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 Japans
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 governments 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 fourteenhour 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 Japans 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 nations
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 Japans 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 Japans early
industrial era. Mineral production in Japan increased 700
percent from 1876 to 1896. After textile mills, mines were the
nations 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, Japans 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 Japans 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 Japans 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
emphasisshipping, 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 capitalintensive, 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.
Japans 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- Japans emergence as a modern state by E. Herbert Norman

Sania Mariam
( History Hons. )