Assignment: Modern East Asia 23/3/2015

Discuss the various facets of Agricultural and Industrial development in Meiji Japan.

Japan was a preindustrial agricultural economy with technology and living standards not greatly different from those of other preindustrial areas of Asia, at the beginning of the nineteenth century. However by the end of the century the proportion contributed by industry had doubled, whereas the contribution of agriculture had declined to less than half the total output. Within Forty years of Meiji restoration, the nation became a Modern state. Much of the infrastructure necessary for the development of an industrial economy, such as transport, communications, ports, and financial institutions, had taken shape and a nucleus of modern factory industry was created. Agricultural and industrial development went hand in hand and shared a symbiotic relationship. This was a century of economic change, and the change occurred at an increasing rate.

A plethora of explanations have been provided for this change which represents the different ways in which the past can be looked upon. Most Japanese historians have viewed it as a transition from a feudal to a capitalist society within the framework of the Marxian theory of stages of economic development. Japanese scholars have been divided into two schools. The Rono School while maintaining the idea that pre modern Japan was basically feudal, stressed the emergence of capitalist elements in the century before the Meiji Restoration of 1868, which is usually taken to mark the beginning of Japan's modern period. According to this school, therefore, the gap between the Japan of 1868 and the Japan of the early twentieth century was not as great as that between feudal and capitalist Europe. The Koza School on the other hand stressed the pre modern aspects of the Japanese economy throughout the Meiji period and beyond, as seen by the survival of non economic factors in the relations between landlords and tenants and between employers and employees, the immaturity of Japanese capitalism, and the

absolutist nature of the Meiji state. Neither school seriously questioned the assumption that the process of economic change in Japan was essentially similar to the earlier European experience. Before the Pacific War, Western observers emphasized the importance of state power in alliance with powerful business groups in exploiting Japanese workers and poor farmers in the interests of building a strong nation as rapidly as possible. Their view may well have been coloured by fears of what they saw as "unfair" competition in international trade supported by low wages in Japan. After the war, Western scholars devoted their attention to explaining Japan's economic development in terms of what were identified as preconditions for economic change. It was an attempt to see whether explanations of economic change in Europe based on such factors as the Protestant ethic and the agricultural revolution could be applied to the Japanese case by identifying analogues to these factors in the Japanese experience. The results were unsatisfactory for two reasons. First, the implied assumption that economic development could not take place in the absence of factors that were thought to be important to European development proved to be invalid. Moreover, when equivalents were found in Japan, such as a merchant ethic analogous to the Protestant ethic, similar conditions were found to exist in other countries, such as China, where modern economic growth did not occur. Second, these studies on the whole took insufficient account of the fact that economic changes in Japan occurred a century or more after the industrialization of Western Europe and North America. Japan was able to draw on the experience of the advanced industrial countries. Since then, explanations of Japan's economic development have mostly been in terms of the quantitative relationships among economic variables such as capital formation, the labour force, technology, the structure of production and consumption, prices and other aggregates, and the ways in which they affect the rate of growth of national income.

The Meiji government took certain specific measures to speed up developments in agriculture and industry. Soon after the Meiji Restoration permanent restriction on the sale and purchase of land, restrictions on the cultivation of certain types of crops and other restriction on movement between communities and on commercial transactions and communications

were removed. The government carried out a series of measures to eliminated Feudal restrictions. In 1868, the system of limited shareholding was abolished thus removing the restrictions of a monopolistic system derived from feudal guilds. Between 1871 and 1872 the system based upon the four classes of society was abolished and the freedom of choice in employment by all classes of people was recognised. By 1872, farmers had been given the choice in selecting the crops they would grow and selling and purchasing land. Through these measures agricultural activities were promoted.

Reform of the agricultural tax system began in 1873 and took nearly six years to complete. The new tax was payable in cash on the assessed value of land, and the taxpayer was given title to his land. There has been some discussion as to whether the farmers' tax burden became heavier or lighter as a result of the change but it seems likely that the new tax as a proportion of output was not higher than the old. Although the object of the land tax reform was to secure a stable source of revenue, its effects went far beyond that. Land became a capital asset that could be freely and legally sold, and with taxes fixed in money terms, landowners received the benefits from agricultural improvements, specialization, falling transport costs, and price rises. Because these benefits went to the landowners, rather than to the cultivating tenants, the more land that a farmer owned in these circumstances, the more he would benefit, and the result was a noticeable concentration of landholdings and an increase in tenancy over this period. These steps helped to stimulate technological development. The technological progress which had occurred regionally during the Tokugawa period now extended throughout the land.

