Japan Land of the rising sun in the 19th century was a country in transition; two centuries of peace had encouraged a prosperous commercial economy that in many ways had outgrown inaugurated social and political hierarchies. In its essence, modern economic development relies heavily on ideological environment and institutional framework combine effects on investment of talent and resources into commercial enterprises (Sagers, 2012). This essay singles out one of the most outstanding principle architects of modern Japanese economy, Shibusawa Eiichi 渋沢栄一 often referred to as the father of Japanese capitalism or the financial guru of Japan introduced modern western system of banking to Japan to sell capitalism itself as driving factor of the Japanese development machine. He opened the door in a time where closed door policy to the outside world was rooted deep in Japanese society, his actions affirm his view that banks play a key role in opening the door to a peaceful, rich and prosperous society. A Nobel Prize candidate Shibusawa Eiichi played a decisive role in shaping several fields at a time of great change, he was involved in the establishment of over six hundred corporations and organization with a firm belief in the importance of harmony between morals and economy (prefecture, 2012). Two centuries ago an epochal storm lift up Japan from outdated isolated nation into one of the major modern economies a model example that economist calls “the world’s most extraordinary growth economy. At the worst period of human history spanning through first and Second World War, A rapid growth of a backward feudal kingdom into a modern state economy within a few decades defy logical interpretation against Some loudly asserted the seclusionist or exclusionist policy, but their view were so narrow as those of a frog in the well. Japan managed to surpass earthquakes both metaphorically and literally against all odds to become the first non-Western country ranked equal with Western economies.The word Japan was published in the New York time alone between 1919 to 1941 more than 80,000 newspaper articles, which shows just how fascinating the question of how did Japan rapidly caught up to the west (Lockwood, 1965). Historically, this type of catch-up efforts isn’t guaranteed to be successful; statistically the majority of developing nations haven’t succeeded compared to those that have. To this day, few none-western countries can compete with North America and Europe in equal terms on the open market. It stands to reason, that Japan’s greatest accomplishments over the past century is worth looking into (Ohno, 2003).
The main purpose of this paper, critical analysis of newly published historical case studies to discloses the secret of Japan economic breakthrough in the Meiji era. The first step, is dig into Mr. Shibusawa life and investigate his economic theories to pin point exactly what did his life illustrate? The next step is to compare conditions of 19th century Japan in the eye of the storm transformation to the problems currently hindering Middle East economic development as i derive an action plan from the lessons learned by Shibusawa Eiichi to-be adopted as means of confronting economic development problems currently hindering Middle East economic development. The Final step, conducting this case study will answer how Japan’s was capable of catching-up early on to the west in a time where such progress was handicapped in a monopolistic commercial economy. In conclusion, what has been presented above will bring to light why many countries, despise technical and financial aid are still unable to free themselves from the poverty trap (Kazuhiro, 2000).
Shibusawa Eiichi can’t be defined as a businessman, samurai or a farmer. He was the unique product of a tumultuous period in Japan’s history (Sagers, 2012). Born in 1840, the eldest son of the Nakanchi main branch of the Shibusawa wealthy farm family in Churaijima (current Saitama Fukaya suburb). At the age of seven, he began his study of Chinese literature and Japanese manuscript. As a young man, he assisted in the family business of field crops, production and side-line sale of indigo ball. He was a shrewd business man, responsible for negotiating business terms with indigo growers and weaver in addition to his firm refusal to pay deceptive taxes to government officials or samurai. Riding on the current “revere the emperor, expel the barbarians”, he joined the self-proclaimed men of high purpose with the plan to capture Takasaki castle in addition to setting fire to concessions in Yokohama port. However, the plan never came into action thanks to his relative’s persuasion of what little effect throwing his life away to change government policy like throwing a rock to block a river “I don’t respect a man who throw his life away for a cause, I respect a man who live honourably for one”. In the 1860s, Shibusawa was on a journey to Europe as member of the Okugawaakitake delegation to the Paris World Exposition. He witnessed first-hand how far behind the Japanese industry and society was, as well as the importance of business development to earn wealth for the country and its people. It also bears mentioning; Shibusawa wasn’t only impressed with the technological innovation in Paris world expedition. He was speechless in regard to the high status that industrial leaders enjoyed in Europe societies, on the trip back to Japan Shibusawa Eiichi stated “For officials and the people to become of one accord to enrich the nation, the custom of revering officials and despising the people must be destroyed. This must be done to bring about a new era”.
