Also during that period, the bakufu commissioned around Red Seal Ships , three-masted and armed trade ships, for intra-Asian commerce. Japanese adventurers, such as Yamada Nagamasa , were active throughout Asia. In order to eradicate the influence of Christianization, Japan entered in a period of isolation called sakoku , during which its economy enjoyed stability and mild progress.
But not long after, in the s, the production of Japanese export porcelain increased greatly when civil war put the main Chinese center of porcelain production, in Jingdezhen , out of action for several decades. For the rest of the 17th century most Japanese porcelain production was in Kyushu for export through the Chinese and Dutch.
The trade dwindled under renewed Chinese competition by the s, before resuming after the opening of Japan in the midth century. Economic development during the Edo period included urbanization, increased shipping of commodities, a significant expansion of domestic and, initially, foreign commerce, and a diffusion of trade and handicraft industries.
The construction trades flourished, along with banking facilities and merchant associations.click here
The Future and How to Survive It
Increasingly, han authorities oversaw the rising agricultural production and the spread of rural handicrafts. By the midth century, Edo had a population of more than 1 million and Osaka and Kyoto each had more than , inhabitants. Many other castle towns grew as well. Osaka and Kyoto became busy trading and handicraft production centers, while Edo was the center for the supply of food and essential urban consumer goods.
The rice was sold at the fudasashi market in Edo. These contracts were similar to modern futures trading. During the period, Japan progressively studied Western sciences and techniques called rangaku , literally "Dutch studies" through the information and books received through the Dutch traders in Dejima. The main areas that were studied included geography, medicine, natural sciences, astronomy, art, languages, physical sciences such as the study of electrical phenomena, and mechanical sciences as exemplified by the development of Japanese clockwatches, or wadokei , inspired from Western techniques.
After , when the Tokugawa shogunate first opened the country to Western commerce and influence Bakumatsu , Japan went through two periods of economic development. When the Tokugawa shogunate was overthrown and the Meiji government was founded, Japanese Westernization began completely. The first term is during Pre-war Japan , the second term is Post-war Japan. The industrial revolution first appeared in textiles, including cotton and especially silk, which was based in home workshops in rural areas.
By the s, Japanese textiles dominated the home markets and competed successfully with British products in China and India, as well. Japanese shippers were competing with European traders to carry these goods across Asia and even to Europe. As in the West, the textile mills employed mainly women, half of them under age twenty.
They were sent there by their fathers, and they turned over their wages to their fathers. One of the biggest impacts on the economy that the Meiji period brought was the end of the feudal system. With a relatively loose social structure, the Japanese people were able to advance through the ranks of society more easily than before. They were able to do this by inventing and selling their own wares.
More important was the fact that the Japanese people now had the ability to become more educated. With a more educated population, Japan's industrial sector grew significantly. Implementing the Western ideal of capitalism into the development of technology and applying it to their military helped make Japan into both a militaristic and economic powerhouse by the beginning of the 20th century. In the Meiji period , leaders inaugurated a new Western-based education system for all young people, sent thousands of students to the United States and Europe, and hired more than 3, Westerners to teach modern science, mathematics, technology, and foreign languages in Japan O-yatoi gaikokujin.
The government also built railroads, improved roads, and inaugurated a land reform program to prepare the country for further development. To promote industrialization, the government decided that, while it should help private business to allocate resources and to plan, the private sector was best equipped to stimulate economic growth.
The greatest role of government was to help provide the economic conditions in which business could flourish. In short, government was to be the guide, and business the producer.
Is technology blurring the lines between war and peace?
In the early Meiji period, the government built factories and shipyards that were sold to entrepreneurs at a fraction of their value. Many of these businesses grew rapidly into the larger conglomerates. Government emerged as chief promoter of private enterprise , enacting a series of pro-business policies. The development of banking and reliance on bank funding have been at the centre of Japanese economic development at least since the Meiji era. The Japanese regarded this sphere of influence as a political and economic necessity, preventing foreign states from strangling Japan by blocking its access to raw materials and crucial sea-lanes, as Japan possessed very few natural and mining resources of its own, although it imported large amounts of coal from Korea , Manchukuo , and some regions of occupied China.
- Customer Logins;
- Capture Gamma Ray Spectroscopy and Related Topics [Procs 11th Intl Symp.].
- Customer Reviews.
- Competing in an Age of Multi-Localism - Global Business Policy Council (GBPC) - A.T. Kearney.
