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Averting a Great Divergence: State and Economy in Japan, 1868-1937

Author(s):Vries, Peer
Reviewer(s):Koyama, Mark

Published by EH.Net (May 2020)

Peer Vries, Averting a Great Divergence: State and Economy in Japan, 1868-1937. London: Bloomsbury Academic, 2019. iii + 310 pp. $120 (hardcover), ISBN: 978-1-350-12167-6.

Reviewed for EH.Net by Mark Koyama, Department of Economics, George Mason University.

 

Peer Vries is well known for several monographs on the historical origins of modern economic growth. In particular, in State, Economy, and the Great Divergence: Great Britain and China, 1680s-1850s (Vries, 2015), he emphasized the nature of the British state as one decisive factor in the different economic paths taken at either end of Eurasia. In this book, Vries turns his attention to Japan, but as the subtitle indicates, he retains his focus on the state.

Vries’s book serves two purposes. First, it is an excellent overview of Japanese economic development from the Tokugawa (1600-1867) period until 1937. Vries’s book is reliant on the secondary literature published in, or translated into, European languages; he has not written extensively on Japan prior to researching this book; but while this might appear to be a limitation, it gives him a bird’s-eye view of the literature. He provides a detailed, scholarly, and strongly argued account of economic and political developments as Japan modernized. Second, the book is also an argument for the importance of the state in economic development, more generally. There is a voluminous literature on the developmental state in East Asian growth after 1945 but far less written about the late nineteenth century. Vries applies Michael Mann’s concepts of despotic and infrastructure power to make the case that Japan’s economic success after 1867 was inconceivable without a transformation in the nature of the Japanese state, that is, the emergence of a powerful, developmental state.

The path of Japanese economic development has long puzzled observers. The traditional view held that Tokugawa Japan was very poor and backwards. Beginning in the 1960s, revisionists, however, found evidence of a market orientated society, one with comparatively high levels of urbanization and literacy. Far from being subsistence farmers, many villagers participated in rural handicrafts and trade and were integrated into a monetary economy. Measured in terms of urbanization rates, literacy, or live expectancy, Tokugawa Japan compared quite favorably with all but the most advanced regions of northwestern Europe. A puzzle remained, however, as real wages in Tokugawa Japan were very low. Incomes per capita, though slightly higher than Qing China, were also substantially lower than those observed in Europe (Bassino et al, 2019). So was Tokugawa Japan advanced or backwards? Recent work by Yuzuru Kumon (2018) reconciles this apparent puzzle, demonstrating that it was a consequence of an egalitarian distribution of land in Japan, which in a Malthusian environment led to lower incomes. Vries provides an excellent summary of the literature. His assessment that the Tokugawa economy was a fairly prosperous and successful organic economy strikes me as fundamentally correct.

From this perspective, Japan had many important preconditions that would help it make the transition to modern economic growth. But nothing about this transition was guaranteed. It was only possible because of the decisive efforts made by Japanese statesmen to build a centralized state. While the Tokugawa era certainly left many positive legacies, Vries argues that had the decentralized Tokugawa system remained in place, the transition to sustained economic growth would not have happened. The deeper question is: What enabled this dramatic and successful transformation in political institutions?

Averting a Great Divergence seeks to answer this question. It is divided into nine substantive chapters. Chapter 1 considers the Japanese economy in the Tokugawa period. Chapter 2 considers the nature of the Japanese state. It asks how the Japanese were able to avoid being colonized and how, instead, they successfully built an overseas empire. It assess the extent to which the state built by the Meiji era reformers was “modern.” Chapter 3 considers the successes of the Meiji era, particularly in building a powerful army and navy. Chapter 4 studies the fiscal system. It asks: How did the Meiji state succeed in establishing a modern tax system? Chapter 5 looks at the relationship between business and the state. It make the case the Meiji state should be considered an avowedly “capitalist” one. Chapter 6 makes the case that the Meiji reformers intentionally created what we now call a developmental state. Economic growth and catchup was their political goal because they understand they if they failed Japan would lose its political independence. Chapter 7 considers education and human capital. Chapters 8 and 9 are very short; the former touches on possible failures in the Japanese path to modern economic growth (very few in Vries’s assessment) and the latter summarizes the overall argument of the book.

