The State and Economic Development

The importance of the state’s role in Japan’s economic development during the modern era is more difficult to assess than is commonly supposed. This is chiefly because generalisations about it are likely to differ according to the perspective in which the economy is viewed. In the early years of Meiji, when the laissez-faire prescription for economic management was applauded and generally followed in Western countries, the widespread economic functions exercised by the Japanese government, and especially its part in the introduction of new manufacturing industries, seemed abnormal to the foreign observer and coloured his judgement about the nature of the economy. Even in the 1930s, when economic liberalism was in retreat all over the world, Japan, intent upon building up a junsenji-keizai (‘quasi-wartime economy’), could properly be grouped with those countries in which state control had been most widely extended. Since the Second World War, however, comparisons of Japanese practices with those of other countries may lead, at first sight, to quite different conclusions. The Occupation Authority in the years immediately after the war sought to create a liberal market economy and to restrict the government’s direct control over economic processes.