Economic Development of Japan No.8 1930s and War Economy Democratic institution (Form) Constitution Laws Parliament Election Court Full democracy US rule Showa2 1960 Now 1945-51 Democratization New constitution LDP dominance Lack of policy debate Military rises 1931 Democracy movement, Party cabinet 1937 Defeat War Male suffrage 1925 Showa1 Taisho Constitution 1889 Parliament Fascism 1937-45 Edo Pure dictatorship Meiji Political fights Reform vs conservatism, big vs small government, other policy debates (Content) Political competition Two-party Politics 1924-1932 PP.130-32 Minsei Party 民政党 Seiyukai 政友会 (Kenseikai until 1927) (Estab. in 1900 by Hirobumi Ito) Economy Small government, free market, fiscal austerity & industrial restructuring for return to gold Big government, fiscal activism, local public works for securing votes Foreign policy Oppose militarism, protect Japan’s interest by diplomacy, promote disarmament To attack Minsei Party, support military and fascism if necessary, even deny democracy Remark Peace orientation is laudable, but stubborn deflation policy caused fascism to gain force Economic recovery policy was welcomed, but its opportunism severely undermined democracy Seiyukai statements: “Prof. Minobe’s theory denies the supreme dignity of Emperor. Just banning his books is not enough.” “Go, go, Japan, the leader of Asia, the vast land of Manchuria and Mongolia is waiting for you!!!” (election campaign song)” Northeastern China today Shidehara Diplomacy PP.106-9 Kijuro Shidehara, 1872-1951 Foreign Minister, 1924-27, 1929-31 Prime Minister 1945-46 His policy was more moderate than before or after him • Maintain good relations with US and UK • Respect Washington Naval Disarmament Treaty (1921-22) • No military intervention in China; secure Japan’s economic interest through diplomacy and negotiation • When China protests and resists, his diplomacy breaks down • Domestically, criticized as Coward Diplomacy • Fail to stop Manchurian Incident (1931) started by Kantogun (Japanese Army stationed in China) Tanaka Cabinet (Seiyukai), 1927-1929 • The Oriental Conference (Japan’s policy toward Giichi Tanaka 1864-1929 China): defend Japan’s interests in ManchuriaMongolia 満蒙, but welcome FDI from any country. • Send Japanese troops to prevent Chiang Kai-shek 蒋介 石’s army to unify China (1927 & 1928). • Suppress communists and proletariat parties. • Strengthen Security Maintenance Law 治安維持法 (introduce death penalty). • Kantogun 関東軍 (Japanese army in China) kills Chinese military leader 張作霖 by train bombing. PM Tanaka did not report the truth to Emperor. Emperor criticizes him and he resigns. Hamaguchi Cabinet (Minsei Party), 1929-31 Finance Minister Junnosuke Inoue Prime Minister Osachi Hamaguchi Foreign Minister Kijuro Shidehara • Fiscal austerity and industrial restructuring for returning to gold standard ($1=2 yen) • Disarmament (supported by people, opposed by navy) • Social policies for workers and farmers Hamaguchi Cabinet is regarded as the crown of pre-WW2 democracy achievement. However, its stubborn deflation policy encouraged fascism and militarism, despite Minsei Party’s peace orientation. Promoting Naval Disarmament • London Naval Disarmament Treaty (1930) signed and ratified against opposition by Navy and Privy Council (cruisers & submarines, 69.75% vs 70% of US/UK tonnage) • Navy attacks government for “violation of Emperor’s supreme command authority” 統帥権干犯 • Seiyukai supports Navy to undermine Minsei Party Government (=helping fascism) • PM Hamaguchi shot at Tokyo Station (1930), dies next year Note: Before WW2, many PMs were assassinated or almost killed: Ito, Okuma, Hara, Inukai, Hamaguchi, Takahashi, Saito, Suzuki PP.126-130 Showa Economic Crisis 昭和恐慌 Causes (1) Impact of global depression (2) Austerity policy initiated and continued by FM Inoue Consequences (1) Severe price deflation (2) Rural impoverishment, coupled with famine (3) Cartelization and rationalization (“free market doesn’t work”) (4) Rise of fascism (army, navy, right-wing groups) --Rejection of party politics Nominal GNP (bil yen) 20 --“Reform” movement 1/ Military readiness for total war 2/ Totalitarian state for the benefit of farmers and workers 15 10 5 0 1929 1930 1931 1932 1933 1934 PP.131-32 Takahashi Budget and Recovery 1932-36 • Korekiyo Takahashi, FM in Inukai Seiyukai Cabinet and two other cabinets (1932-36)--“Japanese Keynes” • “If someone saves 30,000 yen out of his income of 50,000 yen, his savings will increase, which is fine for him. But from the viewpoint of national economy, his