Japan at a Deadlock Also by Michio Morishima

WHY HAS JAPAN ‘SUCCEEDED’? Japan at a Deadlock

Michio Morishima STICERD London School of Economics and Political Science

Partly translated by Janet Hunter First published in Great Britain 2000 by MACMILLAN PRESS LTD Houndmills, Basingstoke, Hampshire RG21 6XS and London Companies and representatives throughout the world A catalogue record for this book is available from the British Library. ISBN 978-1-349-41154-2 ISBN 978-0-230-51216-0 (eBook) DOI 10.1057/9780230512160

First published in the United States of America 2000 by ST. MARTIN’S PRESS, LLC, Scholarly and Reference Division, 175 Fifth Avenue, New York, N.Y. 10010

Library of Congress Cataloging-in-Publication Data Morishima, Michio, 1923– Japan at a deadlock / Michio Morishima. p. cm. Includes bibliographical references and index.

1. Japan—Economic conditions. 2. Japan—History—1868– 3. Capitalism– –Japan. I. Title. HC462.95 .M6764 2000 330.952—dc21 00–033292

© Michio Morishima 2000 Softcover reprint of the hardcover 1st edition 2000 978-0-333-74894-7 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1P 0LP. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages.

The author has asserted his right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act 1988. This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. 10987654321 09 08 07 06 05 04 03 02 01 00 Contents

List of Tables and Figures vi Acknowledgements viii Preface ix

1 Introduction 1 2 Ideology and Economic Activity: An International Comparison 14 3 Transformation from Feudalism to Capitalism in Japan 40 4 The Japanese Financial System: its Solidity and Vulnerability 69 5 Japanese Enterprise as Private Sector Bureaucracy 120 6 Polarization under Capitalism from Above 138 7 Agony towards Capitalism from Below 179 8 A Perspective on Japan in the New Century 212

Notes 246 Bibliography 250 Index 254

v List of Tables and Figures

3.1 Population of selected towns in Japan, 1590–1869 46 3.2 The population composition of Edo, 1721–1867: by sex and birthplace 48 3.3 Population of Iyo clans, 1721–1846 52 3.4 Peasant uprisings 55 3.5 State/private sector wage disparities 58 3.6 Classiﬁcation of selected businessmen in Meiji-Taisho¯ Japan 62 3.7 The business élite of Meijo-Taisho¯ Japan 63 3.8 Mixed marriages between samurai and non-samurai 65 4.1 The business élite of Meiji-Taisho¯ Japan: ﬂow table 86 4.2 The business élite of Meiji-Taisho¯ Japan: stock table 87 4.3 Educational backgrounds of executives of the six enterprise groups, 1992 90 4.4 Educational backgrounds of presidents and chairmen of the six enterprise groups, 1992 92 4.5 The relative power of private universities to state universities, 1992: sectoral indices 93 4.6 The percentage of executives and presidents with science, technology, medicine and agricultural degrees 94 4.7 Educational backgrounds of executives and presidents of banks, 1992 94 4.8 The percentages of the member companies of the six enterprise groups having their own city banks and trust banks as the 1st, 2nd, 3rd main banks, 1984 112 6.1a Wage disparities 142 6.1b Wage disparities 145 6.1c Wage disparities 146 6.2 Estimated wages for male, non-manual workers with senior high school education or more 158 6.3 Estimated wages for female, manual worker with junior high school education only 161 6.4 Relative wages of male, non-manual workers with senior high school education or more 164 6.5 Relative wages of male, manual workers with junior high school education only 165 6.6 Relative wages of female, manual workers with junior high school education only 166 6.7 Relative wages of female, manual workers with senior high school education only 166

vi List of Tables and Figures vii

6.8 Effects of education and occupation upon the wage differentials between manual workers with junior high school education only and non-manual workers with senior high school education or more: the case of male workers 170 6.9 Effects of education and occupation upon the wage differentials between manual workers with junior high school education only and non-manual workers with senior high school education or more: the case of female workers 172 6.10 The educational wage differentials among female workers 173 6.11 The wage differential between female and male workers 176 6.12 Wages of female employees as percentage of wages of male employees 178

Figure 6.1 Wages in small, medium and large ﬁrms, 1958–85: male, non-manual workers with senior high school education or more 159 Acknowledgements

