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Saturday, March 26, 2022

Appeasement

From Wikipedia, the free encyclopedia
 
Adolf Hitler greets UK Prime Minister Neville Chamberlain at the beginning of the Bad Godesberg meeting on 24 September 1938, where Hitler demanded annexation of Czech border areas without delay (see Godesberg Memorandum)

Appeasement in an international context is a diplomatic policy of making political, material, or territorial concessions to an aggressive power in order to avoid conflict. The term is most often applied to the foreign policy of the UK governments of Prime Ministers Ramsay MacDonald (in office: 1929–1935), Stanley Baldwin (in office: 1935–1937) and (most notably) Neville Chamberlain (in office: 1937–1940) towards Nazi Germany (from 1933) and Fascist Italy (established in 1922) between 1935 and 1939. Under British pressure, appeasement of Nazism and Fascism also played a role in French foreign policy of the period, but was always much less popular than in the United Kingdom.

At the beginning of the 1930s, appeasing concessions were widely seen as desirable—due to the anti-war reaction to the trauma of World War I (1914–1918), second thoughts about the perceived vindictive treatment by some of Germany in the 1919 Treaty of Versailles, and a perception that fascism was a useful form of anti-communism. However, by the time of the Munich Pact—concluded on 30 September 1938 between Germany, the United Kingdom, France, and Italy—the policy was opposed by the Labour Party, by a few Conservative dissenters such as future Prime Minister Winston Churchill, Secretary of State for War Duff Cooper, and future Prime Minister Anthony Eden. Appeasement was strongly supported by the British upper class, including royalty, big business (based in the City of London), the House of Lords, and media such as the BBC and The Times.

As alarm grew about the rise of fascism in Europe, Chamberlain resorted to attempts at news censorship to control public opinion. He confidently announced after Munich that he had secured "peace for our time".

Academics, politicians, and diplomats have intensely debated the 1930s appeasement policies for more than eighty years. The historians' assessments have ranged from condemnation ("Lesson of Munich") for allowing Hitler's Germany to grow too strong, to the judgment that Germany was so strong that it might well win a war and that postponement of a showdown was in their country's best interests.

Failure of collective security

"Appeasement policy, the policy of appeasing Hitler and Mussolini, operating jointly at that time, during 1937 and 1938 by continuous concessions granted in the hope of reaching a point of saturation when the dictators would be willing to accede to international collaboration. ... It came to an end when Hitler seized Czechoslovakia on March 15, 1939, in defiance of his promises given at Munich, and Prime Minister Chamberlain, who had championed appeasement before, decided on a policy of resistance to further German aggression."

– Walter Theimer (ed.), The Penguin Political Dictionary, 1939

Chamberlain's policy of appeasement emerged from the failure of the League of Nations and the failure of collective security. The League of Nations was set up in the aftermath of World War I in the hope that international cooperation and collective resistance to aggression might prevent another war. Members of the League were entitled to the assistance of other members if they came under attack. The policy of collective security ran in parallel with measures to achieve international disarmament and where possible was to be based on economic sanctions against an aggressor. It appeared to be ineffectual when confronted by the aggression of dictators, notably Germany's Remilitarization of the Rhineland, and Italian leader Benito Mussolini's invasion of Abyssinia.

Invasion of Manchuria

In September 1931, the Empire of Japan, a member of the League of Nations, invaded Manchuria in northeast China, claiming that its population was not only Chinese but was a multi-ethnic region. The Republic of China appealed to the League of Nations and the United States for assistance. The Council of the League asked the parties to withdraw to their original positions to permit a peaceful settlement. The United States reminded them of their duty under the Kellogg–Briand Pact to settle matters peacefully. Japan was undeterred and went on to occupy the whole of Manchuria. The League set up a commission of inquiry that condemned Japan, the League duly adopting the report in February 1933. In response, Japan resigned from the League and continued its advance into China; neither the League nor the United States took any action. However, the U.S. issued the Stimson Doctrine and refused to recognize Japan's conquest, which played a role in shifting U.S. policy to favour China over Japan in the late-1930s. Some historians, such as David Thomson, assert that the League's "inactivity and ineffectualness in the Far East lent every encouragement to European aggressors who planned similar acts of defiance".

Anglo-German Naval Agreement

In this 1935 pact, the UK permitted Germany to begin rebuilding its navy, including its U-boats, in spite of Hitler already having violated the Treaty of Versailles.

Abyssinia crisis

Emperor Haile Selassie of Ethiopia, circa 1942

Italian Prime Minister Benito Mussolini had imperial ambitions in Abyssinia. Italy was already in possession of neighbouring Eritrea and Somalia. In December 1934, there was a clash between Italian and Abyssinian troops at Walwal, near the border between British and Italian Somaliland, in which Italian troops took possession of the disputed territory and in which 150 Abyssinians and 50 Italians were killed. When Italy demanded apologies and compensation from Abyssinia, Abyssinia appealed to the League, Emperor Haile Selassie famously appealing in person to the assembly in Geneva. The League persuaded both sides to seek a settlement under the Italo-Ethiopian Treaty of 1928 but Italy continued troop movements and Abyssinia appealed to the League again. In October 1935 Mussolini launched an attack on Abyssinia. The League declared Italy to be the aggressor and imposed sanctions, but coal and oil were not included; blocking these, it was thought, would provoke war. Albania, Austria, and Hungary refused to apply sanctions; Germany and the United States were not in the League. Nevertheless, the Italian economy suffered. The League considered closing off the Suez Canal also, which would have stopped arms to Abyssinia, but, thinking it would be too harsh a measure, they did not do so.

Earlier, in April 1935, Italy had joined Britain and France in protest against Germany's rearmament. France was anxious to placate Mussolini so as to keep him away from an alliance with Germany. Britain was less hostile to Germany and set the pace in imposing sanctions and moved a naval fleet into the Mediterranean but in November 1935, the British Foreign Secretary, Sir Samuel Hoare and the French Prime Minister, Pierre Laval, had secret discussions in which they agreed to concede two-thirds of Abyssinia to Italy. However, the press leaked the content of the discussions and a public outcry forced Hoare and Laval to resign. In May 1936, undeterred by sanctions, Italy captured Addis Ababa, the Abyssinian capital, and proclaimed Victor Emmanuel III the Emperor of Ethiopia. In July the League abandoned sanctions. This episode, in which sanctions were incomplete and appeared to be easily given up, seriously discredited the League.

Remilitarisation of the Rhineland

UK Prime Minister Stanley Baldwin

Under the Versailles Settlement, the Rhineland was demilitarised. Germany accepted this arrangement under the Locarno Treaties of 1925. Hitler claimed that it threatened Germany and on 7 March 1936, he sent German forces into the Rhineland. He gambled on Britain not getting involved but was unsure how France would react. The action was opposed by many of his advisers. His officers had orders to withdraw if they met French resistance. France consulted Britain and lodged protests with the League, but took no action. Prime Minister Stanley Baldwin said that Britain lacked the forces to back its guarantees to France and that in any case, public opinion would not allow it. In Britain, it was thought that the Germans were merely walking into "their own backyard". Hugh Dalton, a Labour Party MP who usually advocated stiff resistance to Germany, said that neither the British people nor Labour would support military or economic sanctions. In the Council of the League, only the Soviet Union proposed sanctions against Germany. Hitler was invited to negotiate. He proposed a non-aggression pact with the Western powers. When asked for details he did not reply. Hitler's occupation of the Rhineland had persuaded him that the international community would not resist him and put Germany in a powerful strategic position.

Spanish Civil War

Many historians argue that the British policy of non-intervention was a product of the Establishment's anti-Communist stance. Scott Ramsay (2019) instead argues that Britain demonstrated "benevolent neutrality". It was simply hedging its bets, avoiding favouring one side or the other. The goal was that in a European war Britain would enjoy the 'benevolent neutrality' of whichever side won in Spain.

Conduct of appeasement, 1937–1939

Seyss-Inquart and Hitler in Vienna, March 1938

In 1937 Stanley Baldwin resigned as Prime Minister and Neville Chamberlain took over. Chamberlain pursued a policy of appeasement and rearmament. Chamberlain's reputation for appeasement rests in large measure on his negotiations with Hitler over Czechoslovakia in 1938.

Anschluss

When the German Empire and Austro-Hungarian Empire were broken up in 1918, Austria was left as a rump state with the temporary adopted name Deutschösterreich ("German-Austria"), with the vast majority of the Austrian Germans wanting to join Germany. However, the victors' agreements of World War I (Treaty of Versailles and the Treaty of Saint-Germain) strictly forbade union between Austria and Germany, as well as the name "German-Austria", which reverted to "Austria" after the emergence of the First Republic of Austria in September 1919. The constitutions of both the Weimar Republic and the First Austrian Republic included the aim of unification, which was supported by democratic parties. However, the rise of Hitler dampened the enthusiasm of the Austrian government for such a plan. Hitler, an Austrian by birth, had been a pan-German from a very young age and had promoted a Pan-German vision of a Greater German Reich from the beginning of his career in politics. He said in Mein Kampf (1924) that he would attempt a union of his birth country Austria with Germany, by any means possible and by force if necessary. By early 1938, Hitler had consolidated his power in Germany and was ready to implement this long-held plan.

