The impact of the American occupation years on Japan was momentous. The victor was admired and America’s national sport, baseball, and clothes and manners were widely copied, especially by the young. The occupiers found it hard to believe that this was the enemy that only recently had fought so fiercely and cruelly. To all outward appearances Japan was adapting quickly to a new image of ‘Made in America’. A brand new constitution in 1947 introduced ‘democracy’ and was based on the finest ideals of the West, a mixture of Jefferson and Montesquieu. It provided for a parliament with an upper and a lower house elected by universal suffrage, political parties, a prime minister and Cabinet dependent on a majority in the lower house, and an independent judiciary. The emperor became a mortal, a national symbol rather than a divinity. The changes were for real, but this Western model of democratic institutions had a very traditional Japanese orientation. Western and Japanese attitudes fused to create something different from the constitutional governments of the West but also from the autocratic military-dominated regime of pre-war Nippon. The traditions survived of a hierarchical society that placed great emphasis on personal relations between the leader and the led, each knowing his place. Japanese society tends to be organised in groups, each with its own charismatic leader – the ‘parent’ groups begetting ‘child’ groups, thus building up powerful ‘families’. Policies are decided by the manoeuvres of the leading groups. Group thought prevails. Democracy, with its emphasis on the individual, does not sit very easily with such an ethos. Another weakness of Japanese democracy was that one party dominated Japanese politics for nearly half a century after the Second World War; patronage and corruption became so widespread, they were practically institutionalised. An important feature of Japanese government is the role of the bureaucracy, of the leading personalities who guide the ministries and work in close association with business. They are not civil servants in the Western sense, simply carrying out the instructions of politicians, their elected masters; rather, Japanese mandarins built up an independent network, providing constant guidance and exchange of information with the business elites. This role is not laid down in the constitution, but conforms to Japanese traditions. The prime minister and ministers rely on the bureaucracy not only for carrying out policies but frequently for initiating them. So the bureaucrats are in practice legislators themselves, and the proceedings of the Diet, or Assembly, no more than a formality. In relations with the citizen they also provide gyosei shido, or ‘administrative guidance’, which does not have the character of legislation, and they enjoy a close relationship with members of the ruling Liberal Democratic Party. It takes prime ministers of exceptional strength and ability to impose their wills on the bureaucracy, and of these there have been relatively few. The careers of bureaucrat and politician were not mutually exclusive, and it helps to understand their close relationship when the careers of ministers between 1955 and 1980 are examined. Former bureaucrats held the office of prime minister for no less than twenty out of these twenty-five years. In dealings with business elites and with financial policy the bureaucrats of a number of financial institutions have played a leading role, pre-eminent among them the Japan Development Bank and the Export–Import Bank, working with the Ministry of Finance and the Ministry of International Trade and Industry (MITI). Numerous other agencies play a part, including the Science and Technology Agency. Rivalry between these institutions is endemic, which makes coordination difficult. Japanese government is not therefore, as it is frequently believed to be, an efficient, welloiled machine. Errors are made – for example, the neglect until recently of the environmental consequences of industrial growth – and it can take a long time before decisions are reached. Despite these drawbacks, the Japanese political, bureaucratic and business elites for four decades since the war contained enough men of outstanding vision and ability to propel Japan’s phenomenal economic growth. During these early years Japan’s unique business organisation served Japan well. The Federation of Economic Organisations (Keidanren) was founded in 1946 at the nadir of Japan’s industrial fortunes and rapidly developed wide national and international interests, maintaining close contacts with bureaucrats and the ruling party. The Japan Federation of Employers deals with employer– employee relations, when necessary taking a leading role in fighting labour demands. Another influential body, which is independent but works closely with the bureaucracy, is the Japan Chamber of Commerce and Industry. All these trade organisations publicise their views on national policy and exert great influence on the political process. This is not unconnected with the huge financial contributions that they make to the Liberal Democratic Party, to groups and even to individuals within the party. The other smaller, non-communist parties have benefited to a lesser degree from business contributions. Nor are bureaucrats immune from more subtle forms of business ‘patronage’. What businessmen want from government is to be able to conduct their operations as profitably as possible at home and abroad with the minimum of interference – in other words, capitalist enterprise with government providing incentives, information, tax breaks and so on, restricting imports and leaving the door open for exports. Government, in other words, is required to create an environment in which businesses may flourish. During the first decade after the war, a number of parties competed for power, most of them conservative, though there were also socialist and communist parties. The socialists, in coalition with conservatives, actually held power for a few months in 1947 and 1948. The threat that, with a more united left, the Japanese Socialist Party might return to power overcame the differences among the various conservative parties and drove them to form in November 1955 the Liberal Democratic Party (LDP). But the left split again, and from 1955 to 1990 was unable to mount an effective challenge or to offer a credible alternative administration to the LDP. This enabled the LDP to form the government on its own or with minor allies following the twelve elections held between 1958 and 1990. Only twice, in 1976 and 1979, did the LDP fail to win an absolute majority in the House of Representatives and then only just; the opposition was far too split to form an alternative coalition government. The Japanese Socialist Party, at its strongest in the decade 1958 to 1967, could never muster enough votes to gain more than 166 out of 467 seats (1958) and continued to grow weaker in the 1980s despite a temporary upsurge in 1989. For more than three decades the LDP was the ‘eternal’ ruling party. Nonetheless, there was plenty of political infighting within the umbrella Liberal Democratic Party. The various groups within the party all follow their own leader, whose views they then unanimously back. Membership of a group is a matter not of political attitude but of personal attachment and loyalty. The ‘boss’ determines the power of the group or faction, which rises or falls or splits according to its success in influencing the overall leadership. Thus strongmen dominate the party, and bargains and alliances are struck between the six or seven most powerful groups. Cabinet posts, ministerial portfolios and party executive positions comprise the patronage that the president of the party is able to bestow once he has obtained the support of enough factions to take over the leadership. The ‘leadership factions’, having backed the right horse, enjoy enhanced power; the ‘non-leadership factions’ now work for change so that they can be on the winning side next time. So ‘democracy’ works after a fashion, not between parties but within the Liberal Democratic Party. The emphasis is less on policies than on the power struggles among the factions. The president of the party automatically becomes the prime minister of the country. That was how all the prime ministers of Japan were chosen from the 1950s on. The Japanese in-groups in politics, business and the bureaucracy know the rules and know how to play by them so as to make their influence felt. As individuals they have to conform to the wishes of the leadership of their particular interest group. From the interplay between these groups, consensus policies eventually emerge. But what about the sizeable minority who are not part of the in-group – the politicians of the left, the more militant trade unionists, citizens who do not share the views of the Liberal Democratic Party? What about the generation gap, those young people who rebel against the elders’ practice of trying to determine every facet of their later life? And what about the small band of traditionalists or nationalists who reject imported American culture and Western-style politics? There is no safety valve for their views. They are condemned to be permanent outsiders, and their lack of influence through the established channels leads to pent-up frustrations