DIMENSIONS OF THE POSTWAR ECONOMIC MIRACLE
|GNP||Growth Rate||ANNUAL AVG||Per Capita Income|
|1978||$450 million||$19,642 (0vertakes US)|
More GDP/Comparative Figures: http://kushnirs.org/macroeconomics/gdp/gdp_japan.html
1st Wave = Manufacturing
Optics -- cameras, binoculars, telescoptes, etc.
Electronics--receivers, amps, speakers, radios, TVs,
2nd Wave = tertiary, knowledge-intensive, service industries
trade, transportation, finance, insurance, management, real estate,
information retrieval systems
computer chips, VCRs, handi-cams, big screens, etc.
SOME KEY FACTORS
Role of Historical Imperatives (War, Occupation, Zaibatsu, Dodge Line,Korean War)
Role of Technology
High rate domestic savings
High Rate Investment in R&D
Low Rate of Defense Expenditures ("Free Ride")
Quality of Labor force--JES
Role of Education
JAPANESE ECONOMY IN THE 1950s AND 60s
In 1950, the per capita income of Japan was equal to that of Ethiopia and Somalia and 40 percent less than India. People were still dying of starvation.
Photographs at Yasukini Shrine from the mid 1940s show families standing in front of shop windows "looking longingly" at toasters and refrigerators. In the 1950s, U.S. Secretary of State John Foster Dulles said, Japan "should not expect to find a big U.S. market because the Japanese don't make things we want."
In the 1950s and 1960s, Japanese bought black and white televisions, washing machines with ringers and ice candy from vendors roaming the streets on bicycles. Many people went out to the movies for entertainment.
Throughout the postwar period, Japan's economy continued to boom, with results far outstripping expectations. Japan rapidly caught up with the West in foreign trade, gross national product (GNP), and general quality of life. These achievements were underscored by the 1964 Tokyo Olympic Games and the Osaka International Exposition (Expo '70) world's fair in 1970. [Source: Library of Congress]
“In his 1979 book Japan as Number One Harvard’s Ezra Vogel proclaimed that 'Japan has dealt more successfully with more of the basic problems of post-industrial society than any other country.'” Perry Anderson wrote in the London Review of Books, “The Japanese themselves," he said, "had been too modest about their achievements. It was time they realised that in the overall effectiveness of their institutions, they were ‘indisputably number one’ and it was time, too, that Americans woke up to the fact, and put their own house in order. Post-bubble, the book is no doubt remaindered in Japan. But at the time, Vogel’s flattery electrified sales. “ [Source: Perry Anderson, London Review of Books, February 9, 2012]
Rapid Growth in Japan in the 1960s
In 1960, Prime Minister Hayato Ikeda, regarded as Japan's most charismatic postwar prime minister, challenged Japan to double its income in the next decade. Under the Income Doubling Plan consumption was boosted by cutting taxes, bolstering welfare, raising farm prices and reducing income equality. This ushered in a long period of growth that didn't stall until the oil crisis of 1973. The 58 month period of sustained growth between November 1965 and July 1970 is known as the “Izanagi” boom. Japan became the world’s second largest economy in 1968.
Through the 1960s, Japan had a growth rate of 11 percent (compared to 4.6 percent in West Germany and 4.3 percent in the United States and comparable to the growth rates China has achieved in the 1990s and 2000s), fueled by vigorous investment of private industry in new plants and equipment; a high rate of saving by Japanese households, which provided banks with funds for investment; and the availability of an abundant labor force with a high level of education.
Many ordinary Japanese aspired to get their hands on the "three Cs"—a car, an air conditioner and a color TV. Between 1965 and 1970 the number of households that owned a car jumped from 1 in 20 to 1 in 5. By 1970, 19 out of 20 owned a television.
Protectionism by the United States allowed Japanese companies stop focusing on producing consumer goods and concentrate more on making big things like cars. By 1970, Japan was the third largest industrial nation in the world after the United States and the Soviet Union. Spurred by the Income-Doubling plan of 1960, Japan became the world’s second-largest economy in the early1970s, strong enough to weather the energy crisis and oil shock of the mid-1970s.
Comparative Note with Contemporary Policy Implications: The lessons from Europe and Japan are that austerity, per se, is not the way to move to a sustainable fiscal stance. Rather, the US economy needs a combination of tax reform to boost growth and legislation enacted now to stabilize the future growth of outlays on entitlement programs. That approach would slow overall spending growth enough to stabilize the debt-to-GDP ratio over the next five years. After 2018, sustained economic growth and slower growth of government spending would put the debt-to-GDP ratio on a negative long-run path. Holding the deficit steady at $500 billion per year would achieve this goal of stabilizing and then reducing America’s debt-to-GDP ratio.
Japan’s experience cautions that a monetary policy aimed at avoiding deflation coupled with a fiscal policy aimed at sustaining growth of domestic demand is the best long-run stance to achieve a sustainable level of debt and growth. America has done the monetary part; now it is time for the fiscal part.