The Made-in Japan Miracle

Jun 30, 1981

Since World War II, the Japanese economy has been expanding rapidly. In 1946, production was near a standstill, particularly at the biggest factories and plants. Today, Japan has the third largest gross national product in the world (after the U.S. and the U.S.S.R.). In the past few years, Japan has also surpassed the United States in the production of both steel and automobiles.

As more and more Japanese products have been imported into the United States, the mass media in this country have focused more and more attention on the Japanese economy. The impression has been given that the Japanese economy is superior to the other capitalist economies in some important ways, and that these supposed advantages over other capitalist economies have been the reason for the so-called “Japanese economic miracle.” Japanese capitalism is pictured as offering a way out of the problems of falling growth rates, unemployment and inflation, experienced in other capitalist countries.

This image of Japan as a new form of capitalism is a myth. Japanese capitalism does not offer “a way out” of the major problems faced in other capitalist nations. In fact, the ability of the Japanese economy to avoid these problems for itself has been due to special factors which probably cannot continue to work in the current world situation.

The Immediate Post-war Situation

At the end of World War II, Japan was a defeated and devastated nation. Industry lay in

shambles as a result of the destruction caused by massive U.S. bombing raids. It has been estimated that 40 per cent of the aggregate area of all major Japanese cities was destroyed by this bombing and resulting fire storms, and that the aggregate population declined by half due to deaths and the evacuation of civilians from the bombed-out areas.

As terrible as this destruction was for the Japanese people, it was an advantage of an expensive sort for the Japanese capitalists. It set the stage for the rebuilding of Japanese industry, using the most modern technology. Almost all big industry had been destroyed or severely damaged, but Japanese capital itself was not destroyed. The Japanese capitalists were able to use the most modern technology available – technology available to them either in Japan itself, or borrowed from U.S. industry – when they rebuilt their industry. This modern plant, which was obviously more productive and efficient, is one of the reasons why the Japanese economy has been able to continue expanding rapidly after 1955, when the period of initial rebuilding and economic recovery from the war’s destruction was more or less completed.

The use of modern technology has not been the only reason for the rapid expansion of Japanese capitalism. The defeat of Japan meant that the state apparatus had been weakened and was in no position to control the potentially explosive Japanese population. At the end of the war, the masses of Japanese people were desperate. They were surrounded by the physical destruction of the war. The economy had collapsed, so there were few jobs. And shortly after the war’s end, millions of defeated and demoralized soldiers returned home from overseas, also in need of food, clothing, shelter, and jobs. For seven years following the war, a U.S. occupation army maintained social peace in Japan, while Japanese capitalism was put back on its feet.

While the U.S. occupation army maintained order within the Japanese population, certain political and social changes were carried through jointly by Japanese political leaders and the U.S. occupation authorities. The most discredited military and political leaders and industrialists were removed from their positions. Social and political changes that had already begun in the late 1800s and early 1900s, as Japan’s rising capitalists had restructured Japanese society to meet their own needs, were carried further.

A land reform program was carried out, for example, that turned over most of Japan’s farm land to the peasants who actually farmed it. The old absentee landlords had been little interested in the expansion of agricultural production. When their land, almost 50 per cent of Japanese farm land, was turned over to the peasants, this increased the land actually put under production. The wealthier peasants boosted output by using slightly more modern farm equipment and techniques, and improved their own standard of living.

The modernization of agriculture in turn pushed out many former peasants, and especially the children of many peasants, forcing them to move into the cities, thus expanding the work force available to industry. In 1955, about 40 per cent of the total Japanese work force was still engaged in agricultural production. But by 1965, this had dropped to less than 25 per cent. At the same time, the wealthier peasants were turned into a new domestic market for industrial production.

A system of free public education was also established which allowed many more people to gain the training necessary to fill the large number of technical and managerial positions available in an expanding economy.

The Super-exploitation of the Japanese Working Class

More important even than these special circumstances of the immediate post-war period

in Japan that encouraged a rapid rebuilding and initial expansion of the Japanese economy was the fact that Japanese capitalism has also benefitted from a super-exploitation of the Japanese working class.

Despite their high level of education, skill, and productivity, Japanese workers are paid significantly lower wages than workers in many Western European countries and the United States. At the same time, the prices of consumer goods in Japan are higher. The current wages of a Japanese auto worker are estimated to be roughly 2/3 of the wages for an auto worker in the U.S. And in the big industries, as much as 1/3 or more of these wages were paid in the form of a so-called “bonus” given out at the end of each six month period. At the same time, meat and fish cost significantly more than they cost in the U.S. And bread, sugar, and other food staples are also far more expensive, most of them being imported.

It is also a myth that there are no layoffs among Japanese workers. So-called “lifetime” employment is guaranteed only in the biggest companies. Most workers are employed at medium or small-sized companies. A greater amount of subcontracting work for the large firms is done in Japan than is done here in the U.S. at these medium and small-sized companies. In periods of economic slack in Japan, many of these subcontracts are cut off, and this work is then done by employees of the larger firms themselves. In this way, the large firms are able to “export” a lot of their unemployment to the smaller firms, guaranteeing their own employees work at the expense of the jobs of workers at the medium-sized and small firms.

Benefits for Japanese workers are also lower than for workers in the U.S. or Western Europe. Retirement pensions, for example, are so low that when a worker, even one from one of the large Japanese companies, completes his so-called “lifetime” employment at age 55, he is usually forced to take another job at much lower wages – usually at one of the smaller firms – in order to survive. Government social security benefits average less than $100 per month, and don’t start until a retired worker is 60 years of age, despite the fact that this worker was retired from his “lifetime” job at 55.

