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From recovery to rapid growth

Rehabilitation and Technology Transfer

As stated earlier, the Korean War was an unexpected shot in the arm for the Japanese economy, which, before it had managed to rehabilitate itself, was drowning in a stabilization crisis. It gave Japan a springboard for rapid recovery in the 1950s and for rapid economic growth in the 1960s. It may even be said that the Korean War changed the entire outlook of the Japanese economy.

Post-war Japan may be divided into five periods:

1. Post-war chaos (1945-1949)
2. Decade of recovery (1950-1959)
3. Decade of rapid growth (1960-1969)
4. Decade of adjustment (1970-1979)
5. Contemporary uncertainty (1980s)

There are those who contend that Japan's rapid economic growth began with the Korean War, because in the late 1950s its economy had already posted high growth rates, high even on an international scale. An official Japanese document concluded in 1956, only 10 years after the end of World War II, that "the post-war period is over."

Some indicators may in fact justify the belief that the special procurements during the Korean War enabled the Japanese economy to recover its pre-war levels. Under this line of argument, Japan entered the period of rapid economic growth in the latter part of the 1950s, a period that continued until the oil crisis of 1973. A similar view also characterizes the years from the late 1960s to 1973 as a period of uncertainty for Japan, pressured as it was to internationalize its economy.

For my part, however, I do not consider the post-war period to have ended in 1956, as the Japanese government declared. At that time, Japan's per capita national income was only US$220 (less than 7 per cent what it was in the United States and 50 per cent in West Germany); more than 45 per cent of Japan's population belonged to the primary industry sector; and as the special procurements came to an end, only light-industry goods such as textiles and sundries were competitive as exports.

To be sure, some economic indices for 1955 might compare favorably with those for 1930, but in the early 1960s the nation had really only recovered what it had lost in World War II. The 10-year income-doubling programme was officially declared in 1960, by which time full employment had been realized and there had developed a shortage of labour as the economy increasingly internationalized. Also at this time there were official plans for the liberalization of trade and capital transactions.

Technology transfer began to increase rapidly as Japan prepared for the imminent arrival of foreign capital and technology, considered a possible forerunner of another national crisis.

Furthermore, the technology transfers of the 1960s differed from those of the 1950s. Whereas the earlier effort was aimed at recovering pre-war production levels, the transfers of the 1960s aimed to prevent an influx of foreign goods and to strengthen Japan's position in the impending international commercial war in which Japan would be forced to compete. Thus, the enlarged scale of production was for much more than domestic demand, and, moreover, the technologies would be the world's most advanced.

The situation much resembled the one 90 years earlier, when the new Meiji government committed itself to building an industrialized country under the slogans "promotion of industry" and "prevention of imports." The great difference between the two times, however, was that the national consensus in the Meiji period was based on creating a "rich nation and a strong army," while in the 1960s it was restricted to non-military wealth and power.

Thus, technology transfer in the 1960s was characterized not so much by an intention to expand the scale of production, to mechanize and rationalize, as was the case in the preceding decade, but by the aim to transform the production system itself into automated high-speed mass production.

There had been a mass-production policy in the 1950s, at least in some industry sectors, but it did not stress high-speed production, much less automation, because a plentiful, good-quality, labour force was then available, making automation less attractive.

Technology transfer in the 1950s, the 1960s, and the 1970s may be characterized as follows:

1. In the 1950s technologies were transferred to bridge the wartime gap in such sectors as steel, shipbuilding, chemical fertilizers, and textiles, sectors that were already active in Japan.

2. In the 1960s technology was transferred in such fields as automobiles, small electric appliances, and petrochemicals, industries that were already well developed in the United States and in the industrialized European countries, but that were still in their infancy in Japan. As a result of the transfer, these products began to be mass-produced as domestic products and became highly competitive with foreign goods in Japan's home market.

3. Technologies transferred in the 1970s included electronics, high-polymer chemicals, and atomic energy, which had been developed during and after World War II. In these fields - except for atomic energy - and in particular electronics, Japan followed a painful path of quickly overtaking the advanced countries, then being outrun, overtaking them once again and, in some fields, taking the lead.

Even before Japan's international competitiveness in the most advanced technologies had become globally recognized, its steel-manufacturing technology was drawing foreign attention. In 1964, one of the biggest new steel mills in Europe, an Italian steel maker in Toronto, had newly completed construction of two blast-furnaces with a capacity of 2,000 tons each and a converter with a capacity of 3,000 tons. When it encountered problems in its blast-furnace operations, it turned to Yawata Steel for technological advice. Within six months, Toronto had been able to increase its output 15 per cent.

