How the East was won: Japan in the 20th century

The West usually attributes Japanese industrial success to innate national characteristics such as feudal loyalty, hard work and passivity

This article, written more than 30 years ago, argues that economic collapse in the 1930s, followed by repression of the labour movement, are the real clues to the people behind the stereotype today.

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Author’s note, 2013

Since this piece was written, the rise of China and the enduring impact of Japan’s ‘lost decade’ (1989/91-2000) have combined to eclipse the country’s old prominence in the West. In some ways the location of the Yellow Peril in Western apprehensions has shifted from Tokyo to Beijing, and the fear has moved from Japanese cars and consumer electronics to Chinese cyber capabilities and Samsung’s prowess in TVs and mobile phones. After all, Japan today meets with a falling yen, growing trade deficits, and an American ‘pivot’ to Asia very different from Uncle Sam’s Cold War umbrella. It can no longer count on the dynamism it used to gain from the post-war years of insular reconstruction and overwork. As a result, the West no longer fears what, from the early 1980s on, it used to stigmatise as ‘Japan Inc’.

Even in the 21st century, however, most Western accounts of Japan, China or South Korea continue to neglect the role of the working class in these societies. Of course, the 1988 revision of the Labour Standards Law, the first major change in 40 years, did much to quell residual animosities around long working hours, and in the wake of this the amount of holidays on offer to Japanese workers also improved. Yet while Japan’s workers are today quiescent, by contrast with the strikes and demonstrations that mark other parts of Asia, Japan shares with the whole region a past full of turbulent class struggles. This article gives a flavour of the tensions that divided Japanese society for much of the past century.

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Shortly before the Japanese took Hong Kong, on Christmas Day 1941, the Crown Colony was swept by rumours that the enemy could not drop bombs at night because its pilots could not see in the dark. Once, when he ruled Japan in the years between 1945 and 1952, General Douglas MacArthur remarked that the mentality of a Japanese was that of a 12 year old. And when the League of Nations was formed after the First World War, Japan was unsuccessful in its attempt to get the principle of racial equality embodied in the organisation’s lengthy Covenant.

These incidents serve as a warning. Most explanations of Japan’s rise to fortune seek refuge in vulgar psychological stereotypes about its people. As the Boston Consulting Group whizzes James C Abegglen and George Stalk Jr make clear in their excellently balanced study Kaisha: the Japanese corporation (Basic Books, 1985), accounts of Japanese business practice tend to assume conspiracies.

Sometimes these conspiracies are pursued by enlightened bosses. William Ouchi’s management bestseller, Theory Z: How American Business Can Meet the Japanese Challenge (Addison-Wesley, 1981) put forward this view with some verve. Alternatively, Japan’s conspiracies are held to be sinister forces bent on world domination: this view is popular with Lee Iacocca, who runs Chrysler, and with the United Autoworkers Union, too. Ever since James Clavell’s 1975 novel Shogun, everybody will tell you that the Japanese are still feudal, that they are by nature given to paternalism, strikelessness, hard work, obedience, company hymns in company uniforms, and quality circles rather than unions.

In coming to terms with the Japanese miracle, I only want to make the point that naturalistic analyses miss experiences very peculiar to Japan. To portray the Japanese as a species fundamentally unchanged since the days of the Samurai is particularly inappropriate, given that Japanese anatomy itself has changed a lot in this century. As Takafusa Nakamura makes clear in his useful study The postwar Japanese economy (University of Tokyo, 1981), the average height of the Japanese 17-year-old at middle school rose from less than 158 cm to more than 168 cm between 1900 and 1976, with the bulk of the increase occurring after 1950.

No wonder Nissan and Toyota, the companies surveyed in by the brilliant MIT professor Michael Cusumano in his monumental but engrossing The Japanese automobile industry (Harvard, 1985), are now moving into luxury, full-legroom export models in a big way. The Japanese have changed a lot in the past century, and it is essential to see how different phases of Japanese industrial development has given rise to all the ‘genetic’ characteristics with which we in Britain are familiar today.

MITI and Meiji

One widely observed characteristic of Japan is the level of integration between its kaisha (companies), its banks and the mandarins at the Ministry of International Trade and Industry. The Boston Consulting Group authors make much of Japanese manufacturers are backed by bank loans, and are keen, by contrast, to stress the failures of state intervention. Yet it is a fact that Japanese industry, money and government – not to speak of the leading Liberal Democratic Party – enjoy a symbiosis not known in Britain. Why?

MITI’s prewar predecessor, Cusumano makes clear, played a major role in regulating Japanese car and truck production. But Japan’s special ability to coordinate institutions goes back to the enthronement of the 16-year-old Emperor Meiji in 1868.