During the feudal period, improved varieties of high quality seeds were forbidden to be sold to other class for fear of shortage and in some cases such transactions between villages of the same clan were prohibited. With the Meiji Restoration, however, such obstacles were removed and improved seeds were widely distributed. This gave the landowning farmers who constituted the mainstay of agricultural production up to that time a new field of activity and a new spirit of enterprise was engendered in them. An agricultural discussion group, was formed in 1874. The first task which farmers undertook was the improvement of the strains of rice. They exchanged various types of seeds from different parts of the country and carried out experiments which helped

increase production. 'Seed exchange meetings' were a reflection of these activities.

Similar progress was made in methods of cultivation. One was the improvement on the methods of irrigation while another was in broadening the use of fertilisers which arose in connection with the former development. From feudal times fertilisers made from herring fish were used to a certain extent in Hokkaido. With the development of transport systems between different sections of the country this practice became widespread. While it was originally confined to cultivating special products such as cotton it eventually came to be used in rice cultivation as well. Later, soya bean cakes began to be imported from China and these replaced fish fertilisers and were more extensively used. The Meiji the government established a private institute in Fukoka prefecture in 1882 for instruction in agricultural management. As one of its achievements an improved form of ploughshare was introduced. Up to that time, the hand-plough was the only implement available, inhibiting the level of agricultural productivity. The government also established in 1893 a national agricultural experimental station for improving techniques and adopted a policy of subsidising agricultural improvement.

Agrarian society played a critical role in the economic transformation of Meiji Japan. It was a vital source of the labour power, food, tax revenues, and export earnings that made the industrial revolution possible. From 1880 through 1900 Japan’s population rose from about thirty-five to forty-five million people. At the same time, the rural, agricultural population declined slightly. Millions of people migrated from villages to towns or from towns to major cities. They moved as well from agriculture to commerce and manufacturing industries. Until about 1920, Japanese farmers supported the growing population with increased output. Agricultural productivity steadily increased for two reasons. The best practice of existing farms, previously limited to the most advanced areas, diffused more broadly. In addition, new crops, new seeds, and more fertilizer came into use. The precise extent of the increased productivity of land is a subject of controversy. Estimates of annual increase in output vary from 1 to 3 %. The productivity gain was substantial and crucial as it fed a growing population. It also preserved scarce foreign exchange for imports of industrial and military technologies rather than food.

Simultaneously, farmers brought in crucial foreign exchange by exporting tea and silk products. A silk blight in Europe in 1868 opened the way for a booming export trade in silk cocoons raised in small sheds on family farms. When the European blight ended, the emphasis shifted to exports of silk threads. Between 1868 and 1893 Japanese raw silk production rose almost fivefold. Agriculture had a further indirect economic impact through the export of people. After tea and silk, the third highest source of foreign exchange earnings in Japan around the turn of the century came from emigrant labourers who sent a portion of their earnings in Hawaii, California, or Latin America to relatives in their home villages.

The agrarian sector was a crucial source of state tax revenues used for a wide range of modernizing projects. The land tax accounted for about 80 percent of government income in the 1870s and early 1880s. This fell to around 60 percent by the early 1890s when new taxes were imposed on consumer goods, including necessities such as soy sauce and salt and virtual necessities such as sugar and sake. But taxes on agricultural land still provided the majority of the government’s revenues.

The members of the upper crust of agrarian society played a crucial role in building a capitalist economy in Japan. Silk thread was often spun and woven in small factories in rural locations. The owners and operators were members of entrepreneurial rural elite. They invested in and ran factories, paid large amounts of taxes, and sent their children on to higher education. Their educated sons, in particular, went on to leading positions in business, politics, or bureaucracy. They also foreclosed on high-interest loans to impoverished neighbours, and they hired the daughters of such farmers to work fourteen-hour days in spinning and weaving sheds. These landlords were playing a part in a much larger story of economic policy and its social consequences.

The Meiji government faced a drastic revenue shortfall in 1878 due to the Satsuma rebellion and the numerous costly projects to build the economy and military. It responded first by printing money. The result was a surge of price inflation. This only worsened the deficit, since tax revenues were based on land assessments that did not automatically rise with inflation. The real value of taxes fell and Japanese farmers briefly prospered. In 1881 Finance Minister Matsukata Masayoshi launched draconian fiscal and monetary policies.