Later, Yawata exported converter technology to British Steel Co., in Wales, the birthplace of modern iron-manufacturing technology. Japan's export of such technology culminated in a series of plant exports to developing countries, including Brazil (Usinas Sider˙rgicas de Minas Gerais, or Usiminas), Malaysia (Malayawata Steel Co., Ltd.), and the Middle East (Qater Steel Co.).4

In the 1960s, the world steel industry entered an age of large blast-furnaces and LD converters, although these plants were still at the planning level and were not yet practical as operational technologies. Thus Britain, a long-time iron-manufacturing country, had to seek help from Japan. This reveals that the components of a technology are usable only when they comprise equal elements of the technology. The question of whether a technology can be used is determined by the least developed of its components This is where technology differs from science, which endeavours to uncover a new principle and theoretically build upon it. It is important to keep this difference in mind when discussing science and technology.

Although scientific creativity is directed toward the discovery of principle and theory, technological creativity lies in finding a new way to co-ordinate and direct a set of skills and devices toward a definite practical purpose of operation. In R. & D., or research and development, the R may be expressed as a total of ds: R = d1 + d2 + d3 + ... dn

Japanese science and technology have sometimes been characterized with a small r and a large D, r. & D., but I believe they have both contributed their share to the world's Rs and Ds. All national experiences are different, none being superior or inferior to any other. The evaluation standards for pure science must not be applied to technology, which is for meeting the daily needs of the populace.

The post-war Japanese experience can be summarized by taking microelectronics as an example. Until recently, the vacuum tube was used in communications and computational equipment. In the mean time, the transistor was invented, just at a time when Japan was taking great pains to improve the performance of vacuum tubes and to mass-produce them. Nevertheless, Sony Corporation introduced the transistor into Japan - the first to do so - from the United States, where the technology had been used mainly for military purposes. After 1956 Sony began to develop and manufacture transistor radios, although they were too expensive then for most Japanese.

By 1960, Japanese transistor radios were finding their way into the American market. The transistor itself, as small as a grain of rice, was easier to put together and required the use of fewer hands to produce than the vacuum tube, but it required intensive labour to attach the reed wires to each tiny transistor, to set the resistor, condenser, coil, and variable condenser, and to run through the complicated process of wiring before a radio was completed.

Thus, "the greater the transistor radio industry grew in scale, the more hands were needed. It was the ideal growth industry for Japan at that time where a comparatively cheap labour force with fairly high technological ability was amply available.5 Japan thus became the top transistor manufacturing country in the world by around the mid-1960s.

In 1960, Japan took another punch, the IC shock. The US corporation Texas Instruments invented ICs and sold them to the US Air Force, though at the high price of US$700 per circuit. The switch from transistors to ICs represented also a change in the substrate material, from germanium to silicon. In effecting this substrate change, the Esaki diode, a diode discovered by a Japanese scientist, was used, which in itself indicates the character of Japanese industry. As with the invention of KS magnetic steel by Honda Kotaro in 1933, however, it was not Japanese industry that put it to practical use. Science and technology will not be put to practical use where there is no need; even when a need exists, it might not always lead to a practical application. In any event, Japan had no military need for the new technology at that time.

ICs began to be manufactured in Japan in 1966. As is well known, the IC comes in two types: the bipolar type, which is good at quick calculation but not at minuteness, and the MIOS type, which shows just the reverse characteristics of the bipolar model. Though the bipolar type is preferred for aerospace and military purposes because of its high-speed logic circuitry, the MIOS type was chosen in Japan to develop IC manufacturing for civilian purposes because of its better storage capabilities.

One difficulty Japanese manufacturers were facing at the time arose from the fact that some leading US manufacturers were having their units built in South-East Asia, where cheap labour was available. The Japanese makers knew, however, that if they could double their output through mass production, they would be able to realize a 30 per cent lowering of cost; consequently, they introduced more than six times the number of existing automated lines to rival the US manufacturers.

Then in 1971, Japan was hit by the advent of the LSI. The Japanese-made IC would lose the war. Japanese manufacturers managed to cope with the difficulty, however, by increasing the integration density of IC components by one digit, which resulted in a one-digit cost decrease.

An important factor at the time was a curtailment of manufacturing processes. The existing equipment for SSls and MSls, including even what had been installed within the past two years, were scrapped to prepare for LSI manufacturing.6 This heralded a fierce competition between the ability to develop technology and to manufacture it, a waste, it may be said, of human energy. This sort of battle is being fought even today in areas of product development between Japan and the United States and among Japanese manufacturers.

With the LSI, the efficiency and control of machines was greatly enhanced. Industrial technology, whose products in the 1950s and the 1960s were characterized as "big, long, heavy, and thick," was producing in the 1970s goods that were "small, short, light, and thin."

