How did Japan escape the middle income trap?
- Thread starter Girgisjus
- Start date
The Japanese post-WWII pulled out ALL the stops to gain accession to the GATT system (General Agreement on Tarifs and Trade, sort of a precursor to the WTO), which is achieved in 1955.
And Sher Khan above just explained what that required.
Post-WWII Japanese worked hard at gaining re-admittance to the international trading economy. And to do that, you have to produce for it.
By then people left in charge of Japanese society was precisely the business and industry cadres that the militarist governments in the 1930's and 40's had told to sit down and shut up, or else... while they offered to provide the necessary resources also for industry through imperial expansion. The business and industry folk already knew that Japan needed peace and good trade relations to maintain and build upon the economy it had. But since the people with the guns didn't hesitate to use them, and were promising an alternative, they kind of sat down and shut up – or bided their time – depending a bit on perspective.
And Sher Khan above just explained what that required.
Post-WWII Japanese worked hard at gaining re-admittance to the international trading economy. And to do that, you have to produce for it.
By then people left in charge of Japanese society was precisely the business and industry cadres that the militarist governments in the 1930's and 40's had told to sit down and shut up, or else... while they offered to provide the necessary resources also for industry through imperial expansion. The business and industry folk already knew that Japan needed peace and good trade relations to maintain and build upon the economy it had. But since the people with the guns didn't hesitate to use them, and were promising an alternative, they kind of sat down and shut up – or bided their time – depending a bit on perspective.
Otherwise the surest way tends to be to invest in general education of your population. After which you have to remove osbtacles to them using their skills and knowledge to make good of course. The Meiji restoration did a lot of precisely that – education and reform. And a lot of the people who went into industry and business were a bit paradoxically the defeated former shogunate supporters.
Joined Apr 2010
50,502 Posts | 11,794+
Awesome
Joined Jun 2014
17,822 Posts | 9,478+
Lisbon, Portugal
The structural reforms made during the US Occupation were incremental for Japan to escape its "middle-income trap".
It's also very important to point out that a lot of those structural reforms begun to be built in the 1930s and during wartime, so there is an endogenous origin to that big paradigm shift, not just caused by the US occupying administration.
Even despite all of that, Japan had already some strong prerequisites, caused by its long history, that put it on an advantaged point when you compared to other countries that have been indeed stuck in the "middle-income trap". Some of those important prerequisites are having enormous human capital and a highly educated population, a strong tradition of an effective bureaucratic administrative body, and a history of a strong state.
It's also very important to point out that a lot of those structural reforms begun to be built in the 1930s and during wartime, so there is an endogenous origin to that big paradigm shift, not just caused by the US occupying administration.
Even despite all of that, Japan had already some strong prerequisites, caused by its long history, that put it on an advantaged point when you compared to other countries that have been indeed stuck in the "middle-income trap". Some of those important prerequisites are having enormous human capital and a highly educated population, a strong tradition of an effective bureaucratic administrative body, and a history of a strong state.
Yes, you tend to need a situation where the legal system works well enough, and is sufficiently un-corrupt, to actually protect property and operations from hostile take-over. Otherwise why bother investing your time and resources in them, if some money-grubbing corrupt official might come along and just asset strip you into nothingness?
Joined Apr 2010
50,502 Posts | 11,794+
Awesome
The value-add point is the key. A lot of countries that are stuck in the trap are still producing low value-add products. In particular, the countries of SE Asia still have a large agricultural and tourism sector, which don't produce high value-add goods. Countries like Thailand and Vietnam are trying to move into high-end manufacturing but Thailand is struggling.
China is a curious mix - it has high end products, but a great deal of its output is based on low-end, low-value products, hence it's still stuck in the trap.
China is a curious mix - it has high end products, but a great deal of its output is based on low-end, low-value products, hence it's still stuck in the trap.
Joined Jun 2014
17,822 Posts | 9,478+
Lisbon, Portugal
It requires a lot of institutional preparation, arrangement, socio-economic prerequisites, and promulgation of certain economic policies in the right place, and at the right time, for a country to successfully transition from an agricultural-based economy to a high-end manufacturing one. Very few countries were able to pull that off.
Joined Apr 2010
50,502 Posts | 11,794+
Awesome
I'm not denying that. But all those things can be put into place - it can take a long time, but it can be done, if the political will exists to do it. It's not something that can be done all at once if the prerequisites aren't there. For one thing, you need an educated workforce that's able to sustain those institutions and economic sectors, and not all of those countries have that. Or some of them do, but accessibilty isn't sufficient (and if you rely on the private sector to provide it, will never be).
In China's case now, the skills are there but the jobs aren't. A few decades ago, it was the other way around.
Joined Feb 2022
2,575 Posts | 2,011+
Washington, DC
Well in China's case it's also just a pure numbers game, their middle class is sitting at about 600 million people now and it's hard to envision any kind of world where there are that many well paid white collar jobs to go around, regardless of what policies the government might institute. But this is different from the standard middle income trap, because even as China's labor costs are risen, it has been able to retain most of its industry because their workers are still more cost-effective in terms of productivity per dollar than those in either richer or poorer countries, as American and European workers are marginally more productive but vastly more expensive, while workers in India, SE Asia, or Africa are cheaper but only a fraction as productive. It's just that the current generation of skilled blue collar workers is being replaced by a generation of aspiring white collar professionals who don't want to work the same factory jobs their parents did.
More History Discussions
Trending History Discussions
-
The Great Captains of History - How Many Battles? - Version 7- Started by DiocletianIsBetterThanYou
- Replies: 861
-
-
The Great Captains of History - How Many Battles? - Version 5
- Started by DiocletianIsBetterThanYou
- Replies: 3K
-
The Diversity Of Early African Architecture/Ruins Thread- Started by Kilwa Sultanate
- Replies: 2K
-