which periodically explode into violence – as happened at the massive demonstrations against the ratification of the US–Japanese Mutual Security Treaty in April and May 1960. Just as it did in the West, student protest boiled over in 1968 and 1969 in Tokyo, over the need for university reform. In 1968 large-scale demonstrations demanded the return of Okinawa, the US-occupied island in the Pacific, and clamoured for the removal of American bases. There were also street battles between police and students over the government’s decision to build another international airport outside Tokyo on farmland. The clashes continued into the 1970s. This was ‘direct democracy’, given that other constitutional means of voicing dissent were blocked. But protest was never strong enough seriously to imperil the Japanese way of government or of conducting business. Economic progress and the promise of material benefit encouraged the majority of the people to compete for the best opportunities and to conform. The dominant political leader during the occupation years and immediately after was Shigeru Yoshida, who was out of sympathy with General MacArthur’s liberal and democratic views. He welcomed the ‘reverse course’ which was adopted as soon as Washington became primarily concerned with the containment of communism. Yoshida headed the government five times from May 1946 to May 1947 and then from October 1948 to December 1954. A former career diplomat, he became prime minister only because Ichiro Hatoyama, who was president of the Liberal Party, had chosen him as his successor. Hatoyama had had to leave politics for a time because he was unacceptable to the Americans: like many early leaders, including Yoshida, he had shared the ideology of Japan’s ‘co-prosperity sphere’ in Asia before 1945. Yoshida rehabilitated himself in the eyes of the Americans by courageously pressing for peace when the war was all but lost; moreover, he blamed the military for their adventurist readiness to go to war with the West in 1941. In 1946 he recognised that Japan’s recovery depended on being trusted again by the US. This meant winning over MacArthur and accepting the directives of his headquarters, SCAP, when they could not safely be circumvented. He thus played a similar role to Adenauer in West Germany. The escalation of the Cold War in Asia, Washington’s loss of China as an ally and the outbreak of the Korean War in 1950 hastened Japan’s rehabilitation. Yoshida exploited with great skill the American–Communist confrontation. MacArthur had long been persuaded that his prescriptions had turned Japan into a democracy. In June 1950 Secretary of State John Foster Dulles came to Japan, to win the Japanese as allies in Asia. He wanted the famous Article 9 of MacArthur’s constitution to be set aside so that Japan could rearm. Yoshida rejected rearmament, stressing all the negative results it would have on the Japanese and on Japan’s neighbours. Dulles was ‘flabbergasted’, but MacArthur sided with Yoshida. Japan should build up its industrial potential and in that way help the free world. Soon after the outbreak of the war in Korea, American orders for arms came pouring in and gave the Japanese economy a much needed boost. Eventually the Japanese, under American pressure, did create a Self-Defence Force, initially of only 75,000 men. It expanded to 165,000 by 1954 and 250,000 by 1980. The army, navy and air force came to be equipped with the most modern weapons, but in relation to Japan’s size and wealth it was a small force. The Japanese expended no more than 1.3 per cent of their GNP on the military. The ‘saving’ as against the expenditures of the Cold War countries was enormous and was available for investment in industry. But the Japanese elite was less niggardly in building up a powerful paramilitary police force of 250,000 to guarantee internal order. The negotiations leading to the peace treaty and the end of the American occupation were long and arduous. Yoshida made as few concessions as possible. Japan would not rearm heavily; it would not itself participate in international disputes; it would rely on the US and its nuclear umbrella for security. Japan would be the reliable but passive ally of the US, which it would provide with bases, and it undertook to grant no bases to other countries without American consent. The Americans retained Okinawa for military use only, and the Japanese had to give up all the conquests they had made since 1895. Yoshida also had to concede that, if requested by the Japanese government, the US would provide assistance ‘to put down large-scale internal riots and disturbances in Japan’. American rights inside Japan certainly reminded the Japanese of the special rights that foreigners had enjoyed in Japan until their abolition at the close of the nineteenth century. It was humiliating. Nevertheless these terms, embodied in the US–Japanese Security Treaty, were signed in San Francisco on the same day, 8 September 1951, as the Treaty of Peace with the Allied powers. Australia and New Zealand were reluctant signatories, since they feared a Japanese military revival, but they were reassured by a defensive treaty, ANZUS, with the US; the US–Pacific alliance structure was completed by US treaties with the Philippines (1951), with South Korea (1952) and with Taiwan (1954), and by SEATO (1954). Thus Japan was tied to the anti-communist containment policy of the US and thereby limited in its ability to adopt an independent foreign policy. Japan had to follow the US lead in recognising Chiang Kai-shek on Taiwan as representing China, and it was thus prevented from normalising its relationship with the People’s Republic. Not surprisingly the Soviet Union refused to sign any peace treaty with Japan, and a Japanese– Soviet agreement formally ending hostilities was not reached until 1986 and territorial disputes still stood in the way of a definitive peace treaty. The US–Japanese Mutual Security Treaty of 1951 became a burning issue in Japanese politics. The possibility that there might be nuclear weapons on US warships became a particular problem; the left identified this treaty as a form of US hegemony, which also keeps the conservatives in power. Public hostility to the treaty proved so strong, with widespread demonstrations against it, that Washington agreed to revise it in 1960. The changes were cosmetic, though they allowed Japan a more equal voice; the Japanese stressed their country’s residual sovereignty in the islands still militarily occupied by the US. The revised treaty then came up for ratification by the Diet. In April and May 1960 there were unprecedented demonstrations and street battles between the police and students and other demonstrators. After unseemly scenes in the Diet itself, the Liberal Democratic Party forced ratification through. President Eisenhower was so incensed by these strong anti-American feelings that he called off an intended visit to Japan. In 1970 the treaty was renewed again indefinitely, subject to either country giving a year’s notice to terminate it. The following year a problem was solved that closely touched Japanese pride. The Ryukyu Islands, including Okinawa, were returned to the Japanese in the spring of 1972, though US bases were allowed to remain by agreement. But the territorial claim to four islands of the southernmost part of the Kuril island chain, occupied by the Russians, continued to prevent good relations with the Russian republic. Thus after 1951 the American alliance, despite all the difficulties it caused in internal Japanese politics, remained the sheet anchor of Japan’s international position and defence. It was Yoshida who had set Japan on that course. The close relationship with the US has enabled Japan to eschew extensive military pretensions, which could be seen as a threat to its Asian neighbours and endanger political stability at home; but the relationship is also based on a recognition that the US is indispensable to Japanese prosperity, mainly by providing the enormous single market on which that prosperity is based. The Japanese have on a few occasions followed a more independent line from Washington when their interests seemed to demand it. The most notable instance has been in Japanese dealings with the Arab oil states in the Middle East. After suffering from the effects of the Arab oil embargo in 1973, Japan made it clear to the Arab states that it did not share Washington’s views on Arab–Israeli issues and, indeed, supported the Arab cause. In this way it bought the goodwill of the Arab states, who continued the oil supply vital to Japanese industry. During the Iran–Iraq war in the 1980s the Japanese attempted to stay on good terms with both sides, despite America’s estrangement from Iran, especially following the seizure of the American Embassy hostages. In 1990–1 during the Gulf crisis, Japan again displayed no enthusiasm for the US position. The Americans have at times shown little sensitivity for Japanese feelings; Nixon’s sudden opening to China and the dropping of the Nationalists in Taiwan in the 1970s were undertaken without consulting Japan, which had faithfully followed the Washington line in refusing to recognise communist China. But despite strains, especially in matters of Japanese– US trade, the alliance has held and what later became known as the ‘Yoshida Doctrine’ continued to chart the course of Japanese policy, with only minor modifications. What then was the essence of that doctrine? Yoshida believed he would satisfy America’s demands on Japan as an ally by offering facilities and bases and by restricting Japan’s own military build-up. The Japanese forces were to be purely defensive, forbidden to act except in defence of the home islands, and Japan should forswear development of nuclear weapons. In international disputes its profile should be low. Japan had finally turned its back on achieving greatness through military conquest; all its energies were to be concentrated on economic rehabilitation and growth. For its own security, Japan had no choice but to rely on its American ‘ally’, which was also Japan’s most important trading partner. The Yoshida strategy for Japan’s recovery was accepted by the Liberal Democratic Party consensus as the basis for Japan’s national policy and long outlived Yoshida’s relinquishment of the premiership in 1954. The doctrine was elaborated and put into practice by Yoshida’s disciples and protégés, for example Hayato Ikeda, who became prime minister 1960–4, and Eisaku Sato, prime minister 1964–72, and on into the 1970s and 1980s. Yoshida’s vision helped to make Japan into an industrial and financial superpower, second only to the US, during the second half of the twentieth century. The inner workings of a society are often obscured by outward appearances. This is certainly true of Japan. Its early industrial successes and its recovery from the low of war’s end might at first sight be ascribed to purposeful governments setting planned targets and, with the help of the bureaucrats in the relevant ministries, especially the Ministry of Finance, the Ministry of International Trade and Industry (the famous MITI) and the Economic Planning Agency, achieving them unfailingly. From the mid-1950s onwards, plan after plan, some ten of them in thirty years, were produced, often interrupted, amended or discarded before they could run their five- or ten-year terms. There is no doubt that in the early post-war years the influence of governmental–bureaucratic measures was considerable. At first, priority was given to coal and steel, to provide the basic energy and material for manufacture; then other sectors were successfully developed – chemical fertilisers, shipbuilding, cars, machine tools, transistor radios, cameras, television sets, video-recorders and microchips. MITI encouraged the formation of the keiretsu, the pre-war zaibatsus. Mitsubishi and Mitsui were back in business and huge new conglomerates came into being, such as the electronic innovator Sony and car manufacturers Toyota and Nissan. Government–bureaucracy assisted during the early years in various ways, most importantly by managing the nation’s finances and investments through controlling revenue and banks and by making cheap loans to targeted industries through the Reconstruction Finance Bank, the Export–Import Bank and the Japan Development Bank. Industry expanded fast, fed by enormous investments. Governmental–bureaucratic rules and legislation in the 1960s and 1970s meanwhile protected the emerging home industries, employing many devices to prevent foreign imports from being competitive – where they could not be kept out altogether. This was to lead to tension with the US and Western Europe, which were threatened with a flood of Japanese exports. Japanese trade unions became steadily more cooperative after the more turbulent 1950s; continual conservative government and rising prosperity undermined union militancy and membership. Undeniably, then, the government–bureaucracy has played an important role in Japan’s rapid economic growth. But the notion that it has developed anything like a command economy is very misleading. Since 1945, command economies have failed all over the world. It would be strange if Japan were the one exception. In fact, Japanese government planning had far more in common with the approach of Jean Monnet in France, that is indicative planning, than with Stalinist forms of control over production, investment, distribution and pricing. Japan’s economy was and remains thoroughly capitalist, with a profit-oriented outlook, fiercely competitive at home and abroad. The role of MITI declined after the early 1960s; it remains a source of supplementary assistance to industry but it has long since ceased to be decisive. Business leadership, however, was certainly decisive. But neither government–bureaucracy nor business could have generated the colossal investment in technology necessary for the economies of scale achieved as huge industrial conglomerates were built up but for the availability of funds. These came not from abroad but from the Japanese man in the street, who lived frugally and saved a fifth of his income year after year. The rewards of this frugality were not large in the short term. The return from interest and the growth of pensions was kept very low so that companies could borrow money cheaply. In the longer term, however, the Japanese did benefit from industry’s prosperity. Meanwhile, government expenditure for non-industrial purposes was also held down – welfare payments, housing, the infrastructure were all neglected. The contrast between an automated industry employing the largest number of robots in the world, on the one hand, and the inadequate sewerage system in many large cities, the over-crowded roads and extensive pollution, on the other, was the price paid for the single-minded pursuit of industrial growth. The close links between savings, the banks, their loans to industries good and bad would lead to trouble later. At the start of the 1960s, the new prime minister, Ikeda Hayato, promised to double everyone’s income in ten years. Business met this target with extraordinary rapidity, more than quadrupling exports of ships, textiles, cars and electronic goods during the 1960s. The effects of this expansion percolated far beyond the Japanese islands – to Australia, where the ore was mined to provide Japan with steel, to the Middle East, which supplied much of its oil, to south-east Asia, especially Indonesia and Malaya from which it imported oil and raw materials. The rest of the world took note and tried to gain access to Japan’s market for industrial goods. The Japanese government lifted restrictions and made genuine efforts in the 1980s to open the home market more freely, to head off international hostility, especially from America. But the bureaucracy and business have used administrative obstacles to make it as difficult as possible for foreign goods to penetrate the Japanese market. Japanese business had the advantage of the protected home market as a base from which to expand, protection in the end makes home industry less efficient. Toyota and Nissan began making cars before the war, copying British and American designs. In 1950 Japanese motor manufacturers produced less than 2,000 cars. To take on the American giants, Ford and Chrysler, or the British Austin and Morris seemed a futile ambition. Initially they made agreements with Western car manufacturers to use their designs and technology, and they studied American factories. In 1970 Japan produced 5 million cars, providing Western customers with what they wanted at a lower price than similar Western cars. By the 1990s, to overcome foreign resentment and pre-empt the exclusion of Japanese exports, the Japanese electronic firm Sony and the Japanese car giants had set up factories in the US and Europe. In industry after industry, the Japanese improved technically on the Western product, whether cameras or machine tools. Then, exploiting heavy investment, the hard work of a skilled labour force, the economies that come from large-scale production, a more or less closed home market and a worldwide export market, they raised productivity sharply so that better goods could be produced more cheaply. There is a constant battle for improvement, for keeping ahead in research, design and methods of production. The new generation of computers in the coming information age is the latest industry to be targeted by Japan to become a world-beater. There will be few industries of the twenty-first century in which the Japanese will not excel; one of these, in the 1990s still dominated by the US, is the aircraft industry. After a phenomenal growth rate in the GNP of 10 per cent a year in the 1960s, annual growth in Japan slowed in the 1970s and 1980s to an average nearer 6 per cent, but that had the effect of nearly doubling output in a decade. The highly praised Japanese model ran out of steam and weaknesses of the financial protected industries became apparent. The stagnation of the economy during the last decade of the twentieth century is in stark contrast to earlier spectacular growth. Japan is governed by career politicians, by leaders of factions and local ‘favourite sons’ returned to the Diet. Allegiance is less to mass parties, more to individuals. Politicians play a considerable role in the communities that elect them, attending hundreds of events, including weddings, funerals and festive occasions, at which they are expected to distribute largesse. Their resulting need for money breeds corruption. They do favours for their supporters, using their influence as members of the Diet with ministries. In return they receive