Meiji Economy- Agrarian sector and Industrialization

Types of questions:

  1. 2003 Trace the economic development of the Meiji period. How far did they help the process of modernization?
  2. 2004- Discuss the measures taken by the Meiji state to promote industrialization.
  3. 2005- What were the economic reforms of the Meiji State? What was the role played by Zaibatsu in the economic rise of Japan?
  4. 2006-Discuss the nature of industrialization in the 19th
  5. 2007-Ananlyes the agrarian settlement of the Meijis. In what way was it linked to industrialization?
  6. 2009- What is the significance of the Meiji agrarian settlement, what are its main features?
  7. 2010- To what extent and with what consequences did the Meiji leaders modernize and strengthen Japan? (all reforms, including industry especially)

INTRODUCTION:

The Meiji Restoration refers to the restoration of the monarchy whereby on 3rd January 1868 the Emperor Meiji was restored to the Japanese throne by the insurgent Samurai of the Tozama feudal domains of Satsuma, Choshu, Tosa and Hizen, overthrew the Tokugawa Shogunate(military government) which had ruled Japan for 2.5 centuries. Andrew Gordon states, that within a decade, the new government brought about a revolutionary turnaround in the economy, society, polity and culture and set in motion the transformation Japan from a feudal stateto a modern industrialized, capitalist nation.

The Meiji governmentinherited a country in a deplorable condition.

  1. Hugh Borton says Japan was a fragmented feudal county, the treasury was empty, there was no standard currency, peasantry was excessively taxed and government excesses were the rule of the day; there was no unified army, daimyos maintained their own troops, and there was no navy to defend it against external threat.
  2. From Tokugawa times as early as 1739Japanfaced mounting pressure from Britain, America, Russia, Netherlands, and France for greater trading rights.
  3. After a period of initial resistance, fearing a fate similar to that of China during the Opium wars, the bakufusigned trade treaties with the European nations one by one. These “unequal treaties” signed under the threat of gun-boat diplomacy as in China, zexposed Japan’s military weakness and made it economically subservientto Western powers, which were granted tariff autonomy and extraterritoriality.

Andrew Gordon says that foreign pressure and the bakufu’s soft response ultimately weakened the bakufu and strengthened the emerging national consensus, especially amongst the Tozama lords, who spearheaded the Meiji Restoration. In such a situation, the new government’s most pressing task was tostrengthening Japan economically. While examining the agrarian and industrialization policies of Meiji Japan, most historians often tend to obscure the contribution of agrarian reforms towards industrialization of Japan. However the agrarian settlement was integral to the economic modernization of Japan.

AGRARIAN REFORMS:

ABOLITION OF DOMAINS:

  • Prior to the Meiji period, Japan was a feudal economy, with agriculture at its centre. The Meiji government in 1868 began by abolishing the domains of the daimyo. Over a period of three years, leaders of the new provisional government convinced the daimyo to surrender their lands, laying the foundation for the of agrarian and political unification of Japan.
  • By 1870 this process was complete andall daimyo were appointed Governors, of their former domains, still retaining effective control.
  • In August 1871, the Emperor formally abolished all the domains, which were consolidated into 72prefectures, headed by centrally appointed governors. The power to collect land tax was transferred from the daimyoto the governors.
  • A financial settlement was made granting the daimyo a yearly salary, equivalent to about 10% of their former annual tax collection, according to Andrew Gordon. The government inherited the daimyo’s liability towards the Samurai, paying them a pension too. This was a beneficial settlementfor the daimyos as the government underwrote their previous debts and took on their former liabilities. They also supported the Samurai who were now paid a pension by the government.
  • This policy of paying a pensionto the daimyo and the samurai, proved a financialburdenfor the new government as in 1871 out of 5 million government expenditure, 15 million went towards paying Samurai stipends alone. Thus in 1873government announced that stipendswould be taxed and gave the samurai the option of commuting their stipends into government bonds at 5-7% interest, thus providing some relief to the government.
  • Yet, the government still had to pay interest on the bonds, thus by 1876 it imposed forced commutation of all feudal pensions to bonds. This served the purpose of securing funds for industrialisation and militarisation while simultaneously guaranteeing the support of the politically disaffected classes for the Meiji regime. However it proved far more detrimental to the samurai as the daimyo had larger incomes to begin with and many of them saw a 10-75% drop in income due in part to fiscal mismanagement.

