|
Libertystory.net |
Big
stories |
"Where
liberty dwells, |
|
|
|
|
|
In a single generation, during the late 19th century, Japan
transformed itself from a backward rural nation to a dynamic economy.
The Japanese achieved rapid, self-sustaining growth much faster
than Western nations, and they used comparatively little outside capital.
This was one of the most astonishing transformations in modern
history.
Although the Japanese achievement has often been hailed as the
result of a wise government industrial policy, there's little evidence to
support such a claim. Beyond eliminating
many barriers to enterprise, the government was actually a minor and
rather inept player. It
channelled funds into some high profile businesses, but almost every
single one lost money. Prestigious
heavy industries favored by the government never added as much value as
humble light industries such as textiles which got little or no government
favors.
Two centuries of stagnation. By the mid-19th century, the Tokugawa Shogun (military dictator)
had virtually cut off Japan from the outside world for more than two centuries.
Since 1636, the Shogun had enforced the death penalty
for Japanese people caught trying to leave the country.
Japanese merchants were permitted to see only the Dutch on Dejima,
a small island off Nagasaki. This
two-century period was known as the "Great Peace," and the
Japanese enjoyed a modest prosperity as a consequence.
There was a gradual increase in cultivated land.
But without the stimulus of the outside world, the
economy stagnated. Technology
changed little in agriculture or industry.
The Japanese were oblivious to the industrial revolution
sweeping through Western Europe.
Countless things which were commonplace in Western Europe
had never been seen in Japan.
In addition, there were internal restrictions which discouraged
people in one region from trading with people in other regions.
The primary aim was to keep people apart and thereby prevent
political alliances from forming against the Shogun.
Moreover, people weren't free to choose their occupations.
Sumptuary laws made it illegal for ordinary people to purchase
luxuries like silk; by limiting the market, and such laws assured
that Japanese producers would remain small, unable to accumulate capital
for more ambitious operations. "This late
feudalism represents one of the most conscious attempts in history to
freeze society in a rigid hierarchical mold," noted historian E. Herbert Norman.
An
unintended consequence of these restrictions was that the Japanese
couldn't realize substantial benefits from their own domestic market.
Limited to serving local markets, Japanese companies were smaller
and less competitive than they would otherwise have been.
The worst consequence was famine which occurred because
restrictions made it difficult for farmers with crop surpluses to ship
grain where people suffered from crop failures.
Rebellions became more frequent.
In 1837, armed farmers in Settsu submitted this petition to
local officials: "With both the high price of rice and the
prevalence of epidemics, there have been many who died.
Since spring twenty out of over hundred have died of
starvation and this fall, during the last ninety days, half of the people
have died. We ask that just
government be applied towards us." The Shogun's trade restrictions, intended to bolster the
regime, undermined the nation.
Despite the Shogun's efforts to enforce autarky, Japanese were
curious about the outside world. A
few escaped the country aboard Dutch merchant ships or American whalers.
Dutch books were smuggled into Japan.
Many samurai sold their precious swords to get Dutch grammars,
so they could read Dutch technical books.
Relying only on book learning, curious Japanese produced pens,
ink, chemicals and medicines. Curiousity intensified when the British shelled Kagoshima and
Shimonoseki, following attacks on their merchant ships.
Japanese people didn't need their government to promote knowledge
of the outside world; they needed government to get out of the way, so
they could learn without risking their lives.
The most powerful stimulus. During the mid-19th century, the United States
turned toward the Pacific Basin.
The Oregon and California territories became part of the
Union. People talked
about building a transcontinental railroad.
The China trade was developing, and Japan seemed like a
logical place for ships to replenish their coal and other provisions.
But the Shogun refused to consider expanded contacts with the
outside world.
In July 1853, the American Commodore Matthew Perry
appeared in Edo (Tokyo) Bay with four well-armed ships, two of
them steam-powered -- something few Japanese had ever seen.
Perry's cannon could have levelled much of the city, and
because most of the city's food came in by sea, he could have inflicted a
painful blockade. The Shogun
couldn't have done much about it. Perry presented
officials with a letter from President Millard Fillmore, expressing a
desire to begin peaceful relations.
Then Perry left. He
returned a year later with eight ships.
Clearly, the American threat had to be dealt with.
The Shogun wasn't just powerless against Western weapons.
