States And Markets

Comparing Japan And Russia

Guoli Liu

• Publisher: Routledge
• Year: 2019
• ISBN:
  9781000313161
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Asian Politics
• Index: Politics & International Relations

Initial excitement in the West over the reform of Soviet communism under Gorbachev and then euphoria over the disintegration of the USSR have now been replaced by concern, controversy, and sometimes despair over prospects for democracy and a marlcet economy in the countries of the former Soviet Union. Despair is reflected in the popular joke that the transition from a communist centrally planned economy to a capitalist market economy is like the transition from fiSh soup. to an aquarium. Only time will tell if the aquarium analogy holds water. Meanwhile, as policy makers in Russia and elsewhere in the former Soviet Union grapple with strategies, tactics, and details, scholars and policy advisors continue to debate questions of sequence, timing, and appropriate models.

1
Introduction

LEVIATHAN hath the use of so much Power and Strength
—— Thomas Hobbes

Japan and Russia are different in many respects, but they share a tradition of a strong state and a weak market. Traditionally, the states of the two countries were leviathans dominating their societies and economies. The leviathans harnessed or suppressed market forces to serve state interests as perceived and defined by the political elites. The Japanese leviathan was defeated and reformed by the Americans as a result of World War II. With a fundamentally restructured but more effective state, the Japanese economy gained unprecedented vitality and strength. The tsarist state was destroyed by the Bolshevik revolution in 1917 and replaced by a new leviathan with even greater totalitarian and authoritarian features. The market was not allowed much space to operate, except in the informal sectors. Mikhail Gorbachev and his successor, Boris Yeltsin, have been trying to tame the Russian leviathan, but they face greater difficulties than the Japanese, because they are dismantling their leviathan without a war.

Social scientists and policy makers are facing two extraordinary cases of state market relations: First, the collapse of the Soviet party-state and centrally planned economy and the emergence of multi-party politics and a market economy in newly independent Russian and other post-Soviet republics;¹ and second, the dramatic growth of the Japanese “plan-oriented market economy” in which the state plays an active role.

While Russia and other newly independent states are moving from communist totalitarian rule to representative democracy, and from a centrally planned economy to a market-oriented economy, it is important to examine the possible lessons from Japan. We shall explain in detail later about why we compare and contrast state-market relations in Japan and Russia/USSR. One significant factor is that Japan is one of the few countries that has made the transition from authoritarian rule to democracy and from a militaristic state economy to market-oriented economy. In analyzing what the post-Soviet states can learn from Japan, the central theoretical concern of this study is the dynamics of the transition from command to market economies, and from totalitarian and authoritarian dictatorship to democracy.

The debate on state-market relations is not a purely intellectual exercise. It has great practical implications, e.g., countries following different lines of argument in the debate have taken sharply contrasting roads of political and economic development. At their early stage of modernization, Japan and Russia followed the road of state capitalism. Modernizing reforms in the two countries stressed the role of the state in economic development.

After several decades of the development of state capitalism, the two countries experienced dramatically different transformation in their state-market relations. Following the 1917 revolution, the Bolsheviks attempted to limit and eliminate the market. Stalin’s revolution from above in the late 1920s and early 1930s created the foundation of the centrally planned economy which lasted until the late 1980s. In Japan, state capitalism deteriorated into a zaibatsu- (big family-controlled financial cliques) dominated economy. The rise of the militarists and fascists in the 1930s and early 1940s resulted in an extremely authoritarian regime and highly centralized economy in Japan. Russia/USSR and prewar Japan did not have a tradition of free market economics.

The more contrasting cases are Japan and the USSR in the postwar era. The last half-century witnessed the decline of the military and the rise of the trading state in Japan on the one hand and the expansion of Soviet military power and stagnation of the Soviet economy and society on the other hand. The defeat in World War II and the American occupation facilitated the rise of the trading state in Japan. In the postwar era, the Soviet Union continued its military and political expansion but went through economic stagnation and decline.² In the late 1980s, the USSR entered deep political and socioeconomic crisis while Japan emerged as an economic superpower.

Soviet reformers realized that the old Stalinist system did not work. They also recognized the danger of further economic crisis and political instability in the absence of fundamental system wide reform. However, there has been no consensus on reform strategy and agenda. The Soviet leaders did not have a “theory of simultaneous transitions from a totalitarian/authoritarian to a liberal/socialist or social democratic government and from a planned to a mixed or market economy.”³

This study will contribute to the search for such a theory by comparative analysis of state-market relations in Japan and Russia/USSR from 1861 to 1991. Although there is a large body of literature on Japan and Russia/USSR respectively, there are few explicitly comparative analyses of the two countries except the excellent work by Cyril Black and his colleagues.⁴ With dramatic changes in both countries in the last two decades and with the advantages of new materials made available by glasnost, now is the time for more efforts at comparative analysis of Japan and Russia/USSR in general and in their state-market relations in particular.

