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Press translations [Japan]. Economic Series 0241, 1946-02-01.
Supreme Commander for The Allied Powers. Allied Translator and Interpreter Section.

translation-number: economic-1060

call-number: DS801 .S81



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GENERAL HEADQUARTERS
SUPREME COMMANDER FOR THE ALLIED POWERS
ALLIED TRANSLATOR AND INTERPRETER SECTION
PRESS TRANSLATIONS
No. 1060 Date: 1 Feb 46

ECONOMIC SERIES: 241

ITEM 1 The End of an Era: The Good Old Days Are Gone Forever - Magazine: Economist (Semi-Monthly) - 15 Jan 46 Issue. Translators: T. Kosaka: S. Iwasaki: S. Kuwata: K. Minato: K. Sugasawa: T/4 T. Ikemura.
Summary:
Table of Contents:
Capitalists
Government Bureaucracy
The Great Landowners
The ZAIBATSU.

I. The Capitalists.
Wealthier Classes Vanish.
Imposition of a 100 % war profits tax and a tax of 70 % on Property (the highest yet imposed), means the revelation of Japanese society, as a consequence of which a rich man of one hundred million yen will find his holdings whittled down to less than six million yen. In other words, he will have lost 94% of his property overnight. Therefore, within one or two years there will be no rich men or wealthier classes in JAPAN. Was there ever such a great revolution in the history of the world? None, except once in RUSSIA after WORED WAR I when peers, rich men, big Jandowners and high officials completely vanished, and an army general became a shoe repairer in HARBIN. The Japanese revolution is an orderly one. It did not take the form that it took in other countries. In the first place, there was no uprising of the people, Second, the motive force came from outside the country, through the pressure of the allied forces. Third, the construction of a democratic, peaceful JAPAN is the main purpose of the revolution, and in order to achieve this object, all the old feudal and military systems must be eliminated. In short, in order to achieve revolution in JAPAN it has become necessary to eliminate all rich men and all wealthier classes. This will speed the democratization of JAPAN's aconomy and will help avoid a disastrous inflation.
Economically speaking, there is a distinction between capitalists and entrepreneurs. Capitalists need not be entrepreneurs, nor need they manage their own business, but in JAPAN the capitalists were, at the same time, entrepreneurs, able to earn an income far greater than the interest and dividend return on their investment of capital. They had a dual personality. But now strong demands for their retirement as entrepreneurs are arising in every industry Of JAPAN. This could not have been achieved without defeat in the war.
It is highly unusual that in JAPAN there were hitherto no labor union laws. Stories like that of a laborer climbing to the top of a chimney and not coming down for a few days were common examples of strike methods used heretofore. But, now, through the right of unionization, the right to strike and the right of participation of laborers in the business, the interests of the laborers are being protected and the capitalists can no longer be benefited as much as before.