His position was deteriorating at home.
Choshu and Satsuma, feudal clans in western Japan, had a little
first-hand experience with European naval power, and they were anxious for
reforms which would protect Japan's independence.
At the same time, Japanese scholars challenged the moral
pretensions of the Shogun by arguing that the Emperor was the nation's
spiritual inspiration. These
scholars promoted a renewal of Shinto religious doctrines which
involved Emperor worship. The Emperor,
in turn, gave his blessing to the rebellious feudal chiefs who were
arming themselves with imported rifles.
The Shogun had neither popular support nor the means of
financing an adequate army. His soldiers
went into battle mainly with traditional two‑handed swords.
Besieged from within and without, the Shogun agreed that
Townsend Harris could reside in Shimoda as the first American Counsel.
Harris pursued trade negotiations which dragged on for several
years until 1857. Then
British and French forces succeeded in occupying some Chinese territory.
Conceivably, some of these forces could be deployed against Japan.
To prevent that from happening, the Shogun agreed to the treaty
terms Harris demanded. Namely:
(1) Americans could conduct trade not only in Nagasaki like the Dutch but
also in Yokohama, Kobe, Niigata, Shimoda and Hakadote; (2) tariffs would
be kept at a low 5% for the next 40 years; (3) Americans in Japan would be
subject to American laws, and violations would be handled by the American embassy,
not by Japanese courts. Soon the
Shogun signed similar treaties with Britain, France and Russia.
These treaties unleashed a powerful xenophobic backlash within Japan.
The Shogun lost face for permitting foreign goods free access
to the Japanese market and for agreeing that foreigners would be above
Japanese laws. He seemed to
be sacrificing Japan for the interests of foreigners.
Feudal chiefs from Western Japan mobilized forces and
overthrew the regime in 1868. Because
they couldn't agree on who would be the next Shogun, they decided the
government structure must be changed.
The Emperor, long a ceremonial figure, should be the nation's political
leader. People rallied behind
16-year-old Emperor Meiji, hoping he could help Japan avoid becoming a
Western colony like much of China.
Hence, the new era became known as the Meiji Restoration. The Emperor moved his residence from Kyoto to Edo and
renamed it Tokyo (eastern capital).
Although many Japanese hated foreigners, they couldn't deny the
evidence of their eyes. They
were shocked to discover how far they lagged behind the West in
commerce, industry, education, military technology and much else.
This revelation galvanized the Japanese into action.
Many went abroad for the knowledge needed to help maintain Japan's
independence. Often travel
dissolved their xenophobia. Travel moderated
the views of government officials like Inoue Kaoru and Ito Hirobumi.
They returned and fought xenophobia with books, lectures and
even songs. The
"Civilization Ball Song" asked children to count the
bounces of a ball and call out ten Western things the Japanese should
adopt -- gas lamps, steam engines, steam boats, lightning conductors,
mail delivery, horse-drawn carriages, cameras, telegrams,
newspapers and schools. Many entrepreneurs like Shibusawa Eiichi, Hara Rokuro
and Okura Kihachiro owed much of their remarkable success to
knowledge gained from travel abroad.
The educator Fukuzawa Yukichi was awed by the material wonders
of America and Western Europe. In 1859, he visited San Francisco.
"We were surprised by the carriages," he recalled.
"On seeing a vehicle with horses attached to it, we should
easily have guessed what it was.
But really we did not identify our mode of conveyance until the
door had been opened, we were seated inside, and the horses started
off." His hotel was
another revelation: "There we noticed, covering the interior,
the valuable carpets which in Japan only the wealthy could buy from
importers' shops at so much a square inch to make purses and tobacco
pouches with. Here the carpet
was laid over an entire room -- something quite astounding -- and upon
this costly fabric walked our hosts wearing the shoes with which they had
come in from the streets! Again:
"Immediately bottles were brought in.
Suddenly an explosion -- the popping of champagne.
When the glasses were passed around, we noticed strange fragments
floating in them -- hardly did we expect to find ice in the warm spring weather." Fukuzawa was struck that many things which were precious in
Japan were discarded in America: "there seemed to be an enormous
waste of iron everywhere. In
garbage piles, on the seashores -- everywhere -- I found lying old oil
tins, empty cans, and broken tools.