The Austrian Chancellor Kurt Schuschnigg wished to pursue ties with Italy, but turned to Czechoslovakia, Yugoslavia and Romania (the Little Entente). To this Hitler took violent exception. In January 1938 the Austrian Nazi Party attempted a putsch, following which some were imprisoned. Hitler summoned Schuschnigg to Berchtesgaden in February and demanded, with the threat of military action, that he release imprisoned Austrian Nazis and allow them to participate in the government. Schuschnigg complied and appointed Arthur Seyss-Inquart, a pro-Nazi lawyer, as interior minister. To forestall Hitler and to preserve Austria's independence, Schuschnigg scheduled a plebiscite on the issue for 13 March. Hitler demanded that the plebiscite be cancelled. The German Propaganda Ministry issued press reports that riots had broken out in Austria and that large parts of the Austrian population were calling for German troops to restore order. On 11 March, Hitler sent an ultimatum to Schuschnigg, demanding that he hand over all power to the Austrian Nazis or face an invasion. The British Ambassador in Berlin, Nevile Henderson, registered a protest with the German government against the use of coercion against Austria. Schuschnigg, realising that neither France nor the United Kingdom would actively support him, resigned in favour of Seyss-Inquart, who then appealed to German troops to restore order. On 12 March the German Wehrmacht crossed the Austrian border. They met no resistance and were greeted by cheering Austrians. This invasion was the first major test of the Wehrmacht's machinery. Austria became the German province of Ostmark, with Seyss-Inquart as governor. A plebiscite was held on 10 April and officially recorded a support of 99.73% of the voters.

Although the victorious Allies of World War I had prohibited the union of Austria and Germany, their reaction to the Anschluss was mild. Even the strongest voices against annexation, particularly those of Fascist Italy, France and Britain (the "Stresa Front") were not backed by force. In the House of Commons Chamberlain said that "The hard fact is that nothing could have arrested what has actually happened [in Austria] unless this country and other countries had been prepared to use force." The American reaction was similar. The international reaction to the events of 12 March 1938 led Hitler to conclude that he could use even more aggressive tactics in his plan to expand the Third Reich. The Anschluss paved the way for Munich in September 1938 because it indicated the likely non-response of Britain and France to future German aggression.

From left to right: Chamberlain, Daladier, Hitler, Mussolini, and Ciano pictured before signing the Munich Agreement, which gave the Czechoslovak border areas to Germany.

Munich Agreement

"How horrible, fantastic, incredible it is that we should be digging trenches and trying on gas masks here because of a quarrel in a far-away country between people of whom we know nothing."

Neville Chamberlain, 27 September 1938, 8 p.m. radio broadcast, on Czechoslovak refusal to accept Nazi demands to cede border areas to Germany.

Under the Versailles Settlement, Czechoslovakia was created with the territory of the Czech part more or less corresponding to the Czech Crown lands as they had existed within the Austria-Hungary and before. It included Bohemia, Moravia, and Slovakia and had border areas with a majority German population known as the Sudetenland and areas with significant numbers of other ethnic minorities (notably Hungarians, Poles, and Ruthenes). In April 1938, the Sudeten German Party, led by Konrad Henlein, agitated for autonomy and then threatened, in Henlein's words, "direct action to bring the Sudeten Germans within the frontiers of the Reich". An international crisis ensued.

France and Britain advised Czech acceptance of Sudeten autonomy. The Czech government refused and ordered a partial mobilisation in expectation of German aggression. Lord Runciman was sent by Chamberlain to mediate in Prague and persuaded the Czech government to grant autonomy. Germany escalated the dispute, the German press carrying stories of alleged Czech atrocities against Sudeten Germans and Hitler ordering 750,000 troops to the German-Czech border. In August, Henlein broke off negotiations with the Czech authorities. At a Nazi Party Rally in Nuremberg on 12 September, Hitler made a speech attacking Czechoslovakia and there was an increase of violence by Sudeten Nazis against Czech and Jewish targets.

Chamberlain, faced with the prospect of a German invasion, flew to Berchtesgaden on 15 September to negotiate directly with Hitler. Hitler now demanded that Chamberlain accept not merely Sudeten self-government within Czechoslovakia, but the absorption of the Sudeten lands into Germany. Chamberlain became convinced that refusal would lead to war. The geography of Europe was such that Britain and France could forcibly prevent the German occupation of the Sudetenland only by the invasion of Germany. Chamberlain, therefore, returned to Britain and agreed to Hitler's demands. Britain and France told the Czech president Edvard Beneš that he must hand to Germany all territory with a German majority. Hitler increased his aggression against Czechoslovakia and ordered the establishment of a Sudeten German paramilitary organisation, which proceeded to carry out terrorist attacks on Czech targets.

German annexation of the Sudetenland

On 22 September, Chamberlain flew to Bad Godesberg for his second meeting with Hitler. He said he was willing to accept the cession of the Sudetenland to Germany. He was startled by Hitler's response: Hitler said that cession of the Sudetenland was not enough and that Czechoslovakia (which he had described as a "fraudulent state") must be broken up completely. Later in the day, Hitler resiled, saying that he was willing to accept the cession of the Sudetenland by 1 October. On 24 September, Germany issued the Godesberg Memorandum, demanding cession by 28 September, or war. The Czechs rejected these demands, France ordered mobilisation and Britain mobilised its Navy.

British Prime Minister Neville Chamberlain, landing at Heston Aerodrome on 30 September 1938 after his meeting with Hitler at Munich. In his hand he holds the peace agreement between Britain and Germany.

On 26 September Hitler made a speech at the Sportpalast in Berlin in which he claimed that the Sudetenland was "the last territorial demand I have to make in Europe," and gave Czechoslovakia a deadline of 28 September at 2:00pm to cede the territory to Germany or face war.

In this atmosphere of growing conflict, Mussolini persuaded Hitler to put the dispute to a four-power conference and on 29 September 1938, Hitler, Chamberlain, Édouard Daladier (the French Prime Minister) and Mussolini met in Munich. Czechoslovakia was not to be a party to these talks, nor was the Soviet Union. The four powers agreed that Germany would complete its occupation of the Sudetenland but that an international commission would consider other disputed areas. Czechoslovakia was told that if it did not submit, it would stand alone. At Chamberlain's request, Hitler readily signed a peace treaty between the United Kingdom and Germany. Chamberlain returned to Britain promising "peace for our time". Before Munich, President Franklin D. Roosevelt sent a telegram to Chamberlain saying "Goodman", and afterward told the American ambassador in Rome William Phillips, "I am not a bit upset over the final result."

First Vienna Award, German annexation of Bohemia and Moravia

As a result of the annexation of the Sudetenland, Czechoslovakia lost 800,000 citizens, much of its industry and its mountain defences in the west. It left the rest of Czechoslovakia weak and powerless to resist subsequent occupation. In the following months Czechoslovakia was broken up and ceased to exist as Germany annexed the Sudetenland, Hungary part of Slovakia including Carpathian Ruthenia, and Poland Zaolzie. On 15 March 1939, the German Wehrmacht moved into the remainder of Czechoslovakia and, from Prague Castle, Hitler proclaimed Bohemia and Moravia the Protectorate of Bohemia and Moravia, completing the German occupation of Czechoslovakia. An independent Slovakia was created under a pro-Nazi puppet government.

In March 1939, Chamberlain foresaw a possible disarmament conference between himself, Edouard Daladier, Adolf Hitler, Benito Mussolini and Joseph Stalin; his home secretary, Samuel Hoare, said, "These five men, working together in Europe and blessed in their efforts by the President of the United States of America, might make themselves eternal benefactors of the human race."

In effect, the British and French had, through the Munich negotiations, pressured their ally Czechoslovakia to cede part of its territory to a hostile neighbour in order to preserve peace. Winston Churchill likened the negotiations at Berchtesgarten, Bad Godesberg and Munich to a man demanding £1, then, when it is offered, demanding £2, then when it is refused settling for £1.17s.6d. British leaders committed to the Munich Pact in spite of their awareness of Hitler's vulnerability at the time. In August 1938, General Ludwig Beck relayed a message to Lord Halifax explaining that most of the German General Staff were preparing a coup against the Fuhrer, but would only attack with "proof that England will fight if Czechoslovakia is attacked". When Chamberlain received the news, he dismissed it out of hand. In September, the British received assurance that the General Staff's offer to launch the coup still stood, with key private sector, police and army support, even though Beck had resigned his post. Chamberlain ultimately ceded to all of Hitler's demands at Munich because he believed Britain and Nazi Germany were "the two pillars of European peace and buttresses against communism".

Czechoslovakia had a modern, well-prepared military and Hitler, on entering Prague, conceded that a war would have cost Germany much blood but the decision by France and Great Britain not to defend Czechoslovakia in the event of war (and the exclusion from the equation of the Soviet Union, whom Chamberlain distrusted) meant that the outcome would have been uncertain. This event forms the main part of what became known as Munich betrayal (Czech: Mnichovská zrada) in Czechoslovakia and the rest of Eastern Europe, as the Czech view was that Britain and France pressured them to cede territory in order to prevent a major war that would involve the West. The Western view is that they were pressured in order to save Czechoslovakia from total annihilation.

German annexation of Lithuania's Klaipėda Region

Rumors had reached the Lithuanian government to the effect that Germany had specific plans to take over Klaipėda. On 12 March Foreign Minister Urbšys represented Lithuania at the coronation of Pope Pius XII in Rome. On his return to Lithuania he stopped in Berlin with the hope of clarifying the growing rumors. On 20 March, just five days after the Nazi occupation of Czechoslovakia, Ribbentrop agreed to meet with Urbšys, but not with Kazys Škirpa, who was asked to wait in another room. The conversation lasted for about 40 minutes. Ribbentrop demanded the return of Klaipėda to Germany and threatened military action. Urbšys relayed the verbal ultimatum to the Lithuanian government. Because the ultimatum was never set down in writing and did not include a formal deadline, some historians have downplayed its importance, describing it as a "set of demands" rather than as an ultimatum. However, it was made clear that force would be used should Lithuania resist, and it was warned not to seek help from other nations. While a clear deadline was not given, Lithuania was told to make a speedy decision and that any clashes or German casualties would inevitably provoke a response from the German military.