Japan's large military force was regarded as essential to the empire's defense. Rapid growth and structural change characterized Japan's two periods of economic development since In the first period, the economy grew only moderately at first and relied heavily on traditional agriculture to finance modern industrial infrastructure. During World War I , Japan used the absence of the war-torn European competitors on the world market to advance its economy, generating a trade surplus for the first time since the isolation in the Edo period. Transportation and communications had developed to sustain heavy industrial development.
Most industrial growth, however, was geared toward expanding the nation's military power. Beginning in with significant land seizures in China, and to a greater extent after , when annexations and invasions across Southeast Asia and the Pacific created the Greater East Asia Co-Prosperity Sphere , the Japanese government sought to acquire and develop critical natural resources in order to secure economic independence.
Among the natural resources that Japan seized and developed were: coal in China, sugarcane in the Philippines , petroleum from the Dutch East Indies and Burma , and tin and bauxite from the Dutch East Indies and Malaya. Japan also purchased the rice production of Thailand , Burma, and Cochinchina. During the early stages of Japan's expansion, the Japanese economy expanded considerably. Steel production rose from 6,, tonnes to 8,, tonnes over the same time period.
In Japanese aircraft industries had the capacity to manufacture 10, aircraft per year. Much of this economic expansion benefited the " zaibatsu ", large industrial conglomerates. Over the course of the Pacific War , the economies of Japan and its occupied territories all suffered severely. Inflation was rampant; Japanese heavy industry, forced to devote nearly all its production to meeting military needs, was unable to meet the commercial requirements of Japan which had previously relied on trade with Western countries for their manufactured goods.
Local industries were unable to produce at high enough levels to avoid severe shortfalls. Furthermore, maritime trade, upon which the Empire depended greatly, was sharply curtailed by damage to the Japanese merchant fleet over the course of the war.
By the end of the war, what remained of the Japanese Empire was wracked by shortages, inflation, and currency devaluation. Transport was nearly impossible, and industrial production in Japan's shattered cities ground to a halt.
Reinterpreting the Japanese Economic Miracle
The destruction wrought by the war eventually brought the Japanese economy to a virtual standstill. The war wiped out many of the gains which Japan had made since The people were shocked by the devastation and swung into action. New factories were equipped with the best modern machines, giving Japan an initial competitive advantage over the victor states, who now had older factories. As Japan's second period of economic development began, millions of former soldiers joined a well-disciplined and highly educated work force to rebuild Japan.
Japan's colonies were lost as a result of World War II, but since then the Japanese had extended their economic influence throughout Asia and beyond. The United States' occupation of Japan —52 resulted in the rebuilding of the nation and the creation of a democratic nation. US grant assistance, however, tapered off quickly in the mids. A variety of United States-sponsored measures during the occupation, such as land reform, contributed to the economy's later performance by increasing competition.
In particular, the post-war purge of industrial leaders allowed new talent to rise in the management of the nation's rebuilt industries. Finally, the economy benefited from foreign trade because it was able to expand exports rapidly enough to pay for imports of equipment and technology without falling into debt, as had a number of developing nations in the s. A study, using the synthetic control method whereby Japan is compared to "synthetic Japan" a combination of which are similar to Japan but without the US alliance , found that the US alliance allowed Japan's GDP to "grow much faster" from In the wake of WWII, the Japanese citizenry was suffering from widespread exhaustion and despair from the war, known as " kyodatsu ," causing large-scale dejection and despondency.
These gifts referred to the bloodless democratic revolution from above ushered in by US forces that put an end to a socially debilitating war. One of the first and most significant economic reforms was the division and distribution of rural land to Japanese tenant farmers. Previously, property belonged to landlords and farmers worked on it in a feudal type system. Modern capitalist theory held that this feudal practice did not incentivize growth and the rural landlord class was dissolved. The early post-war years were devoted to rebuilding lost industrial capacity: major investments were made in electric power, coal, steel, and chemicals.
By the mids, production matched prewar levels. Released from the demands of military-dominated government, the economy not only recovered its lost momentum but also surpassed the growth rates of earlier periods. Japan's highly acclaimed post-war education system contributed strongly to the modernizing process.
The world's highest literacy rate and high education standards were major reasons for Japan's success in achieving a technologically advanced economy. Japanese schools also encouraged discipline, another benefit in forming an effective work force. The mids ushered in a new type of industrial development as the economy opened itself to international competition in some industries and developed heavy and chemical manufactures. Whereas textiles and light manufactures maintained their profitability internationally, other products, such as automobiles, electronics, ships, and machine tools assumed new importance.