cash donations. For example, the country farmers enjoying farm subsidies support the LDP. The opposition support comes from the newer urban areas, which are discriminated against in that each of their electoral districts contains a much larger number of voters than those in the countryside. This suits the LDP. When getting to Tokyo, young LDP politicians have to join one of the factions; thereafter they will gradually rise in the hierarchy of national politics, increasingly able to bestow favours. The Yoshida faction and followers dominated Japanese politics from 1946 through to the 1980s. A rival was Hatoyama, who had earlier stepped down and passed the presidency to Yoshida, whom he expected to make way for him later. From 1956 to 1960 two protégés of Hatoyama became successively president of the party and prime minister. But the second of these, Nobusuke Kishi, fell from power in 1960. Kishi’s anti-unionist and anti-socialist stance earned him the hatred of a wide grouping among the opposition. The renewal of the US–Japanese Security Treaty in 1960 became the catalyst that brought the opposition on to the streets in April and May 1960. The polarisation, the violence of demonstrators and police, and the intemperate scenes in the Diet itself presented the ugly face of Japanese politics. These spectacles and the manoeuvring of the factions within the LDP forced Kishi to step down. Hayato Ikeda took his place, representing the Yoshida line, as did his own successor Eisaku Sato (1964–72). Eisaku Sato’s selection was probably effected by a deal between Ikeda and Kishi; he had the advantage of being Kishi’s brother, and he proved himself a very adept politician. Sato’s eight years in office were notable for the estrangement between Japan and the US arising out of the Nixon administration’s demands that Japanese textile exports to the US should be restricted. Nonetheless, the renewal of the US–Japanese Security Treaty in June 1970 prompted Nixon, after much Japanese agitation, to promise to return Okinawa, and an agreement to that effect was concluded in June 1971. A month later relations were soured again by Nixon’s announcement that he would visit China; his failure to inform Japan of this reversal of US policy towards Nationalist China on Taiwan, which the Japanese had hitherto supported, greatly angered the Japanese, who did not relish being treated as very much a junior partner in Asia. The second ‘Nixon shock’, in August 1971, was a devaluation of the dollar – in effect making Japanese exports more expensive – and the imposition of a temporary import surcharge. The Japanese interpreted America’s defensive economic moves as unfriendly to themselves. These foreign-policy difficulties and internal LDP manoeuvres ended Sato’s premiership. In July 1972, after bitter internal feuding between Sato’s two principal lieutenants, the younger, more ambitious Kakuei Tanaka defeated Takeo Fukuda to win the presidency and become prime minister. Tanaka was unusually active in foreign affairs. He visited Beijing, following in Nixon’s footsteps, and toured south-east Asia, where memories of the Japanese occupation were still too recent to ensure a good reception. In Indonesia, the Philippines and Thailand, demonstrators carried placards demanding ‘Tanaka Go Home’. His premiership was anyway a stormy one. In 1973 the Arab–Israeli War produced the shock of the quadrupling in the price of oil. This hit Japan particularly badly, as it depended overwhelmingly for oil on the Middle East, and there was widespread panic. Tanaka now called in his arch-rival Takeo Fukuda, a financial expert, to take charge of the Ministry of Finance. Fukuda imposed drastic measures to squeeze the economy. It worked. By 1975 the Japanese economy was expanding once more by a healthy 6 per cent, which it continued to do for the rest of the decade. Tanaka’s ambitious plans to develop the Japanese regions had been put into cold storage and were only gradually revived after 1975. More significantly, Japan took effective steps to reduce its reliance for power on Middle Eastern oil by securing alternative sources and developing nuclear power stations. Even among Japanese political leaders, Tanaka was exceptional in the power and money he commanded. Institutionalised corruption had reached new heights. In the end publicity about his financial misdeeds in Japan and in the foreign press undermined his standing. The LDP factions agreed to replace him with a minor figure, Takeo Miki, to restore an image of propriety. But Miki proved rather too energetic in trying to reform the LDP, especially when he had Tanaka arrested in 1976 for accepting bribes in the Lockheed aircraft-purchase scandal. Lockheed had handed over $12 million in bribes to Japanese bureaucrats and politicians, including Tanaka, to ensure that the aircraft order went to them. Tanaka spent only a short time in jail and was then let out on bail, still a power-broker behind the scenes among the LDP factions. The close of the 1970s was a turbulent time in internal LDP politics, and from 1978 to 1982 further tame successors were found. In November 1982 the LDP factions of Tanaka and Suzuki chose Yasuhiro Nakasone for the presidency and premiership. He turned out to be much more decisive and more of his own man than Tanaka or Suzuki liked. His success in winning the general election of 1986 enabled him to stay a further year in office, although LDP rules would normally have required him to hand over the presidency that year. Nakasone wanted to break away from Japan’s outdated traditions, to remove the heavy hand of centralised control with its myriad regulations, and so prepare the way for a new phase of economic growth. He asserted Japan’s claim to respect from the world’s powers, a claim that entailed losing its pygmy international status and its dependency on the US. In 1986 he hosted the annual summit of leading industrial nations in Tokyo and that same year visited Beijing. War guilt was now part of history. He would lead Japan, backed by popular approval, in the American presidential style. Nakasone’s self-confidence and his promise of a more active Japanese foreign policy were welcomed by Western leaders. Visiting Washington in 1983, Nakasone promised President Reagan Japan’s active assistance in the containment of the Soviet Union. He toured south-east Asia and indicated that he was ready to expand Japan’s military capacity. But his attempt to revise the constitution for this purpose so alarmed the Japanese that he promised not to go ahead during his first term of office. Nakasone engaged in high diplomacy with a relish, but government efforts to open the domestic market to foreign goods, as the rest of the world was demanding, were constantly frustrated by bureaucracy and business. Every year Japan amassed huge balance-ofpayments surpluses, while the US had to cope with the largest debt in the world. The deficit was in part managed by Japan recycling its surplus into the purchase of US treasury bonds. But the Japanese also bought many physical assets abroad – real estate in California, the Rockefeller Center in New York, factories in America and Europe. Japan’s financial and manufacturing power globally seemed to be on an ever continuing upward trajectory. When Nakasone finally left office in November 1987, his reputation internationally and at home was at its peak. He had achieved a great deal during his five years in office, aligning Japan more closely with the West and freeing it from its shackles of tradition. But Japanese politics were about to take a surprising turn. Nakasone’s successor, after much factional struggle, was Noboru Takeshita, who enjoyed Nakasone’s support. Takeshita continued Nakasone’s foreign travels, exhibiting thereby a more independent Japanese foreign policy, though the American alliance remained the bedrock, despite growing trade tensions. Progress towards closer relations with China, however, was temporarily upset by the Chinese leadership’s brutality in the massacre of Tiananmen Square. Takeshita’s efforts at home were concentrated on reducing direct taxation and increasing indirect taxation through a sales tax, which was especially unpopular with the poorer Japanese families. But the most sensational event of the Takeshita premiership was the uncovering of yet more corruption in what became known as the ‘Recruit scandal’. The Recruit group operated in publishing, real estate and other areas, and it needed favourable decisions from the government and bureaucrats if it was to expand and start making large profits. To gain favours, the group not only lavished legal donations on the political parties but also made illegal payments to politicians and officials. As usual, money had been needed in the leadership race between the factions in 1986, and huge profits were made by Nakasone’s ministers in illicit share-dealings. The scandal broke in 1988 and its investigation continued into the following year. Even Prime Minister Takeshita had received political donations and was forced to resign. Many suspected Nakasone too, but he was not formally charged. Nonetheless, the standing of LDP politicians reached a low point in public esteem, and for the first time it looked as if the party might lose power. Sousuke Uno, the new president and prime minister, did not last long when a sex scandal arose to