Lithuania secretly informed the signatories of the Klaipėda Convention about these demands, since technically Lithuania could not transfer Klaipėda without the approval of the signatories. Italy and Japan supported Germany in the matter, while the United Kingdom and France expressed sympathy for Lithuania but chose not to offer any material assistance. They followed a well-publicized policy of appeasing Hitler. The UK treated the issue in the same way as it had treated the Sudeten Crisis and made no plans to assist Lithuania or the other Baltic States if they were attacked by Germany. The Soviet Union, while supporting Lithuania in principle, did not wish to disrupt its relations with Germany at that point, since it was contemplating a pact with the Nazis. Without any material international support Lithuania had no choice but to accept the ultimatum. Lithuanian diplomacy characterized the concession as a "necessary evil" that would enable Lithuania to preserve its independence and maintained the hope that it was merely a temporary retreat.

Outbreak of World War II and the Phoney War

By August 1939 Hitler was convinced that the democratic nations would never put up any effective opposition to him. He expressed his contempt for them in a speech he delivered to his Commanders in Chief: "Our enemies have leaders who are below the average. No personalities. No masters, no men of action… Our enemies are small fry. I saw them in Munich."

On 1 September 1939, German forces invaded Poland; Britain and France joined the war against Germany, but initially averted serious military involvement during the period known as the Phoney War. Following the German invasion of Norway, opinion turned against Chamberlain's conduct of the war; he resigned, and on 10 May 1940 Winston Churchill became Prime Minister. In July, following the Fall of France, when Britain stood almost alone against Germany, Hitler offered peace. Some politicians inside and outside the government were willing to consider the offer but Churchill would not. Chamberlain died on 9 November the same year. Churchill delivered a tribute to him in which he said, "Whatever else history may or may not say about these terrible, tremendous years, we can be sure that Neville Chamberlain acted with perfect sincerity according to his lights and strove to the utmost of his capacity and authority, which were powerful, to save the world from the awful, devastating struggle in which we are now engaged."

Attitudes towards appeasement

As the policy of appeasement failed to prevent war, those who advocated it were quickly criticised. Appeasement came to be seen as something to be avoided by those with responsibility for the diplomacy of Britain or any other democratic country. By contrast, the few who stood out against appeasement were seen as "voices in the wilderness whose wise counsels were largely ignored, with almost catastrophic consequences for the nation in 1939–40". More recently, however, historians have questioned the accuracy of this simple distinction between appeasers and anti-appeasers. "Few appeasers were really prepared to seek peace at any price; few, if any, anti-appeasers were prepared for Britain to make a stand against aggression whatever the circumstances and wherever the location in which it occurred."

Avoiding the mistakes of the Great War

Chamberlain's policy in many respects continued the policies of MacDonald and Baldwin, and was popular until the failure of the Munich Agreement to stop Hitler in Czechoslovakia. "Appeasement" had been a respectable term between 1919 and 1937 to signify the pursuit of peace. Many believed after the First World War that wars were started by mistake, in which case the League of Nations could prevent them, or that they were caused by large-scale armaments, in which case disarmament was the remedy, or that they were caused by national grievances, in which case the grievances should be redressed peacefully. Many thought that the Versailles Settlement had been unjust, that the German minorities were entitled to self-determination and that Germany was entitled to equality in armaments.

Government views

Appeasement was accepted by most of those responsible for British foreign policy in the 1930s, by leading journalists and academics and by members of the royal family, such as King Edward VIII and his successor, George VI. Anti-communism was sometimes acknowledged as a deciding factor, as mass labour unrest resurfaced in Britain, and news of Stalin's bloody purges disturbed the West. A common upper-class slogan was "better Hitlerism than Communism". (In France, right-wingers were sometimes heard to chant "Better Hitler than Blum," referring to their Socialist Prime Minister Léon Blum at the time.) Anticommunism was a motiv of a close ally of Chamberlain, Lord Halifax. After visiting Göring and meeting Hitler in Germany in 1936 and 1937 he said: "Nationalism and Racialism is a powerful force but I can't feel that it's either unnatural or immoral! I cannot myself doubt that these fellows are genuine haters of Communism, etc.! And I daresay if we were in their position we might feel the same!"

Most Conservative MPs were also in favour, though Churchill said their supporters were divided and in 1936 he led a delegation of leading Conservative politicians to express to Baldwin their alarm about the speed of German rearmament and the fact that Britain was falling behind. Baldwin rejected their sense of urgency, declaring he would not get Britain to war with anybody "for the League of Nations or anybody else", and that if there were to be any fighting in Europe, "I should like to see the Bolshies and Nazis doing it." Amongst Conservatives, Churchill was unusual in believing that Germany menaced freedom and democracy, that British rearmament should proceed more rapidly and that Germany should be resisted over Czechoslovakia. His criticism of Hitler began from the start of the decade, yet Churchill was slow to attack fascism overall due to his own vitriolic opposition to Communists, "international Jews", and socialism generally. Churchill's sustained warnings about fascism only commenced in 1938 after Hitler's ally, Francisco Franco, decimated the left in Spain.

The week before Munich, Churchill warned "The partition of Czechoslovakia under pressure from the UK and France amounts to the complete surrender of the Western Democracies to the Nazi threat of force. Such a collapse will bring peace or security neither to the UK nor to France." He and a few other Conservatives who refused to vote for the Munich settlement were attacked by their local constituency parties. However Churchill's subsequent leadership of Britain during the war and his role in creating the post-war consensus against appeasement has tended to obscure the fact that "his contemporary criticism of totalitarian regimes other than Hitler's Germany was at best muted". Not until May 1938 did he begin "consistently to withhold his support from the National Government's conduct of foreign policy in the division lobbies of the House of Commons", and he seems "to have been convinced by the Sudeten German leader, Henlein, in the spring of 1938, that a satisfactory settlement could be reached if Britain managed to persuade the Czech government to make concessions to the German minority".

Military views

In Britain the Royal Navy generally favoured appeasement. In the Italian Abyssinia Crisis of 1937 it was confident it could easily defeat the Royal Italian Navy in open warfare. However, it favoured appeasement because it did not want to commit a large fraction of its naval power to the Mediterranean, thereby weakening its positions against Germany and Japan. In 1938, the Royal Navy approved appeasement regarding Munich because it calculated that at that moment, Britain lacked the political and military resources to intervene and still maintain an imperial defence capability.

Public opinion in Britain throughout the 1930s was frightened by the prospect of German terror bombing of British cities, as they had started to do in the First World War. The media emphasised the dangers, and the general consensus was that defence was impossible and, as Prime Minister Stanley Baldwin had said in 1932 "The bomber will always get through." However, the Royal Air Force had two major weapons systems in the works—better interceptors (Hurricanes and Spitfires) and especially radar. These promised to counter the German bombing offensive. However they were not yet ready, so that appeasement was necessary to cause a delay. Specifically regarding the fighters, the RAF warned the government in October 1938 that the German bombers would probably get through: "the situation... will be definitely unsatisfactory throughout the next twelve months."

In France, the Air Force intelligence section closely examined the strength of the Luftwaffe. It decided the German pursuit planes and bombers were the best in the world, and that the Nazis were producing 1000 warplanes a month. They perceived decisive German air superiority, so the Air Force was pessimistic about its ability to defend Czechoslovakia in 1938. Guy La Chambre, the civilian air minister, optimistically informed the government that the air force was capable of stopping the Luftwaffe. However, General Joseph Vuillemin, air force chief of staff, warned that his arm was far inferior. He consistently opposed war with Germany.

Opposition parties

The Labour Party opposed the Fascist dictators on principle, but until the late 1930s it also opposed rearmament and it had a significant pacifist wing. In 1935 its pacifist leader George Lansbury resigned following a party resolution in favour of sanctions against Italy, which he opposed. He was replaced by Clement Attlee, who at first opposed rearmament, advocating the abolition of national armaments and a world peace-keeping force under the direction of the League of Nations. However, with the rising threat from Nazi Germany, and the ineffectiveness of the League of Nations, this policy eventually lost credibility, and in 1937 Ernest Bevin and Hugh Dalton persuaded the party to support rearmament and oppose appeasement.

A few on the left said that Chamberlain looked forward to a war between Germany and the Soviet Union. The Labour Party leader Clement Attlee claimed in one political speech in 1937 that the National Government had connived at German rearmament "because of its hatred of Russia". British Communists, following the party line defined by Joseph Stalin, argued that appeasement had been a pro-Fascist policy and that the British ruling class would have preferred fascism to socialism. The Communist MP Willie Gallacher said that "many prominent representatives of the Conservative Party, speaking for powerful landed and financial interests in the country, would welcome Hitler and the German Army if they believed that such was the only alternative to the establishment of Socialism in this country."