Even Milton Friedman’s monetarist bible Free to choose (1979) has to admit that the Meiji Restoration was marked by considerable state activity. In fact state intervention proved indispensable in shifting resources from agriculture to industry, abolishing feudalism, and creating a basic infrastructure of transport and communications throughout the country.

Japan, like Germany and Italy, was industrialising late. Without an independent base for capital accumulation, its state was forced into a pivotal position. After the First Anglo-Chinese War (Opium War) of 1839-42, security concerns had made the state a central fact of Japanese life. Now, after the Meiji Restoration, the state built a telegraph system, a steamship line between Osaka and Tokyo, and a 29km railway track – financed by an English loan – from Tokyo to the international port of Yokohama. The Nagasaki Iron Foundries were turned into artillery works, and victorious wars fought with China (1894-5) and with Russia (1904-5). The state established the Bank of Japan, and, for foreign-exchange dealings and support for exports, the Yokohama Specie Bank. By 1914, a network of government-founded banks became Japanese manufacturing’s chief source of funds. There was little middle class of private investors available to buy industrial securities (G C Allen, A short economic history of modern Japan, Macmillan, 1981).

Government efforts to improve the quality of Japan’s products were only really effective with the silk industry. However such efforts were made throughout Japanese manufacturing. The state fuelled the growth of trade associations, and worked closely with Mitsui, Mitsubishi, Sumitomo and Yasuda, the four main ‘money cliques’ (zaibatsu), to finance wars, colonial development, and strategic industries at home.

Japan, however, had made a late start. It did build up an import-proof bicycle industry quite early on, and, by the mid 1920s, was proficient in prime moving gear, shipbuilding, electrical and textile machinery, and scientific instruments. But by the time the Depression struck, Japan was still a rural country. Textiles were its main industrial staple.

A Bismarckian programme of state fiat built the networks that today surround MITI, but was not enough to put Japan ahead of its rivals. To do that, something else was called for.

Repression

All over the west, commentators wax lyrical about Japanese industrial relations. But far too few bother to investigate why it is that Japan’s employees are so docile or so loyal. Events during the quarter-century from 1929 to 1958 contain some of the answers.

Japan was hit hard by the collapse in world trade that followed the Wall Street Crash of October 1929. However in the three years of economic downturn that followed, and the subsequent five years of reflation by finance minister Takahashi, Japan’s population took a battering. Wage rates dropped by nearly 10 per cent between 1926 and 1931 and slid a further 10 per cent by 1936. As Japan embarked on a series of economic and military adventures abroad, including attacks on Manchuria (1931) and China (1937), a climate of reaction grew up, dominated by the nation’s militarists.

From 1929, a heavy domestic investment in technology was followed by a rise in industrial output of more than 80 per cent in the recovery of 1931-34. Japan’s population rose from 63 to 71 million, 1929-37. But her impetuous spurt of growth was enormously costly. Continued rearmament in the wake of the assassination of Takahashi in February 1936 was conducted, as Professor Nakamura points out, ‘on the verge of bankruptcy’. While people flooded into the cities from the countryside, Japan’s historic textile industry could only really progress on the basis of cheap female labour.

Modern industrial sectors – steel, chemicals, machine tools – leapt ahead; but overall the pattern of Japanese trade in manufacturers was dangerous. Imports soared in the race to build more arms, while Japan’s exports switched away from the United States, now to dovetail all too closely with the designs of her generals: with China, Manchuria, Kwantung, Hong Kong, India, the Dutch East, the Straits Settlements and South America.

Poverty

As Christopher Thorne notes in his classic study, The issue of war: states, societies and the Far Eastern conflict, 1941-1945 (Hamish Hamilton, 1985), real wages fell no less than 17 per cent between 1937 and 1940. Japan’s trade unions were wiped out. Japan had only enough oil to fight a war lasting two years: she had no choice but to break into Southeast Asia, the Philippines, Singapore and Indonesia.

There was no domestic opposition to the war. When it finished, the Bank of Japan, the forces that emerged as MITI in 1948, and – significantly – the country’s system of health insurance and welfare were each strengthened. Still, three million lay dead or wounded. In the Burma war against Gen Slim, Japan lost 100 infantrymen for each soldier of the Allies. The originator of strategic bombing in the 1930s, Japan lost ¥64 billion in national wealth through the war; what survived was worth ¥189 billion – about the value of assets in 1935. The rise of the large scale capital goods sector had highlighted the fact that the bulk of Japanese industry remained based on small firms and subcontractors. This is an expression of economic weakness which persists, unnoticed by foreign commentators, till this day.