Japan faced a severe economic challenge in the mids. The oil crisis shocked an economy that had become dependent on imported petroleum. Japan experienced its first post-war decline in industrial production, together with severe price inflation. The recovery that followed the first oil crisis revived the optimism of most business leaders, but the maintenance of industrial growth in the face of high energy costs required shifts in the industrial structure.
Changing price conditions favored conservation and alternative sources of industrial energy. Although the investment costs were high, many energy-intensive industries successfully reduced their dependence on oil during the late s and s and enhanced their productivity. Advances in microcircuitry and semiconductors in the late s and s led to new growth industries in consumer electronics and computers, and to higher productivity in pre-established industries. The net result of these adjustments was to increase the energy efficiency of manufacturing and to expand knowledge-intensive industries.
The service industries expanded in an increasingly postindustrial economy. But these rates were remarkable in a world of expensive petroleum and in a nation of few natural resources. Despite more petroleum price increases in , the strength of the Japanese economy was apparent. It expanded without the double-digit inflation that afflicted other industrial nations and that had bothered Japan itself after the first oil crisis in Japan experienced slower growth in the mids, but its demand -sustained economic boom of the late s revived many troubled industries.
Complex economic and institutional factors affected Japan's post-war growth. First, the nation's prewar experience provided several important legacies. The Tokugawa period — bequeathed a vital commercial sector in burgeoning urban centers, a relatively well-educated elite although one with limited knowledge of European science , a sophisticated government bureaucracy , productive agriculture, a closely unified nation with highly developed financial and marketing systems, and a national infrastructure of roads.
The buildup of industry during the Meiji period to the point where Japan could vie for world power was an important prelude to post-war growth from to , and provided a pool of experienced labor.
Table of Contents
Second, and more important, was the level and quality of investment that persisted through the s. Japanese businesses imported the latest technologies to develop the industrial base. As a latecomer to modernization , Japan was able to avoid some of the trial and error earlier needed by other nations to develop industrial processes. In the s and s, Japan improved its industrial base through licensing from the US, patent purchases, and imitation and improvement of foreign inventions. In the s, industry stepped up its research and development , and many firms became famous for their innovations and creativity.
Japan's labor force contributed significantly to economic growth, because of its availability and literacy, and also because of its reasonable wage demands. Before and immediately after World War II, the transfer of numerous agricultural workers to modern industry resulted in rising productivity and only moderate wage increases. As population growth slowed and the nation became increasingly industrialized in the mids, wages rose significantly.
However, labor union cooperation generally kept salary increases within the range of gains in productivity. High productivity growth played a key role in post-war economic growth. The highly skilled and educated labor force, extraordinary savings rates and accompanying levels of investment, and the low growth of Japan's labor force were major factors in the high rate of productivity growth.
The nation also benefited from economies of scale. Although medium-sized and small enterprises generated much of the nation's employment, large facilities were the most productive. Many industrial enterprises consolidated to form larger, more efficient units. Before World War II, large holding companies formed wealth groups, or zaibatsu , which dominated most industry. The zaibatsu were dissolved after the war, but keiretsu —large, modern industrial enterprise groupings—emerged.
The coordination of activities within these groupings and the integration of smaller subcontractors into the groups enhanced industrial efficiency. Japanese corporations developed strategies that contributed to their immense growth. Growth-oriented corporations that took chances competed successfully. Product diversification became an essential ingredient of the growth patterns of many keiretsu. Japanese companies added plant and human capacity ahead of demand. Seeking market share rather than quick profit was another powerful strategy. Finally, circumstances beyond Japan's direct control contributed to its success.
International conflicts tended to stimulate the Japanese economy until the devastation at the end of World War II. In addition, benign treatment from the United States after World War II facilitated the nation's reconstruction and growth. Japan's economic growth in the s and s was based on the rapid expansion of heavy manufacturing in such areas as automobiles, steel, shipbuilding, chemicals, and electronics.
The secondary sector manufacturing, construction, and mining expanded to By the late s, however, the Japanese economy began to move away from heavy manufacturing toward a more service-oriented tertiary sector base. During the s, jobs in wholesaling, retailing, finance, insurance, real estate, transportation, communications, and government grew rapidly, while secondary-sector employment remained stable.
