The role played by the state in the development of capitalism in Japan

The classical view of how capitalism develops is that within feudal society a class emerges made up of merchants, bankers, early industrialists, i.e. the bourgeoisie, and that for this class to be able to develop its full potential a bourgeois revolution is required to break the limits imposed by the landed feudal aristocracy. That is how things developed, more or less, in countries like France and England, but not in Japan.

Simply because that is how capitalism came into being in a few advanced capitalist countries does not at all mean that the selfsame process has to be repeated again and again in all countries of the world. In fact, if one looks at most countries today , that was not the way things developed.

There is a good reason for this. Once a few advanced industrialised capitalist nations had emerged on the scene of history, these tended to dominate the rest of the world. Hence, the phenomenon of imperialism. The existence of powerful industrial countries, with a high level of productivity and advanced technological methods, meant that the path of gradual emergence of a local bourgeoisie was blocked off in the lesser developed countries.

This is a key idea that Trotsky developed in his theory of the Permanent Revolution. The events in Russia in 1917 confirmed the correctness of this theory. The Russian bourgeoisie was incapable of leading its own revolution. Unlike the French bourgeoisie in the 18th century or the British in the 17th, the Russian bourgeois was tied hand and foot to the interests of the powerful imperialist nations. That is why the task of carrying out the bourgeois revolution fell to the young Russian proletariat, the only truly revolutionary class in Russia at that time. Of course, the fact that there was already a modern proletariat in Russia meant that in beginning the task of carrying out the bourgeois revolution, the workers would pass over to the socialist tasks in one “permanent” process, but that is not the subject of this article.

What we are interested in here is a phenomenon whereby, precisely because of the weakness of a class that is supposed to be the leader of a process, i.e. the development of capitalism in this case, another class takes that task upon itself. When the class to whom the leadership of the bourgeois revolution should rightly belong is too weak, or too dependent on mightier bourgeois powers, another class can step in. Japan is a clear example of such a phenomenon.

Historical precedent

From the history of Japan we have several examples that show how a ruling class, or caste, can consciously adopt an economic system from another country if it considers it to be superior to its own and to better suited to promoting and defending the interests of that ruling group.

The Yamato state in sixth century Japan adopted Buddhism, taking it from China, and with it came an attempt to adopt the economic system of China, which was the Asiatic mode of production. At that time, China had a more advanced civilisation and level of development than Japan.

The ruling classes of Japan were concerned about being invaded and colonised and thus they looked to China, and sought to emulate its economic and legal system. The wealthy families sent their sons to study in China and to learn about the economic and legal system there. This led in 645 to a major reform being introduced, the nationalisation of land. This was an attempt to introduce into Japan the economic system that existed in China. For a period it worked and allowed Japan to develop, but as the geographic conditions that were at the base of the Chinese system did not exist in Japan, this state ownership of the land tended to break down and by the 8th century the system was shifting to private land ownership and therefore to feudalism. By the 10th century half of all land was privately owned.

In these conditions powerful local feudal warlords emerged and Japan experienced long periods of war between the various clans. It took centuries for the country to be finally united under one emperor and one central power. Having achieved this, the ruling elite attempted to shut off Japan from all outside influence. From around 1600, for two centuries, Japan was an extremely closed society, with the feudal aristocracy keeping a firm grip on power, using all means possible to stifle any kind of development that could affect their source of wealth, ownership of the land and a peasantry tied to that land. It was an attempt at autarchy. In fact some historians have commented on the fact that had a visitor to Japan in 1600 been able to return in 1800, 200 years later, he would have hardly noticed any change. In spite of this, there was a degree of capitalist-type development, especially in the first half of the 19th century, but this was held back within the constraints of the feudal state.

However, elsewhere capitalism was developing, in Europe and the USA, and this could not but have an impact on Japan. In neighbouring China, the ruling class of Japan could see the effects of the western-induced Opium Wars. China was being colonised and the Japanese aristocracy feared the same fate. Initially they attempted to tighten their control and stop any foreign influence, but matters came to a head in July 1853 when US Commodore Matthew Perry steamed into Edo Bay with four ships. He came with very clear demands: a more humane treatment of foreigners landing in Japan, the opening of ports to foreign ships for provisions and fuel, and most importantly the opening of ports for trade. Perry gave the Japanese a year to consider these requests and to make his point he gave them white flags that they may have needed upon his planned return one year later. Perry in fact returned in February 1854 and the Japanese shogunate accepted all his demands, including the opening of a consular office of the United States in Japan. This outside pressure provoked conflict within the Japanese aristocracy. The shogunate was removed and the emperor was “restored” in 1868, but the real power was passing to those within the Japanese ruling class that favoured “westernisation” as a means of resisting the Western powers.