Japanese workers also have poorer medical care than that available to workers in Western Europe. There is also an acute lack of housing for Japanese workers. Many families double, triple, or quadruple-up in houses. This is the reason for the company-provided housing at the biggest firms: it is necessary in order to have any place for the workers to live.

Last, but not least, the air and water of Japan have become polluted to an even greater extent than in the U.S. due to the rapid industrial expansion with little or no pollution controls.

There seems to have been less pressure exerted by the workers in Japan to improve their situation, than in most of the other industrialized countries. One reason is that any militancy among the workers was repressed during the years of dictatorship before and during World War II, reinforced by what happened in the post-war occupation.

Another reason is that in the succeeding period the Japanese unions were able to take credit for the crumbs given to the Japanese workers because of the boom; given this credit, the unions were able to be the vehicles for tying the workers to the Japanese bourgeoisie. The unions were molded during the U.S. occupation period by union officials and labor advisors from U.S. unions on the model of U.S. unions, but even more corporatist. These unions are structured along company lines, with all the employees – both blue and white collar – of a single large firm (rather than an entire industry) usually composing the entire membership of a union. Corporatist attitudes to look out for “your own company” against all others are encouraged by such union structures. Given the concessions made by unions in other countries which are supposedly less corporatist, it is no surprise, therefore, that in recent years the Japanese unions have repeatedly come to agreements with their bosses to cut their bonuses in order not to “ruin the business” and thus to “save jobs.”

The super-exploitation of the Japanese working class, combined with the use of modern technology has made it possible for Japanese capitalists to produce goods at costs significantly lower than in Western Europe or the United States. The U.S. Department of Transportation has estimated, for example, that it is possible to produce a car in Japan for between $1, 000 and

$1, 500 less than it costs to produce the same car in the U.S. Maybe the figures are distorted in a slightly self-serving way; nonetheless, they give some indication of the relationship between costs in the U.S. and in Japan.

International Conditions

The lower cost of Japanese goods made it possible for the Japanese economy to take

advantage of the rapid expansion on the international scale which began after World War II. As the world-wide recovery from the war’s destruction got underway – encouraged by U.S. loans made under the Marshall Plan and other programs – international markets for industrial goods were wide open. One of the longest periods of general world-wide economic growth that has ever occurred began. So Japan’s basic industries, like textiles and later steel, shipbuilding, electronics and auto, which were either rebuilt, or newly developed, were geared to produce for export. The results of this can be seen in the current figures for the auto industry, for example: Toyota depends on exports for 43% of its sales, Nissan (Datsun) for 48% of its sales, Toyo Kogyo (Mazda) for 67%, and Honda for a whopping 76%.

But producing so much for export also has great liabilities – liabilities that are now becoming quite evident. The prosperity of the Japanese economy is dependent on world

markets – markets that can shrink very rapidly when there are economic crises in other countries or in the world as a whole. These markets shrink both because the demand for goods declines generally during an economic recession or depression, but also because during a world-wide economic crisis, the capitalists of each country try to maintain demand for their own products by shutting off the markets in their own countries to imported goods.

The Japanese capitalists were able to rebuild and expand their exports continually and with little opposition for 25 years or more following World War II. But as the world economy goes into a state of a more general economic crisis, the international markets for Japanese goods are threatening to shrink. This functioning of the marketplace has been reinforced by governmental threats to restrict the sale of Japanese electronic products, steel, autos, and other goods withing many countries, through the use of quotas, tariffs, or other regulations. As a result of the economic crisis, the Japanese economy is no longer expanding at the rate it was previously. And if the movement toward protectionist measures continues in the United States and Western Europe, it is certain that the Japanese economy will have acute problems as its access to these essential foreign markets is cut off.

We see the limits of the exceptional Japanese situation reflected on the military level. The Japanese capitalists benefitted from the luxury of having their export markets and overseas investments protected militarily by the U.S. forces. In the years immediately following World War II, the U.S. prevented the Japanese from having powerful military forces. While U.S. imperialism was interested in reviving both Japanese and Western European capitalism in order to strengthen world capitalism against Russia and China, it was against the re-creation of a strong Japanese military power that might someday rival its own power in the Far East.

For a period of time, when Japan was engaged in rebuilding its economy, this gave the Japanese capitalists a substantial benefit. The resources that would have otherwise had to have been devoted to creating a weapons industry and large military forces were available instead for investment in new industry or to boost exports.

Today considerable pressure is being applied by the U.S. government to have the Japanese government bear a heavier burden of their own military expenditures. Given the increasing problems of maintaining production within Japan, in a period of reduced international demand, a growing number of Japanese capitalists also are beginning to look toward military spending by the Japanese government as a panacea. They hope that military contracts could help replace some of the lost markets for Japanese exports. Government spending could be used today as more important means to try to maintain their production and profits. Thus Japan is returning to the same situation wherein all the other imperialisms of the world today find themselves.

A “Miracle” that Is No Miracle at All

For these reasons, the so-called “Japanese economic miracle” is no miracle at all. This

so-called “miracle” in reality was achieved through the super-exploitation of Japanese workers within the context of rapidly expanding international markets for Japanese products and investments.

Today most of these international markets are no longer expanding, in fact, they are even threatening to contract drastically. And to the extent that the government commits sizable expenditures to military goods purchases, we will see more of a push toward inflation in the Japanese economy. Japanese workers themselves will be forced to fight harder just to maintain the lower standard of living they now have.

But if they would pursue this fight militantly, no longer willing to accept their role up until now as a super-exploited working class in a modern industrial society, there could yet be another “miracle” in Japan – but one which would be just a bit less to the liking of both the Japanese and the U.S. capitalists!