After a mild economic slump in the mids, Japan's economy began a period of expansion in that continued until it again entered a recessionary period in The distribution of the gains from trade depends on what different groups of people consume, and which types of jobs they have, or could have. You can read more about these economic concepts, and the related predictions from economic theory, in Chapter 18 of the textbook The Economy: Economics for a Changing World.
We review the empirical evidence in detail in a related blog post. Here is an overview:. In a recent study, the economists David Atkin, Benjamin Faber, and Marco Gonzalez-Navarro explored the impact that the arrival of global retail chains had on workers and consumers in Mexico. In this study Atkin and coauthors find that the arrival of global retail chains led to reductions in the incomes of traditional retail sector workers.
However, they find little impact on average municipality-level incomes or employment; and a large positive impact on both rich and poor households, via lower costs of living. The following chart shows the estimated distribution of total welfare gains across the household income distribution the light-gray lines correspond to confidence intervals.
These are proportional gains, and are expressed as percent of initial household income. As we can see, there is a net positive welfare effect across all income groups; but these improvements in welfare are regressive, in the sense that richer households gain proportionally more about 7. The following visualization presents a compilation of available trade estimates, showing the evolution of world exports and imports as a share of global economic output. The higher the index, the higher the influence of trade transactions on global economic activity.
The first wave of globalization came to an end with the beginning of the First World War, when the decline of liberalism and the rise of nationalism led to a slump in international trade. In the chart we see a large drop in the interwar period. After the Second World War trade started growing again. This new — and ongoing — wave of globalization has seen international trade grow faster than ever before. Klasing and Milionis , which is one of the sources in the chart below, published an additional set of estimates under an alternative specification. You find all these alternative overlapping sources in this comparison chart.
Over the early modern period, transoceanic flows of goods between empires and colonies accounted for an important part of international trade. The following visualizations provides a comparison of intercontinental trade, in per capita terms, for different countries. As we can see, intercontinental trade was very dynamic, with volumes varying considerably across time and from empire to empire. Leonor Freire Costa, Nuno Palma, and Jaime Reis, who compiled and published the original data shown here, argue that trade, also in this period, had a substantial positive impact on the economy.
The following visualization shows a detailed overview of Western European exports by destination. Figures correspond to export-to-GDP ratios i. But this process of European integration then collapsed sharply in the interwar period. After the Second World War trade within Europe rebounded, and from the s onwards exceeded the highest levels of the first wave of globalization. In addition Western Europe then started to increasingly trade with Asia, the Americas, and to a smaller extent Africa and Oceania.
The indicators in this chart are indexed, so they show changes relative to the levels of integration observed in This gives us another viewpoint to understand how quickly global integration collapsed with the two World Wars. In this interactive chart you can explore trends in trade openness over this period for a selection of European countries. The world-wide expansion of trade after the Second World War was largely possible because of reductions in transaction costs stemming from technological advances, such as the development of commercial civil aviation, the improvement of productivity in the merchant marines, and the democratization of the telephone as the main mode of communication.
The visualization below shows how, at the global level, costs across these three variables have been going down since The reductions in transaction costs had an impact, not only on the volumes of trade, but also on the types of exchanges that were possible and profitable. The first wave of globalization was characterized by inter-industry trade. This means that countries exported goods that were very different to what they imported — England exchanged machines for Australian wool and Indian tea.
As transaction costs went down, this changed. In the second wave of globalization we are seeing a rise in intra -industry trade i. France, for example, now both imports and exports machines to and from Germany. The following visualization, from the UN World Development Report , plots the fraction of total world trade that is accounted for by intra-industry trade, by type of goods.
As we can see, intra-industry trade has been going up for primary, intermediate and final goods. This pattern of trade is important because the scope for specialization increases if countries are able to exchange intermediate goods e. Above we took a look at the broad global trends over the last two centuries.
The next chart plots estimates of the value of trade in goods, relative to total economic activity i. These historical estimates obviously come with a large margin of error in the measurement section below we discuss the data limitations ; yet they offer an interesting perspective. Each country tells a different story. If you add the Netherlands, for example, you will see how important the Dutch Golden Age was. Here is the same chart but showing imports , rather than exports. In the next chart we plot, country by country, the regional breakdown of exports. This gives us an interesting perspective on the changing nature of trade partnerships.