Public opinion

British public opinion had been strongly opposed to war and rearmament at the beginning of the 1930s, although this began to shift by mid-decade. At a debate at the Oxford Union Society in 1933, a group of undergraduates passed a motion saying that they would not fight for King and country, which persuaded some in Germany that Britain would never go to war. Baldwin told the House of Commons that in 1933 he had been unable to pursue a policy of rearmament because of the strong pacifist sentiment in the country. In 1935, eleven million responded to the League of Nations "Peace Ballot" by pledging support for the reduction of armaments by international agreement. On the other hand, the same survey also found that 58.7% of British voters favoured "collective military sanctions" against aggressors, and public reaction to the Hoare-Laval Pact with Mussolini was extremely unfavorable. Even the left-wing of the pacifist movement quickly began to turn with the outbreak of the Spanish Civil War in 1936 and many peace-balloters began signing up for the international brigades to fight Hitler's ally Francisco Franco. By the height of the Spanish conflict in 1937, the majority of young pacifists had modified their views to accept that war could be a legitimate response to aggression and fascism.

Czechoslovakia did not concern most people until the middle of September 1938, when they began to object to a small democratic state being bullied. Nevertheless, the initial response of the British public to the Munich agreement was generally favourable. As Chamberlain left for Munich in 1938, the whole House of Commons cheered him noisily. On 30 September, on his return to Britain, Chamberlain delivered his famous "peace for our time" speech to delighted crowds. He was invited by the Royal family onto the balcony at Buckingham Palace before he had reported to Parliament. The agreement was supported by most of the press, only Reynold's News and the Daily Worker dissenting. In parliament the Labour Party opposed the agreement. Some Conservatives abstained in the vote. However, the only MP to advocate war was the Conservative Duff Cooper, who had resigned from the government in protest against the agreement.

Role of the media

Positive opinion of appeasement was shaped partly by media manipulation. The German correspondent for the Times of London, Norman Ebbutt, charged that his persistent reports about Nazi militarism were suppressed by his editor Geoffrey Dawson. Historians such as Richard Cockett, William Shirer, and Frank McDonough have confirmed the claim, and also noted the links between The Observer and the pro-appeasement Cliveden Set. The results of an October 1938 Gallup poll which showed 86% of the public believed Hitler was lying about his future territorial ambitions was censored from the News Chronicle at the last minute by the publisher, who was loyal to Chamberlain. For the few journalists who were asking challenging questions about appeasement – primarily members of the foreign press – Chamberlain often froze them out or intimidated them. When asked at press conferences about Hitler's abuse of Jews and other minority groups, he went so far as to denounce these reports as "Jewish-Communist propaganda".

Chamberlain's direct manipulation of the BBC was sustained and egregious. For example, Lord Halifax told radio producers not to offend Hitler and Mussolini, and they complied by censoring anti-fascist commentary made by Labour and Popular Front MPs. The BBC also suppressed the fact that 15,000 people protested the prime minister in Trafalgar Square as he returned from Munich in 1938 (10,000 more than welcomed him at 10 Downing Street). The BBC radio producers continued to censor news of Jewish persecution even after the war broke out, as Chamberlain still held out hopes of a quick armistice and did not want to inflame the atmosphere. As Richard Cockett noted:

[Chamberlain] had successfully demonstrated how a government in a democracy could influence and control the press to a remarkable degree. The danger in this for Chamberlain was that he preferred to forget that he exercised such influence, and so increasingly mistook his pliant press for real public opinion...the truth of the matter was that by controlling the press he was merely ensuring that the press was unable to reflect public opinion.

The journalist Shiela Grant Duff's Penguin Special, Europe and the Czechs was published and distributed to every MP on the day that Chamberlain returned from Munich. Her book was a spirited defence of the Czech nation and a detailed criticism of British policy, confronting the need for war if necessary. It was influential and widely read. Although she argued against the policy of "peace at almost any price" she did not take the personal tone that Guilty Men was to take two years later.

At the start of World War II

Once Germany invaded Poland, igniting World War II, consensus was that appeasement was responsible. The Labour MP Hugh Dalton identified the policy with wealthy people in the City of London, Conservatives and members of the peerage who were soft on Hitler. The appointment of Churchill as Prime Minister after the Norway Debate hardened opinion against appeasement and encouraged the search for those responsible. Three British journalists, Michael Foot, Frank Owen and Peter Howard, writing under the name of "Cato" in their book Guilty Men, called for the removal from office of 15 public figures they held accountable, including Chamberlain. The book defined appeasement as the "deliberate surrender of small nations in the face of Hitler's blatant bullying". It was hastily written and has few claims to historical scholarship, but Guilty Men shaped subsequent thinking about appeasement and it is said that it contributed to the defeat of the Conservatives in the 1945 general election.

The change in the meaning of "appeasement" after Munich was summarised later by the historian David Dilks: "The word in its normal meaning connotes the pacific settlement of disputes; in the meaning usually applied to the period of Neville Chamberlain['s] premiership, it has come to indicate something sinister, the granting from fear or cowardice of unwarranted concessions in order to buy temporary peace at someone else's expense."

After the Second World War: historians

Churchill's book The Gathering Storm, published in 1948, made a similar judgment to Guilty Men, though in moderate tones. This book and Churchill's authority confirmed the orthodox view.

Historians have subsequently explained Chamberlain's policies in various ways. It could be said that he believed sincerely that the objectives of Hitler and Mussolini were limited and that the settlement of their grievances would protect the world from war; for safety, military and air power should be strengthened. Many have judged this belief to be fallacious, since the dictators' demands were not limited and appeasement gave them time to gain greater strength.

One of the first dissents to the prevailing criticism of appeasement was made by John F. Kennedy in his 1940 Harvard College thesis Why England Slept, in which he argued that appeasement had been necessary because the United Kingdom and France were unprepared for a world war.

In 1961 the view of appeasement as avoidable error and cowardice was similarly set on its head by A.J.P. Taylor in his book The Origins of the Second World War. Taylor argued that Hitler did not have a blueprint for war and was behaving much as any other German leader might have done. Appeasement was an active policy, and not a passive one; allowing Hitler to consolidate was a policy implemented by "men confronted with real problems, doing their best in the circumstances of their time". Taylor said that appeasement ought to be seen as a rational response to an unpredictable leader, appropriate to the time both diplomatically and politically.

His view has been shared by other historians, for example Paul Kennedy, who says of the choices facing politicians at the time, "Each course brought its share of disadvantages: there was only a choice of evils. The crisis in the British global position by this time was such that it was, in the last resort, insoluble, in the sense that there was no good or proper solution." Martin Gilbert has expressed a similar view: "At bottom, the old appeasement was a mood of hope, Victorian in its optimism, Burkean in its belief that societies evolved from bad to good and that progress could only be for the better. The new appeasement was a mood of fear, Hobbesian in its insistence upon swallowing the bad in order to preserve some remnant of the good, pessimistic in its belief that Nazism was there to stay and, however horrible it might be, should be accepted as a way of life with which Britain ought to deal."

The arguments in Taylor's Origins of the Second World War (sometimes described as "revisionist") were rejected by many historians at the time, and reviews of his book in Britain and the United States were generally critical. Nevertheless, he was praised for some of his insights. By showing that appeasement was a popular policy and that there was continuity in British foreign policy after 1933, he shattered the common view of the appeasers as a small, degenerate clique that had mysteriously hijacked the British government sometime in the 1930s and who had carried out their policies in the face of massive public resistance; and by portraying the leaders of the 1930s as real people attempting to deal with real problems, he made the first strides towards explaining the actions of the appeasers rather than merely condemning them.

In the early 1990s a new theory of appeasement, sometimes called "counter-revisionist", emerged as historians argued that appeasement was probably the only choice for the British government in the 1930s, but that it was poorly implemented, carried out too late and not enforced strongly enough to constrain Hitler. Appeasement was considered a viable policy, considering the strains that the British Empire faced in recuperating from World War I, and Chamberlain was said to have adopted a policy suitable to Britain's cultural and political needs. Frank McDonough is a leading proponent of this view of appeasement and describes his book Neville Chamberlain, Appeasement and the British Road to War as a "post revisionist" study. Appeasement was a crisis management strategy seeking a peaceful settlement of Hitler's grievances. "Chamberlain's worst error", says McDonough, "was to believe that he could march Hitler on the yellow brick road to peace when in reality Hitler was marching very firmly on the road to war." He has criticised revisionist historians for concentrating on Chamberlain's motivations rather than how appeasement worked in practice – as a "usable policy" to deal with Hitler. James P. Levy argues against the outright condemnation of appeasement. "Knowing what Hitler did later," he writes, "the critics of Appeasement condemn the men who tried to keep the peace in the 1930s, men who could not know what would come later. ... The political leaders responsible for Appeasement made many errors. They were not blameless. But what they attempted was logical, rational, and humane."

The view of Chamberlain colluding with Hitler to attack Russia has persisted, however, particularly on the far-left. In 1999, Christopher Hitchens wrote that Chamberlain "had made a cold calculation that Hitler should be re-armed...partly to encourage his 'tough-minded' solution to the Bolshevik problem in the East". While consciously encouraging war with Stalin is not widely accepted to be a motive of the Downing Street appeasers, there is historical consensus that anti-communism was central to appeasement's appeal for the conservative elite. As Antony Beevor writes, "The policy of appeasement was not Neville Chamberlin's invention. Its roots lay in a fear of bolshevism. The general strike of 1926 and the depression made the possibility of revolution a very real concern to conservative politicians. As a result, they had mixed feelings towards the German and Italian regimes which had crushed the communists and socialists in their own countries."

After the Second World War: politicians

Statesmen in the post-war years have often referred to their opposition to appeasement as a justification for firm, sometimes armed, action in international relations.