titillate the public. Next, Toshiki Kaifu became prime minister and leader of the LDP; he pulled the party together and promised to rid it of corrupt politicians. It was enough. In 1990 the LDP was securely back in absolute power after a landslide victory. The dream that a charismatic female politician, Takako Doi, who led the Japan Socialist Party, might effect a decisive change in Japanese politics on two counts – forcing the LDP into opposition and advancing the cause of what was very much the second sex in Japan – quickly faded again. The majority preferred to stick with the party that had presided over Japan’s growing prosperity. But the Japanese miracle began to fade in 1990. Financial scandals continued to undermine the standing of ministers and leading members of the LDP. Some of the most renowned names among securities companies had manipulated stock-market prices by agreeing to compensate some favoured clients against losses. Production plummeted, loans based on inflated house and land prices turned into bad debts, the Stock Exchange registered huge losses and the whole financial fabric appeared threatened. Kaifu was regarded as a weak prime minister by the barons of the LDP factions, a good stopgap while scandals still hung in the air. During his two years in office Kaifu nevertheless was very popular among the Japanese people as a clean politician. This mattered little to the LDP and in October 1991 Shin Kanemaru, the most powerful of the barons and chairman of the Takeshita faction, forged the necessary alliances in the corridors of power so that the premiership should fall to Kiichi Miyazawa. Miyazawa had been minister of finance at the time of the Recruit financial scandal and had resigned in December 1988. His return to politics was intended to mark the end of any recriminations. Cabinet posts were distributed among the factions. Miyazawa faced new challenges. The trade surplus with the US was the cause of considerable tension while America remained bogged down in recession, and President Bush’s visit to Tokyo in January 1992 did little to repair the image of the US, unable to compete with Japan in manufactures such as automobiles where it was once the world leader. Miyazawa, who abandoned most of Kaifu’s reform programme, was saddled in 1992 with a new investigation of a financial scandal that promised to be bigger even than the Recruit affair. Known as Sagawa, it concerned the handouts made to some hundred politicians, mainly LDP, including two Cabinet ministers. Sagawa Kyubin was a parcel-delivery firm that went into bankruptcy with huge debts. It was one scandal too many. The political power-broker Shin Kanemaru was forced to resign in October 1992. A breakaway faction of the LDP formed the Renewal party. Elections in July 1993 resulted in a political upheaval. The LDP fell from power. Morihiro Hosokawa headed a new seven-party coalition government committed to reform until his fall in April 1994. The contrast between Japanese politics – faction-ridden, endemically prone to scandal – and Japan’s success as an economic superpower subverts the claim that in all regions of the world democracy is essential for prosperity. Indeed, prosperity has undermined the growth of a healthy democracy in Japan and in the more prosperous nations of Asia – Taiwan, Singapore and Thailand, not to mention Hong Kong. There is a parallel here with China, where Deng too believed that the great majority of the people would accept the communist political system as long as it delivered rising standards of living; conversely, democracy would be in danger where standards fell. Will Japan break this cycle and combine democracy and prosperity? Unlike the inhabitants of many countries in the world, the Japanese enjoy civil liberties, and their government is neither dictatorial nor authoritarian. If it were, the politicians would not have to distribute so much largesse and favours to ensure their reselection. They have to keep on the right side of the people. Politics is marginal to the ordinary Japanese, except for necessary favours, his own job prospects, education and the outlook for his children. Material progress and security are what matter. Fo those who won places in the right schools, universities and companies, there were jobs for life. The company took care of you, and you owed it absolute loyalty. It was good for those who were ‘in’ – once they survived the fearsome competition. There is a place, too, for those who are ‘out’, but there is also much frustration and crime. In the early 1990s growth stalled, industrial and banking profits plunged. The last decade of the twentieth century brought changes and challenged old customs. Future peace in Asia depends on the relations between the US, Japan and China. Japan has had to adjust to the fact that in the 1990s its economy was faced with economic difficulties and debtridden banks. Once all that mattered was the peaceful pursuit of global economic power, which had replaced Japan’s military aspirations. Concern for the quality of life and for the environment took second place and the Japanese accepted that a benevolent bureaucracy would manage much of their lives. Education provided post-war generations with equality of opportunity. But it was the bureaucrats rather than the politicians who wielded economic and legislative power. Dealings between companies, bureaucrats and the politicians of the Liberal Democratic Party (LDP), which continued to govern Japan, had become corrupt. Bribery scandals surrounding the politicians became high-profile news, but the bureaucrats involved largely escaped detection. The LDP fall from power in 1994 did not mark a dramatic change in Japanese politics. By the October 1996 general election the LDP was again the leading party in the coalition government; fundamental change would prove elusive. The LDP prime minister, Ryutaro Hasimoto, promised ‘administrative’ reforms of the bureaucracy but little was achieved. Changes in the conduct of politicians will take even longer; the old party bosses of the LDP still pull the strings from behind the scenes. The stagnation, in the 1990s, of Asia’s biggest economy and the second largest in the world, still did not look like ending in the early twentyfirst century. The boom of the 1980s turned to bust, property prices fell to lows not imagined, the Stock Exchange slumped by three-quarters, unemployment rose to heights that made the Japanese fearful. Although, at under 5 per cent, it was good by European standards, still it meant that a culture of a job for life in one of Japan’s large corporations was changing, many businesses went bankrupt. All at once the greatly admired ‘Japan model’ that had served the country well since the Second World War was blamed for stifling change and bureaucratic sclerosis. An indicator of Japan’s loss of self confidence in its managerial skills was the take-over by French Renault of ailing Nissan especially when European management turned it around. What had gone so drastically wrong in Japan? Politics were dominated by the LDP which was slow to react to new conditions at home and in the world. The overexuberance of Japanese and foreign investors sent shares to unsustainable multiples of earnings. Investors from abroad poured in funds. Banks in cosy relationships with Japanese conglomerates, the keiretsu lent money recklessly, small businesses were showered with easy finance, all leading to a huge build-up debt. But no sector was as unrealistic as property prices – by the close of the 1980s Tokyo’s real estate was valued as the equivalent of the whole of the US. When the property prices slumped to a fraction of their former value the banks that had financed the boom were in trouble, saddled with bad loans. The Asian economic crisis of 1997 and 1998 did the rest, debts of businesses threatened to bankrupt them. The government stepped in, guaranteeing the savings of the people who otherwise would have panicked and caused an economic meltdown. Japan began to suffer from deflation, next year’s prices would be lower than this year’s, the frightened public more uncertain of the future, saved more and consumption in Japan dropped adding further to Japan’s woes, the currency lost value to the dollar, but exports of world-leading companies alone were not sufficient to counteract consumer loss of confidence at home. Japan was caught in a spiral of low growth. With near zero interest rates even inefficient companies could ‘service’ their loans and stay afloat. Then during the early years of the new millennium, the US was struck by its own ‘economic bubble’, world growth slowed, Japan’s export markets became more difficult. After more than ten years of such a depressing trend, possibly the main obstacle to any dramatic improvement is the low expectations of the Japanese people who see no hope in political change. The Japanese absence of a ‘feel good’ factor was reinforced by the poor performance of suc- cessive LDP governments and the uninspiring choice of leaders by a cabal of powerful elders behind the scenes. Hasimoto admitted failure in 1998 and was succeeded by Keizo Obuchu, avuncular and unpretentious he did rather better, introducing some cautious reforms; in April 2000 Obuchu was felled by a stroke and died before he achieved very much, however. The elders of the Liberal Democrat Party then gathered in