This was remarkable for us, for in Yedo, after a fire, there would
appear a swarm of people looking for nails in the ashes."
Fukuzawa observed how travel helped open the minds of others.
In Paris, for example, food made friends: "there was such
a spread of food, delicacies of both the 'woods and the sea', that
even those who professed their dislike of 'foreign objects' could not
maintain this aversion in the choice of food...we were treated to a
continual hospitality until at times we returned exhausted to our
lodgings." Fukuzawa went
on to write Seiyo Jijo (Things Western), a book which did
much to inform Japanese people about revolutionary economic changes going on.
A few Japanese embraced free trade ideas.
In 1878, Ukichi Taguchi published Jiyu Koeki Nihon Kaiza Ron
(A Free Trade Policy For Japan) which, inspired
by Adam Smith, Richard Cobden and John Stuart Mill,
argued that government protection of industry would undermine crucial
incentives to adapt in a changing world.
He was especially concerned that protection would encourage idle samurai
to continue their backward ways. Ukichi's
book went through many editions.
Ukichi started the economic journal Keizai Zasshi,
and in 1882, published the book Keizai Saku (Economic Policy),
an attack on economic nationalism which was gaining popularity.
He declined offers to join the government, maintaining that he
was most effective as an independent citizen.
The Japanese introduced a number of sweeping reforms which set the
stage for economic growth. Feudal domains
were abolished. All social
classes -- former feudal lords, samurai, merchants and peasants --
were declared equal before the law. The
government abolished barriers to domestic trade as the treaties
abolished barriers to international trade.
The Japanese abolished restrictions on freedom of movement.
Guilds were abolished, enabling people to choose occupations
freely. Property rights were
expanded so that practically anyone could buy land.
Farmers could plant whatever they wanted.
Free trade -- the freedom of Japanese consumers to do business with
whom they wished -- had a dynamic impact on the economy.
The availability of imports helped stimulate consumer tastes which
weren't being satisfied by domestic producers.
Competition from cheap Indian cotton textiles and Chinese lacquer
goods forced inefficient Japanese crafts people out of business.
Merchants, who had long enjoyed guild monopolies, were slow to
adapt in changing markets, and many went broke. The failure of traditional businesses made people available
for new businesses. This
might seem like a euphemism for unemployment, but as University of
California economic historian David S. Landes observed,
"no status society has ever effected an industrial revolution,
presumably because of the limitation imposed on the mobility of human and
material resources, and because of the prevalence of social values and
attitudes unfavorable to business enterprise."
Once Japan opened up, people were no longer forced to make do with
limited resources available within their borders.
They could benefit from foreign talent and capital.
Japan's most serious scarcity was technical knowledge, and for
a number of years this was alleviated by doctors, chemists, engineers,
economists and other experts who came from abroad.
Japanese entrepreneurs were better off because they were free to
tap foreign investment capital. The
British, for example, offered their services.
They helped finance a railroad connecting Tokyo and Yokohama (1870).
Free trade stimulated Japan's port cities.
Nagasaki was perhaps the first to expand, since the few Japanese
who knew anything about international business were located there.
Most of Japan's silk was exported from Yokohama, and Western technology
such as railway equipment, textile machinery and lighting devices
were typically shipped to Yokohama. Japan's only
foreign exchange dealer -- Yokohama Specie Bank -- was in that
city. It was the place
to go for the latest technical information as well as the first Japanese
lemonade and ice cream. There
was a commercial revolution in Osaka, center of the cotton trade. Entrepreneurs from Tokyo, China and the West went there.
They established a wide range of businesses, including cotton spinning
mills, a paper mill, steel mill and a tannery.
These immigrants made Osaka more important than it had been before.
In 1885, an estimated 10%-12% of Japan's industrial capital was in
Osaka; within a decade, this figure was approaching 30%.
Western goods and ideas appeared all over Tokyo. Emperor Meiji
set an example for adopting Western ways.
He was the first Emperor in a thousand years to mingle with
commoners. After 1772, he dressed
not in traditional Japanese robes but in a Western uniform or a
swallowtail coat and silk top hat. He rode about in a Western-style coach rather than the
traditional palanquin. Meiji ministers
abandoned the traditional practice of shaving their eyebrows and
blackening their teeth. It
became fashionable among ordinary people to combine Western with
traditional clothing; to wear a kimono over slacks, for example,
or a frock coat with a sword. Fewer
and fewer men continued the traditional hairstyle -- some hair shaved
entirely off, the rest long and gathered into a top knot; by the
1880s, some 90% of men favored Western-style "random cropping".