It was militarism and devastation, not inherent personality traits, that conspired to make the ordinary Japanese cowed and ready to accept any sacrifice – including the congenital habit of salting money away as savings. Wage differentials between old and young workers (‘seniority’), statutory wage controls and the metamorphosis of the old unions into ‘patriotic industrial associations’ were telling features of the war.

The special readiness of the postwar Japanese workforce to accept paternalistic styles of management was rooted in two circumstances. First, a massive trade union movement was no sooner born than crushed. Backed by the Japanese Communist Party, trade unions multiplied, fought for control of production and were repulsed. In October 1946 a work-in by staff at the newspaper Yomiuri was smashed. MacArthur banned a general strike in February 1947 and denied public sector employees the right to strike in 1948. By early 1949, under the American Dodge plan, an offensive in favour of ‘second’ (company) unions was in full sway, aided by management provision of full-time union posts and offices in return for worker pliancy on the shop floor. At this time some 85,000 redundancies were pushed through each month under industrial rationalisations, which were especially vigorous in electric power, machinery, cars and coal. Japan was declared a ‘bulwark against communism’ by America; in the coalition government, the Socialist party presided over a country where wages were 50 times pre-war levels, but prices were up by a multiple of 100. Eventually a series of strikes at Nissan (1953), in steel (1954), at Oji paper (1958) and at Mitsui Mining (1960) were violently defeated.

Aftermath of the defeat of a major strike at Nissan, 1953

The second factor underlying labour passivity consisted simply in the fact that Japan remained an agricultural state. Thus ‘feudal’ industrial work norms were a handy means of socialising those workers caught up in the exploding urbanisation that created modern Tokyo after 1955. Indeed the weight of agriculture was so great that employment in the sector dramatically increased in the years just following VJ day.

The basic tardiness of Japanese industrialisation meant that productivity increases could be exacted from those making the exodus from the rural areas with little but company dormitories being offered in return. According to Nakamura, production in mining and manufacturing was up 60 per cent on 1930 levels by 1953, but income per head had risen by only 9 per cent. Over at quarter of a century, Japanese labour was ground into the dust. The Korean war and the expenditures of the occupying American army played their part in Japan’s economic miracle, but the destruction of the labour movement is the distinguishing feature of mid-century Japan.

The prospectus today

‘Economic giant, political dwarf’ was how people labeled West Germany in the 1960s, and in many ways the epithet applies to Japan today. Japan has boomed; but that did not prevent the eminent American author Theodore H White from threatening her, in a major feature published shortly before his death, with military reprisals against her exports (‘The danger from Japan’, New York Times Magazine, 28 July 1985). Today the penetration of Japanese multinationals and banks into western markets has reached unprecedented levels. How long can the contrast between vibrant economics and inscrutable diplomacy continue?

In Japan’s quest for comprehensive security (Francis Pinter, 1983), the British writers Chapman, Drifte and Gow present some chilling facts. Premier Yasuhiro Nakasone was made director-general of Japan’s defence agency in 1970. In that year he signed the nuclear non-proliferation treaty, but issued a statement that the use of nuclear weapons by Japan ‘for defensive purposes’ would not be unconstitutional. According to Chapman and his colleagues, American nuclear weapons already exist in Japan. Moreover since 1978 popular interest in and support for the creation of a national body to look after ‘comprehensive security’ has grown. The concept embraces not just Japan’s Self-Defence Force, but also economic tools in the realms of energy, food and product quality, plus the striking of diplomatic postures toward China and the USSR.

In 1980 the ruling Liberal Democratic Party declared the opening of a ‘defence era’ in Japan. In September 1986 Nakasone told the party that the growing multitude of blacks and Hispanics in America made that country ‘far and away lower’ in intellectual ability than the Japanese. In the five years to 1990, Japan will have spent $75 billion on defence, and already major companies like Toshiba have been allowed to export arms for the first time since the war.

Japan spends only one per cent of her GNP on defence, a fact which has played its part in today’s prosperity. But with Japan’s output so large, her defence budget is sizeable. Japan maintains a keen interest in the Iraq-Iran war; her skills in tanks and even rocketry are advancing; she packs more of a punch at Group of Seven summits; her premier visits Gorbachev in Moscow to talk defence policy and SS-20 missiles.

Sinister secrets

To say all this is not to add a further voice to the Western demonology that surrounds Japan. But the upwardly mobile and dynamic to the Yen in the late 1980s ensures that the companies which drove export-led growth in the 1960s now declare paltry profits, higher prices, and plans to extend their foreign investments still further. We have not heard the last of Western stereotypes about Japan: the chances are that they will spread and grow more uncomprehending. All the more reason, therefore, to see the secret of Sony, not just in the genius or the scheming of Akio Morita, but also in the belated, thwarted and terrible industrialisation drives preceding him.