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Historical perspectives on self-reliance
From imitation to creation
Japanese industrial development has relied heavily on imported technology. In the process of industrialization and modernization, Japan imported new technologies in a wide variety of fields- from brick-making to nitrogen fixation technology in the fertilizer industry.
The development of industry in Japan over the last 120 years can be divided into four stages, as follows:
Stage 1. Policies for promoting manufacturing industries by means of imported technology only
The Meiji government (from 1868 to 1912) recognized that increased production and the promotion of manufacturing industries were essential to establishing a solid economic foundation for the construction of a modern state. The immediate target of its industrial policies was the curtailment of imports of machinery, metal products, and chemicals. These poured into the domestic market with the opening of the country to foreign trade and had caused a chronic deficit in the international balance of payments. To counter this trend, the introduction of modern industry was urgently required. However, there was little private capital available, so that only direct investment by the government could accomplish the desired end.
The Ministry of Engineering, created in 1870, was charged with the responsibility for encouraging the development of many industries and running the mines, railways, and communications. The major importer of technology was the government. For example, Tomioka Spinning, located in Gumma Prefecture, was established in 1872 by the government. It was equipped with French-made spinning machines, used French techniques, and was supervised by French engineers.
In this manner, by its own example, the Meiji administration succeeded in introducing foreign industries and technology. The industrial technology of the early Meiji era, having been almost wholly dependent on technology imported from Europe and the USA, had little affinity with contemporary indigenous production techniques. This technological dependence took the form not only of employing foreign engineers and craftsmen and importing plants, machinery, and industrial raw materials, but also of importing such elementary techniques as the making of bricks. This was found necessary because of the lack of a technological tradition that could be drawn on for the development of modern industries.
S&T research agencies were at first systematically organized in the respective administrative agencies of the state. The creation of private organizations for S&T research came about rather late. From 1868 to about 1885, Japan depended entirely on foreigners for scientific and academic guidance. Thus, nearly all the teachers in the higher scientific and technological educational institutions were foreigners invited and employed by the Japanese authorities. But as time went on, they were rapidly replaced by Japanese scholars who had studied abroad or had received scientific training under foreign teachers, and who then initiated their own original courses of study. An early example of this new regime was the Earthquake Prevention Research Council, established in 1892, all of whose personnel were Japanese.
Stage 2. Self-reliance policy for science and technology
Drastic changes in the industrial structure of Japan were brought about by the policies of the Meiji government. A landmark was reached in 1919, when, for the first time, the output of industry outstripped that of agriculture. Structural changes accelerated the attainment of self-sufficiency in technology, thus consolidating the foundations of modern industries. During the First World War, when the introduction of foreign technology was abruptly suspended, the government made a determined effort to establish and realign state-run research laboratories serving manufacturing industries. At the same time, it gave friendly consideration to the views and proposals of private scientists and engineers about the opening of engineering institutes.
In an effort to devise an effective industrial policy, the government enlisted academicians and businessmen to form research councils in various fields.3 The activities of these councils helped make the government's industrial policies truly effective. They dealt with such questions as the reduction of the price of industrial salt, the development of hydroelectric power, the promotion of technical education, and so on. They also advocated priority for the physical sciences along with the establishment of a chemical research laboratory. Impressed by their recommendations, the government established the Physiochemical Research Institute in 1917, with a government subsidy and contributions from industrial circles.
The institute was a typical example of cooperation between government and private companies. Active interchange between the different research branches was encouraged in a liberal atmosphere. The institutes earned international esteem, not only for academic performance, but also for providing business opportunities. On the technological side alone, its successful results included Masatoshi Ohkochi's piston ring, Umetaro Suzuki's synthetic sake, and Kotaro Honda's magnetic steel. Two Japanese Nobel Prize winners were former members of this institute's staff.
The second stage of technological development in Japan could be defined as the age of self-reliance, even though the economy still depended heavily on imported technology.