This is an excellent book. It represents precisely the kind of detailed, scholarly, comparative economic history that helps broaden and deepen our understanding of the origins of economic growth. Vries displays impressive command of both the secondary literature on Japanese development and the wider economic history literature.

In a short review it is impossible to fully summarize the entire contents of the book. Nor is there space for a detailed scholarly engagement with every aspect of the argument. I am fundamentally in sympathy with the overall thrust of the Vries’s argument (see Koyama, Moriguchi, and Sng, 2018). But at times I was frustrated with various claims and arguments! And a review would not be complete without noting some points of disagreement.

In general Vries excels in both explaining how the achievements of the Tokugawa period laid many of the foundations for the Meiji Restoration and in making clear quite how dramatic these achievements were. Less usefully, Vires places great emphasis on the notion that “[t]he state in Japan . . . wanted to develop Japan” (p 163). But it is not clear what is gained by anthropomorphizing the state this way. Individual policymakers across nineteenth century Asia wanted to develop their economies and states, as the examples of individuals like Li Hongzhang in China testify. The question is not their desire but their ability to access power — to overcome or convince those who benefited from the existing distribution of economic and political rents. Rather than treating the state as a unitary actor, I think Averting a Great Divergence could have benefited from a more systematic analysis of the internal political economy of the Meiji state. What political coalitions made these reforms sustainable? In short, more public choice analysis. There is little attempt a looking “under-the-hood” so to speak of the Meiji state.

The book would also have benefited from a more focused engagement with the literature on economic and state development. Vries discusses relevant authors are various points — Acemoglu and Robinson (2012) are taken to task in Chapter 3 for arguing that the Meiji Restoration represented the formation of inclusive institutions in Japan: “Everyone with even the slightly acquaintance with the history of the Japan between 1868 and the beginning of the Asia Pacific War will be struck by the extreme naive ‘optimism’ and historical incorrectness of Acemoglu and Robinson’s interpretation of the Meiji Restoration and its implications” (p. 82). The presentation in Why Nations Fail is certainly overly simplified. But surely what Acemoglu and Robinson mean is that the Japanese state became more inclusive (i.e. the statement is not an absolute one but a relative one, comparing the Meiji regime to its predecessor). In general, Vries convincingly makes the case that a powerful state was critical to Japan’s successes in the Meiji period in both domestic and foreign policy. But he neglects to discuss what (if any) formal or informal institutional constraints ensured that the despotic and infrastructure power of the state was directed towards developmental ends.

I have some other quibbles. The writing is needless wordy at times. A shorter and punchier version of the argument, minus the inessential digressions would attract a wider audience, as would a lower price tag.

Considering the importance of Meiji Japan as the first non-Western country to achieve sustained economic growth, the absence of comprehensive, up-to-date, comparative assessment of its success has long been a lacuna in the literature. Instead, attention has focused on China as a comparator to Western Europe. As major survey of the Japanese experience by a leading scholar of the Great Divergence, Averting a Great Divergence belongs on the shelves of all economic historians interested in comparative economic development.

References:

Acemoglu, Daron and James A. Robinson. 2012. Why Nations Fail: The Origins of Power, Prosperity, and Poverty. New York: Crown Publishing.

Bassino, Jean-Pascal, Stephen Broadberry, Kyoji Fukao, Bishnupriya Gupta and Masanori Takashima. 2019. “Japan and the Great Divergence, 730–1874,” Explorations in Economic History.

Koyama, Mark, Chiaki Moriguchi, and Tuan-Hwee Sng, 2018. “Geopolitics and Asia’s Little Divergence: State Building in China and Japan after 1850,” Journal of Economic Behavior and Organization.

Kumon, Yuzuru. 2018. “How Equality Created Poverty: Japanese Wealth Distribution and Living Standards 1600-1870.” Working Paper. October.

Vries, Peer. 2015. State, Economy, and the Great Divergence: Great Britain and China, 1680s-1850s. London: Bloomsbury Academic.

 

Mark Koyama is an Associate Professor of Economics at George Mason University. He is the author of Persecution and Toleration: The Long Road to Religious Freedom (with Noel Johnson) which was published by Cambridge University Press in 2019.

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Subject(s):Economic Development, Growth, and Aggregate Productivity
Economywide Country Studies and Comparative History
Government, Law and Regulation, Public Finance
Geographic Area(s):Asia
Time Period(s):19th Century
20th Century: Pre WWII