secret in Tokyo’s Akasaka Prince Hotel and from their deliberations Yoshiro Mori emerged as caretaker prime minister. He performed so badly that he was pushed aside and ‘resigned’. His successor, Junichiro Koizumi, broke the mould of elderly, staid politicians. He looked different for a start, more with it, like a rock star with a trademark shock of hair. For once the LDP power-brokers had clearly chosen someone who was popularly acclaimed by the voters placing their hopes on the exterior of his appearance. Koizumi may well have been genuine when promising radical reform. He called an election in 2001 campaigning for the LDP. They won in the Diet and dictated the pace of change. The power-brokers of the LDP had not lost control. Koizumi was unfortunate to come to office during the economic world downturn. Deep reforms would cause massive pain. The LDP did not change its ways, continued the palliative of printing money, increased Japan’s high debt to finance a wasteful public works programme to prevent rising unemployment, and did not clean up the failing banking sector, the root of the problem. Some moderate reform opened Japan cautiously to fairer competition at home. Some keiretsus have improved their efficiency by laying off workers and manufacturing abroad and supporting factories in mainland China. But the banks, burdened with bad loans, remained an obstacle to financial health. The big monopolies have not been broken up, the stimulus of cutting interest rates has been applied to the point where it can go no further as interest rates are set close to zero, the huge public works budget was only slightly reduced. Eventually, the economy will emerge from the doldrums and perhaps sooner than was expected, in 2003. Despite the stagnation of more than a decade and the destruction of individual wealth, the annual Gross Domestic Product at around $38,000 per head is still the highest in Asia. Abroad, Japan has followed a cautious policy of improving relations with its neighbours. Koizumi even normalised relations with North Korea by paying the Dear Leader a visit. But security is founded on the military shield of its US ally. There was debate about modifying its ‘peace constitution’ in which the Japanese people forever renounced war as a sovereign right of the nation and the threat or use of force as means of settling international disputes; Japan further undertook that land, sea, and air forces would never be maintained (Article 9 of the Constitution of 1946). The reality is that Japan does have armed forces, modest army, navy and air units for self-defence which may support US forces, but cannot fight offensively abroad though Japan has supported a peace mission in Afghanistan under UN auspices. Public opinion remains strongly averse to any enhanced military role. But Japan lies at the crossroads of a volatile tense region of China, Taiwan, North and South Korea. Of greatest concern has been the development of missiles by the North Korean regime. Their capacity was demonstrated when in 1998 a first-generation missile passed over Japan into the Pacific; it was probably not intended as a threat, but was most likely a space shot whose third stage had failed. Still there is no complacency about North Korea’s missile capability. North Korea’s nuclear ambitions, once assisted by Pakistan, and probable possession of a small number of nuclear bombs, heightened the tension in the new millennium. In the face of the threat Japan has not sought to shelter in neutrality in place of reliance on the US alliance but is anxious to play a role in cooling tensions in the region. The ‘other’ China, the Republic of China on Taiwan, was founded when the remnants of Chiang Kai-shek’s army withdrew to the island in 1949. Some 20,000 Taiwanese who resisted Kuomintang rule were killed that year and martial law was imposed. Under American protection and with American forces stationed in Taiwan, Chiang Kai-shek and the ageing Kuomintang party and military leaders were able to rebuild a formidable military force of half a million men, ruling over the native Taiwanese with only the façade of a constitutional process. Security police ensured that no opposition could make itself felt for long. Despite American influence, civil liberties and democracy were given no real opportunity to take root. Politically, Taiwan was an ally, and as such the Kuomintang acted internally as it thought best. Taiwan was poor, but even under the Kuomintang economic progress was achieved in the production of textiles and simple electronic goods such as transistor radios. Chiang Kai-shek died in 1975, and after an interval was succeeded by his eldest son, Chiang Ching-kuo, in 1978. The rapprochement of the US and the People’s Republic of China gradually led to the withdrawal of US troops (in 1979) and of US diplomatic recognition. Chiang Ching-kuo had to readjust Taiwan’s international stance. He cautiously improved relations with the People’s Republic, and trade and other links expanded. The leaders in Beijing, meanwhile, had no intention any longer of attempting to unify China by force. At home Chiang Ching-kuo likewise gradually followed a reforming policy, having to carry with him the gerontocracy of Chiang Kai-shek’s former political and military companions. He finally lifted martial law in 1987 and permitted a multi-party system to evolve. On his death, Vice- President Lee Teng-hui, the first Taiwanese to head the Kuomintang, became president and continued the reforms of the fragile democratic process. Taiwan’s human rights record had previously been lamentable; in contrast, its economic growth was another of the so-called economic miracles, giving it an income per head twenty times greater than mainland China’s. Lee Teng-hui won the elections of 1988, and continued to move away from the old authoritarian style. The most important foreign issue was to regularise relations with mainland China and democratise politics at home. He encouraged family visits with the mainland and economic links. When in the spring of 1996 he campaigned against the ‘one China’ formula, he brought the wrath of Beijing on his head. Missiles were fired into the Taiwanese Straits as a warning that China would invade if independence was declared and the US countered by moving two aircraft carriers within striking distance. The crisis passed to be repeated during the presidential election campaign of 1999. After the elections both sides cooled their rhetoric once again. The changes in Taiwanese politics had begun in 1987 when martial law, in existence for more than three decades, was lifted. Reforms to create a multi-party state were introduced. On 1 May 1991 Taiwan declared the forty-two-year ‘communist rebellion’ at an end, code for recognising the regime in Beijing. Reform at home made possible a historic change in July 2000 when the opposition candidate of the Democratic Progressive Party Chen Shui-bian won the presidential election. Talk of declaring independence receded. Taiwan, too, had to adjust to the economic crisis in Asia of 1997 and meet the challenges of the new millennium. Another Chinese ‘miracle’ is Hong Kong, which has no resources except the ingenuity of its merchants and the enterprise of its Chinese population. Capitalist Hong Kong adjoins the communist mainland of China, on which it is dependent for water and food imports. Its geographical position makes it, in practical terms, indefensible. Hong Kong island was seized by Britain in 1841, and more territory was forcibly secured in 1860. Then in 1898 the Chinese were made to lease the so-called New Territories for ninety-nine years, in what then looked like becoming a ‘scramble for China’. The lease expired in 1997, and the prosperous colony of Hong Kong rejoined the rest of China. Margaret Thatcher’s Conservative government tried to make the best of this predicament by negotiating conditions for the return of the Crown colony, at a time (the mid-1980s) when the presence in office of a reform-minded Chinese leadership seemed to promise a liberal future. In the Sino-British Joint Declaration negotiated in 1984, China pronounced that the government of Hong Kong would be composed of local people and that what would be known as the Hong Kong Special Administrative Region would enjoy a high degree of autonomy. Britain, afraid to offend Beijing, declined to pre-empt the choice of a system of representation by creating a wholly elected legislature before the Chinese takeover. The Declaration promised that the: current social and economic systems in Hong Kong will remain unchanged, and so will the life-style. Rights and freedoms, including those of the person, of speech, of the press, of assembly . . . of travel . . . [as well as] private property [and] . . . foreign investment will be protected by law. But Beijing’s Basic Law for Hong Kong, published in April 1988, raised fears that Hong Kong’s freedoms and autonomy would not be respected after 1 July 1997 and would make meaningless Beijing’s doctrine of ‘one country, two systems’. In June 1989 the Tiananmen Square massacre of the student demonstrators not only aroused passionate sympathy in Hong Kong, but further undermined confidence in a Chinese takeover. For the first time in its history elections were held in Hong Kong in September 1991. But the Legislative Council was still dominated by nominees, just