Japanese discarded traditional bamboo-and-paper umbrellas and
started using imported umbrellas which were dubbed "bat shades".
Gold watches became popular.
Modern newspapers flourished in Tokyo. Schools began teaching knowledge of the West.
Dry goods shops like Daimaru evolved into department stores.
Restaurants opened to serve Western‑style beef.
Trading on the Stock Exchange started in 1878.
All this was heady stuff which attracted entrepreneurs looking
for new opportunities.
Nazan University (Nagoya) economic historian Johannes Hirschmeier
compiled a survey of 50 successful Meiji entrepreneurs, and it revealed
that while place of birth and social background didn't correlate with
success, early experience in a port city did.
Hirschmeier reported: five of the 50 entrepreneurs were in Nagasaki
before age 20; five were in Yokohama; six in Osaka; 27 in Tokyo.
Only 13 of these entrepreneurs didn't have any experience in
these cities.
As commercial centers prospered, they stimulated agriculture which
was where perhaps 80% of Japanese worked during the early Meiji period.
The closer farmers were to a commercial center, the more they specialized
in producing cash crops like cotton, silkworms, tea, oil, sugar.
Moreover, commerce stimulated "putting out" industries
like cotton textiles, raw silk, paper and tatami.
Though the technology was primitive, these rural industries helped
break the yoke of peasant customs, and they prepared large numbers of
people for modern industry. Some of
the most successful Meiji era entrepreneurs were the sons of "putting out" masters.
The silk industry was the biggest winner in newly-opened markets.
Disease substantially wiped out European silkworms in 1860,
creating a sudden demand for Japanese silkworms.
But within a few years, the European silkworm business was
reestablished, and Japanese silkworm exports declined.
Since Japanese entrepreneurs weren't subsidized or protected,
they had to adapt. They expanded exports of raw silk. But, produced by hand, this was uneven in quality.
It was inferior to European silk.
Markets forced Japanese entrepreneurs to adapt again.
They began importing silk reeling machinery which improved quality.
Industrial policy backfires. Japanese officials became impatient with the private sector.
The most influential Meiji minister was Okubo Toshimichi
who believed that progress could be accelerated by government industrial
promotion, known as shokusan kogyo: be bold and spend a lot of
money on new technology.
Accordingly, the government started capital-intensive industries.
In 1871, the government established a postal service between Tokyo
and Osaka. It started building a telegraph system and a rail network.
It pursued shipbuilding, brick production and silk manufacturing.
By the mid-1870s, according to an official report, the
government owned three shipbuilding yards, 51 merchant ships, 52 civilian
factories, two munitions factories and 75 miles of railways.
Yet almost all these projects were a bust.
The government's Fukugawa cement factory lost money.
Its Shinagawa glass factory reported losses.
The government never made money with Tokyo Gas Company. Government railroads cost twice as much per mile to
build as private railroads. By
1892, private companies had built 1,320 miles of railroads, double the
mileage of government railroads.
The government tried to modernize iron mines in Kamaishi.
They bought modern machinery, but they couldn't handle
technical problems. The
government spent 2.5 million yen and produced only 175,126 yen worth
of iron before they closed down the operation. Although government officials believed shipyards were
essential for protecting national security, they couldn't get the
Nagasaki shipyards to do more than minor repair work.
The government couldn't even turn a profit in a traditional
business like silk reeling. The
most conspicuous failure was the grandiose Tomioka Filiature.
It became a make-work scheme for hundreds of samurai
daughters. Managers closed the factory to visitors, so they couldn't see
how inefficient the place was.
As has happened so many times before and since, government
officials didn't have a clue how to create value.
They thought that money and technology were enough.
They missed the crucial importance of detailed knowledge which was
beyond their grasp, because it was dispersed among large numbers of local
people, and it was continuously changing.
Twentieth century governments with super computers
haven't been able to master such details as problems with a
proposed business location, how to avoid over-paying for various assets,
how to recruit the most effective people, how best to motivate
employees, how to get a reliable power supply, how to assure adequate
product quality, what to do about product pricing, how to
negotiate with distributors, how to handle marketing, how to manage
inventory, how to cut capital costs -- these and myriad other
details, which make or break a business, have always been beyond
the grasp of centralized officialdom.