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ECONOMIC SERIES: 241 (Continued)
ITEM 1 (Continued)
1945 marks the end of an era. The day of the capitalists has passed away forever.
II. Government Bureaucracy.
A. The Basis of JAPAN's Authoritarianism.
If one is to understand JAPAN's unique bureaucracy, he must examine carefully the peculiar circumstances which surrounded its birth in the MEIJI era. That was a time when JAPAN, though apparently "modernized" in many respects, was still rooted in the feudalistic age from which she had only begun to emerge. The modernization of the western world was achieved largely through the efforts of the people themselves. Free thought, dissolution of class restrictions, and even capitalism itself were things for which the people of the western world hid to fight and spill blood.
In JAPAN, however, this was not the case. With the MEIJI restoration, the old feudalistic regime was swept away with one stroke. and the new "western" system of government substituted in its place. Unlike the peoples of EUROPE and AMERICA, the Japanese did not win their new rights, but were handed them by their rulers. After so many centuries of ignorance and oppression, they were not even aware of the changes which were being carried out by their rulers. Thus, although the old feudal classes and class relations were formally abolished by the new government, the feudal relationships, in the form of unquestioning respect and obedience to superiors, persisted in the minds of the people. Their rulers, whether ancient overlords or modern bureaucrats, were the OKAMI, the authorities whose orders they had to obey without question.
In the western world new economic activities were born naturally as a result of changing conditions. In JAPAN, as we know, the process of economic development took an entirely different course in order to overcome its several hundred years of backwardness. The Government set out to build a new capitalistic economy in JAPAN, by its own efforts, and according to its own plan. Thus railroads were built before the movement of the population and the transportation of products demanded them. Company organization, because it was essential to the organization of modern capitalism, was promoted by the Government. Practically all of JAPAN's new industries, in fact, were developed with the direct aid and support of the Government. Ship building, spinning, banking, etc., were in effect government-sponsored industries. The significant fact is, that the Government had a hand in every new industrial development, and no new industry achieved substantial growth without the expressed approval and support of the authorities. Actually the new economy was "private enterprise" in name only. The Government and the officials who administered it had as much to do with the various industries in their early stages as did the capitalists themselves.
Both these factors, the feudal class relationships which survived the formal abolition of feudalism, and the role which the Government played in the building of the new economy, contributed to the strengthening of authoritarianisms and bureaucracy in JAPAN. Still another factor was the very important KANRI FUKU[illegible]U KITEI (the service regulation of government officials), in which it was asserted that an official's loyalty was only to the Emperor, and that he was not a servant of the people. The effect of this regulation was to make officials a select, superior class, remote, and in many ways indifferent, to the people whose lives they controlled.
Thus, early in the MEIJI era, the bureaucratic class became firmly entrenched. In the years that followed, as Japanese capitalism grew
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ECONOMIC SERIES: 241 (Continued)
ITEM 1 (Continued)
and flourished, the power of the bureaucrats gradually diminished. The great firms were able to operate without government assistance, and indeed preferred the incompetent, disinterested government official who did not interfere with their work. In the minds of the common people, however, the feudalistic respect for their government officials did not diminish. Unaware of the true facts of the situation, they have continued to respect them and accept their decisions down to the present day.
B. Flower Garden.