U.S. President Harry S. Truman thus explained his decision to enter the Korean War in 1950, British Prime Minister Anthony Eden his confrontation of Egyptian President Gamal Abdel Nasser in the Suez Crisis of 1956, U.S. President John F. Kennedy his "quarantine" of Cuba in 1962, U.S. President Lyndon B. Johnson his resistance to communism in Indochina in the 1960s, U.S. President Ronald Reagan his air strike on Libya in 1986, and U.S. President Donald Trump his drone strike to assassinate Qassim Soleimani in 2020.

After the Viet Minh won the Battle of Dien Bien Phu in 1954, U.S. President Dwight D. Eisenhower wrote in a letter to British Prime Minister Churchill, "We failed to halt Hirohito, Mussolini and Hitler by not acting in unity and in time. That marked the beginning of many years of stark tragedy and desperate peril. May it not be that our nations have learned something from that lesson?" Similarly, President Lyndon B. Johnson said in defense of the Vietnam War, "Everything I knew about history told me that if I got out of Vietnam and let Ho Chi Minh run through the streets of Saigon, then I'd be doing exactly what Chamberlain did in World War II. I'd be giving a big fat reward to aggression."

During the Cuban Missile Crisis, U.S. Air Force Chief of Staff Curtis LeMay and various hawks within the Kennedy administration who favored an air strike on Soviet nuclear missiles in Cuba compared Kennedy's hesitance to do so to appeasement. This was partially a jab at Kennedy's father Joseph P. Kennedy Sr., who had favored appeasement while U.S. Ambassador to the United Kingdom and later a negotiated surrender to Nazi Germany during the May 1940 War Cabinet Crisis and the Battle of Britain.

During the Cold War, the "lessons" of appeasement were cited by prominent conservative allies of Reagan, who urged Reagan to be assertive in "rolling back" Soviet-backed regimes throughout the world. The Heritage Foundation's Michael Johns, for instance, wrote in 1987 that "seven years after Ronald Reagan's arrival in Washington, the United States government and its allies are still dominated by the culture of appeasement that drove Neville Chamberlain to Munich in 1938." Some conservatives even compared Reagan to Chamberlain after his withdrawal of the Multinational Force in Lebanon following the 1983 Beirut barracks bombing.

British Prime Minister Margaret Thatcher invoked the example of Churchill during the Falklands War of 1982: "When the American Secretary of State, Alexander Haig, urged her to reach a compromise with the Argentines she rapped sharply on the table and told him, pointedly, 'that this was the table at which Neville Chamberlain sat in 1938 and spoke of the Czechs as a faraway people about whom we know so little'." Thatcher, along with U.S. National Security Advisor Brent Scowcroft, made similar arguments after the 1990 Iraqi invasion of Kuwait and the planning for the Persian Gulf War. The spectre of appeasement was raised in discussions of the Yugoslav wars of the 1990s.

U.S. President George W. Bush and British Prime Minister Tony Blair also cited Churchill's warnings about German rearmament to justify their action in the run-up to the 2003 Iraq War.

In 2013, Obama administration officials such as Secretary of State John Kerry and Secretary of Defense Chuck Hagel claimed that a failure of the United States to intervene in the Syrian Civil War after the 2013 Ghouta chemical attack would be an act of appeasement towards Bashar al-Assad.

In May 2008, President Bush cautioned against "the false comfort of appeasement" when dealing with Iran and its President, Mahmoud Ahmadinejad. Opponents of President Barack Obama later criticized the Joint Comprehensive Plan of Action as an act of appeasement with Iran. Secretary of State Mike Pompeo later stated that the Trump administration's foreign policy was "trying to correct for what was the Obama administration's appeasement of Iran."

Dutch politician Ayaan Hirsi Ali demands a confrontational policy at the European level to meet the threat of radical Islam, and compares policies of non-confrontation to Neville Chamberlain's appeasement of Hitler.

Tibetan separatists consider the policy of the West towards China with regard to Tibet as appeasement.

Some experts noted that NATO countries have been following the policy of appeasement towards Vladimir Putin's Russia by rejecting the support of the Ukrainian democracy through any military operations during the 2022 Russian invasion of Ukraine.

Economic history of Japan

Historical GDP per capita development

The economic history of Japan is most studied for the spectacular social and economic growth in the 1800s after the Meiji Restoration. It became the first non-Western great power, and expanded steadily until its defeat in the Second World War. When Japan recovered from devastation to become the world's second largest economy behind the United States, and from 2010 behind China as well. Scholars have evaluated the nation's unique economic position during the Cold War, with exports going to both U.S.- and Soviet-aligned powers, and have taken keen interest in the situation of the post-Cold War period of the Japanese "lost decades".

Prehistoric and ancient Japan

Yayoi period

Bronze mirror from Yayoi period excavated in Tsubai-otsukayama kofun, Yamashiro, Kyoto

The Yayoi period is generally accepted to date from 300 BCE to 300 CE. However, radio-carbon evidence suggests a date up to 500 years earlier, between 1,000 and 800 BCE. During this period Japan transitioned to a settled agricultural society. As the Yayoi population increased, the society became more stratified and complex. They wove textiles, lived in permanent farming villages, and constructed buildings with wood and stone. They also accumulated wealth through land ownership and the storage of grain. Such factors promoted the development of distinct social classes. Yayoi chiefs, in some parts of Kyūshū, appear to have sponsored, and politically manipulated, trade in bronze and other prestige objects. That was made possible by the introduction of an irrigated, wet-rice agriculture from the Yangtze estuary in southern China via the Ryukyu Islands or Korean Peninsula.

Kofun period (250–538)

Brown building with an angular roof
Reconstructed Kofun-era warehouse
 

The Kofun period recorded Japan's earliest political centralization, when the Yamato clan rose to power in southwestern Japan, established the Imperial House, and helped control trade routes across the region. Much of the material culture of the Kofun period demonstrates that Japan was in close political and economic contact with continental Asia (especially with the southern dynasties of China) via the Korean Peninsula; bronze mirrors cast from the same mould have been found on both sides of the Tsushima Strait. Irrigation, sericulture, and weaving were brought to Japan by Chinese immigrants, who are mentioned in ancient Japanese histories; the Chinese Hata clan (, read "Qín" in Chinese) introduced sericulture and certain types of weaving.

Classical Japan

Asuka period (538–710)

Copper 'Fuhonsen [ja] (富本銭) coinage from the 7th century, Asuka period

The Yamato polity evolved greatly during the Asuka period, which was concentrated in the Asuka region and exercised power over clans in Kyūshū and Honshū, bestowing titles, some hereditary, on clan chieftains. The Yamato name became synonymous with all of Japan as the Yamato rulers suppressed other clans and acquired agricultural lands. Based on Chinese modelhi s (including the adoption of the Chinese written language), they developed a system of trade roads and a central administration. By the mid-seventh century, the agricultural lands had grown to a substantial public domain, subject to central policy. The basic administrative unit of the Gokishichidō (五畿七道, "five cities, seven roads") system was the county, and society was organized into occupation groups. Most people were farmers; others were fishers, weavers, potters, artisans, armorers, and ritual specialists.[13]

In 645, the Soga clan were overthrown in a coup launched by Prince Naka no Ōe and Fujiwara no Kamatari, the founder of the Fujiwara clan. Their government devised and implemented the far-reaching Taika Reforms. The Reform began with land reform, based on Confucian ideas and philosophies from China. It nationalized all land in Japan, to be distributed equally among cultivators, and ordered the compilation of a household registry as the basis for a new system of taxation. What were once called "private lands and private people" (私地私民, shichi shimin) became "public lands and public people" (公地公民, kōchi kōmin), as the court now sought to assert its control over all of Japan and to make the people direct subjects of the throne. Land was no longer hereditary but reverted to the state at the death of the owner. Taxes were levied on harvests and on silk, cotton, cloth, thread, and other products. A corvée (labor) tax was established for military conscription and building public works.

Wadōkaichin (和同開珎) is the oldest official Japanese coinage, having been minted starting on 29 August 708 on order of Empress Genmei. Inspired by the Chinese Tang dynasty coinage Kaiyuan Tongbao, the Wadōkaichin began being produced following the discovery of large copper deposits in Japan during the early 8th century.

Nara period (710–794)

Before the Taihō Code was established, the capital was customarily moved after the death of an emperor because of the ancient belief that a place of death was polluted. Reforms and bureaucratization of government led to the establishment of a permanent imperial capital at Heijō-kyō, or Nara, in AD 710. The capital was moved shortly (for reasons described later in this section) to Kuni-kyō (present-day Kizugawa) in 740–744, to Naniwa-kyō (present-day Osaka) in 744–745, to Shigarakinomiya (紫香楽宮, present-day Shigaraki) in 745, and moved back to Nara in 745. Nara was Japan's first truly urban center. It soon had a population of 200,000 (representing nearly 7% of the country's population) and some 10,000 people worked in government jobs.

Economic and administrative activity increased during the Nara period. Roads linked Nara to provincial capitals, and taxes were collected more efficiently and routinely. Coins were minted, if not widely used. Outside the Nara area, however, there was little commercial activity, and in the provinces the old Shōtoku land reform systems declined. By the mid-eighth century, shōen (landed estates), one of the most important economic institutions in prehistoric Japan, began to rise as a result of the search for a more manageable form of landholding. Local administration gradually became more self-sufficient, while the breakdown of the old land distribution system and the rise of taxes led to the loss or abandonment of land by many people who became the "wave people" (furōsha). Some of these formerly "public people" were privately employed by large landholders, and "public lands" increasingly reverted to the shōen.