Meiji government enterprises lost money because they botched
details.
Many historians have suggested Meiji government enterprises
were valuable "models" for technology, but they failed at that,
because they didn't show entrepreneurs how to use technology profitably.
Far from adding value, government enterprises consumed scarce resources.
Losses meant that fewer resources were available for more
promising agricultural as well as industrial ventures.
Government enterprises were a drag on the economy.
Even if government enterprises had been successful, they were too
small to warrant the generous attention they've received in historical
accounts of the Meiji period. The
government was never a significant employer. Government spending was estimated to be 12% to 14% of the
economy -- comparable to Britain until World War I. Only about one-seventh of the population worked in
manufacturing, the bulk of those in the labor-intensive textile industry
which received little government support.
During the Tokugawa period, long before the Meiji Restoration,
there was a well-established trend for people to migrate out of
agriculture and into manufacturing.
The government tried "targeting" private firms for
subsidies, on the theory this would help spur economic development, but
here again success required knowledge which was beyond the capacity of a
few officials to master, regardless how smart they were. The government helped three merchant houses -- Shimoda, Ono
and Mitsui -- but when special privileges were later withdrawn, only
Mitsui survived. The
government helped many samurai start businesses with subsidies.
During the Japanese deflation of 1881-85, most of the subsidized
samurai businesses failed.
The government awarded contracts, subsidies and monopoly privileges
to companies which evolved into the giant zaibatsu conglomerates.
For instance, because Minomura Rizaemon, chief executive
of the Mitsui money-changing firm, had backed the Restoration government
early on, Mitsui was awarded lucrative contracts to provision the army;
Mitsui handled about two thirds of this business.
Since the Restoration government considered shipbuilding a
national security issue, it conferred monopoly privileges on Iwasaki Yataro
who established the Mitsubishi zaibatsu and became perhaps the wealthiest
Meiji entrepreneur. Hirose Saihei
transformed Sumitomo from a stagnant copper monopoly -- apparently no
innovations in 150 years -- into a streamlined producer.
Sumitomo became a successful trading company which handled copper,
coal, tea and silk.
Impressive as the zaibatsu became, there isn't much evidence that
favoring these companies at the expense of others was a net gain for the
economy. Monopoly privileges
simply meant that consumers and taxpayers had to pay more to the zaibatsu
than would have been the case in an open market. Subsidies encouraged lobbying and bribes, which is why
companies receiving these favors were known as saisho -- or
"political merchants", a derogatory phrase.
In any case, the zaibatsu didn't dominate the economy.
At the end of the Meiji period, 1912, about 60% of
Japanese still worked in agriculture.
Japan's biggest exporters in the 1930s were unsubsidized silk and
cotton producers. Indeed, during
the postwar period, the first Japanese exports which the US government
restricted were cotton textiles, not cars, consumer electronics
or other glamor goods. American companies
feared Japanese competitors because of their access to cheap labor,
not because they were highly sophisticated.
William Lockwood, an economic historian at Princeton University,
underscored the point: "The founding of large-scale industry in Japan,
because of its political support, its strategic implications, and the
striking contrast it offered with traditional Japan, attracted a good deal
of attention from the outside world.
But it was the expansion of Japan's basic economy --
agriculture and small-scale industry built on traditional foundations --
which accounted for most of the growth of national productivity and income
during this [Meiji] period."
How effective was the government's spending on infrastructure?
Railroads were costly and didn't directly affect many people.
Hence, University of London economic historian G.C. Allen
maintained that at least during the early Meiji period,
"construction of 'dirt' roads, and the replacement of pack-horses and
human porters by rickshaws and carts pulled by horses, oxen, dogs and men
probably exerted a more powerful influence on the development of the new
economy than railways."
The cost of all these industrial promotion schemes was borne on the
backs of peasants. The land
tax, enacted in 1873, provided as much as three-quarters of government revenue.
It took almost 30% of what peasants produced.
Tenant farmers paid taxes equivalent to about 60% of what they
produced. As University
of Hawaii economist Harry Oshima reported, such tax burdens
"can only mean that for the vast majority of the farming
population saving and investment were almost out of the question.