What was meant by “westernisation” was the development of industry. Thus began a period of industrialisation. Part of this was the laying of the basic infrastructure for capitalist development, with priority being given to developing the rail network. In the years 1870 to 1874 one third of government investment went on the railways. The Japanese bourgeoisie was weak and did not directly guide this process.

Weak bourgeoisie

As Kenneth Henshall in his ‘A History of Japan, from Stone Age to Superpower’ (1999) states:

“In general the merchant houses from the Tokugawa period were not especially willing to take up the challenge of establishing modern industries, which they saw as too risky. Mitsui and Sumimoto were in fact the only major houses to do so. Rather, in most cases entrepreneurial initiative was taken either by the government itself or by the same ‘class’ of lower-ranking samurai – often with peasant associations – who formed the government.”

And although there were some ex-samurai who played a role in developing industry, “at least in the early years, the government was disappointed at the lack of private entrepreneurs. It ended up having to establish many enterprises by itself. The hope was that these would serve as successful models for private industry to follow…”

Henshall goes on to explain that, “During the 1870s the government also set up factories in industries such as munitions, brick, cement, and glass, and took over a number of mines and shipbuilding yards.”

Japan was still a predominantly agricultural country, with agriculture contributing 42% of GDP. This meant that large amounts of cheap peasant labour were available for employment in the factories that were more and more export-orientated. In the 1880s exports were 6-7% of GNP, but by the Meiji period these had grown to 20%.

In order to acquire the necessary advanced western technology, companies were encouraged to form joint ventures. Today’s well-known companies such as NEC (Nippon Electric Company) and Toshiba started off as joint ventures with American companies.

And as Henshall explains: “Throughout the Meiji period the government played an important guiding role in the economy, developing and maintaining relations with the business world, and offering assistance in areas it favoured and to those companies it favoured.” And after explaining that the government didn’t always get it right, he states that, “Nevertheless, one thing was certain – the government was reluctant to leave economic development to market forces. It still is.”

Role of the state in the economy

E. Sydney Crawcour of the Australian National University, in his work, “Industrialization and technological change, 1885-1920 (Chapter Two of the book, The Economic Emergence of Modern Japan’, edited by Kozo Yamamura, 1997), points out that, “No explanation of industrialization and technological change in Japan between 1885 and 1920 would be complete or satisfying without considering the role of the state.” And almost as if to answer latter-day “neo-liberal” thinking, i.e. that the market is the answer to everything, he points out the following:

“Some economists oppose state intervention on the grounds that it cannot raise total output above the level that would be produced by the operation of competitive markets. Free competitive markets are not, however, necessarily the best strategy for long-run dynamic growth. Specifically, market forces do not maximize long-run growth when the returns from an investment depend on other developments outside the investor’s control. We have already seen that in the 1890s neither an ironworks nor a steel mill in isolation were profitable. A coal mine might not be profitable without a railway to carry its product to the market, but a railway might not be economical without the development of both the coal mine and other industries along its route. Yet all of these might be highly productive investments as parts of a state-supported development program.”

Here we see how state intervention can be an essential part of developing an economy even on a capitalist basis. The author even refers to the advantages of such methods in what he calls a “late-developing economy”.

In all this economic development what was the driving force? Was it the emerging bourgeoisie as in the England of Cromwell’s days or of the French Revolution of 1789? No, it was not. The driving force came from outside. It was the pressure of the advanced capitalist countries, which threatened the position of the Japanese feudal aristocracy, that led to sections of this same aristocracy to push for modernisation, i.e. industrialisation, which meant capitalism. As the bourgeoisie was too weak to play its historical role, the task fell to another class, in this case the samurai class through its control of the state.

Henshall explains:

“The young samurai who led the coup [of 1868] in his name [the boy-emperor] were able to consolidate their control of the government and bring a certain stability to the country beneath all the changes.

“Their aim was to build up a strong nation that could match and even perhaps eventually outdo the west.”

And who abolished the feudal system? Not the bourgeoisie, which was too weak to do so, but elements from within the feudal aristocracy itself. As Henshall explains again, “The restrictive feudal class system was abolished, including the samurai class from which the government leaders themselves came.” [our emphasis].