Stage 3. Process of catching up with advanced technology through further imitation
After recovering from the ruinous conditions of the post-war years, the Japanese economy achieved a 10 per cent annual growth rate until the 1973 oil crisis. Underlying these achievements were government policies promoting domestic industry. At the same time, the import of foreign technology was strongly encouraged. After 30 years, the cost of imported technology amounted to 20 times that in 1955. Thus, Japan's technological recovery owed much to imported technology. The expenditure on R&D in Japan in 1960 was only 1.2 times the cost of imported technology. The assimilation of this technology depended on a certain mature technological base that in turn was instrumental in reducing inputs, particularly those of manufactured goods, in accordance with government policies.
In the 1950s and 1960s, Japanese industry gravitated toward eventual self-reliance, thereby reducing its dependence on imports and achieving a high degree of independence in manufactured goods. The policies geared toward this self-reliance can be grouped into three categories: restricting imports of manufactured products; fostering domestic industries by protective measures; and promoting technology transfer from advanced countries.
The Ministry of International Trade and Industry (MITI) tried to foster domestic production in every manufacturing industry to increase the self-reliance of the industrial structure. Two large electric power plants, which could not be produced by Japanese electrical equipment manufacturers in the 1950s, were imported, one from Westinghouse and one from General Electric. Thereafter, Japanese contractors were forced to produce subsequent power plants through licensing and using know-how from both manufacturers.
Another example is the computer industry. In 1960, MlTI decided to start a computer industry in Japan with strong protection from import restrictions. MITI persuaded Japanese users of business computers to buy Japanese brands and required the government to purchase only domestic products. Technological assistance, subsidies, the establishment of a financial company for computer leasing, and other measures were applied to nurture domestic computer production.
Japan's import-substituting policies have strongly affected the policies for S&T and caused them to deviate from an import-oriented policy. In addition to this tendency, one should note the specific technological conditions after the war. During the war, Japan's technology was isolated from foreign technologies and had specialized in the military area of the munitions industry. The technological gap in 1955 between Japan and the US was too big to be eliminated in a short time. Development through imported technology of the then new industries, such as synthetic chemicals, petrochemicals, consumer durable goods, and electronics, was urgently needed.
Whereas in 1955 more than 50 per cent of the technology imported had been developed before or during the Second World War,4 in the 1960s Japanese industries imported advanced technology which was invented in the US after the war. So far as technology was concerned, the fundamental behaviour of Japanese big business was directed toward the imitation of foreign technology and the acquisition of technical information faster than other companies.
The imitation of technology was more effective than its creation. The importation of established foreign technology obviated commercial risk and the uncertainties inherent in the development of newly created technology. It provided a rapid and effective method of enhancing the technological level of Japanese industries.
Policies for the introduction of foreign technology
The door permitting the entry of foreign technology, which had been closed since the war years, was reopened in 1950 when the government enacted two laws dealing, respectively, with the introduction of foreign capital and with foreign exchange and trade control. These laws were designed to assist the post-war rehabilitation of the Japanese economy. Safeguards were included in the form of stipulations that such foreign technology should contribute to the improvement of the international balance of payments, and the corresponding policy on foreign exchange involved the control of the influx of foreign holders of technology, and resulted in the selective importation of foreign technologies of such high quality that their cost in external payments was warranted. Moreover, from 1965 onward, substantial payments were received for technology exported from Japan. Of the technology imported, some 80 per cent was related to the machinery and chemical industries.5
As a result, production in those industries increased markedly in the latter half of the 1950s. In 1960, the value of production derived from imported technology and allocated to domestic consumption equalled total imports as calculated on the basis of customs clearance.6 However, the export of goods produced by imported technology still remained at a comparatively low level in 1960. Japan had caught up with American standards in many spheres of technology by 1970, and was able to start selling Japanese commodities, turned out by modern industrial complexes, at relatively low prices in other countries.
Stage 4. From imitative to creative technology
According to estimations made by the Japan Productivity Centre, the labour productivity (added value base) of Japanese steel industries exceeded that of the United States in about 1973. Labour productivity in the electric appliance industries became superior in the mid-1970s, and in the automobile industries labour productivity is likely to exceed that of the United States in the 1980s.7
This means that technology in Japan is already on the same level as that in the United States and has surpassed that of the European nations. The total balance of payments for technology is still unfavourable to Japan. However, when the transactions are limited to newly contracted know-how and patents (table 5), Japanese technology exports have exceeded technology imports since 1977. The receipts (through export) from newly contracted patents in 1979 were almost double the payments for imported technology newly contracted in the same year.
