyo, 1964), p. 97Google Scholar. Professor Hayashi also supports this observation based on an examination of the 1955 data. Yoshio, Hayashi, Sengo Nippon no Sozei Kôzô [The Tax Structure of Post-War Japan] (Yuhikaku, 1958), p. 363.Google Scholar

22 The Tax System Examination Commission, Tomen no Zeisei Kaisei no Kansuru Toshin [The Report on Current Revisions of the Tax System] (Tokyo, 1961), p. 398Google Scholar. Ten percent is an average figure; it fluctuates with business conditions. The differential, for example, in 1956 (a boom year) was 12.6 percent, as against 6.7 in the 1958 recession.

23 Bronfenbrenner, M. and Kogiku, K., “The Aftermath of the Shoup Tax Reform,” National Tax Journal, December, 1957, p. 354Google Scholar. This was Part II of their excellent and useful observations on post-war Japanese tax policy. Readers are referred to these articles for pre-1957 tax rates and general policy discussion.

24 Kyoko, Imura, “Several Considerations on the theory of Wage Differential by firm size,” Mita Gakkai Zassi, (Keio University, June-July, 1963), p. 150.Google Scholar

25 Ibid., p. 159.

26 In 1961, the first minimum wage law was enacted, but this has been regarded as “ineffectual,” as its coverage is limited and the minimum set is too low even for the employees of small firms. See Isobe Kiichi, “The present tasks of the minimum wage system,” and Tokutaro, Yamanaka, “Japan's Minimum Wage System,” both in Nippon Rôdô Kyokai Zassi [Journal of Japan Labor Associations], February, 1962.Google Scholar

27 This is an exclusive club of financial leaders and the giant corporation officers, and politically a very vocal group.

28 Asahi, May 31, 1965.

29 Ibid., May 29, 1965.

30 Ibid., May 29, 1965.

31 Following the 1958–59 recession, the consumer index rose from 100 in 1960 to 105.3 in 1961 and 112.5 in 1962. The effects of the easy money policy during this period of active industrial investment lagged into 1963, when the index rose to 121.0. This became one of the major campaign issues of the 1963 general election.

32 For informative discussion on this point, see Kinyu Jyanaru [Finance Journal], March and August, 1964Google Scholar, and Toshihiko, Yoshino, ed., Keìzai Seicho to Bukka Mondai [Economic Growth and Price Level Problems] (Tokyo, 1962), pp. 17–184.Google Scholar

33 See: Ryutaro, Komiya, “Supply of Personal Saving” in Ryutaro, Komiya, Ed., Sengo Nippon no Keizai-seicho [Economic Growth of Postwar Japan] (Tokyo, 1963), pp. 157–182Google Scholar; Tadao, Ishizaki, “Distri bution of Income by Income class and Redistribution of Income,” Nippon Rodo Kyokai Zassi [Journal of Japan Labor Associations], No. 29, August, 1961Google Scholar; and, Yoshiaki, Kaizuka and Hiroshi, Niida, “Effects of Income Redistribution by Taxation,” in Yakata, and Tobe, , eds., Keizai Seicho to Zaisei Kinyû [Economic Growth and Finance] (Tokyo, 1965), pp. 44–80Google Scholar. The last article has empirical data showing the point made in the text.

34 The index is slightly higher than for the U. S. (32.9), England (33.6) and Switzerland (35.0), but compared to India (60.3), the Japanese level of living, judged by this index, is clearly non-Asian. All these figures are for 1962 and based on I.L.O. Annual Data for 1962.

35 For a theoretical analysis of this point, see my “A Theoretical Analysis of Oligopoly Policy,” Kosei Torihikf, January, 1963, pp. 18–24.Google Scholar

36 Asahì, June 5, 1965.

37 From November, 1964, bankruptcies reached the level of five hundred cases per month and 90 percent of these are firms having assets below 10 million yen; the number of bankruptcy cases exceeds those filed during the 1958–59 recession. For a detailed discussion of the data, see: Finance Journal, op. cit., August, 1964Google Scholar, and Asahi, September 4, 1965.

