The Economist’s anonymity policy makes it somewhat difficult for individual journalists to rise to fame. It’s thus not surprising that the death of Norman Macrae in 2010 did not create more widespread coverage given that he spent his entire career with the weekly paper. With Macrae, though, the world lost one of its most formidable journalists that had a very special connection to Japan.
Fancy flying to Tokyo on Alitalia? Ad in Economist 1962
I stumbled upon Macrae when researching the Japanese Economic Miracle. He had spent the summer of 1962 in Japan and wrote his famous “Consider Japan” dispatches that were to make the (business) world aware of the rising giant in the East.
While he set out to educate the then overwhelmingly British audience of the magazine of the virtues of Japanese post-war economic policy, the Japanese public quickly picked up the survey. A translation of it was soon published under the somewhat more triumphant title “Amazing Japan” (Odorokubeki Nihon).
Luckily for us, there’s a reprint available on Macrae’s son’s website as well as a lot of the original text can be read in the Economist’s archives (part one, part two, some of the adverts that ran with it are here and here).
The gist of the survey is perhaps best summed up in this book review (I would assume from 1964 or 1965) in academic journal Developing Economies, written by Japanese economist Hisao Kanamori. In Macrae’s eyes, Japan was developing so rapidly because
- The Japanese economy has not yet fully been developed.
- Japan has inherited advantages from prewar days.
- The influences of the American Occupation policies.
- Japanese people has [sic] a vigorous desire for advance.
- Excellent economic policies, and
- The influence of the peculiar social systems in Japan.
Kanamori mainly agreed with Macrae except for the debate on fiscal expenditure. In Macrae’s opinion, Britain should have used more fiscal spending to create demand and promote growth industries just like Japan.
Kanamori, however, argued that Japanese fiscal expenditure growth was not a reason for the economy’s growth but rather vice versa. The real reason for success was not to be found in big government budgets but easy bank lending.
The main question raised by Kanamori was whether the Japanese miracle could continue in the face of three major constraints:
- In Macrae’s opinion, growth until 1962 was mainly thanks to massive investments in industries with large catch-up potential (including second-stage industrialisation sectors), explaining large parts of the massive productivity growth figures for post-war Japan. Now that the gap between Japan and the West was shrinking (or gone), this growth model became questionable.
- The demographic dividend enjoyed by post-war Japan was about to fade as proportionately less and less people entered the workforce each year. The Golden Eggs, the coveted high school graduates that were coming to the cities foreshadowed a looming labour supply shortage (see the photo accompanying chapter 11 of this paper).
- As Japan grew its economy, imports grew side by side. Could exports keep pace, especially as they (before 1962) were mainly of the labour-intensive kind?
It’s fascinating to read about these concerns given the comfortable position we’re in now. In this way, the 1962 paper, incidentally published in the year of the World Bank / IMF meetings in Tokyo, represents a turning point.
Japan was to cope with the constraints remarkably well and grow at more than 10% p.a. until the oil crisis a good decade later, because the quality of its growth changed.
Instead of just catching up with the West, Japan actually overtook many countries as its industries were becoming extremely competitive and high value added exports began replacing labour-intensive ones.
Japan did not get trapped in the middle income trap.
Even after the oil crisis, the economy expanded rather rapidly throughout the 1980s, until systemic imbalances brought the economy to a virtual standstill ever since.
To return to Macrae, he was a true “unacknowledged giant”. I particularly liked this quote of his (from here). It shines bright also when thinking about the massive leap forward Japan had made since the end of the war:
During the brief civilian working lives of us returning soldiers from the Second World War, we have added seven times as much to the world’s producing power as was added during all the previous millennia of homo sapiens’ existence. That may help to explain why some of us sound and write rather tired. It does not explain why anybody in the next generation, to whom we gladly vacate our posts, can dare to sound pessimistic.