saving will surely reduce demand elsewhere, which lowers national output. For the nation, it is actually better that this person spend all his income of 50,000 yen.” (Takahashi speech on austerity and returning to gold standard, 1929) • Reversing Inoue’s austerity policy --Terminate gold standard, let yen fall --BOJ monetization of fiscal deficit --“Spending Policy” on public works Takahashi was assassinated by rebellion army in 1936 Manchurian Incident (1931) PP.133-35 (Sep. 18 Incident) • Kantogun (関東軍 Japanese army stationed in China) initiates well-planned invasion of Manchuria without informing Tokyo • Tokyo Government and Army HQ try to stop it but fails Kantogun is now uncontrollable Violating “open door, equal opportunity” principle • US Secretary of State Stimson’s press statement undermines FM Shidehara (regarding Jinzhou bombing) • Seiyukai (Inukai) Government declares the “independence” of Manchuria (1932). • The League of Nations determines that Manchuria is not an independent state and Japan’s action is not self-defense Japan withdraws from the League of Nations (1933) Multiplicity of Political Players and Policy Debates (1930s until the outbreak of Japan-China War (July 1937) Democracy ProZaibatsu, Pro-Capitalism Workers’ & Farmers’ Rights Fascism/militarism Minsei Party Seiyukai Party Ugaki “Proletariat” parties Military Political parties in parliament Army factions 無産政党 民政党 政友会 陸軍統制派 陸軍皇道派 Proletariat parties Minsei Party Seiyukai Party Discipline Faction Imperial Faction Gain seats under broad voter base, demands social policies Opposes fascism, promotes social policies Supports fascism to undermine Minsei Party Social reform through parliament Social reform thru coup & terrorism Navy Attempt to cooperate to fight fascism fails Dissatisfied with two major parties, sympathetic to “social reform” by fascio groups Lose election Feb. 1936 Anti-military criticism in parliament DEMOCRACY X Rivalry among fascio groups R Wing Political terrorism 1931‐36 Failed coup Feb. 26 Incident, 1936 Dominant & suppressive Japan-China War, 1937 X FASCIO Why People & Media Supported Military? (Not all of them, but some) • The Sense of “Crisis in Manchuria-Mongolia” 満蒙の危機—need to protect Japan’s interests against the emergence of anti-Japanese movement in China; Shidehara Diplomacy is regarded as too soft • Showa Economic Crisis—workers and farmers suffer severely while big businesses make money • Disgust with political parties—both Seiyukai and Minsei Party are regarded as corrupt and unfriendly to workers’ welfare • However, some journalists criticized militarism consistently--Tanzan Ishibashi 石橋湛山, Kiyoshi Kiyosawa 清沢冽 War Economy 1937-45 PP.136-39 • Political debate and democracy completely suppressed. • Economic planning to mobilize people and resources under private ownership (no nationalization). 1937-39 Planning Board, National Mobilization Law; State Power Management Law 1939-41 Control over civil life becomes pervasive 1941-44 Total war with US--Ministry of Military Demand; Military Needs Company Act 1944-45 Economic collapse due to lack of inputs War with China prolongs Resource shortage within Yen Bloc Invade SEA for more resources Total war with US and rest of the world Military Production Consumer Product Supply (1937=100) (1933=100) 2500 160 Weapons & ammunition 2000 Food 120 Planes (navy) Battleships 1500 Total 140 Planes (army) Clothing 100 80 1000 60 40 500 20 1953 1951 1949 1947 1945 1943 1941 1939 1937 1935 1945 1944 1943 1942 1941 1940 1939 1938 1937 1936 1935 1934 1933 1932 1931 1933 0 0 Million tons 25 Other Oil from SEA Nonferrous metals Iron ore Coal 20 15 10 Maritime Transport during Pacific War 1941-1945 5 0 1942:H1 1942:H2 1943:H1 1943:H2 1944:H1 1944:H2 1945:H1 PP.140-41 Origin of the Post-WW2 Japan System • Featuring long-term commitments and official intervention Government-led industrial drive, administrative guidance, subcontracting, lifetime employment, keiretsu, mainbanks, friendly trade unions, BOJ window guidance, etc. • Negative view—this system was installed artificially after 1937 to execute war. It continued to work reasonably well in the 1950s-60s, but it is now obsolete. • Positive view—advanced industrialization requires such features. Free markets do not generate high-tech or heavy industries. Japan needed such a system to develop. This means laissez-faire policy supports light industries and simple processing only; to go further, developing countries need above features even today.
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