During the war and the years immediately following, bureaucrats, in spite of their inability and incompetence, tried to control everything. As a result of their interference, many industries were all but paralyzed. A certain iron manufacturing company, for instance, engaged in vital war work, required 163 days to receive its allotment of iron material. In order to produce and sell one single article, it required some forty-odd papers, each of which required the personal approval of a government official. Those men also stood in the path of scientific research. An atomic bomb experiment costing 50,000 yen was disapproved with the statement that it was only a scientist's illusion. The scientists' efforts were wasted in trying to raise the experimental cost rather than in the actual experiment.
As a result of increasing governmental interference, bribery of officials by business men became an established practice. It was the only method by which the operation of any enterprise could be made profitable. Visits to the government office became more popular than visits to the shrine. Wining and dining of officials were the rule rather than the exception.
Officials who had outlived their usefulness to the Government always managed to work their way into the different enterprises to which they had given their attention in the past, either as directors of the enterprise or in similar capacities. The people themselves, instilled as they were with a feudal reverence for their rulers, unconsciously promoted this bureaucratic despotism and power. During the war and the years immediately preceding it, the influence of the bureaucrats grew by leaps and bounds. Their prestige during this period reached the fullest growth like a richly blooming flower garden. The flower was not cut down until 15 August 1945.
C. The Collapse of the Pillar.
It may seem that too much attention has been given in this article to the rise of bureaucracy when the main topic is the fall of the bureaucrats. However, once one understands the motive power which enabled the bureaucrats to rise so high, he can readily understand how they are destined to go rapidly backwords to their original position, once that motive power is lost. It is still fresh in our minds how TOJO, then premier, stood before the Diet and praised, with tears in his eyes, the faithful services which the detested officials had given, because even the Government-appointed Diet was aware that much of JAPAN's industrial inefficiency could be laid to these officials. The Diet at that time passed an impeachment bill against certain of these officials. In order to retain the people's respect, however, the impeachment bill was entitled, "Bill for Increased Production". During the war, inspection reports never failed to mention the obstructions which officials placed in the way of production, and criticism was making itself heard in spite of the repressive conditions which prevailed. With the end of the war and wartime restrictions, the feeling against bureaucracy reached new heights. Not a day passed in which the newspapers did not reproach them for their corruption and Inefficiency.
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ECONOMIC SERIES: 241 (Continued)
ITEM 1 (Continued)
The prestige of this ruling class seems now irreparably lost. The public election of provincial governors appears now to be inevitable. The people have no uncertainty about that. The only question in their minds now, according to a survey, is the method of election. At any rate, even the common man may have become a government official, and the abolition of the distinction between higher and lower officials is under consideration. The announced reduction of 50 per cent government officials is keeping the bureaucrats occupied not with the task before them, but with methods and tactics of retaining their positions. But though the fortunate 50 per cent may retain their respective positions, the power which they enjoyed under the authoritarian system will be lost forever. The remaining 50 per cent will be unable to work themselves into soft-cushioned jobs as they did in the good old days.
KARAHASHI, President of the Legislative Bureau, stated in the Diet that we must revise fundamentally the existing regulations concerning official service, that is, it must be made clear that the officials are servants of the people and not servants of the Emperor. When this is done, the sole power in which the bureaucracy so vitally depended will have been swept away. Blind obedience to the power, in the minds of the people, and all the other pillars which supported and maintained bureaucracy, will, by this means, be done away with. The officials themselves, deprived of their crafty disguises, are at last exposed for what they are. The golden age of the Japanese bureaucracy is gone forever.
