Economic History, Part 1

Abstract This chapter is devoted to the economic history of Japan during the Tokugawa period (1603–1868) and Meiji era (1868–1912). It first describes how the Japanese economy developed under the baku-han political system erected by Tokugawa Ieyasu in 1603, a system that persisted until the Meiji Restoration in 1868. The durability of the baku-han system owed much to features that themselves had significant economic implications that are also explained. These features included a caste system (shi-nō-kō-shō), a system of collecting rice taxes, seclusion of the country (sakoku), and a requirement that the feudal lords called daimyō alternate their residences between their own domains (han) and the shogunal capital Edo (later renamed Tokyo). The chapter explains how the economic development that did occur within this controlled and oppressive political system comports with the logic of Malthus. Expansion of trade within Japan, epitomized by the Ohmi merchants, and the increasing sophistication of economic institutions, allowed a modest increase in the population during the eighteenth century but without significantly raising the average standard of living. Modern economic growth—sustained rise in income per person—began in Japan only after the 1868 Meiji restoration brought economic freedom. The chapter details the steps taken by the Meiji oligarchs to dismantle the previous system, leading to the formation of a modern market economy. Japan’s experience in the Meiji era fits the Gerschenkron thesis; the country had sophisticated market institutions and its growth was the result of private economic initiative, not government control and direction.