This volume contains some of my papers which have been published elsewhere as: ‘Ideology and Economic Activity’, in A. Martinelli and N.J. Smelser (eds), Economy and Sociology (Sage, 1990); ‘Banking and Industry in Japan’: foreword to H. Okumura, ‘Japanese Corporation Capitalism’ in Classics in the History and Development of Economics (Macmillan and St Martin’s Press, 1999); ‘Japanese Enterprise as Private Sector Bureaucracy’: foreword to H. Hazama, ‘The History of Labour Management in Japan’ in Classics in the History and Development of Economics (Macmillan and St Martin’s Press, 1997); and ‘Democracy and Economic Growth: the Japanese Experience’, in A.K. Bagchi (ed.), Democracy and Development (International Economic Association, Macmillan, 1995). Also included are two of my STICERD discussion paper articles: ‘A Historical Transformation from Feudalism to “Capitalism”’; and ‘Wage Differentials in Japan: 1958–85’. I am pleased to acknowledge that Janet Hunter at STICERD, LSE, has translated the part of the manuscript that was originally written in Japanese. The author and publishers acknowledge Sage Publications Ltd for permission to include the above-mentioned paper, which appeared in Economy and Sociology in 1990.

viii Preface

Japan was unified as a modern nation state in 1868 and, by 1920, was among the world’s leaders in light industrial production. Following this, the country’s heavy industries also grew and prospered, but production totally collapsed with Japan’s defeat in 1945. I myself was still a student at that time, and was demobilized, having served as a young officer in the navy for one year and nine months. Perhaps because I was young and enthusiastic, however, I did not at that time think about Japan’s future with pessimism. Sure enough, 40 years later, in 1985, Japan had recovered to become the envy of the world, including the top industrial nations (the then so-called G7). Since that time, however, Japan has failed to open up its economy to the world and to contribute to the building up of the world market system. That there has been collusion between government and private enterprises, money has been invested in a slipshod and unsound fashion, and government and the top enterprises have been involved in one economic crime after another. Questions must be asked concerning whether Japan has stum- bled, whether the country will stagnate if it continues along present lines or if it is impossible for her to rise again, and we must expect collapse. Having lived for so long in England, I can be no more than a bystander as far as this is question concerned, but this time, unlike at the time of defeat – and this may be due to my time of life – my observations are extremely pessimistic. I am an economic theorist. My observations in this book relate to trends in Japan over the last 150 years and more. The economic analysis of these kinds of problems, and the prediction of the future, is undertaken by an army of economic analysts, but it is my view that if we are to try and understand these problems as a whole, we should not rely for our under- standing on just one instrument. To continue with our musical analogy, at the very least I think that we need proficiency in several instruments, and we need to portray the totality of trends by using them together, and to present to others the synthesized view or vision that results from the process. In this book I have sought to take this kind of orchestrated approach. An important part of this approach is focussing on the kind of ethos subscribed to by the people who go to make up Japan. In other to understand Japan from this angle we must begin with an overview of people’s ethos in the world more broadly, though this may well be regarded as a rather roundabout way of doing things. However, as a result of defeat in the Second World War the Japanese people were reborn as people who have now lost their traditional ethos. The consequent rivalry

ix x Preface between two generations, each with a different ethos, can be said to be a major theme of this work. Apart from the study of ethos, there are a number of other disciplines within the social sciences, and it is my belief that it is essential for these disciplines to be orchestrated. One of the most conspicuously successful examples of this is to be found in J.A. Schumpeter’s Capitalism, Socialism and Democracy. No doubt from a scientific perspective this is a work con- taining a number of errors. It is, however, a book that is extraordinarily interesting to read, and a book that makes one think. It is true that the individual instruments used in the ‘orchestra’ have to be all scientific disciplines. However, the synthesis of the various sciences is not necessarily itself scientific but only on art. This is because there are as yet no theories established, so that they can provide clear rules as to where and which issues to deal with, and which to ignore, and which instruments to use, and which to discard. This depends on the general abilities of the person responsible for arranging the symphony, and hence the immediate skills of that arranger. My previous book, Why Has Japan ‘Succeeded’? (1982), was also a symphony composed with such an intention. I am now humbly offering a book written as a kind of elegy for Japan, a ‘Pathetique’ symphony. Please note that it is consistent methodologically with the earlier work. Finally, this book can be said to be in one sense a collection of essays written during the years from 1986 through to 1998. This has resulted in some duplication of material in different chapters. However, since this duplication can be regarded as a convenient way of driving home to the reader my perspective on Japan, most of it has been allowed to remain.

MICHIO MORISHIMA