38 Seiji's, GigaGendai Nippon no Dokusen Kigyo [Monopolistic Industries of Contemporary Japan] (Tokyo, 1962)Google Scholar is a typical example of this view.

39 The Holding Companies Liquidation Commission, which effected the dissolution of Zaibatsu, was composed of Japanese.

40 Ryutaro, Minobi, Keizai Hyoron [Economic Discussions], August, 1952, p. 82.Google Scholar

41 SirShone, Robert, “Problems of Planning for Economic Growth in a Mixed Economy,” Economic Journal, Vol. LXXV (March, 1965), p. 2.Google Scholar

42 Growth rate is δY/Y, thus s/Y. δY/Y is δY/Y since all savings are assumed to be invested (s = I) in this growth model.

43 Harrod, R. F., Toward a Dynamic Economics (London, 1956), p. 79.Google Scholar

44 Shone, , op. cit., p. 3.Google Scholar

45 In the iron-steel, chemical fiber, ship-building, cement, ammonium industries, and some lines of the machine tool industry, it is generally agreed that these industries have been internationally competitive since 1962, and some much earlier. Camera, electric appliances and light machinery are areas in which Japan's international competitive ability is unquestioned. Debates on further need for government protec tion are heard for the automobile, some machine tool, and heavy industries. But, as can be determined by export data, export of buses, trucks and small passenger cars has been increasing, and in the heavy equipment areas, such as generators and transportation equipment, Japanese firms are winning an increasingly large number of international bids.

If one observes Japanese industries during the period of 1961–64, when investment activities were at their postwar peak, and analyzes increases in efficiency-cost reductions, one is forced to realize tiiat government reports which showed the relative inefficiency of several of the Japanese industries up to this period were rapidly becoming out-dated. M.I.T.I.'s comprehensive Report of Industrial Structure Commission (the so-called Arisawa Commission Report), published in 1963, compared plant scale curves of the largest Japanese firms in 28 industries to the best estimates of diose of the Western firms, and found that “in nearly all cases a significant cost reduction could be achieved by enlarging the scale of production to that of the Western level.” Especially, they found, in nine industries (passenger car, ball-bearing, coal-tar derivatives, chemical fibers, cement, petroleum refining, lathe, aluminum and chemical fertilizer) at least a 20–10 percent cost reduction could be achieved if further rationalization is carried out [pp. 10–25]. Also, of the 1,036 largest firms in Japan, the Commission reports that 841 are in need of “enlargement of scale” [p. 13].

However, a careful examination of technical and trade journals reveals that the 1961–64 investment activities rapidly changed this condition. For example, in diose areas still debated, the machine tool industry, as did the automobile industry, effected mergers and enlargements of scale of production in 1963 and 1964. Thus, judging from the published data, the remaining problems are large excess capacities and methods of financing the expansion rather than technological problems. Though pockets of technological inferiority cannot be denied, as in any industrial nation regardless how advanced, the writer believes that the level of Japanese technology today can no longer be considered inefficient by international standards. See Allen, , op. cit., p. 235Google Scholar, for a view supporting the foregoing.

46 Along with footnote 45, for a detailed examination of the state of Japanese technology, see: Imai, , Misonou, , Miyazaki, and Nakamura, , eds., Gendai Nippon No Dofotsen Shihon [Monopolistic Capital of Contemporary Japan], Vol. 4, subtided “Technological Innovation, International Dissemination” (Shiseido, 1965).Google Scholar

47 This figure was 22.1 in the U.S., 28.3 in England, and 18.7 in West Germany in 1962. This must be considered vis-à-vis the fact that the military expenditure is much smaller in Japan than in these countries. Per capita outlay is at the level of “Tunisia and Ceylon.” Yoshida Hiroshi, “Conditions and the policy of Social Welfare,” Ekonomisuto, March 16, 1965, p. 15.Google Scholar

48 This figure is for Tokyo which enjoys the highest welfare payments, and the calculation is based on the Engel Index of 53.6. The allowance for one meal for an adult is approximately ten cents. Ibid., p. 18. Also see for very informative and detailed examinations of Japan's poor in a special issue of Ekpnomisuto on “Poverty in the midst of prosperity,” October 10, 1963.