Factional fighting at the imperial court continued throughout the Nara period. Imperial family members, leading court families, such as the Fujiwara, and Buddhist priests all contended for influence. Earlier during this period, Prince Nagaya seized power at the court after the death of Fujiwara no Fuhito. Fuhito was succeeded by four sons, Muchimaro, Umakai, Fusasaki, and Maro. They put Emperor Shōmu, the prince by Fuhito's daughter, on the throne. In 729, they arrested Nagaya and regained control. However, as a major outbreak of smallpox spread from Kyūshū in 735, all four brothers died two years later, resulting in temporary reduction in the Fujiwara dominance. In 740, a member of the Fujiwara clan, Hirotsugu, launched a rebellion from his base in Fukuoka, Kyushu. Although defeated, it is without doubt that the Emperor was heavily shocked about these events, and he moved the palace three times in only five years from 740, until he eventually returned to Nara. In the late Nara period, financial burdens on the state increased, and the court began dismissing nonessential officials. In 792 universal conscription was abandoned, and district heads were allowed to establish private militia forces for local police work. Decentralization of authority became the rule despite the reforms of the Nara period. Eventually, to return control to imperial hands, the capital was moved in 784 to Nagaoka-kyō and in 794 to Heian-kyō (literally Capital of Peace and Tranquility), about twenty-six kilometers north of Nara. By the late eleventh century, the city was popularly called Kyoto (capital city), the name it has had ever since.

Heian period (794–1185)

While on one hand, the Heian period was an unusually long period of peace, it can also be argued that the period weakened Japan economically and led to poverty for all but a tiny few of its inhabitants. The control of rice fields provided a key source of income for families such as the Fujiwara and was a fundamental base for their power. The aristocratic beneficiaries of Heian culture, the Ryōmin (良民 "Good People") numbered about five thousand in a land of perhaps five million. One reason the samurai were able to take power was that the ruling nobility proved incompetent at managing Japan and its provinces. By the year 1000, the government no longer knew how to issue currency and money was gradually disappearing. Instead of a fully realized system of money circulation, rice was the primary unit of exchange.

Throughout the Heian period, the power of the imperial court declined. The court became so self-absorbed with power struggles, and with the artistic pursuits of court nobles, that it neglected the administration of government outside the capital. The nationalization of land undertaken as part of the ritsuryō state decayed as various noble families and religious orders succeeded in securing tax-exempt status for their private shōen manors. By the eleventh century, more land in Japan was controlled by shōen owners than by the central government. The imperial court was thus deprived of the tax revenue to pay for its national army. In response, the owners of the shōen set up their own armies of samurai warriors. Two powerful noble families that had descended from branches of the imperial family, the Taira and Minamoto clans, acquired large armies and many shōen outside the capital. The central government began to use these two warrior clans to suppress rebellions and piracy. Japan's population stabilized during the late-Heian period after hundreds of years of decline.

Feudal Japan

Kamakura period (1185–1333)

The samurai armies of the whole nation were mobilized in 1274 and 1281 to confront two full-scale invasions launched by Kublai Khan of the Mongol Empire. Though outnumbered by an enemy equipped with superior weaponry, the Japanese fought the Mongols to a standstill in Kyushu on both occasions until the Mongol fleet was destroyed by typhoons called kamikaze, meaning "divine wind". In spite of the Kamakura shogunate's victory, the defense so depleted its finances that it was unable to provide compensation to its vassals for their role in the victory. This had permanent negative consequences for the shogunate's relations with the samurai class. Japan nevertheless entered a period of prosperity and population growth starting around 1250. In rural areas, the greater use of iron tools and fertilizer, improved irrigation techniques, and double-cropping increased productivity and rural villages grew. Fewer famines and epidemics allowed cities to grow and commerce to boom.

Muromachi period (1333–1568)

A ship of the Muromachi period (1538)
 
1584 Japan-Ming trade ship flag, inscribed with the signatures and kaō, or stylized signatures, of three Ming merchants; to be raised the following year upon arrival in what is now Shimonoseki (Yamaguchi Prefectural Archives)
 

In spite of the war, Japan's relative economic prosperity, which had begun in the Kamakura period, continued well into the Muromachi period. By 1450 Japan's population stood at ten million, compared to six million at the end of the thirteenth century. Commerce flourished, including considerable trade with China and Korea. Because the daimyōs and other groups within Japan were minting their own coins, Japan began to transition from a barter-based to a currency-based economy. During the period, some of Japan's most representative art forms developed, including ink wash painting, ikebana flower arrangement, the tea ceremony, Japanese gardening, bonsai, and Noh theater. Though the eighth Ashikaga shogun, Yoshimasa, was an ineffectual political and military leader, he played a critical role in promoting these cultural developments.

The Japanese contact with the Ming dynasty (1368–1644) began when China was renewed during the Muromachi period after the Chinese sought support in suppressing Japanese pirates in coastal areas of China. Japanese pirates of this era and region were referred to as wokou by the Chinese (Japanese wakō). Wanting to improve relations with China and to rid Japan of the wokou threat, Ashikaga Yoshimitsu accepted a relationship with the Chinese that was to last for half a century. In 1401 he restarted the tribute system, describing himself in a letter to the Chinese Emperor as "Your subject, the King of Japan". Japanese wood, sulfur, copper ore, swords, and folding fans were traded for Chinese silk, porcelain, books, and coins, in what the Chinese considered tribute but the Japanese saw as profitable trade.

First contacts with Europe (16th century)

Renaissance Europeans were quite admiring of Japan when they reached the country in the 16th century. Japan was considered a country immensely rich in precious metals, a view that owed its conception mainly to Marco Polo's accounts of gilded temples and palaces, but also due to the relative abundance of surface ores characteristic of a volcanic country, before large-scale deep-mining became possible in Industrial times. Japan was to become a major exporter of copper and silver during the period.

The Samurai Hasekura Tsunenaga in Rome in 1615, Coll. Borghese, Rome

Japan was also perceived as a sophisticated feudal society with a high culture and advanced pre-industrial technology. It was densely populated and urbanized. Prominent European observers of the time seemed to agree that the Japanese "excel not only all the other Oriental peoples, they surpass the Europeans as well" (Alessandro Valignano, 1584, "Historia del Principo y Progresso de la Compania de Jesus en las Indias Orientales).

Early European visitors were amazed by the quality of Japanese craftsmanship and metalsmithing. This stems from the fact that Japan itself is rather poor in natural resources found commonly in Europe, especially iron. Thus, the Japanese were famously frugal with their consumable resources; what little they had they used with expert skill.

Trade with Europe

The cargo of the first Portuguese ships (usually about four small ships every year) that arrived in Japan consisted almost entirely of Chinese goods (silk, porcelain). The Japanese were very much looking forward to acquiring such goods, but had been prohibited from any contacts with the Emperor of China, as a punishment for Wakō pirate raids. The Portuguese (who were called Nanban, lit. Southern Barbarians) therefore found the opportunity to act as intermediaries in Asian trade.

A Portuguese carrack in Nagasaki, 17th century

From the time of the acquisition of Macau in 1557, and their formal recognition as trade partners by the Chinese, the Portuguese started to regulate trade to Japan, by selling to the highest bidder the annual "Captaincy" to Japan, in effect conferring exclusive trading rights for a single carrack bound for Japan every year. The carracks were very large ships, usually between 1000 and 1500 tons, about double or triple the size of a large galleon or junk.

That trade continued with few interruptions until 1638, when it was prohibited on the ground that the ships were smuggling priests into Japan.

Portuguese trade was progressively more and more challenged by Chinese smugglers on junks, Japanese Red Seal Ships from around 1592 (about ten ships per year), Spanish ships from Manila from around 1600 (about one ship per year), the Dutch from 1609, and the English from 1613 (about one ship per year).

The Dutch, who, rather than "Nanban" were called "Kōmō" (Jp:紅毛, lit. "Red Hair") by the Japanese, first arrived in Japan in 1600, on board the Liefde. Their pilot was William Adams, the first Englishman to reach Japan. In 1605, two of the Liefde's crew were sent to Pattani by Tokugawa Ieyasu, to invite Dutch trade to Japan. The head of the Pattani Dutch trading post, Victor Sprinckel, refused on the ground that he was too busy dealing with Portuguese opposition in Southeast Asia. In 1609 however, the Dutch Jacques Specx arrived with two ships in Hirado, and through Adams obtained trading privileges from Ieyasu.

The Dutch also engaged in piracy and naval combat to weaken Portuguese and Spanish shipping in the Pacific, and ultimately became the only westerners to be allowed access to Japan from the small enclave of Dejima after 1638 and for the next two centuries.

Edo period

Japanese-made clockwatch of the 18th century, or Wadokei. Then time changed in the season because from sunrise to sunset made 12 hours and from sunset to sunrise made 12 hours.

Economic development during the Edo period included urbanization, increased shipping of commodities, a significant expansion of domestic and, initially, foreign commerce, and a diffusion of trade and handicraft industries. The construction trades flourished, along with banking facilities and merchant associations. Increasingly, han authorities oversaw the rising agricultural production and the spread of rural handicrafts. By the mid-18th century, Edo had a population of more than 1 million and Osaka and Kyoto each had more than 400,000 inhabitants. Many other castle towns grew as well. Osaka and Kyoto became busy trading and handicraft production centers, while Edo was the center for the supply of food and essential urban consumer goods. Rice was the base of the economy, as the daimyō collected the taxes from the peasants in the form of rice. Taxes were high, about 40% of the harvest. The rice was sold at the fudasashi market in Edo. To raise money, the daimyō used forward contracts to sell rice that was not yet harvested. These contracts were similar to modern futures trading.