In India, we see the rising importance of trade with Africa — this is a pattern that we discuss in more detail below. This metric gives us an idea of integration, because it captures all incoming and outgoing transactions. The higher the index the larger the influence of trade on domestic economic activities.
The visualization below presents a world map showing the trade openness index country by country. For any given year, we see that there is a lot of variation across countries. The weight of trade in the US economy, for example, is much lower than in other rich countries. If you press the play button in the map, you can see changes over time. This reveals that, despite the great variation between countries, there is a common trend: Over the last couple of decades trade openness has gone up in most countries.
Expressing trade values as a share of GDP tells us the importance of trade in relation to the size of economic activity. The chart below shows the value of exports goods plus services in dollars, country by country. All estimates are expressed in constant dollars i. The main takeaway here are the country-specific trends, which are positive and more pronounced than in the charts showing shares of GDP. This is not surprising: most countries today produce more than a couple of decades ago ; and at the same time they trade more of what they produce.
Here is the same chart, but showing imports rather than exports. Trade transactions include goods tangible products that are physically shipped across borders by road, rail, water, or air and services intangible commodities, such as tourism, financial services, and legal advice. Many traded services make merchandise trade easier or cheaper—for example, shipping services, or insurance and financial services. Trade in goods has been happening for millenia ; while trade in services is a relatively recent phenomenon. Globally, trade in goods accounts for the majority of trade transactions. This interactive chart shows trade in services as share of GDP across countries and regions.
Firms around the world import goods and services, in order to use them as inputs to produce goods and services that are later exported. That is, the share of the value of exports that comes from foreign inputs. Foreign value added in trade peaked in — after two decades of continuous increase.
This is consistent with the fact that, after the global financial crisis, there has been a slowdown in the rate of growth of trade in goods and services, relative to global GDP. This is a sign that global integration stalled after the financial crisis. The integration of global value chains is a common source of measurement error in trade data, because it makes it hard to correctly attribute the origin and destination of goods and services.
We discuss this in more detail below. The following interactive chart from the Observatory for Economic Complexity OEC , at the Massachusetts Institute of Technology, shows a breakdown of total world merchandise exports by product category, for You can visit the OEC website to see this composition country by country. In this embedded interactive chart you can use the options at the bottom to change how the data is presented.
If we consider all pairs of countries that engage in trade around the world, we find that in the majority of cases, there is a bilateral relationship today: Most countries that export goods to a country, also import goods from the same country. The following interactive visualization shows this. In this chart, all possible country pairs are partitioned into three categories: the top portion represents the fraction of country pairs that do not trade with one-another; the middle portion represents those that trade in both directions they export to one-another ; and the bottom portion represents those that trade in one direction only one country imports from, but does not export to, the other country.
As we can see, bilateral trade is becoming increasingly common the middle portion has grown substantially. As we can see, up until the Second World War the majority of trade transactions involved exchanges between this small group of rich countries. But this has been changing quickly over the last couple of decades, and today trade between non-rich countries is just as important as trade between rich countries.
Here is a stacked area chart showing the total composition of exports by partnership. The last few decades have not only seen an increase in the volume of international trade, but also an increase in the number of preferential trade agreements through which exchanges take place. A preferential trade agreement is a trade pact that reduces tariffs between the participating countries for certain products. The following visualization shows the evolution of the cumulative number of preferential trade agreements that are in force across the world, according to the World Trade Organization WTO.
These numbers include notified and non-notified preferential agreements the source reports that only about two-thirds of the agreements currently in force have been notified to the WTO , and are disaggregated by country groups. This figure shows the increasingly important role of trade between developing countries South-South trade , vis-a-vis trade between developed and developing countries North-South trade.
In the late s, North-South agreements accounted for more than half of all agreements — in , they accounted for about one quarter. Today, the majority of preferential trade agreements are between developing economies. The increase in trade among emerging economies over the last half century has been accompanied by an important change in the composition of exported goods in these countries. Two points stand out. First, there has been a substantial decrease in the relative importance of food exports since s in most countries although globally in the last decade it has gone up slightly.
And second, this decrease has been largest in middle income countries, particularly in Latin America. Regarding levels, as one would expect, in high income countries food still accounts for a much smaller share of merchandise exports than in most low- and middle-income-countries. Economic costs include physical inputs the value of the stuff you use to produce the good , plus forgone opportunities when you allocate scarce resources to a task, you give up alternative uses of those resources. The forgone opportunities of production are key to understand this concept.