Due to the complexity of the LSI, manual labour had a limited part in its manufacture. Rather, highly complex equipment was necessary, which required heavy capital investment, and this, in turn, demanded a big market. Japanese LSI manufacturers chose non-military areas in which to sell their goods.

IC manufacturers in the United States tended to be venture businesses with a specialty line, but in Japan the chief manufacturers of instruments had their own IC branches, thus their comparative advantages in capital investment, marketing, and product development.

The Effects of Technology

What will the rapid development of semiconductor technology bring to mankind? One argument made in response to this question at a UN University meeting underlined that the development of micro-electronics (ME) would radically change the information and communications networks in the developing countries. The effects of using ME for educational purposes were also discussed and opposing arguments heard. A situation might arise, it was argued, in which a country's central government would make use of ME for monopolizing information so that central needs might be met at the cost of provincial needs.

Does the LSI signal a new industrial revolution? The arguments began when the IC was first used to operate machine tools (the advent of the numerically controlled, or NC, machine tools). More interest was aroused when the machining centre (MC) made its appearance, followed by robots for welding and painting. The NC machine tool in its early years differed from today's in output and price as greatly as the IC and the LSI did.

In 1980, the NC machine tool almost doubled its built-in capability, compared with its predecessor of a year earlier. The machinery industry prompted the appearance of these automated machines in its call for higher-speed mass production and greater product precision. In the automobile industry, for example, the structure of which is shown in figure 1, each car required about 30,000 parts, constituting 5,000 different types. Even the largest car makers manufactured an average of only 30 per cent of these parts. The rest were supplied by small independent manufacturers, and that is where the need for NC machine tools was felt the most.

The adoption of robots in Japan (initially in the small- and medium-scale industries) to weld and paint was encouraged by a labour shortage and the lower prices of LSls. The introduction of the robot was, it should be noted, a labour-saving device only at this stage, since the intention was to meet the existing tact of the production line; consequently, there was no time savings or loss.

The appearance of the NC machine tool represented an important innovation for the machine tool in the machinery industry. As noted earlier, machines were changed in the 1960s, and in the 1970s, factory layouts were altered. Furthermore, to be able to handle the new machines well, the workers were required to have the basic mechanical and mathematical knowledge of a technical high school graduate. Today's machines, however, require less ability to operate. It is clear, though, that higher educational standards are a prerequisite for higher technology.

Though the NC and MC revolutionized the parts-manufacturing processes, some 75 per cent of the labour and working hours in the machinery industry were in assembly. Consequently, assembly process automation was the next object of rationalization. The Japanese machinery industry is currently testing assembly automation, referred to as factory automation (FA), and the flexible manufacturing system complex (FMSC). It is estimated that, if such automation can be successfully implemented, labour productivity could be enhanced 30 to 40 times. At the same time, workers would be expected to have the skills of a multi-skilled mechanic, skills far exceeding in quantity and quality what they have today. That would require additional investment for education, whether public or private.

Complex manufacturing systems result in lower prices and diversification. The LSI has already changed the character of the mass-production system, allowing, as it does, the production of a uniform product through the assembly of a great many standard and exchangeable parts.

Figure 1.

Division of labour in the Japanese automobile industry

Notes:

1. Percentage of in-house manufactured parts =

2. Sub-contracting manufacturers of primary parts do not necessarily work for Company "A" alone.

3. In Japan, parts manufacturers are, as a rule, affiliated with one or more controlling companies; in the United States, they are vertically integrated with automobile manufacturers; in Europe, there is a horizontal division of labour between the two. With Japanese auto makers, despite the comparatively low percentage of parts made in-house (25% to 30% for Japan versus 50% to 60% for the United States and Europe), quality control and cost control are well maintained because they control their sub-contractors' technologies, capital, and personnel.

Sources: ChŘsh§ kigy§ hakusho (White paper on small - and medium-scale enterprises), 1980 edition; Industrial Bank of Japan - Research Department, ed., Nihon sangy§ doku-hon (A reader on Japanese industry), Tokyo, Toyo Keizai Shimpo Sha. 1984, p. 163.

Computers enable mass-production lines to meet the specifications for more than 200 parts that go into the manufacture of a particular car model. Thus, mass production has undergone immense qualitative change, from the mass production of a single kind of Colt rifle (the first mass-produced product) to that of highly diversified products. What has made this possible was the development of the electronics industry in the 1960s and thereafter and the introduction of its products into the manufacturing process.

The development of the electronics industry has caused great concern about how the advances would affect employment. In Japan, this worry has so far proved unfounded, according to an official survey.7 The appearance of the quartz watch is an example: Technological innovation in one of the manufacturing processes increased productivity four times. But, rather than simply decreasing the number of workers by four times, it was the policy of Japanese business to transfer those displaced to another process. Here we see a great difference between management practices in Japan and those in the United States and Europe, where management is characterized by functionalism.