The beginning of the Edo period coincides with the last decades of the Nanban trade period, during which intense interaction with European powers, on the economic and religious plane, took place. At the beginning of the Edo period, Japan built her first ocean-going Western-style warships, such as the San Juan Bautista, a 500-ton galleon-type ship that transported a Japanese embassy headed by Hasekura Tsunenaga to the Americas, and then continued to Europe. Also during that period, the bakufu commissioned around 350 Red Seal Ships, three-masted and armed trade ships, for intra-Asian commerce. Japanese adventurers, such as Yamada Nagamasa, were active throughout Asia.

In order to eradicate the influence of Christianization, Japan entered in a period of isolation called sakoku, during which its economy enjoyed stability and mild progress. But not long after, in the 1650s, the production of Japanese export porcelain increased greatly when civil war put the main Chinese center of porcelain production, in Jingdezhen, out of action for several decades. For the rest of the 17th century most Japanese porcelain production was in Kyushu for export through the Chinese and Dutch. The trade dwindled under renewed Chinese competition by the 1740s, before resuming after the opening of Japan in the mid-19th century.

During the period, Japan progressively studied Western sciences and techniques (called rangaku, literally "Dutch studies") through the information and books received through the Dutch traders in Dejima. The main areas that were studied included geography, medicine, natural sciences, astronomy, art, languages, physical sciences such as the study of electrical phenomena, and mechanical sciences as exemplified by the development of Japanese clockwatches, or wadokei, inspired from Western techniques.

Meiji period

After 1854, when the Tokugawa shogunate first opened the country to Western commerce and influence (Bakumatsu), Japan went through two periods of economic development. When the Tokugawa shogunate was overthrown in 1868 and the Meiji government was founded, Japanese Westernization began completely. The first term is during Pre-war Japan, the second term is Post-war Japan.

In the first half of the Meiji period, most labour disputes occurred in the mining and textile industries and took the form of small-scale strikes and spontaneous riots. The second half of the period witnessed rapid industrialization, the development of a capitalist economy, and the transformation of many feudal workers to wage labour. The use of strike action increased, and 1897, with the establishment of a union for metalworkers, saw the beginnings of the modern Japanese trade-union movement.

The industrial revolution first appeared in textiles, including cotton and especially silk, which was based in home workshops in rural areas. By the 1890s, Japanese textiles dominated the home markets and competed successfully with British products in China and India, as well. Japanese shippers were competing with European traders to carry these goods across Asia and even to Europe. As in the West, the textile mills employed mainly women, half of them under age twenty. They were sent there by their fathers, and they turned over their wages to their fathers. Japan largely skipped water power and moved straight to steam powered mills, which were more productive, and which created a demand for coal.

1907 saw the greatest number of disputes in a decade, with large-scale riots at Japan's two leading copper mines, Ashio and Besshi, which were only suppressed by the use of troops. None of these early unions were large (the metalworkers union had 3,000 members, only 5% of workers employed in the industry), or lasted longer than three or four years, largely due to strong opposition from employers and the government's anti-union policies, notably the Public Order and Police Provisions Law (1900).

One of the biggest impacts on the economy that the Meiji period brought was the end of the feudal system. With a relatively loose social structure, the Japanese people were able to advance through the ranks of society more easily than before. They were able to do this by inventing and selling their own wares. More important was the fact that the Japanese people now had the ability to become more educated. With a more educated population, Japan's industrial sector grew significantly. Implementing the Western ideal of capitalism into the development of technology and applying it to their military helped make Japan into both a militaristic and economic powerhouse by the beginning of the 20th century.

In the Meiji period, leaders inaugurated a new Western-based education system for all young people, sent thousands of students to the United States and Europe, and hired more than 3,000 Westerners to teach modern science, mathematics, technology, and foreign languages in Japan (O-yatoi gaikokujin). The government also built railroads, improved roads, and inaugurated a land reform program to prepare the country for further development.

To promote industrialization, the government decided that, while it should help private business to allocate resources and to plan, the private sector was best equipped to stimulate economic growth. The greatest role of government was to help provide the economic conditions in which business could flourish. In short, government was to be the guide, and business the producer. In the early Meiji period, the government built factories and shipyards that were sold to entrepreneurs at a fraction of their value. Many of these businesses grew rapidly into the larger conglomerates. Government emerged as chief promoter of private enterprise, enacting a series of pro-business policies.

Banking

The development of banking and reliance on bank funding have been at the centre of Japanese economic development since the Meiji era. Before 1868 the feudal fiefs all issued their own money, called hansatsu, in an array of incompatible denominations. The government sent observers to the United States, and at first copied the decentralized American system with no central bank. The New Currency Act of Meiji 4 (1871) did away with local currencies and established the yen as the new decimal currency. It had parity with the Mexican silver dollar. The former han (fiefs) became prefectures and their mints became private chartered banks. Initially they retained the right to print money. For a time both the central government and these so-called "national" banks issued money. That period ended when central bank—the Bank of Japan—was founded in 1882, after the Belgian model. It has since been partly privately owned (its stock is traded over the counter, hence the stock number). The national Bank was given a monopoly on controlling the money supply in 1884, and by 1904 the previously issued notes were all retired. The Bank started out on the silver standard, but adopted the gold standard in 1897. The gold standard was suspended in 1917 and dropped in 1931. In 1973 flexible exchange rates were adopted.

Railways

After 1868 the new Meiji regime strongly encouraged railroad construction. This modernizing move had multiple objectives. It would weaken feudalistic institutions. Railroads would enable rapid military responses to invasion threats, as by Russia The movement of rice would become cheaper and foreign trade would grow. In a broader sense, modernized transportation would inspire the people and facilitate growth. The government made the final decision to build the system in 1870, using a million-pound sterling loan from Britain and British engineers. The Japanese Public Works Ministry handled the actual construction.

In 1868 Thomas Blake Glover, a Scottish merchant, was responsible for bringing the first steam locomotive, "Iron Duke", to Japan, which he demonstrated on an 8-mile track in the Ōura district of Nagasaki. However, after centuries of a culture of 'distrust of foreigners', construction of the premier railway built by non-Japanese was considered politically unacceptable to the new Japanese regime. Therefore, the government of Japan decided to build a railway from the major port of Yokohama to Tokyo using British financing and 300 British and European technical advisors: civil engineers, general managers, locomotive builders and drivers. In order to undertake its construction, foreign experts were contracted, with the specific intent that such experts would educate Japanese co-workers so that Japan could become self-sufficient in railway construction expertise, at which time the foreign contractors were expected to leave the country. In late 1872, the first railway, between Shimbashi (later Shiodome) and Yokohama (present Sakuragichō) opened. A one-way trip took 53 minutes in comparison to 40 minutes for a modern electric train. Service started with nine round trips daily.

British engineer Edmund Morel (1841–1871) supervised construction of the first railway on Honshu. American engineer Joseph U. Crowford (1842–1942) supervised construction of a coal mine railway on Hokkaidō in 1880, and German engineer Herrmann Rumschottel (1844–1918) supervised railway construction on Kyushu beginning in 1887. All three trained Japanese engineers to undertake railway projects. Two men trained by Crowford later became presidents of Japan National Railways.

The precise reason why a track gauge of 3 ft 6 in (1,067 mm) (also known as "Cape gauge") came to be selected remains uncertain. It could be because 3 ft 6 in (1,067 mm) was supposed to be cheaper to build than the internationally more widely used "Stephenson gauge" of 4 ft 8+12 in (1,435 mm), or because the first British agent, whose contract was later cancelled, ordered iron sleepers made for the narrower gauge. It seems most likely, however, that Morel's previous experience building Cape gauge railways in similar New Zealand terrain was a significant influence, and Cape gauge became the de facto standard.

Network expansion

The next line constructed was from another port, Kobe, to the major commercial city of Osaka (opening in 1874), and then to Kyoto (1877) and Otsu (1880) at the southern end of Lake Biwa. A line was constructed from Tsuruga, on the Sea of Japan, to Ogaki (connecting to a canal to Nagoya) via Nagahama on the northern end of Lake Biwa, opening in 1884 and utilizing trans-shipment onto water-going vessels to connect the Sea of Japan to Osaka, Kyoto and Nagoya.

Linking Tokyo to Nagoya and Kyoto became the next priority. Initially the proposed route was inland, from Tokyo north to Takasaki, then west through the Usui Pass to Karuizawa and the Kiso River valley. At this time the Nippon Railway Co. (NRC) became the first to be granted a concession to operate what became the Tohoku Main Line from Ueno to Aomori, with a branch line from Omiya to Takasaki. Construction of both lines was undertaken by the Government at the company's expense, with the government having running rights on the Takasaki-Ueno section. The line to Takasaki opened in 1884, as did the Tohoku line as far as Utsunomiya.

The NRC also financed a new line linking to the Yokohama line which was built from Akabane via Shinjuku to Shinagawa (with the NRC gaining track usage rights at the government station at Shinagawa). This was the first section of what has become the Yamanote Line, and opened in 1885.

The government funded line from Takasaki reached Yokokawa at the base of the Usui Pass in 1885, and initial surveys indicated a ruling grade of 10% (later improved to 6.67%) and extensive tunneling was required to reach Karuizawa.

Construction also started on another line from the Sea of Japan, commencing at Naoetsu and opening to Karuizawa via Nagano in 1888.