Though savings and investment data are lacking, the frequency of
disputes, uprisings and riots, the rise in unpaid taxes and land
confiscated in lieu of tax payments, the increase in debts and
mortgage foreclosures, and the rapid rise in the amount of tenanted land
(from around 30 percent of the total cultivated land to 45 percent
by the end of the Meiji period) were clear signs of the difficulties
experienced by the majority of agriculturists in the period."
Moreover, industrial promotion schemes added to inflationary pressures,
already serious because of pensions for idle samurai warriers and the
cost of suppressing the 1877 Satsuma revolt of disgruntled samurai.
Government debt soared from 55 million yen in 1876 to 254 million
yen by June 1778. Rice
prices doubled between 1877 and 1880.
Government bonds plunged. Yen,
expressed in terms of silver, fluctuated as much as 10% per day.
Inflation fueled wild land speculation.
Retrenchment & privatization. A turnaround began with the appointment of Count Matsukata Masayoshi
as Minister of Finance, October 1881.
After surveying the financial mess, he concluded that bureaucrats
had no place in trade or industry, because they couldn't compare
"in shrewdness, foresight, and enterprise men who are acuated by
immediate motives of self-interest."
Matsukata ended industrial subsidies, and in 1882 he began selling
just about all enterprises except munitions factories.
Determined to get these money-losers off the government's books, he
was willing to accept whatever they might fetch, which often wasn't much.
For example, in 1885 the entrepreneur Furukawa Ichibei paid
338,000 yen for the Ani Copper Mines on which the government had
spent 1.7 million yen. The government
had spent 350,000 yen developing the Shinagawa glass factory, but it sold
for only 79,950 yen. The
government had poured 2.4 million yen into the Mamaishi iron mine,
but the results were so bad that it was shut down; in 1887 the
entrepreneur Tanaka Chobei bought the remnants for 12,600 yen.
Matsukata used the proceeds from privatization to pay down the
national debt. It declined
from 245 million yen in 1880 to just 5 million yen in 1890.
Government interest costs dropped accordingly.
National budgets were covered entirely by taxes and fees.
Matsukata encouraged private banking to tap private sector savings.
After several failed attempts, solvent banks developed.
Yokohama Specie Bank, started in 1880, specialized in
foreign exchange transactions. It
provided financing for the growing export trade.
Hypothec Bank (1896) handled agricultural lending.
Hokkaido Development Bank (1899) financed enterprises on
Japan's northern island. The
Industrial Bank of Japan (1900) raised foreign as well as domestic capital
for newly-privatized industries.
Entrepreneurs invariably outperformed government officials.
For example, in 1870 the government had established Nippon Postal
Steamship Company. But it did
a miserable job compared to Iwasaki Yataro's new Mitsubishi Company.
"While the Postal Steamship Company makes use of
government protection and is boastful and overbearing," he declared,
"we of the Mitsubishi strengthen our internal controls and go out of
the way to please the people." Soon
afterwards, Mitsubishi started competing with foreign companies, and it
came to dominate Japanese shipping.
Bummei kaika. Initially,
many entrepreneurs were eager to make money any way they could.
They were brash, bold, ruthless and didn't mind cutting corners.
But it soon became apparent that achieving big success
required repeat business and therefore continuous cooperation with
many people who were free to do business anywhere.
The need for repeat business created strong, persistent
incentives for moral behavior.
Joint stock companies promoted honesty by enabling entrepreneurs to
raise capital without lobbying the government or paying bribes.
These companies could tap the savings of a dispersed multitude.
In 1884, there were a reported 1,298 joint stock companies
with at least 1,000 yen of capital; a decade later, the number had
jumped to 4,133.
Some formidable individuals wanted to make business an honorable
profession, and the personal example they set had an enormous influence.
They promoted the ethics of bummei kaika
-- "civilization and enlightenment".
Fukuzawa Yukichi was a prolific pamphleteer who argued that
self-reliance, rational behavior, free trade and entrepreneurial
profits were keys to Japan's progress.
