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10-08-2015, 16:49

A Zaibatsu Economy

Japan also continued to make impressive progress in economic development. Spurred by rising domestic demand as well as a continued high rate of government investment in the economy, the production of raw materials tripled between 1900 and 1930, and industrial production increased more than twelvefold. Much of the increase went into the export market, and Western manufacturers began to complain about the rising competition for markets from the Japanese. As often happens, rapid industrialization was accompanied by some hardship and rising social tensions. A characteristic of the Meiji model was the concentration of various manufacturing processes within a single enterprise, the so-called zaibatsu, or financial clique. Some of these firms were existing merchant companies that had the capital and the foresight to move into new areas of opportunity. Others were formed by enterprising samurai, who used their status and experience in management to good account in a new environment. Whatever their origins, these firms gradually developed, often with official encouragement, into large conglomerates that controlled a major segment of the Japanese industrial sector. According to one source, by 1937, the four largest zaibatsu (Mitsui, Mitsubishi, Sumitomo, and Yasuda) controlled 21 percent of the banking industry, 26 percent of mining, 35 percent of shipbuilding, 38 percent of commercial shipping, and more than 60 percent of paper manufacturing and insurance. This concentration of power and wealth in the hands of a few major industrial combines resulted in the emergence of a form of dual economy: on the one hand, a modern industry characterized by up-to-date methods and massive government subsidies and, on the other, a traditional manufacturing sector characterized by conservative methods and small-scale production techniques. Concentration of wealth also led to growing economic inequalities. As we have seen, economic growth had been achieved at the expense of the peasants, many of whom fled to the cities to escape rural poverty. That labor surplus benefited the industrial sector, but the urban proletariat was still poorly paid and ill-housed. Rampant inflation in the price of rice led to food riots shortly after World War I. A rapid increase in population (the total population of the Japanese islands increased from an estimated 43 million in 1900 to 73 million in 1940) led to food shortages and the threat of rising unemployment. Intense competition and the global recession in the early 1920s led to a greater concentration of industry and a perceptible rise in urban radicalism, marked by the appearance of a Marxist labor movement. In the meantime, those left on the farm continued to suffer. As late as the beginning of World War II, an estimated half of all Japanese farmers were tenants.