SOCIAL CHANGES:

Accompanying this there were changes in the social structure which the government initiated. Keeping with the abolition of feudalism, in 1869 the governmentreduced the numerous samurai ranksto two – upper samurai (shizoku) and lower samurai. In 1872 majority of lower samurai were reclassifiedas commoners or heimin, still receiving their stipends. In 1876 they were stripped of their traditional privilege to bear swords. By 1870non-samurai classes were classified as commoners. Other changes in the social order constituted, removal of restrictions on travel, dress and hairstyle.

The peasantry under the Tokugawa regime was subject to a high tax burden imposed by the lord who was usually indebted to the wealthier trader and artisanal classes . The peasantry was subject to restrictions onmoving out of their domains and selling or dividing their lands. The new systemabolished restrictions on movement as well as privateownership/saleofland. These changes were favourable for the rise of capitalism. The government also ended legal discrimination against hereditaryoutcaste groups such as eta and hinin. This fluid socialorderbenefitted the educated and moneyedclasses specially the landowners, moneylenders, and rural elites. Some educated samurai also fared well but the landless peasantry however continued to liveindirepoverty, later forming the labour for industrialization.

LAND TAX REFORM (1873)

  • The most important measure in the agrarian sector introduced by the Minister of Finance, Okubo Toshimichi, was the private ownership of landthrough the Land tax reform of 1873. According to Kozaburo Kato the land confiscated by the new government amounted to 1/3rd of Japan’s total tax assessment.
  • The governmentmet its earlyexpenditure, specially payment of stipends by – (i) issuing paper currency and (ii)bycollectinglandtaxes under the old tax system. Under the oldlandtaxsystem, land was valued in terms of rice production,but with the introduction of the privateownershipofland, land value needed to be calculated in monetary terms, and tax collected in cash. 
  • The new governmenthesitated to introduce a newcadastralsurvey to determine land value as it would invite peasant resistance.
  • Kohei Kanda, a scholar solvedthis problem- he recommended thesaleofarableland in perpetuity through the issuance of chiken or title deeds, by local government officials, which would bear the location, type, owner and price of land. Land price was fixed by the government as Okubo devised a formula to set the valueofland. It was determined that the value of the crop was equal to 6% of the value of the land. Thus the value of land was 16 and 2/3rd times the value of the crop. The government could tax the landvaluenotedinchiken, without a survey of arable land.
  • Thus the 1873LandTaxReform included the following provisions:
  1. Complete abolitionof the oldtaxationsystem
  2. Implementation of landpricesurvey with chikenissued to all owners,
  3. The nationaltax was fixed at 3%of the land price or half the value of the crop (keeping in mind the Tokugawa average tax rate, i.e. 50%) and additional local taxes were not to be more than 1/3rd of the national tax.
  4. Land values were also set forprivately owned residential lands, forests, grasslands and wetlands, only if proof of a cash purchase could be produced thus many lands lapsed to the government, when proof couldn’t be produced specially forests .

The tax reform was completed by 1881 with 120 million chiken issued. The impactof the land taxreform can be seen in the close match between the estimated tax and the actual tax collected in contrast to the Shogunate period. In 1881Kozaburo Kato says the land tax was estimated at 51.22million yen, and the actual revenue collected was 48.72 million which almost matched the estimated amount of 3%. There most importantimpact of the land tax reform and social change was that privatepropertyrights and a unifiedtaxsystem were established which was essentialforcapitalistdevelopment of the economy.