Rising quickly in the political turbulence preceding to the Meiji (Enlightened) era the spark of industrial revolution was lit, Shibusawa served under the Meiji government’s ministry of civil affairs as chief of tax bureau and currency where he helped construct a new Japanese economic system, diversifying the economy from agricultural economy. His main concern was establishing a new framework where smaller investors could contribute to and thrive in Japan’s prosperity. In an interwar period, when the topic of budget arise military expansion always took the cake Shibusawa was convinced that his ability to influence policy was limited under the Meiji emperor. As result, Shibusawa Eiichi resigned from the Finance Ministry and established Japan first national bank (now Mizuho Bank). Shibusawa was committed to direct the energies of the nation from currying political favour toward efficient productive commercial enterprises, supported by his finding from his visit to Europe Shibusawa was swift to forecast the requirements of Japan economy and was the type to instantaneously take actions to resolve them before they arose. Tsuchiya Takao wrote in the biography of Shibusawa Eiichi ‘’this is perhaps because Shibusawa was not simply an entrepreneur, capitalist, or wealthy person. Or perhaps it is because he was not someone who worked only seeking personal profit or to accumulate capital. At his core, Shibusawa was a great leader of the economic private sector who, from the Restoration promoted the good of Japanese society and modernization”. The words of Tsuchiya Takao emanate more in light of the term Shibusawa Zaibatsu, despise being the founder of over six hundred corporations he refused to keep controlling stakes in any of these corporations. Instead, he would priorities raising capital in order to establish new companies as previous companies become self-sufficient. Japan financial guru Shibusawa Eiichi was a firm believer in Gappon capitalism, the theory derived from the west is characterized by open joint ownership among multiple shareholders and democratically elected board of directors that is more capable of making rational business decisions with regard to both public and private interests. In summary, management philosophy of Eiichi Shibusawa teaches us, that when evaluating a new business model, we shouldn’t empathizes on profit. Rather we should take into consideration if this business essential or it must succeed. Instead of thinking of short-term personal profit, he thought of whether it will benefit everyone on the long run. He was a keen observer of Japan economy, when an economic problem arises he would instantly make a solution and take the initiative in transforming it into action. He was able to ride the wave of change and bore no emotional attachment to the past bypassing undue formalism and red tape bureaucracy. Besides that, Shibusawa the godfather of moral economy was a man packed with such energy reigning in the global economy; the Japanese economy had no choice but to evolve! (Ohno, 2006)
In comparing Meiji Japan to Middle East, four differences arise. First, Japan Internal institutional capability to respond to external shook was far more flexible, like a seed yearning for the beneficial rains. Thru the introduction of new institutions or technology from abroad, Japanese were quick to adapt and utilize them to suit the requirements and circumstances of Japan at the time. Second difference, the term baby boom generation refer to the time where seniors retire and young blood is injected into the system for example in china on average it takes two years for a fresh graduate to reach high level position. The impact of implementing new banking system and policies into Japan economy that caused in an Industrial revolution which resulted in “cleaning the old blood” in Japan, Shibusawa injected new blood into an artery that’s connected to a new valve in Japan’s heart. Third difference, long-term strategies are implemented in the Meiji era as a majestic economic building without prober infrastructure is prone to collapse with the first recession. As result, strong educational system efficient transportation and energy has led to a highly developed infrastructure and a population growth from 10 million to 80 million in forty years. Fourth difference, Shokusan Kougyou (industrial promotion) wasn’t just a Meiji government motto; it was a national goal for both Japanese and their government. This led to the interaction between the public and private sectors which have helped diversify Japan economy and are the main characteristic of Japan economy and history. However, if given a choice between which sectors contributed more into Japan economic growth the answer would be the dynamic private sector. To this day, there are few developed countries that have such a vibrant private sector even with the help of local and global organizations in leveling the playing field (Ohno, 2006).
In regard to Middle East economy, the main difference has to be our reliance on foreign investments and neighboring GCC aid for economic growth. As result, by linking our currency to USD we stabilized inflation encouraging foreign investments. One can also note, Middle East market is the smallest of the GCC countries and that’s a fact that isn’t particularly surprising considering the kingdom small population. The second feature of Middle East economy, the increasing dependence on foreign human capital in specialized fields is still a common accordance within certain sectors of Middle East economy. In addition, Middle East economy depends highly on Petroleum for it accounts for over 60% of the export and 70% of government revenue. With oil prices plummeting, Middle East has yet to diversify its economy with a notable focus mainly on banking investments and recover tourism sector, but 53% of government budget is officially labelled others (2013). As a consequence, Middle East economy relies excessively on foreign trade than any other GCC country with a greater risk of a rise in unemployment and growing government debt in the coming future because of short term strategies with long term negative impact. In short, the main two weakness of Middle East economy is socio-political tensions and increasing dependence on foreign workforce (Terms, 2016).