Seeking to halt the inflation, he cut state expenses sharply. The result has come to be called the Matsukata deflation of the early 1880s. Agricultural commodity prices crashed to 50 percent in 1884. To survive, small-scale landholders took new loans from moneylenders who were often nearby wealthy landlords. A related result of the great deflation was a dramatic shift in landownership. The financial program of shock therapy stabilized Japan’s economy by the end of the 1880s but it was also a devastating experience for millions of people.

As in agriculture, the government played a major role in the development of industries. In the beginning of Meiji period Japan was inferior in respect of organisation techniques and capital in comparison with European countries. The government regarded the building of infrastructure and communication as a matter of urgency, partly for internal security reasons and partly to forestall foreign investors who had shown a keen interest in direct investment in this area. Furthermore, the Meiji leaders did their outmost to resist the temptation to seek heavy foreign loans as it might have compromised the nation’s economic independence.

The Meiji government found itself in possession of all of Japan's amunition plants and shipyards. It inherited a number of Western-style ironworks, munitions plants, and shipyards from the Bakufu and some domains that had developed them for defense purposes. In addition it acquired about half of the country's forests and all the major gold and silver mines. Between 1868 and 1881 the government continued to develop these facilities and to establish new ones.

The first step that the government took was to foster the conversion of business organisations into joint stock companies. During the Tokugawa period economic activity in Japan was conducted on the principle of the family system and was by its nature wholly different from that of a joint stock company. The government assisted and encouraged joint stock companies enabling them to develop rapidly. By granting special privileges such as increased subsidies, the government sought to appeal to the wealthy businessmen to establish foreign exchange firms, trading companies, transportation companies and the like in the form of joint stock concerns. The government also granted extensive financial assistance to enterprises breaking new ground. For example a

company was granted several steamships and a large subsidy in order to encourage the building of Japan's own shipping fleet.

Another activity by which the government sought to assist the development of industries involved the building of model factories directly operated by the government. These model factories encompassed a broad range of industrial production: steel, cement, plate glass, firebrick, woollen textiles and spinning. There were in general, three objectives of the government policy: to demonstrate production methods and techniques of European-type factories, to be self-sufficient in the production of new products which hitherto had to be imported from abroad and finally to show how profits could be enhanced by adopting modern production techniques.

In short, when the government thought that a certain industry or enterprise was necessary to the achievement of the national purpose of economic modernisation and considered that the particular company possessed some degree of strength of its own but could not be expected to stand on its own feet subsidies were granted to make the enterprise viable. If no such company existed the government, by its own efforts, brought such company into existence, operated it with profit in order to encourage others to set up such units by their own enterprise and with the help of government where necessary.

The Meiji state had begun to put in place the infrastructure of a capitalist industrial economy by the early 1880s. It continued to build the economic foundation over the next two decades: railway lines, a new code of commercial law, specialized banks to provide long-term credit to industry. In the two decades spanning the turn of the century Japan’s industrial economy took off. Manufacturing output rose 5 percent annually over these years. This was a much stronger performance than the worldwide annual growth rate of 3.5 %.

Industrialization was led by the textile industry. From the 1890s through 1913, output of silk quadrupled. Production of cotton thread increased at similar rates. Mechanized production also replaced hand spinning. And about half of the cotton output came to be exported, mainly to China and Korea. Coal and metal mining was a second leading sector in Japan’s early industrial era. Mineral production in Japan increased 700 percent from 1876 to 1896. After

textile mills, mines were the nation’s major employers of wage labour. By the early twentieth century, the Ashio copper mine and refinery was one of the largest producers of this metal in the world.

A revolution in transport supported these new industries. By the late 1880s, Japan’s railway lines extended over one thousand miles. The rail system promoted other industrial ventures, most importantly textiles and coal mining, by lowering the transport cost of raw materials to factories and cutting the cost of sending finished goods to domestic markets and to harbours for export. A boom in private railroad investment sparked a more generalized “private company boom. The total length of private lines was more than double that of government lines. This investment boom spread to spinning and mining and beyond. However the “enterprise mania” culminated in Japan’s first modern financial crisis in 1890. The stock market crashed. Many poorly conceived enterprises failed. But the boom also had some enduring impact. Most of the new railroad companies were solid ventures. They and a number of other new businesses survived the panic of 1890 to become leaders in the private sector of the economy.