III. The Great Landowners.
A. The Landowning Class.
The arable land surface of JAPAN amounts to less than 16% of the total land surface. This figure stands in sharp contrast with those of the following countries: DENMARX - 62.3%; INDIA - 57-2%; ITALY - 49.3%; FRANCE - 41.5%; GEPMANY - 40.0%. And even in GREAT BRITAIN, which is dependent upon overseas sources for a definite proportion of its required foodstuffs, the proportion of arable land to total land surface is 21.7%.
Table No. 1. Arable Land in JAPAN. (in 1,000 cho)
Year 1903 1938
Total land surface 38,316 38,573
Total arable land 5,266 (13.8%) 6,078 (15.7%)
Rice paddies 2,831 (7.4%) 3,208 (8.3%)
Other fields 2,434 (6.4%) 2,870 (7.4%)
Note: Percentages in parentheses give ratio of arable land to the total land surface. These percentages, in the cases of KOREA and FORMOSA, are 22.3% 23.9% respectively.
AS against these figures, the population of JAPAN is the fourth largest in the world, and 47.7% of all persons gainfully employed depend upon agriculture (and forestry) for their basic livelihood. This is a very high percentage, when compared to the following:
AMERICA - 21.8% GREAT BRITAIN - 6.4% PRANCE - 35.3% GERMANY - 28.9% ITALY - 46.8%.
The amount of land per household is then infinitesimally small. Neverthelees, the landlord class has been able to subsist comfortably by utilizing a system of traditionally high rents, and payments in kind, both of which have in no small part helped to keep the size of the individual farm held down to its present low level.
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ECONOMIC SERIES: 241 (Continued)
ITEM 1 (Continued)
Table No. 2. Total Arable Land per Farm Household.
U. S. A. (1925) 31.7 hectares (TN: approx 60 aeres)
DENMARK (1925) 16.9 "
ENGLAND (1936) 10.9 "
FRANCE (1908) 7-5 "
GERMANY (1928) 5.6 "
ITALY (1535) 4.5 "
JAPAN (1935) 1.1 "
B. The Exploited Tenant Farmer.
During the feudal period, the farmer was an object of thorough exploitation and was denied such rights as those of assembly, movement, and freedom of enterprise. His taxes and rents were so high that during the last days of the SHOGUNATE they amounted to about 65% of his produce. The MEIJI period witnessed the restoration of some rights to the farming class, but the most fundamental elements of the system of farm land ownership remained unchanged. Although the landlords rights of ownership were well-recognized, the rights of the tenant remained undefined. Secondly, the cancellation of his contract left the tenant at the mercy of the landlord. Thirdly, although rent levels were more or less stabilized in some farming areas, the system of rent payment in kind remained in force as heretofore. Then, when the prices of commodities been to rise, land holdings became so increasingly profitable, that absentee landlordism expanded. An examination of present-day land rents is revealing. As shown in an Agriculture Ministry survey which was made shortly before the outbreak of the CHINA Incident, land rents for paddies and dry fields amounted to 47.8% and 31.4% respectively. Compared to ENGIAND's average rate of 11%, SCOTLAND'S 18.2%, and FRANCE'S 24%, our rates are decidedly high. Consequently, the resultant financial difficulties have led to a loss of efficiency among over 1,000,000 tenant households, and this in turn has had a bad effect on the industrial segment of the population.
C. Collapse of an Era.
The government has decided to reform the agricultural land system and has offered a bill to the 89th Diet for revision and adjustment of the agricultural system. Of course, it is inadequate as a thorough reformation, but it contains many vital points which are a great blow to the old feudal system of agricultural landholding.
If the revised bill passes the Diet, the absentee landlords will be abolished, landlords in the villages will be allotted a fixed and limited landholding, and rents will be paid in money instead of product.
The summaries of SCAP's directives are as follows:
Removal of land ownership from the absentee landlords to the present cultivating farmers.
Regulations providing for the purchase of farm lands at a fair price from the non-cultivating landowners.
Regulations relating to the land buying capacity of present tenants by means of yearly instalments.
Regulations preventing tenants from falling into a miserable position again:
Short or long term loans of agricultural funds at a reasonable rate of interest.
Measures emancipating farmers from the exploitations of crop refiners and merchants.
Measures stabilizing the prices of agricultural products.