Thus, Japan is now a net exporter of technology. According to an analysis by the Institute of Investment Economics of the Development Bank of Japan,8 Japanese industries have reduced their dependence on imported technology since 1970. The dependence on imported technologies is calculated by dividing the accumulated intellectual knowledge of imported technology (payments for imported technology are capitalized into present values) by the total domestic and imported stock of technological knowledge. The dependence rate on imported technology was highest in 1970 at 16.7 per cent; however, in 1983 it had dropped to 10.9 per cent.
Table 5. Trends in Japan's technology tradea
|Year||Imports||Exports||E/1 x 100|
|(billions of yen)||(billions of yen)||(%)|
Source: Agency for Science and Technology, Annual Report.
a. Patent fees are paid by the receiver annually in proportion to production for 20 years, until expiration of the patent rights. Japanese payment for imported technology has increased because of the increased production based on import licences. Numbers in parentheses show payments for the first year of patents newly contracted in 1979.
This means that Japanese industries, including high-technology and high-growth industries, have to invest more in R&D to develop their own technology, even though this is accompanied by the threat of increased risks and reduced efficiency. In response, the private sector has begun substantial investment in R&D for new technologies. In this way, Japan's government and private industry have launched a joint campaign to foster high technology, with the emphasis not only on applied research but also on basic research. Indeed, Japan is now making massive investment in R&D, equivalent to 2.5 per cent of the gross national product. This spending is exceeded only by the United States and the USSR.
Over the past 40 years, Japan has advanced from the status of a technically developing nation to that of a technically advanced nation, and has become a net exporter of technology, largely by improvements to existing technologies. Continuing as a net exporter of industrial technology might be possible in the future. However, this will require more R&D expenditure, which will tend to reduce efficiency. Japan will have to recognize that the effort to develop new technologies requires societal change rather than economic power.
According to the same analysis made by the Institute of Investment Economics, the marginal rate of return on R&D has decreased markedly from 22 per cent in 1965-1982 to 17 per cent in 1970-1982
(manufactured industries average.) The same type of analysis of US industries shows a similar tendency, 14 to 16 per cent in the 1960s and 7 to 10 per cent in the 1970s. The lower the dependency on imported technology, the higher the cost of developing new technology.
Debate continues about the degree to which technical originality or scientific creativity can be found among the Japanese, who are still widely regarded as inherently more skilful at adapting than at inventing. Japanese business is more adept in applied research than in basic research. Table 6 shows that the number of important innovations by Japanese inventors is not high, especially in terms of breakthrough inventions. However, in the 1970s Japanese inventions in the field of electronics progressed rapidly and this has dramatically increased her share of the world patent market.
Four advantages in technological self-reliance
To appreciate Japan's ability for technological development and to learn from her experiences in technological self-reliance, it is necessary to consider not only the country's national policies for S&T, but also her economic, social, and cultural background, which have enhanced technology, by and large. Four major factors which have influenced the development of Japanese independence in technology can be detected.
High capacity for the absorption of technology
Before acquiring self-reliance in technology, countries have to absorb modern technology imported from abroad. At that stage, the capacity for imitation is more important than creativity. The fundamental requirements for a capacity to absorb foreign technology are threefold: a high standard of education, assimilation of technology, and an average level of technology and scientific knowledge.