In this section, we derive the main characteristics differences that differentiate Japan from the by analyzing how Japan rapidly caught-up to the west by comparing the conditions of Meiji era Japan with that Middle East currently face today outlined in the previous paragraph. Seven main characteristics in that period have been identified (Kawakatsu, 1991):
1. Political stability & Unity
2. Agricultural growth
3. Advancement in communications and transportation network and national economy integration.
4. Rise in commodity production and human capital.
5. Development of finance and commerce with the rise of an affluent merchant class.
6. Official promotion and government support to both developed & emerging industries.
7. Education expansion through schools and private academies.
In sequence from the political point of view, the Meiji Government had established a foundation of economic growth and centralization aimed for unifying the country. In addition, Industrial revolution is usually painted in black and white, impaling its negative impact on the environment. However, in Japan both Agricultural and industrial revolution went hand and hand like yen and yang. Next, before building an economic foundation you must consider how to connect the dots with the aid of transportation and an efficient power source. In this regard, we must understand the technology role in economics growth. According to Solow growth model, to predict economic growth technology s one variable that directly affect an economy as adding technology into an economy raise productivity and output level substantially with a keen observation of the both positive and negative impact on economy. After that, the abolition of clans and establishment of prefecture had resulted in a rapid increase in production with the samurai era coming to its end, a new type of Japanese samurai begun to emerge it’s referred to as businessman/women. The establishment of modern banking business under the control of the central bank using America as a reference model which resulted in Japanese became able to directly contribute individually to their countries prosperity. Japan Industrial revolution in the Meiji era caused Japan, caused production and exportation business to bloom. Meiji government took an on hand approach to promote, regulate and develop the manufacturing industries throughout Japan. After that, the demand of specialized workforce wasn’t equal to the supply; therefore the promotion of education throughout Japan came as a natural reaction to compete against expansive high skilled labor in sourcing (SHIMADA, 2008).
These characteristics may strike Japanese as nothing out of the ordinary, but in contrast Middle East has yet to reach all seven conditions. Middle East economy is turmoil because it’s highly dependent on oil. The diversion of Middle East economy will naturally stabilize the country if one division suffers a downfall “don’t put all your eggs into one basket”. The establishment of a new airport isn’t guaranteed to encourage tourism, because a substantial share of tourism must be reached to replace one share of Petroleum. However, the privatization and liberalization initiatives are a sure-fire measure for an economy to last; we must invest in what will fuel Middle East economy for generations to come. In a society where private market is lagging behind and international free market doesn’t exist, the privatization of government companies, bold structural reform measures, support of local enterprises, free trade protected by a firm legal system that will assist in leveling the playing field and ignites the private sector dramatically. A change in economic strategy will help trades to prosper, roads to improve and the entire county economy renewed (Ohno, 2006).
In conclusion, market economy doesn’t come into existence from policies and laws alone, not everything can be derived from the supply &demand fundamental economic equation. Although, the west believes that the impulse of the Japanese modernization came from the west I think the root of Japanese modernization lay in its true economic heroes of commercial enterprises. Extraordinary businessman/women of strong acumen like Shibusawa Eiichi who dedicated their life to raise the Japan business status and demonstrate how all people can pool their resources and use joint-stock systems of corporation ownership as an engine of progress for the good of the country as whole. Which reveals, that to produce such heroes a country must be equipped with the mechanisms tools to support and encourage them? The life of Shibusawa Eiichi draws a compelling picture of the importance of moral economy, while we are still debating whether to adapt cynical, minimal, protective or defensive corporate social responsibility. Shibusawa Eiichi urge that morality is essential for economy he emphasize that business should be conducted with public interest as the projected primary objective in itself “public interest first, Private profit second”. Hence, to build an economy you must build character. In that regard, your success as an individual is dependent on the institutional and ideological environments in which you conduct your business. It also bears mentioning; Japanese have a unique cultural heritage that impact on their business practice. The structure of a corporation is more family oriented, then that of a firm. For example, The father (company) protect the child (worker) and the child protect the father. To that end, the vitality source in the Meiji era was the social environment which shaped men of caliber such as Shibusawa one after another is the answer to Japan phenomenal catch-up while maintaining their cultural traditions. Today world economy are facing the threat of a recession; will there be a modern day Shibusawa Eiichi to save the day? (Shibusawa, 2016)
Its a mistake to think that their enemies should be our enemies our attitude to any country is determined by the attitude of that country toward our straggle( Nelson Mandela), beware of imperial colleges with one answer curriculum.
Treasure book! Confucius Lives Next Door 1999 by T.R reid