over two-thirds chosen by the governor and just over one-third by professional bodies, leaving only eighteen of sixty seats to be contested. China’s shadow loomed over Hong Kong’s development. The attempts belatedly to broaden representative government before the take-over as proposed in 1993 by the British governor was sharply condemned in Beijing. Democracy is anathema to Beijing. Only 50,000 favoured Hong Kong British passport holders were allowed to come to Britain. The future of the more than 3.5 million people of prosperous Hong Kong lies with China. The people of Hong Kong have been watchful and defiant in the new millennium, massively demonstrating against any Beijing attempts to circumscribe their freedom and the bases of their prosperity. The Chinese of Singapore are much more fortunate in having their own independent island state to which no one else lays claim. Singapore, which has been independent since it seceded from the Federation of Malaysia in 1965, is a well-ordered state with a democratic constitution, although one party, the People’s Action Party, has ruled since 1959. Prime Minister Lee Kuan Yew, who headed the government for thirty-one years until he stepped down in 1990, was notable for his authoritarian tendency, his incorruptibility and his almost puritanical zeal for law and order, which extended to requiring long-haired youths to cut their hair short. In common with Thailand and some other Asian countries, Singapore combated the drug menace with draconian laws, including the death penalty. It was, at best, half a democracy. Opposition politicians and parties were allowed, but the Internal Security Act passed in 1963 permitted the authorities to detain suspects without trial, and the power of the courts to review administrative decisions was severely restricted. Repressive politically, Singapore was economically free – enterprise was encouraged and since the island, like Hong Kong, was without resources except fish, manufacture and trade flourished. Lee kept a watchful eye on his chosen successor, Goh Chok Tong, remaining in the government as ‘senior minister’ and staying as general secretary of the Action Party. Democratic progress of sorts was made in Singapore in the general election held in August 1991, when the opposition quadrupled its representation, from one to four members, albeit swamped by the ruling Action Party’s seventy-seven. Singapore remained an economic powerhouse in Asia in the 1990s, robustly tied to the West – the government welcoming the US fleet, which was offered facilities in Singapore after the Americans lost their Philippine bases. In 1990, unlike other south-east Asian leaders, Lee Kuan Yew did not leave under a cloud but was deeply respected and was given the title of senior minister. His influence behind the scenes remained considerable, his legacy of a wellordered state, derided by some as a ‘nanny state’, endured. Singapore is the cleanest city in the world, there is no grafitti or chewing gum, hooligans receive strokes of the cane. Society is orderly and well behaved, the atmosphere restrictive, but the 4 million people enjoy the highest living standards in Asia. The democracy established here was, in effect, one-party rule through repression but by the consent of the majority. The opposition in the legislature has become more lively but is powerless and small. The economic crisis of 1997 did not pass Singapore by, but Singapore soon recovered. As a developed nation, Singapore faces new challenges in trade and its economy, surrounded by countries that can manufacture the goods that made Singapore rich, more cheaply. There are now, in the new millennium, no development models to follow any longer. The high degree of education and business skills of Singapore’s people, the absence of crime and conflict provides a good base for the future. After the terrible devastation of war, Korea was still a partitioned country in the early 1990s. Sporadic talk of bringing the two Koreas together, of uniting families again, had made little progress. No personality cult anywhere equalled the excesses of worship bestowed on Comrade Kim Il Sung, the longest-ruling communist dictator in the world. He had presided over the ‘democratic’ Korean Republic since 1948 and was already a veteran communist then. There was no freedom in North Korea, with its showpiece capital Pyongyang, its huge and costly military establishment and all the trappings of an oppressive one-party state. Living standards were appallingly low in consequence and did not compare with those in the South. The history of South Korea can be told in two quite different ways. When the world came to Seoul in 1988 and the XXIV Olympic Games were televised, a fine modern city came into view with well-dressed people in the streets. The economic recovery and industrial growth of South Korea, which accelerated after the 1970s, now place it in Asia’s club of rich nations. The other side of South Korea’s history, however, has to recount the violence and brutality of its politics. For most of the years since the early 1950s the military ruled Korea oppressively, violent student and popular protests were put down with force and bloodshed. Aligned with the West, especially with the US, South Korea had to make some show of a democratic process with a national assembly and elections. But the military made sure that they held on to power, ruling under martial law, imprisoning opposition leaders and resorting to torture and bloodshed to suppress demonstrators who, in their frustration, frequently turned to violence. The ruling cliques were identified by those who opposed them with the US, so anti-American and anti-military agitation often merged. For the Americans such authoritarian regimes were an embarrassment, but pressure to democratise took second place before 1990 to the global aim of containing communism. South Korea was a frontline state of the free world, and the credentials of the South Korean rulers as implacable opponents of communism were never in doubt. South Korea’s first president, Syngman Rhee, lasted until 1960. By then the old autocrat had lost his grip and was forced to bow out after student-led riots in April of that year, protesting against corruption and election fraud. There was a brief hope that the politicians might create at least the semblance of civilian, democratic government. After some months of turmoil, in May 1961 the military stepped in and a junta led by Major-General Park Chung Hee took control. His repressive military-police regime allowed just enough leeway in the 1970s for political activity to function sporadically. But, whenever such activities threatened to become too assertive or violent, Park reimposed rigid control by emergency decree, arresting opposition politicians and suspending civil rights. Suppression would be followed by a measure of liberalisation, as long as it did not threaten military power. Korea’s chief of intelligence assassinated him in October 1979. A civilian president was tolerated for nine months but the military remained the real power in the land. In 1980 a new general took over, General Chun Doo-Hwan, who was no less determined to keep the opposition under firm control than Park. The 1980s, like the 1970s, were plagued by periodic demonstrations and riots answered by police truncheons, firearms and torture. The killings in the riotous town of Kwangju in May 1980, when hundreds lost their lives, were just the worst of these. But Korea’s rapid industrial development made it desirable to create a better image in the West. The opposition was again allowed a degree of activity, political prisoners were released, and the most prominent opposition leaders, Kim Dae- Jung and Kim Young, were from time to time freed from house arrest and allowed to campaign. In 1987, on the eve of the Olympics, a relatively free presidential election was held. The general’s nominee, Roh Tae-Woo, won, but the opposition would have succeeded instead had they been able to close ranks behind a single candidate. Without full democracy it is difficult, if not impossible, for political parties and institutions to develop, which are necessary for democracy to function. So South Korean politics were caught in a vicious circle. Roh Tae-Woo was prepared to allow a wider margin of political freedom than his predecessors. In May 1990 the opposition was strengthened and gained a majority in the National Assembly when two opposition parties combined. The wellknown dissident Kim Young Sam, leader of the Liberal Democratic Party, was elected president in December 1992. He took office in February 1993, the first civilian president in 32 years. The dichotomy between political backwardness and economic modernisation had been a characteristic since 1962. For the ordinary Korean, politics took second place to material welfare, which so rapidly increased for the majority of the people. Opposition politics and violent demonstrations were for the young and for the minority of political activists, not for the majority. For those who did not actively oppose, there was not only far greater prosperity but also greater freedom in the South. The influence of the generals receded, and the president tackled corruption; democratisation made some headway. In the North, nothing much was to change until Kim Il Sung died in 1992 and was succeeded