Jerry Hough suggested that Mikhail Gorbachev was looking at Japan for a model of development.⁵ Gorbachev made it clear during his visit to Tokyo in 1991 that the Soviet Union could learn much from Japan. Boris Yeltsin and some of his advisers also realized that Japan can be a model to build a competitive economy based on high technology and active participation in the world market.⁶ However, there has been no serious academic analysis of the lessons from Japan for the Soviet Union comparable to the research on Japan and the United States, Japan and Great Britain, or Japan and the newly industrialized economies.⁷

By focusing on state-market relations, we can better understand the changing nature of the Japanese and Russian/Soviet states. As Andrew Janos recently pointed out, many scholars studying industrialization and/or modernization of the Soviet Union missed the militaristic nature of the Soviet state as described by Herbert Spencer.⁸ Thus, they have had enormous difficulty in understanding the “genuine shift from the principles of militancy to true industrialism” taking place in the former Soviet Union.⁹ A similar weakness existed in many works on Japanese modernization. Most analysts saw big differences between prewar and postwar Japanese society in terms of level of economic development and the degree of democratic participation. However, many of them missed the dramatic transformation in state-market relations and the changed nature of the state. Of course, there are exceptions to this general statement. For instance, Richard Rosecrance insightfully pointed out the dramatic shift from the military-territorial state to the trading state in postwar Japan.¹⁰ According to Paul Kennedy, the history of the rise and fall of the “Great Powers” in the last five centuries “shows a very significant correlation over the longer term between productive and revenue-raising capacities on the one hand and military strength on the other.”¹¹ This study can strengthen Janos’, Rosecrance’s, and Kennedy’s theses of transition from militancy to industrialism and from the military state to the trading state by comparing the transition process in Japan and Russia/USSR.

The long-term comparative historical analysis taken by this study contributes to discovering the underlying patterns of state-market relations in Japan and Russia/USSR. Facing an information explosion regarding the two countries, we find that a large proportion of the literature is about short-term policy problems rather than long-term historical macro-trends. Experience suggests that research focusing on short-term, on-going events is not necessarily useful for theoretical construction. We believe that studying the key turning points in state-market relations in Japan and Russia/USSR between 1861 and 1991 will help us reveal the historical patterns of development and avoid being deceived by short-term ups and downs.

Furthermore, this study provides not only theoretical analysis but also policy suggestions on the lessons from Japan for the new Russia and other post-Soviet states. There are key lessons from Japan that can be very instructive for the post-Soviet states in their historical transition from a command economy to a market-oriented economy. Lessons from Japan can be especially relevant for Russia because they shared the common experience of highly militaristic state control of the economy and society.¹² Japan is a potentially influential model for post-Soviet development because many post-Soviet elites have expressed appreciation of the Japanese competitiveness in the world market. Considering the historical and contemporary differences between Japan and the post-Soviet states, are the lessons from Japan repeatable in Russia and other republics? We shall demonstrate below that the answer is affirmative. Differences among nations do not preclude mutual learning. In fact, Japan was/is quite different from the West in many aspects. Nevertheless, Japan has succeeded in learning from the advanced Western nations in important political and economic fields.

Ideal Types and Models of State-Market Relations

State-market relations is a topic of long-standing controversy in the social sciences. Two of the earliest theorists on this subject, Adam Smith and Karl Marx, had profound impacts on the development of the market economy and the planned economy respectively. As the leading advocate of the free market system, Smith viewed the market as an alternative to government control of economic life. Smith saw the state as a necessary evil whose functions should be limited to some clearly defined fields. Marx, on the other hand, was antagonistic toward the capitalist market. He stressed the role of the state as a tool of the ruling class. In his original design, contrary to the highly centralized state in the Soviet Union, the state would wither away following the proletarian revolution.

Marx’s theory was once held as official ideology by the Soviet Union and its allies. However, most believers of the theory found it was impossible to put the classic Marxist theory into practice because it was too utopian. Lenin revised Marxism; Stalin created his own version of Marxism-Leninism. All other former communist countries had to make revisions of Marxism in order to adjust it to their specific conditions. The 1989 revolution in Eastern Europe and dramatic changes in the Soviet Union since then have totally discredited the official ideology.

From a different perspective, Max Weber analyzed the two ideal types of market economy and planned economy; his theoretical formulation provided insights into the current debates on the state and the market. Weber pointed out the essential difference between a market and a planned economy: In a “market economy” economic action is oriented to advantages in exchange on the basis of self-interest. In a “planned economy,” in contrast, economic action is oriented systematically to an established substantive order, whether agreed or imposed, which is valid within an organization.¹³

Weber agreed with Smith that free and rational pursuit of self-interest is the essence of the market economy: “The market economy is by far the most important case of typical widespread social action predominantly oriented to ‘self-interest.’”¹⁴ But Weber pointed out an ideal type of planned economy, unimagined by Smith, in which authority rather than exchange was the norm. Weber clearly warned of the danger of economic bureaucratization without the market. “The abolition of private capitalism would simply mean that also the top management of the nationalized or socialized enterprises would become bureaucratic. ... State bureaucracy would rule alone if private capitalism were eliminated.”¹⁵

The relationship between politics and the economy has been discussed by scholars from different perspectives and with different approaches. Charles Lindblom proposes “exchange” and “authority” as the central concepts of political economy. Charles Kindleberger prefers “power” and “money”; Richard Rosecrance contrasts “market” and “territoriality.”¹⁶

Following the Weberian tradition, Robert Gilpin conceptualized two ideal types of state-market relations, i.e., a purely political world and a purely market world.

In a purely political world in which the market did not exist, the state would allocate available resources on the basis of its social and political object...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Contents
• Foreword
• Acknowledgments
• 1 Introduction
• 2 The State’s Vital Role in Modernization
• 3 Postwar Patterns of State-Market Relations
• 4 Perestroika and the Push Toward Marketization
• 5 The Japanese Model: Limits and Lessons for Russia
• 6 Conclusion
• Bibliography
• Index
• About the Book and Author