HIGH EDUCATIONAL STANDARD AT THE INCIPIENT STAGE OF INDUSTRIALIZATION. An increase in agricultural productivity must accompany industrialization at the incipient stage of economic development. In this connection, it is important that the educational standard of Japanese farmers was fairly high at that point. In the Tokugawa or Edo period, preceding Japan's industrial revolution, terakoya or temple schools (the equivalent of private elementary schools) numbered more than 15,000, exceeding the number of elementary schools established in the early Meiji era. According to an estimate made by Professor Ronald
Table 6. Number and index of major innovations in the post-war period compared with surplus measured by productivity
|Innov. listed by OECD||Innov. listed by Gellman||
Productivity = GDP/workforce
Radicalness (Gellman) (%)
|United States||74 (100)||319 (100)||100||100||100||100||41.4||31.2||27.4||100|
|United Kingdom||18 (24)||85 (27)||50||50||53||51||4.4||40.0||55.6||100|
|Federal Republic of Germany||14 (19)||33 (10)||36||51||67||51||36.4||50.0||13.6||100|
|Japan||4 (5)||34 (11)||16||25||49||30||38.5||53.8||7.7||100|
|France||2 (3)||21 (7)||43||55||71||56||11.8||64.7||23.5||100|
|Canada||0 (0)||8 (3)||81||86||89||85||50.0||0.0||50.0||100|
|Total||112 (-)||500 (-)||-||-||-||-||43.7||36.7||28.6||100|
Source: H. Inhaber and M. Alvo, World Science as an Input-Output System." Scientometrics 1 (1978): 43-46.
P. Dore, the male literacy rate toward the end of the Tokugawa period was 40 per cent, while the female rate was in the order of 19 per cent.9 These percentages are much higher than the literacy rate today in many developing countries in the early stages of industrialization.
Japan's high literacy rate at the time made it easy to secure a high-quality labour force for the subsequent process of industrialization. It also facilitated the introduction of new strains of crops into farming villages. The introduction and expansion of elementary education from the beginning of the Meiji era contributed to the subsequent economic development. However, it has to be borne in mind that Japan had enjoyed a high educational standard prior to industrialization.
ENTREPRENEURIAL SPIRIT AND STRONG WILLINGNESS TO LEARN NEW TECHNOLOGY. Japanese enterprises have shown a strong propensity for new technology. A notable characteristic of Japanese technical progress is the rapid diffusion of new technology in Japan. No new technology can help to strengthen national competitiveness unless it is applied to the production lines of many companies.
An analysis by Professor Edwin Mansfield shows that conversion of half the steelmaking capacity in the United States to basic oxygen furnaces took 13 years after the development of that technology."' This reflects neglect in replacing existing furnaces with new ones, regardless of the fact that basic oxygen steelmaking technology opened the way to economical production of high-quality steels. In Japan, basic oxygen furnaces accounted for 60 per cent of total capacity only seven years after the introduction of the American technology. This example suggests the reason why Japan has overtaken the United States in steelmaking, expanding its productivity to 1.5 times that of the US. The lesson is that in addition to the development of new technologies, the readiness to abandon old technologies, even with risk, is essential for the successful imitation of technology.
Another characteristic of the Japanese ability to absorb technology is the ingenuity of Japanese workers in responding to technological innovation. They feel a sense of intimacy with technology. American and European workers have often opposed the introduction of new technology, including the use of robots, but Japanese workers rarely think in this way. In Japan's automobile factories, for example, each robot is called by a pet name. Robots are regarded as friends who can take over menial, unwanted chores; robotization in Japan is thus steadily expanding. To American workers, on the other hand, robots are only enemies that threaten them with possible unemployment.
HIGH LEVEL OF TECHNOLOGY IN SMALL-SCALE INDUSTRIES. While considering the capacity to absorb technology, we cannot neglect the technological gap among domestic industries. Japan's technological diffusion was accelerated by her specific industrial structure. Japan excels in technology where mass production is an important element, and where, at the same time, shared precision machining and assembly are prominent. Japanese competitiveness in the world market is strong in specific manufacturing industries such as automobiles, TVs, cameras, and other electronics. Generally, these industries rely heavily on parts makers and subcontractors.
The Japanese industrial structure is characterized as a dual economy in which large- and small-scale industries coexist harmoniously. Parent companies, which produce automobiles and TVs, buy and assemble their parts. To maintain high quality and high productivity in the final products, they have to utilize the same quality-control systems and highly organized delivery systems as the subcontractors.