Within quite a short period of time Japan emerged as a major economic power and with it went military might, as it expanded beyond its borders building its own empire in the east. In addition, although the Japanese ruling class copied the West in terms of economic reform, it did not take on board the political institutions of the West. As Henshall explains, “The cabinet of oligarchs remained ‘transcendental’ – a law unto itself – and freedoms were very much within limits…”

Here we have some useful analogies with present-day China. Who had the power in Japan at the end of the 19th century and the early part of the 20th? The bourgeoisie was still too weak to exert direct control over the state. However, the state was building a modern capitalist Japan. Was the Japanese state bourgeois, in 1870? One would have to answer both yes and no. If one were to judge it purely from the men who led that state, the same feudal aristocrats of the past, one could be led to making the mistake that it was “feudal”. The point here is that those elements who came from within the old feudal aristocracy were at the head of a state that was building the foundations of a powerful capitalist economy. Although they were then in the early stages of such development, the direction was clear: towards capitalism. In that sense it was a bourgeois state. If one ask the correct question, i.e. in which direction was that state going, the answer would be unequivocally towards capitalism, and that is what would finally define the fundamental nature of that state.

An extremely relevant and interesting point precisely on this question is to be found in one of the writings of Trotsky, “Not a workers’ and not a bourgeois state?” (November 25, 1937): “The assertion that the bureaucracy of a workers’ state has a bourgeois character must appear not only unintelligible but completely senseless to people stamped with a formal cast of mind. However, chemically pure types of state never existed, and do not exist in general. The semi-feudal Prussian monarchy executed the most important tasks of the bourgeoisie, but executed them in its own manner, i.e., in a feudal, not a Jacobin style. In Japan we observe even today an analogous correlation between the bourgeois character of the state and the semi-feudal character of the ruling caste. But all this does not hinder us from clearly differentiating between a feudal and a bourgeois society.”

Role of US imperialism

The fact that Japan never had a “bourgeois revolution” left remnants of the old feudal state in place, the emperor for example. (This is even true of Britain with its monarchy and House of Lords to this day!). Most of these would only be finally removed by the occupying US army under General Douglas MacArthur. In his memoirs MacArthur explained that while his aim was to destroy Japan’s ability to wage war, he was also pushing for “modernisation”. In his words what was needed were to, “Build the structure of representative government. Modernise the constitution. Hold free elections. Enfranchise the women. Release the political prisoners. Liberate the farmers. Establish a free labor movement. Encourage a free economy. Abolish police oppression. Develop a free and responsible press. Liberalize education. Decentralize the political power. Separate church from state…”

Although some of this is pure demagogy, they did proceed to implement key land reform in 1946, whereby farmers were allowed to own as much land as they could farm themselves. The government went so far as to buy up land from absentee landlords and redistribute it to small farmers. This measure was clearly dictated by the fear of revolution, as “Communism” [i.e. Stalinism] was spreading to large parts of the world, in the first place to neighbouring China.

The American imperialists had good reason to push for such reforms as within Japan itself a powerful trade union movement had developed, together with a large Communist Party. It was to cut across such developments that the Americans pushed for what amounted to the final completion of the Japanese bourgeois revolution.

Thus, Japan became a powerful, advanced capitalist country, indeed one of the most successful capitalist economies of the post-war period, with sustained levels of growth of over 10% per year for several years. Eventually even Japan succumbed to the contradictions of capitalism and in the late 1980s entered into a prolonged crisis. However, the modern, capitalist transformation of Japan took place under the guiding hand of a section of the old feudal aristocracy.

This development inside Japan was determined by the world situation. A section of the ruling elite of Japan, that until the early 1800s was a feudal aristocracy, could see that their own position of privilege and power would be threatened by the more powerful industrialised countries unless they too developed industry. There was no actual bourgeois revolution as such, but a series of steps that led nonetheless to a modern capitalist Japan.

We could also take the example of the historical development of German capitalism, where modernisation (i.e. industrialisation and therefore capitalism) was promoted by the Junkers, elements from within the old landed, feudal aristocracy, Bismarck being the best example, but that is material for another article.

The point, however, is that two of the most advanced industrial powers on the planet, Germany and Japan, emerged from their feudal past not through classical bourgeois revolutions, of the French type, but through a process that was dictated by the needs of the ruling elite of a system that could no longer defend its interests by clinging on to feudalism.