LINK BETWEEN AGRICULTURE AND INDUSTRIALIZTION:

  • The agrarianmeasures initiated by the Meijis were intrinsicallylinkedto the process of industrialization, which converted Japan into a formidable economic and military power by the early 1900s.
  • Irving I. Kramer points out that Japan followed a dual approach to economic stabilization– one of land reform accompanied by industrial development.
  • The Meiji government needed to raise capital to fund the industrialization and technological modernization of Japan. However, it did notwant to rely on foreignloansnorcould it raise capital from the trade sector as trade tariffs were fixed by foreign powers according to the “unequal treaties”. Thus the Meijis were left with no option but to raise capital internallyforindustrialization, majority of which came from the agrarian sector.
  • Andrew Gordon points out that the agrariansector fuelled industrialization in many ways.
  1. It was a critical source of capital as land tax constituted 80% of the government’s income in the 1870s and early 1880s. This figure slowly fell to 60% by the 1890s, as consumer goods) began to be taxed.
  2. Secondly this sector providedlabourforindustrialization. The rise in the population of Japan from the 1880s was accompanied by a shift of the rural population to towns to work in industry. Gordon points out that in this process teenage girls of farm families were an important source of labour. At the end of the Meiji period, out or 8,00,000 factory workers, 4,75,000 were employed in textile mills and 4/5 were women workers, as they were cheaper to employ than men.
  3. Thirdly as Japan’s populationgrew from 35million to 45 million between 1880-and early 1900s, it was the agrariansector which supported this growth, with a 1-3% increase in productivity due to addition of new crops, seeds and fertilizer. This helped conserve valuable foreign exchange till 1920s as Japan met its domestic food needs.
  4. FourthlyIrving I. Kramer says that the conversion of daimyo and samurai to pensioners was another vital link between industry and agriculture. The daimyo and samurai accumulated wealth from pensions the government paid them and invested that into industry. The government first developed industry and later sold it to privateers. Initially it sold non- military industries. Thus the government aided in this shift from agriculture to industry, thereby, creating businessmen and financiers.
  5. The agrarian sector also earned large amounts of foreign exchange by exporting tea, cotton and silkW.G. Beasley states that there was growing demandfor Japanese silk, especially in USA as well as in Europe (which was hit by silk blight in 1868) in the 1870/80s. Silk accounted for 30% of exports in 1880 and continued as a main item of export till the 1930s. Andrew Gordon holds that silk accounted for 42% of Japanese revenue from exports. Cotton exports were negligible in 1880 by 1910 they accounted for 14% of exports. Tea accounted for 26% of exports in 1880 but was down to a mere 3% in 1910. Andrew Gordon points out that the third highest source of foreign exchange, came from foreign exchange that emigrant labour sent back home to their families, from Hawaii, California or Latin America.
  • In conclusion it can be said that the agrarian reforms introduced by the Meijis changed afeudal economy into a modern capitalist economy, in a very short span. The government played a major role in aiding this change, as it introduced reforms, establishedagricultural collegesg. at Saporro (1875), experimental farms, a national agricultural society (1881), and provided seeds and fertilizers, to help small farmer families increase production. Though the area of arable land only increased by13% between 1880 and 1900 the yield per hectare rose by 30% according to W.G.Beasley.  Capital for industrialization was raised without major consolidation of land holdings as in Europe.
  • Thus changes in the agrarian settlement were intrinsically linked to industrialization, raising the initial capital for this and finally to achieving the ultimate Meiji aim of building a, “rich country, strong army” or fukoku kyohei.

INDUSTRIAL GROWTH-

Various historians such as W.G. Beasley and T.C. Smith state that in the lateTokugawaperiod certain attributes necessary for economic growth emerged. These were-a money economy, a good distribution system covering both rural and urban areas, some expertise in finance ,  knowledge of Western science among the ruling class and small capital accumulation amongst leading families such as Ono and Mitsui as well as commoners. W.G.Beasly says that the ‘unequal treaties’,spurred the Meiji industrialization as they forced Japan into the world economy, exposed it to new technology and stimulated centralization and economic growth to defend Japan against the threat of colonialism.