The most distinctive feature of Japan’s emerging system of capitalism was the central role played by monopolies that later came to be called zaibatsu. Several of the zaibatsu most notably Mitsui and Sumitomo had roots in merchant houses dating back to the Tokugawa era. Others, including the famous Mitsubishi zaibatsu, were founded from scratch by entrepreneurs in the Meiji era. In all cases, it was the 1870s and 1880s when these combines began to coalesce in their modern form. Their founders exploited long-standing close ties to the government and synergistic links between key industries to found their business empires. With slight differences in emphasis—shipping, then shipbuilding and railroads, were more important to the Mitsubishi .Other zaibatsu emerged in similar fashion in the 1880s and 1890s. Although the founding families retained financial control of the each zaibatsu complex, owners recruited able young men from outside the family and delegated important management responsibilities to them. This practice clearly separated ownership from management of Japanese business at a comparatively early stage in modern industrial development. The zaibatsu were unusual in their broad reach. They were not limited to particular

industries or even to particular fields such as finance or manufacturing. Each zaibatsu spanned the entire range of business endeavour from trade and shipping to finance, mining, and all sorts of factory production.

In the early twentieth century, the government took key steps that changed the situation on both the supply and demand side of this economic equation. On the supply side, it used government funds to found the Yahata iron and steel mill in 1896. State funds were also used to subsidize the shipping industry. On the demand side, the government nationalized almost all inter city railroads in 1906. It used this control of the railroads to direct orders for locomotives and rails to Japanese producers. It simultaneously placed tariffs on competing imports. All these steps combined to nurture private sector heavy industries that otherwise would not have come into existence at this time or on such a scale. The visible hand of the state was complemented by significant competition and entrepreneurship in the private sector. Multiple engineering and shipbuilding firms competed for government railway or naval procurements. Tariffs offered these emerging Japanese firms some protection from foreign imports in the early twentieth century, but they were forced by domestic competitors to increase productivity and quality.

Another crucial factor for the rise in industries was the ability of Japanese producers to draw from a pool of relatively inexpensive labour. Comparatively low wages for relatively unproductive workers was crucial to the strong performance of Japanese manufacturers in these decades. The immediate impact of the industrial revolution was disastrous for many people in Japan. Especially hard hit were members of two large, overlapping groups: small-scale family farmers and young women workers. Huge numbers of farmers lost their lands to moneylenders, and hundreds of thousands of teenage girls experienced the hardship of labour in the thread mills, the weaving sheds, the match factories, and the expanding brothels of the new Japan.as well as private manufacturers in machine-making, engineering, and shipbuilding.

To conclude, the proactive role of the state was an important factor which enabled the state to built an economic infrastructure and provided a base for the early zaibatsu in the 1870s and 1880s. In the following years the state took

the lead in promoting and enabling the development of capital-intensive, higher technology industries. According to E.H Norman, the unique feature of Japanese industrialisation was the state control of “strategic” industries. The predominance of state control is reflected in the manner in which the government while restraining its control over the key industries disposed off the peripheral one by selling them into private hands.

Japan’s economic growth thus depended on a dynamic mix of state and private initiative. In parallel fashion, the ethos of the business elite mixed ideals of service to the nation with a drive for personal wealth. Japanese capitalists, like state bureaucrats, did not exalt the creativity of the market pure and simple. Neither did they laud the untrammelled pursuit of profit as the ultimate social benefit. Rather, they drew on Confucian language to put forward a philosophy of what might be called “selfless” profit-seeking. Shibusawa Eiichi made this point with particular force. He argued strongly against the view that “through individualism or egoism the State and society can progress most rapidly.” In the words of a like-minded Meiji era trader, “the secret to success in business is the determination to work for the sake of society and of mankind as well as for the future of the nation, even if it means sacrificing oneself.”

BIBLIOGRAPHY

1 - Basis of Japan's Modernisation Source: Economic and Political Weekly, Vol. 23, No. 33 (Aug. 13, 1988)

2- The Cambridge History of Japan. Edited by Marius B. Jansen, Volume 5

3- Japan’s emergence as a modern state by E. Herbert Norman

Sania Mariam

( History Hons. )