The enhanced productivity called for an expanded market, and the rapid economic growth of Japan at that time provided it. Without enlarged markets resulting from product diversification, enhanced productivity as a result of technological innovations will reduce employment.

In Japan, increased productivity, a realization of full employment, and wage increases led to an enlarged and deepened market, which proved the government's growth-oriented income-doubling policy effective. As a result, the world-wide reputation of Japanese goods being cheap but poor changed in the 1960s to cheap and good, and since the 1970s they have been regarded as expensive but superb. After IC manufacturing became automated, the cost performance of the Japanese electronics industry began to be highly regarded in the American market.

Besides changing the nature of its products, Japanese industry has now begun to change its employment structure. The total number of employees in the manufacturing sector is on the decline, while in the non-manufacturing sector, especially in sales and in R. & D., it is increasing. In manufacturing, the technology is mature, and the use of ICs and LSls has generally had a great skill-saving effect, resulting in differences in the quality and efficiency of goods between major and minor manufacturers being almost indiscernible. To use our terms, M3, Ma, and M5 have become weightier.

In the case of a certain calculator manufacturer, 1,000 of 3,500 employees are engaged in R. & D. at a technology centre. At a motor cycle manufacturer, salesmen participate in meetings for technological development so that the company's manufacturing technology may better meet market needs, and in the manufacturing department, workers are encouraged to acquire skills not directly related to those required for their current employment. For example, an assembly-line worker may be encouraged to qualify as a maintenance technician, as a plumber, or as an operator of high-pressure machines or instruments. Though this practice may pose a risk to the employer that skilled workers will resign their jobs, it is considered desirable that a single-craft worker should become an all-around worker: hence, the big investment in employee education. Current technological development and innovation require the convergence of a wide range of engineering and scientific knowledge, and, likewise, it is necessary for workers, at all levels, to have a proficiency in several areas, and this represents a new means of skill formation.

It should be noted, however, that the development of technology in Japan was not without cost. First, it widened regional gaps in development; second, it aggravated industrial pollution. The underground water pollution caused by LSI factories has recently attracted attention.

Growth-oriented economic calculations, with their peculiar values, disregard such social problems. If a pollution victim loses all income because of illness, the case will be counted a negative in the economic calculation, but if the victim receives medical care, it will be counted a plus. In the same sense, the building of anti-pollution facilities will mean an increase in GNP. This should be taken into consideration when one makes use of macro-economic calculations.

Between the periods of recovery and rapid economic growth, Japan's industrial picture underwent radical change. The four major industrial centres of pre-war Japan combined to form a single long belt. This concentration widened the income gap between the urban and rural sectors, which further intensified the concentration of population in the cities, aggravated the urban housing problem, and pushed up land prices to result in the mushrooming of "rabbit-hutch" dwellings. At the same time, the exodus of young people from the remoter towns and villages created areas of underpopulation.

When a community's population decreases below a given level, the community cannot continue to exist; once its working-age inhabitants are gone, its social balance is lost. The phenomenon of village disintegration (muratsubure) appeared in many parts of the country, brought on by the decline in the primary labour population because of industrialization. This went hand in hand with mechanization, which also contributed to a decreased labour force.

The middle-aged and the elderly, unable to adapt to the changes brought on by the rapid economic growth, were placed at a disadvantage. This may be said to parallel the problems arising in third world countries in their development. Their problems today and the problems facing Japan during post-war industrialization are essentially the same in character and structure.

The pollution problems Japan faced also parallel the situation in the developing countries. In the period of rapid economic growth, which was strongly oriented toward the heavy and chemical industries, little attention was paid to the problem of pollution.8 Aside from automobile exhaust fumes, the noise and vibration from the Shinkansen (superexpress bullet trains), and the smoke and dust from the growing steel mills, air pollution caused by petrochemical plants gave rise to asthma and related disorders among the populace in the areas around the plants, and the heavy-metal effluence from fertilizer plants, ingested by fish, eventually culminated in the tragic outbreak of Minamata disease.

Figure 2.

Transactions in automobile production (for every 1 million yen, based on 1975)

Note: Numbers in circles correspond to the size of transactions; the structural relations shown here indicate the structure of transactions between different branches directly and indirectly necessary for producing a unit of automobiles.

Source: Prepared by Watanabe Toshio and Kajiwara Hirokazu on the basis of Ozaki Iwao, "Reaction of Economics to Changing Structures: Technological vs. Economic Systems," Kikan Gendai Keizai, no. 40 (1980). Taken from Ajia suihei hungy§ no jidai (Horizontal division of labour in Asia) (Tokyo, JETRO, 1983).

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