He relentlessly hammered at the Confucian hostility to
commerce. His best-known work
was Exhortations for Learning which went through 17 editions
and sold over 3 million copies during the 1870s. A typical saying of his: "only if each individual
becomes independent can the nation become independent." He introduced the ideas of Benjamin Franklin and other
Westerners to Japan. Fukuzawa
started Keio Gjuku, a school which encouraged Japanese to become
entrepreneurs rather than bureaucrats; later Keio Gijuku became Keio University,
one of the most respected universities in Japan. Fukuzawa started Maruzen, a trading company which, among
other things, was -- and still is -- Japan's biggest book importer.
He was the most important single influence for private sector
modernization.
Western books about the moral dimension of markets enjoyed
startling popularity. Samuel Smiles'
Self-Help, translated as Saikoku-Risshi-Hen (1871), sold over a
million copies. This book
was followed by Smiles' Character (Seiyo Hinko Ron)
in 1878 and Thrift (Seiyo Setsuyo Ron) in 1886.
Benjamin Franklin's The Way to Wealth
was published as Kanetame no Hiden (1879), and it did
well. Among other popular
Western books on the morality of markets were Daniel Defoe's The
Complete English Tradesman, William Chamber's Moral Class‑book
and F. Wayland's The Elements of Moral Science.
A private economic miracle. Many historians have talked about wise Japanese government
officials doing this and that to plot the future of their nation.
Yet few historians, obsessed with politics, seem to have recognized
that Japan's extraordinary transformation was overwhelmingly the
achievement of private individuals. Land was
in private hands. Almost all
enterprises were in private hands.
Entrepreneurs and farmers created all the wealth in Japan, and the
government spent much of it on samurai pensions, money-losing enterprises
and a military build-up.
Competition forced entrepreneurs to introduce continuous
improvements such as more productive seeds, rodent-proof warehouses,
better accounting systems, electric lamps and gas engines for
fishing boats. It's hard to
name an important economic problem which wasn't resolved by determined and
resourceful entrepreneurs, once they were set free.
Shibusawa Eiichi single-handedly did more than anyone else
to promote sound banking practices and nurture entrepreneurial companies.
The son of a farmer‑merchant, he joined the Finance
Ministry which gave him an opportunity to visit Western Europe.
He was astonished at the dynamic private sector which he
believed was the key to prosperity. He quit
the government and became a private banker.
He served as mentor to perhaps a third of Japan's more than
200 private banks who sent him their people for training.
He taught techniques which were familiar in the West but
little-known in Japan: spread lending risks by placing a part of
large loans with other banks; understand collateral and get enough of
it; be prepared to help finance trustworthy, competent entrepreneurs
even when the chips are down.
Shibusawa insisted that financiers had a moral imperative to
encourage new business ventures. He
started Japan's first paper company.
Her started a cotton spinning company. He started three shipping companies.
He had a hand in 45 railroad companies.
Altogether, as investor, advisor, director or president, he was
involved with more than 500 business ventures.
Kashima Manpei, a Tokyo cotton merchant, built Japan's first
private cotton spinning mill. He
did it to help drive down calico prices.
Unlike government operations, Kashima never had losses.
The most successful Meiji silk reeler was an entrepreneur named
Katakura Kentaro who started a small business on his farm.
He developed the business gradually, as he acquired machinery
and improved his management techniques.
He sent his son to the United States so he could study the
latest reeling methods first-hand. Katakura might not have attracted as much attention as
the grandiose Tomioka Filiature, but by 1894 he was producing more silk.
While government officials flopped as silk exporters, entrepreneurs
Sato Momtaro and Rioichiori Arai prospered.
Sato, a business student, absorbed tremendous practical knowledge
from American, English, French and Dutch aquaintances.
When he was 13, his parents sent him to America.
He arrived in 1867. He
attended business school, then worked in a general store.
After he gained some first-hand experience with business methods,
he subleased part of the store to sell green tea, lacquer wares and
other Japanese goods. He won
a scholarship and moved East so he could attend Boston Technical School --
later this became the Massachusetts Institute of Technology.
Ever alert to opportunity, he explored New York and there
established a little store offering Japanese goods. He did well, but he realized that to dramatically improve his
prospects, he'd need better sources of goods.
He decided to form his own export business.
In 1875, he returned to Japan and began seeking business
associates. Fukuzawa Yukichi
cheered him on, saying it was his patriotic duty to develop export
business. Sato didn't have
much capital, but his family pledged their assets as collateral to buy
26,000 yen worth of merchandise for his New York business.