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ECONOMIC SERIES: 241 (Continued)

ITEM 1 (Continued)
Plans to bestow technical and other effective knowledge upon all farmers.
The realization of agricultural co-operative unions aiming at the betterment of all of the farmers' economic and cultural life, with great care being taken that such union shall not be affected by outside interests.

This agricultural land adjustment bill was, at last, brought about thanks to the SCAP directives. As consequences, the feudalistic influences of the old landowning classes of long standing are now on the verge of a total collapse. The era of the large absentee landholder is gone forever.
IV. The ZAIBATSU.
The names of the Japaness ZAIBATSU, such as MITSUI, MITSUBISHI, SUMITOMO, and YASUDA, have been familiar to the public for a long time. During the 20 - 30 year which followed the first world war their traditional and enormous wealth, their monopolistic concentration of production, their interlocking control of the nation's industrial and banking capital reached into every corner of Japanese life, and completely dominated the political, economic, and social structure of the nation. Thus in the years before the war, capitalism in JAPAN had developed into an advanced stage of monopoly capitalism, and JAPAN had attained its maturity as an imperialistic nation.
About the time the Manchurian Incident began, the first true government was formed in JAPAN. It had long been obvious that behind the two major political parties - the SEIYUKAI and the MINSEITO - stood various elements of the ZAIBATSU. Now, under a party cabinet government, the ZAIBATSU were also to exert their power almost entirely unchallenged. But in a very short while the scene began to change.
Beginning with the Manchurian Incident, the smell of powder gradually spread around the world; an old epoch came to an end, and a new terrible epoch was born. Confronted by a rising tide of political and economic crises, some European countries turned to totalitarian policies within their borders, and to a strong, aggressive policy without. In the Far East JAPAN, already embarked on a policy of military expansion, could not long rely on party politics in her interior administration. Accordingly, control of the government passed from the political parties and their ZAJBATSU supporters to the militarists and their henchmen among the bureaucrats. Indeed, the ZAIBATSU were not only excluded from the government, but, in a sense, were sacrificed to the new policy: throughout the political crisis which recurred from 15 May 1932 to 25 February 1935, they were the primary targets for the radical demands by the military. Considering these facts, should we then exempt the ZAIBATSU from responsibility for the war policies which developed after that time? Was it only the militarists and the bureaucrats who launched JAPAN on her reckless adventure of aggression and conquest? We can host answer these questions by considering the role which the ZAIBATSU played in the years that followed.
The historical function of fascist totalitarianism in all nations was to bring "order" out of the political and economic chaos caused by the world-wide economic collapse. JAPAN was no exception to the general rule: the rapid accumulation of capital by the few great firms, contrasted with the increasing impoverishment of the middle and lower classes, concentrated the hatred for the ZAIBATSU among the general public. The militarists took advantage of this hatred, and ever encouraged its development, whether or not the ZAIBATSU actually suffered as a result of these attacks, however, is another question.
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ECONOMIC SERIES: 241 (Continued)
ITEM 1 (Continued)
In the economic development of MANCHURIA, newly-risen ZAIBATSU took the lead: the old ZAIBATSU were in fact largely excluded from the area. This did not mean, however, that they were deprived of - or in any way attempted to avoid - the opportunities to make war profits. Throughout the years of quasi-war and war, the lion's shore of war production fell to them; indeed, it could not have been otherwise, for they controlled the raw materials and the heavy industries upon which the war-makers were forced to rely. All the facilities of the ZAIBATSU were used by the militarists, and from all of them the ZAIBATSU reaped their enormous profit. Even interests apparently Form removed from the needs of war played important roles. From compulsory exports which were needed to pay for munitions and raw material; for instance, the shipping, insurance, and banking interests took their share of the profits, As the army advanced into CHINA and to the south, the great firms followed closely behind. All in all, the war profits of the ZAIBAISU were so great that they cannot even be estimated; there is no doubt, though, that the major portion of the 220,000,000,000 yen which the war cost went into their hands. While the nation sacrificed and suffered, their wealth and power enormously increased.
In accordance with a SCAP directive on 6 November 1945, the four major ZAIBATSU - MIISUI, YASUDA, SUMITOMO, and MITSUBISHI - were ordered dissolved. In the near future at least l4 other firms will probably be dissolved. They are: KAWASAXI JUKO, NISSAN, ASANO, FUJIKOGYO, SHIBUSAWA DOZOXU, FURUKAWA. KOURA, KOGYO. MOMURA, RIKEN KOGYO, NIPPON SODA, NIPPON CHISSO HIRYO, HITACHI, NICHI DEN KOGYO, and KANSHU TOSHI SHOKEN.
According to the SCAP directive, the purpose is to dissolve the trusts controlling industry, commerce, finance, and agriculture; to eliminate the undesirable combines of industries and interlocking a curities ownership; and to promote the development of economic organization in keeping with the peaceful and democratic course which this country is to pursue.
The importance of the economic democratization which this directive implies can hardly be over estimated. Without economic democracy, we need hardly point out, political democracy has no meaning. The Japanese people should therefore assure themselves that the order is vigorously and faithfully carried out.
According to the Government's plans for the dissolution of the four major companies, the dissolution of the stock-holding companies will be accomplished by requiring delivery of their assets to the adjustment committee in return for bonds issued by the government (unredeemed for 10 years), whereupon the stock will be sold publicly. After this step has been taken, trusts in every sector of industry, commerce and agriculture will be dissolved, interlocking directorates will be abolished, and legislation will be passed to present their re-establishment or their participation in international cartels in the future.
This one concrete step toward the dissolution of the ZAIBATSU has been taken, in order to complete the work, however, and to make certain that these monopolistic giants do not rise again, every step in the process just be under careful democratic supervision. If the people see that the process is effectively carried out, the age of the ZAIBATSU will indeed be gone forever.
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HomePress translations [Japan]. Economic Series 0241, 1946-02-01.
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