by his son the ‘dear leader’. By the 1990s the reunification of Korea had for long been one of the demands of the radical opposition. All politicians in the South were in favour of it; it was the official policy, and visits of government delegations from the North and the South were exchanged in 1990 and in 1991. In December 1991 the communist North and the capitalist South at their fifth meeting signed a non-aggression pact. The meetings continued in 1992. North Korea was working towards the manufacture of nuclear weapons. The Americans withdrew their army from the South, so President Roh’s prime interest was to stop the North from making its own bomb. The whole of Korea, according to the wishes of the South, of Japan and of the US, should be free of nuclear weapons. South Korean enthusiasm for merger with the North was at its height when Germany reunified in 1989, but it waned in the light of German experience. The population of the North with its low standard of living is far greater proportionately to the South’s than East Germany’s was to its well-off Western cousins. The Korean statistics bring out this contrast very sharply. By 1994 North Korea’s nuclear programme had raised fears and tensions between North and South and the South’s ally, the US, to new heights. Japan also felt threatened by the situation’s volatility. Reductions in the large armies and numerous weapons, a tremendous burden especially to the North, a lessening of tension and more intercourse between North and South nevertheless brought their own tangible benefits to a people who had suffered so much in the twentieth century. North Korea remains one of the last unreconstructed communist dictatorships. Its ‘Dear Leader’ lives in luxury while the people starve. Famine in 1997 caused the deaths of possibly as many as 2 million. The population survives at subsistence level at best, the gap in its grain made up mainly by China and also the West. This does not deter Kim Jong Il from diverting scarce resources to a million-strong army, a missile and a nuclear programme at the Yongbyon nuclear complex. The 1993/4 crisis, when North Korea threatened to produce bomb-usable plutonium by reprocessing fuel rods, was resolved by Clinton concluding a ‘Framework Agreement’. The US would build two Light Water reactors less capable of plutonium production and supply oil until they were built, and in return North Korea undertook to freeze plutonium production. North Korea also signed the Nuclear Non- Proliferation Treaty. In October 2002 a new crisis erupted. North Korea threatened to reactivate the plutonium reactor at Yongbyon and process fuel rods enabling it to make nuclear weapons. In December the international supervisory inspectors were thrown out and Kim threatened to discard the Nuclear Non-Proliferation Treaty. The timing was well chosen as Bush was preparing for war against Iraq. The response from Washington in partnership with South Korea and Japan was to stop the supply of fuel oil essential to North Korea as the construction of the two reactors promised in 1994 had hardly begun. As a member of Bush’s ‘axis of evil’, a regime that could not be allowed to acquire weapons of mass destruction, North Korea’s challenge could not have been more direct. The US went to war with Iraq to destroy Saddam’s weapons of mass destruction which he had not been proven to possess, but resorted to diplomacy with North Korea which almost certainly had nuclear bombs already. The apparent inconsistency is not difficult to understand. South Korea is exposed to a North Korean army of overwhelming strength. The 37,000 US troops can act as no more than a trip wire in the event of an invasion. The US would have to risk a nuclear war in defence of the South. By sacrificing the welfare of the people to build his military arsenal Kim believes himself safe from attack. He demonstrated his defiance in 2003 by firing a cruise missile into the sea of Japan and sending fighters to force down a US spy plane. His regime may one day implode, but this is something China is anxious to avoid as it would upset the strategic balance. The reactivation in 2003 of the nuclear bomb programme was causing the greatest worry. The disarmament and neutralisation of the Korean peninsula is a distant hope. In the South the political leaders and the bosses of the big conglomerates, the chaebols, are being called to account for misrule and corruption. President Kim Young Sam was elected on an anticorruption platform. His two predecessors were brought before the courts. General Chun Doo Hwan was accused of instigating the 1979 military coup and the 1980 massacre in the city of Kwangju and ex-president Roh Tae-Woo of taking $361 million in bribes from business leaders while in office. Kim Dae-Jung, former dissident, was elected president as the decade drew to a close in December 1997. South Korea was one of the most successful of the ‘Asian Tigers’, its economy boosted by global exports. In this South Korea was following the first of the ‘Tigers’, Japan. But lax government management, foreign debts, as well as competition from Asian countries with lower labour costs have created problems. Corruption in business and politics has been endemic. Twenty-three bosses of the big industrial conglomerates, the chaebols, were convicted of bribing the two disgraced ex-presidents General Chun and Roh Tae- Woo, but escaped prison terms. A country can manage without ex-presidents but not without its business leaders. By the autumn of 1997 the ‘Asian Tigers’ had lost their bounce – not only Japan and South Korea but also the younger more virile Tigers. Stability and investor confidence, with money from abroad readily available, had brought rapid, seemingly unstoppable, growth. The abundance of cheap credit led to mismanagement and excess: building – especially of office block skyscrapers – boomed. And then the giddy ride shuddered to a halt and investor panic even engulfed the sounder economies of Hong Kong and Singapore. North Korea’s military threat hangs as a shadow over South Korea. Kim Dae-Jung adopted a policy of reconciliation with the North. Kim and his regime, he believed, should be engaged not condemned to containment and isolation which would, he believed, only increase the paranoia of the leadership. His ‘sunshine policy’ reached its climax when he met with Kim Jong Il in 2000, both exuding smiles and friendship. The South Korean president promised financial assistance and development help in return for closer links between the two countries, open road and rail links and for families torn apart by the Korean war to be able to visit. Rather prematurely Kim Dae-Jung was rewarded for his efforts with the Nobel Peace Prize. In 2003 it emerged that the wheels had been oiled by a bribe of a large sum paid by a company in the Hyundai chaebol to the ‘Dear Leader’, it is alleged with Kim Dae-Jung’s knowledge. In South Korea politics were enlivened by the corruption scandal investigation. Kim Jong Il was able to play on the resentment of a new generation of South Korean anti- Americanism which had its roots in ethnic resentment and, justifiably, in protest at the American support for past corrupt military regimes. Kim Dae-Jung’s dissident politics in Korea remained far from clean. Corporate ‘donations’ and vote buying distorted the democratic process. In relations with the North, Kim saw no alternative to the policy of engagement he was following though it has yielded little positive results after the first media-hyped family reunions. While Kim Dae-Jung’s five-year record as a political reformer does not shine, his government engineered a spectacular turn around of the economy from its depths in 1997. Once Japan was the model, now Korea can serve Japan as an example. The medicine was drastic. The IMF provided a loan to save the country from bankruptcy. The chaebols, Korea’s largest conglomerates, overladen with debt, were forced to restructure, those that were unable to survive financially were not bailed out but went to the wall or were taken over by foreign companies such as Daewoo managed by US General Motors. The culture of business secrecy and corruption was tackled. The banking system was overloaded with bad debts. Banks unable to deal with them were taken over by the state. Western management skills were introduced, the country opened to competition and deregulation. The pain was great, unemployment soared. The people, however, responded to the crisis with dogged determination to build their industries anew on a sounder basis. Inefficient businesses were forced into bankruptcy. Within two years, South Korea was back on a healthy growth rate, once more attracting foreign investment but this time into a sound economy. Employment is back to pre-crisis levels. Yet the one thing the people wished for remained unfulfilled, the lifting of the threat of the armistice frontier and the unification of the country. The December 2002 presidential elections were won by the more progressive Roh Moo-hyn who beat a conservative candidate. The issue of how to deal with the North was a central issue. Roh Moo-hyn campaigned on the promise to continue the ‘sunshine policy’ and end corruption and was inaugurated in February 2003. Despite rising resentment of the US, which had supported past military regimes, the bedrock of security remained the US alliance.