Fukuzawa helped Sato meet many entrepreneurs including Hoshino Chotaro
who owned a silk mill. Hoshino
encouraged his younger brother Riochiro Arai to contact Sato.
Riochiro bought a second-hand suit for about two yen -- then
worth about $4. Hoshino paid
260 yen to buy his brother a steerage ticket so he could help develop an
export business. After three
weeks of enduring buckwheat and pork fat, he arrived in San Francisco,
March 26, 1876. Four
more young men joined Sato's American venture: Date Chushichi,
knowledgeable about ceramics; Matsuda Rinzo, for tea; Morimura Yutaka,
general merchandise; and Suzuki Toichi, pharmaceuticals.
Carrying his sachel of silk samples, Riochiro called on prospective
New York buyers. Some
didn't want to deal with Orientals. Others
had been cheated by disreputable Japanese merchants.
It became clear to Riochiro that he would prosper only if he
achieved a first-class reputation. He began by introducing quality controls, to make sure that
the raw silk he imported didn't have extraneous materials added to
increase weight. In May 1878,
he booked a 400-pound order for delivery by September.
A recurrence of European silkworm disease sent prices soaring.
Riochiro honored his much lower contract price and lost over
$2,000, but in the process helped establish a reputation as a honorable
man.
Riochiro, Hoshino, Sato and their associates addressed all the
practical details involved with building the business.
They arranged for secure means of remitting funds to Japan.
Riochiro and Hosino formed Jomo Kairyo Kaisha, a company
to help develop thinner, more consistent quality silk thread and keep
Japanese silk producers informed about American requirements, so that
customers would be satisfied with their shipments.
As these merchants prospered, they had ships built with special
holds to provide more protection for their silk.
Rioichiro looked for opportunities to send American goods back in
the ships. As Shibusawa Eiichi
and other Japanese entrepreneurs were rapidly expanding their mechanized
cotton mills, raw cotton seemed like a natural.
Thus, Rioichiro began exporting American raw cotton to Japan.
By 1910, about 25% of Japan's raw cotton imports came from America.
Such private initiative, not government industrial promotion,
turned Japan into a prosperous commercial nation.
Between 1874 and 1916, imports soared 824%.
Exports soared 1,121%. Trade
as a percentage of gross national product grew rapidly, reaching 23% by
1916.
The most important single factor in the Meiji boom was opening up.
Free trade, wrote G.C. Allen, "by exposing the
economy to pressures from outside, helped to bring about quickly a more
efficient allocation of resources. Hence
there was created the great export trade in raw silk.
In the absence of foreign exchange earned by this trade,
Japan would have found great difficulty in financing the imports of
raw materials and capital equipment needed for her industrialization..."
Ironically, although free trade was crucial, forcing it on Japan
backfired. The threat of
force showed that Westerners would push around other people when they
could get away with it. This
humiliation ignited the flames of nationalism.
The Japanese resolved to become a military power
foreigners must take seriously.
A popular saying of the Meiji era was Fukoku kyohei:
"Rich country, strong army." Conscription was introduced in 1870. A military build-up proceeded apace. Japan displayed its new military power in successful
wars with China (1894) and Russia (1905).
Three decades later, militarism had completely displaced
commercial considerations from Japanese government policy, and the result,
of course, was catastrophe.
Postwar Japan redeemed itself from barbarism not by diplomacy and
military might, but by peaceful commerce which had brought Japan into the
modern world during the Meiji era. See: G.C. Allen, A Short Economic History of Modern Japan (London: Macmillan Press, 1981). J. Hirschmeier and T. Yui, The Development of Japanese Business (London: George Allen, 1975). Junjiro Amakawa, "The Spirit of Capitalism in Meiji Japan," Kwansei Gakuin University Annual Studies, XVII (November 1968). William W. Lockwood, The Economic Development of Japan, Growth and Structural Change 1868-1938 (Princeton: Princeton University Press, 1954) Edwin
O. Reischauer and Albert M. Craig, Japan, Tradition and Transformation
(London: George Allen, 1979). Haru Matsukata Reischauer, Samurai and Silk, A Japanese and American Heritage (Cambridge: Harvard University Press, 1986). Yukuchi Fukuzawa, Autobiography
(New York: Columbia University Press, 1960). |
|
Home
Overview
Search
Chronology
Unforgettable moments
|