PHASE I:

The Industrialization of Japan has been divided into two broad phases by W.G. Beasley– (i) Phase I- 1860-1885 and (ii)PhaseII-1885-1930. The Meiji government started the industrialization process by concentratingon, what E.H. Norman refers to as, ‘strategic industries’. Thus the government began by developingthree main sectors–Communication and Transport, Defence and Mining, while instituting agrarian reforms mentioned afore simultaneously.

In the sphere of Communication and Transport, the government established a postal service with 3000 offices within three years. It established telegraph lines in 1869, laying the first line between Tokyo and Osakahiring English technicians. Thetelegraph was purely government owned for security reasons, which benefitted them in war time. The  Railways sector was initially entirely government owned, though by the end of the century 2/3rds of it was privatized. The first line connected Tokyo and Yokohama by 1872. Railways were a strategic industry as it connectedTokyo, Osaka and Kyoto and deep water ports of Kobe(1877)and Yokohama, which was important for defence and trade. Andrew Gordon says railways impacted society as it radically altered their notion of time, distance and social behaviour.

Shippingservices were also developed the government controlling, internal and overseas trade. In 1873Iwasaki Yatarofounded a leading shipping firm-Mitsubishi, with a few ships acquired from the dissolution of his domain Tosa, he later added government subsidised military transports to his fleet operating this as far as Vladivostok. In 1885 the governmentforced him to merge his firmwith a shipping rival the NYK(Nippon Yusen Kaisha), and granted them 8% dividends for 15 years. Mitsubishi was to be one of the most influential industrialhouses of Japan`, initially aided by government contracts and subsidies, it would later be part of the ‘Zaibatsu’.

In the defence sectorHugh Borton points out that the government confiscated former Tokugawa military industries and nationalized them. In 1868 it took over the Nagasakishipyard and foundry which it sold to Mitsubishi in phase II. The Yosukashipyard and foundry, was retained till 1945. The government also inherited arsenals, one at Osaka, where it employed foreigners, and built up weapons.

In the miningsector, important for growth of heavy industries and railways, the government took over the Takashima coal mine, which was developed earlier by B. Glover and Co. In this sector it allowed greater privatization and employed many European miners, geologists and engineers . Other mines that were important were Ikuno silver mine (1868), Sado gold mine (1869) and the Kozaka silver mine (1869). Hugh Borton points out that the government set up the Ministry of Industry in 1870, under which industrial school were set up and subsidies and finance arranged.

The government also developed cotton textile, silk and the teaindustries. These industries were very important as these commodities earned good foreign exchange later coal was also added to this list.  W.G. Beasley says that tariff regulation by foreign powers, left Japan with no choice but to mechanize and improve the quality of its silk and tea. Thus regulations regarding silk reeling were introduced (1873) the government financed silk filatures at Marbashi and Tamioka to introduce Japanese entrepreneurs to western manufacturing methods. Students were sent abroad to study sericulture in Europe. The benefits of this paid off as raw silk production increased by 60% and exports by 100% between 1868 and 1883. Beasley also points out that the government set up machine manufacture to reduce its dependence on foreign import of machinery. Thus a machine factory was established in 1871, steam powered factories to produce cement in 1875, glass in1876 and white brick factory in 1878.

 Important banking reforms were introduced, since a financial crisis hit Japan in 1881, due to high government expenditure incurred in order to suppress the Satsuma rebellion (1877). Bonds had to be issued in lieu of samurai pensions (1876) all of which resulted in high inflation . Thus Finance minister Matsukata Masayoshi initiated the Matsukata Reforms to deal with this situation. He cut back government expenditure, introduced new taxes on cigarettes and sake, thus achieving a budget surplus which he used to stabilize the currency. He also set up centralized fiscal control, as the Bank Of Japan(1877) was meant to regulate banking and national currency. He reorganized the Yokohama Specie Bank to control foreign exchange and introduced post office saving schemes. These reforms resulted in a major deflation, causing bankruptcies and a large amount of rural distress, however they left Japan with a strong industrial base for future industrial growth.