The modern technologies introduced in big business at the beginning have been rapidly disseminated to small-scale factories, which are supported by the parent company not only in technological know-how but also in management and finance, under the so-called pyramid industrial structure. Furthermore, the Japanese industrial structure, which was historically developed and modernized over a long period, accelerates the closing of the technology gap between big business and small-scale factories.
Narrow technological gap at the beginning of industrialization
Although Japan had lagged behind in industrialization, her technological standards in the development of the heavy and chemical industries at the beginning of the 1930s were not far behind those of the Western advanced countries. For example, the production of ammonium sulphate began in the 1930s using a nitrogen fixation method. Although the main technology for this had been imported from the West, Japan succeeded in industrializing her own technology, which had been domestically developed by the Government Experimental Station (Tokyo Kogyo Shikenjo.) This means that the Japanese ammonium sulphate manufacturing industry had secured a technological standard high enough to compete with foreign technology. Also, in the post-war period, the Tore company, one of the biggest producers of rayon fibre, started manufacturing nylon by introducing nylon technology. Although the company had already developed the technology at that time, because of patent considerations it had to introduce it from the inventor, Du Pont (USA).
Thus, the high standard of basic technology had made it possible for Japan to catch up with the Western advanced countries. In the developing countries today, the mere introduction of technology will not lead to success in industrialization because the gap in large-scale, sophisticated technology between the more and the less developed countries is too wide.
Non-reliance on foreign capital in the process of capital accumulation
As a result of the economic development process characterized by the high saving and investment propensities, Japan did not attempt to accelerate her industrialization by inducing foreign capital, though she temporarily borrowed money from abroad. This is partly because the Japanese have a peculiarly negative feeling toward foreign capital. With the exception of the petroleum-refining industry, Japan introduced technology but did not induce capital. Brazil, for instance, relies on foreign capital for more than 5 per cent of its annual net investment in capital equipment. In contrast, Japan hardly depends on foreign capital at all.
Many of the developing countries in Asia either restrict the induction of foreign capital or treat domestic capital preferentially in order to avoid either extreme dependence on foreign capital or being ruled by multinational corporations. In their attempts to establish basic industries, however, dependence on both foreign capital and technology is normally unavoidable. This has brought about such problems as a failure to develop the national economy or to improve the people's welfare, in spite of industrialization. On top of these problems, MNEs (multinational enterprises) prefer to make decisions on technology to suit their own interests. They do not care for the development of local technology or the modification of traditional technology. Self-reliance in technology should be achieved through self-determination in technology.
The dual structure of Japanese culture
One of the reasons why industrialization and modernization progressed rapidly in Japan is that the Japanese have accepted foreign culture without resistance. Earlier, the Japanese had established a unique system by accepting Chinese culture. Japanese culture, therefore, has been "mixed" from the very beginning. It is due to this high adaptability to alien culture that, during the modernization process when industrialization was beginning, some people proposed that the English language supersede Japanese. However, it should be specifically pointed out that, despite this openness to acculturation, everyday life in Japan does not change readily. The dual structure of everyday life, as exemplified by some Japanese wearing business suits at work and changing into the traditional dotera or padded dressing gowns at home, can be said to have expedited adaptation to alien culture.
Japan has attached great importance to science and technology throughout the history of her modernization. However, the leader of Japan's modernization, Sakuma Shozan (1811-1864), at the end of the Tokugawa era, advocated the famous slogan "Japanese Morals and Western Arts." Shozan thought that the combination of local ethics and foreign technology was the key factor in modernization. In fact, after the Meiji Restoration, Japan accepted Western science and technology without reserve, while she recognized the value of her independence in the realms of philosophy, morals, and culture itself.
Another example of this dual cultural structure may be that, despite the recent, total Westernization of life style, the Japanese make a sharp distinction between foreigners and their fellow countrymen in terms of ways of thinking or interpersonal relationship patterns. The fact that English words are distinctly distinguished from Japanese words in writing by the use of katakana, or the square form of the Japanese alphabet (though many English words have been Japanized and many 'Japanglish' words have been coined), serves as yet another example.
The dual cultural structure may be said to have expedited the modernization of Japan without impairing the traditional value systems. Japan was thus able to establish her own technology and to promote policies for self-reliance in science and technology.
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