PHASE II-

Phase II– The second phase of industrial growth began in 1885 and was associatedwithprivatization of some industries,the establishment of new ones and the rise of the ‘Zaibatsu’.W.G. Beasley points out that this phase saw investment of private capital in the domestic textile industry. This far the textile industry had required a small initial investment; it could be carried out in small workshops and used Japanese farm labour and simple technology. Increasing demand for silk exports, especially in U.S.A., led entrepreneurs to mechanize. He says in 1893 there were only 3200 reeling factories which usually employed 10 people, yet by 1929 mechanization led to increased production by few filatures. Beasley says the cotton industry was also privatized now as the Osaka Cotton Spinning Company was established in 1882 by Shibusawa Ei’ichi, who introduced Western technology. As he was able to pay 18% dividend others followed his path and between 1886 and 1890 the yarn output in cotton increased seven fold. Beasley says this led to a temporary over production crisis but soon things stabilised as 1895 victory of Japan over China in the Sino-Japanese war led to china and Korea opening up as new markets.

The periodpost1900 saw the development of the heavy industries sector. Beasley says between 1910-14volume of output of the following industries increased-metal and machinery , chemical and ceramic and electricity and gas . In this period the YawataIron and Steel Works were set up in 1901. By 1914 the output of iron and steel could meet half and one third of the requirement of local industry respectively.

There was also an increase in coal and metalmining, with mineral output increasing by 700% between 1876 and 1896. The coal fields of Kyushu and Hokkaido were important in this period as they provided fuel to heavy industry. Mitsui emerged with major mining interest and minesraised output from 1million ton in 1885 to 21 million in 1914 and 34 million by 1929. Increase in industrial production led Japan to import coal. The railways now largely privatized,continued to grow, and covered 1000miles by the 1880s, lowering transport costs of raw material. The ‘Big Five’ or five major companies Nippon, Sanyo, Kyushu, Kansai and Hokkaido now controlled rail expansion.

This period also witnessedthe emergence of the Zaibatsu or an industrial cliques. The ‘zaibatsu’ comprised large family enterprises that monopolized industrial sectors, with government help.These were merchant families such as Mitsubishi and Sumitomo ,from the pre-Meiji period who extended credit to the Tokugawas and later shifted allegience to the Meiji. All these companies had diverse interests in banking, shipbuilding etc. These companies exploited the role of the government in the industrial sector, and got large concessions from the government when it sold off enterprises in 1882. For exampleIto Hirobumiallowed Mitsui to mine from state owned Miike mine at a cost price and sell coal for a profit. Mitsui profited from this as it sold coal to foreign steamer and thus established links with foreigners as far as London. Mitsui also founded a cotton firm, paper pulp factory and engineering concern, thus diversifying.

The zaibatsusurvived industrialization well as they brought in professional management, just controlling finances themselves. Alexander Gerschenkron says that the relative lateness of Japanese industrialization and the pressure to catch up with the west led to the rise of the Zaibatsu. Andrew Gordon says they rose due to many factors such as government’s support of these firms, inexpensive labour in the 19th century, and due to the entrepreneurial atmosphere.

The industrialization of Japan had a profound impact on society not only did it lead to the emergence of industrial magnates, but also the emergence of a working class. Andrew Gordon points out that women workers comprised 4/5th of workers in the textile industry, faced great hardship, being young and from rural backgrounds, they were paid half the wages of male workers, exposed to poor work conditions and sexual harassment. Male workers worked in the heavy industries. By the 1890s they formed unions to protest their poor working conditions and were often job hopping. The State amongst all this tried to create worker pride, for building kukoku kyohei –or a “strong army rich country”. Thus in conclusion the industrialization of Japan was initially sparked off by the government and was dependenton the agrarian sector, but by 1900s private industry injected much dynamism, and helped create a secure industrialized nation a match for the great Western world power by the World Wars.