As the costs of construction through the mountainous interior of Japan became apparent, in 1886 the construction of what became the Tokaido line was approved, approximately paralleling the southern coastline (and Tokaido road) as far as Nagoya. Although ~238 km longer, it was projected to cost 13% less, this saving then being allocated to construct a line from Otsu along the eastern side of Lake Biwa to Nagahama to remove the need for trans-shipment, which opened in 1889, as did the final section of the Tokaido Line via Gotemba. Until the opening of the Tokaido Shinkansen in 1964, this was the most important main line in Japan.

Consolidating the network

In 1888 the San'yō Railway Co. (SRC) was granted a charter to build the San'yō Main Line from Kobe west to Shimonoseki, a port providing a connection to the port of Moji on Kyushu, from which the Kyushu Railway Co (KRC) built its line to Hakata and Kumamoto opening between 1889 and 1891, extended to Yatsushiro in 1896. The SRC line reached Hiroshima in 1894, and Shimonoseki in 1901. Other private endeavors included the Mito Railway, which opened the first section of the Joban Line in 1889 and was acquired by the NRC in 1892 which extended to Sendai via an east coastal route in 1905 and the Bantan Railway, which built a 52 km line north from Himeji between 1894 and 1901, and was acquired by the SRC in 1903.

The success of the Nippon Railway Co and other private companies led to a Japanese situation akin to the UK Railway Mania. From the mid 1880s until 1891 new railway companies had little difficulty in attracting funding, usually through issuing shares. However, in 1891 the failure of a company proposing to build a line from Gotenba to Matsumoto ended the 'mania', and the Government realized a more planned approach to the network expansion it desired was required.

Evolving policy

In 1887 the Japanese Army proposed building its own lines to ensure routes of military significance were given priority. The Railway Department deflected that proposal by commencing development of a policy for a comprehensive national network. The Japanese Government became increasingly interested in the policy formulation following the completion of the Tokaido Main Line in 1889, the creation of the National Diet in 1890 and the financial panic of 1891. The 1892 Railway Construction Act (RCA) listed a series of priority routes on Honshu, Kyushu and Shikoku (Hokkaido was covered separately in 1896 legislation), with the specific policy that private construction of such routes would be encouraged, with the Japanese Government only funding routes not able to be privately constructed. By that year the privately owned network was ~2,124 km compared to the government owned sections totaling ~887 km. While this figure seemed to indicate the potential for further private funding of railway construction (notwithstanding the routes already targeted by private companies), subsequent events demonstrated otherwise.

A two-phase approach was adopted in the RCA, with 40 routes totaling ~3,000 km included in the "phase one" 12-year program, with phase 2 covering another ~4,000 km of proposed lines, the priorities being set on the basis of economic development and/or military strategic importance.

A specific outcome of the RCA was that every prefecture would be served by railway communication. The major routes proposed under the act for government construction included;

  • The Chuo line, an inland connection from Tokyo to Nagoya favored by the military (detailed below);
  • The Ou line, also detailed below;
  • Extension of the line from Tsuruga to Kanazawa and Toyama (Hokuriku Main Line) opened 1896–1899;
  • A connection from the Chuo line at Shiojiri to Matsuyama and Nagano (Shinonoi Line) opened 1900–1902; and
  • The original inland line from Kagoshima to Yatsushiro (now the Nippo Main Line and Hisatsu Line) opened 1901–1909

The Chuo line, the route of which approximated the initial proposed inland line between Tokyo and Nagoya, was favored by the military as its inland alignment protected it from perceived risk of bombardment by enemy vessels. A privately built line from Shinjuku to the silk industry centre of Hachioji had opened 1889, and this became the starting point for government construction.

The newly determined route was via Kofu (through the 4,657 m Sasago tunnel, which was the longest in Japan until the Shimizu Tunnel opened in 1931), Shiojiri and then via the Kiso River valley to Nagoya. Construction was undertaken from both ends, with sections opening sequentially from 1900 until the lines were connected in 1911.

The Ou line from Fukushima to Yamagata, Akita and Aomori, serving the poorer northern Sea of Japan coastal prefectures, was seen as a priority for national development that was commercially unattractive. The government commenced construction from Aomori towards Hirosaki in 1894, and at the southern end from Fukushima in 1899, the lines connecting in 1905. Most of the major routes proposed under the act for private construction were not so funded and were ultimately constructed by the government.

The Japanese National Railways was formed by the nationalization of 17 private railways in 1907. It actively promoted uniformity and scientific management.

Early 20th century

From 1918 to 1921, a wave of major industrial disputes marked the peak of organized labour power. A prolonged economic slump that followed brought cutbacks in employment in heavy industry. By 1928, the GNP of Japan at current prices peaked at ¥16,506 million. In the mid-1930s, the Japanese nominal wage rates were a tenth of those in the United States (based on mid-1930s exchange rates), while the price level is estimated to have been about 44% that of the US.

Comparison of GDP per capita (US Dollars) between East-Asian Nations and the US in 1935:

Country GDP/capita, in 1935 dollars (Liu-Ta-Chung) GDP-PPP/capita, in 1990 dollars (Fukao) GDP-PPP/capita, in 1990 dollars (Maddison)
U.S. 540 5,590 5,590
Japan (Mainland Japan) 64 1,760 2,154
Taiwan 42 1,262 1,212
Korea 24 690 1,224
China 18 619 562

Militarism

Before World War II, Japan built an extensive empire that included Taiwan, Korea, Manchuria, and parts of northern China. The Japanese regarded this sphere of influence as a political and economic necessity, preventing foreign states from strangling Japan by blocking its access to raw materials and crucial sea-lanes, as Japan possessed very few natural and mining resources of its own, although it imported large amounts of coal from Korea, Manchukuo, and some regions of occupied China. Japan's large military force was regarded as essential to the empire's defense.

Rapid growth and structural change characterized Japan's two periods of economic development since 1868. In the first period, the economy grew only moderately at first and relied heavily on traditional agriculture to finance modern industrial infrastructure. When the Russo-Japanese War began in 1904, 65% of employment and 38% of the gross domestic product (GDP) was still based on agriculture but the modern industry had begun to expand substantially. During World War I, Japan used the absence of the war-torn European competitors on the world market to advance its economy, generating a trade surplus for the first time since the isolation in the Edo period. By the late 1920s, manufacturing and mining contributed 23% of GDP, compared with 21% for all of agriculture. Transportation and communications had developed to sustain heavy industrial development.

In the 1930s, the Japanese economy suffered less from the Great Depression than most industrialized nations, its GDP expanding at a rapid rate of 5% per year. Manufacturing and mining came to account for more than 30% of GDP, more than twice the value for the agricultural sector. Most industrial growth, however, was geared toward expanding the nation's military power.

Beginning in 1937 with significant land seizures in China, and to a greater extent after 1941, when annexations and invasions across Southeast Asia and the Pacific created the Greater East Asia Co-Prosperity Sphere, the Japanese government sought to acquire and develop critical natural resources in order to secure economic independence. Among the natural resources that Japan seized and developed were: coal in China, sugarcane in the Philippines, petroleum from the Dutch East Indies and Burma, and tin and bauxite from the Dutch East Indies and Malaya. Japan also purchased the rice production of Thailand, Burma, and Cochinchina.

During the early stages of Japan's expansion, the Japanese economy expanded considerably. Steel production rose from 6,442,000 tons to 8,838,000 tons over the same time period. In 1941 Japanese aircraft industries had the capacity to manufacture 10,000 aircraft per year. Much of this economic expansion benefited the "zaibatsu", large industrial conglomerates.

Over the course of the Pacific War, the economies of Japan and its occupied territories all suffered severely. Inflation was rampant; the Japanese heavy industry, forced to devote nearly all its production to meet military needs, was unable to meet the commercial requirements of Japan (which had previously relied on trade with Western countries for their manufactured goods). Local industries were unable to produce at high enough levels to avoid severe shortfalls. Furthermore, maritime trade, upon which the Empire depended greatly, was sharply curtailed by damage to the Japanese merchant fleet over the course of the war.

By the end of the war, what remained of the Japanese Empire was wracked by shortages, inflation, and currency devaluation. Transport was nearly impossible, and industrial production in Japan's shattered cities ground to a halt. The destruction wrought by the war eventually brought the Japanese economy to a virtual standstill.

According to a 2020 study, Japan used its imperial power to boost its industrialization.

Post-World War II

The war wiped out many of the gains which Japan had made since 1868. About 40% of the nation's industrial plants and infrastructure were destroyed, and production reverted to levels of about fifteen years earlier. The people were shocked by the devastation and swung into action. New factories were equipped with the best modern machines, giving Japan an initial competitive advantage over the victor states, who now had older factories. As Japan's second period of economic development began, millions of former soldiers joined a well-disciplined and highly educated work force to rebuild Japan. Japan's colonies were lost as a result of World War II, but since then the Japanese had extended their economic influence throughout Asia and beyond.

Occupation

After the Japanese surrender on 15 August 1945, allied forces, mostly American, rapidly began arriving in Japan. Almost immediately, the occupiers began an intensive program of legal changes designed to democratize Japan. One action was to ensure the creation of a Trade Union law to allow for the first time workers to organize, strike, and bargain collectively, which was passed by the Diet of Japan on 22 December 1945. While the law was created while Japan was under occupation, the law itself was largely a Japanese work. It was put together by a large legal advisory commission headed by the legal scholar Suehiro Izutaro. The commission was quite large, consisting of "three Welfare ministry bureaucrats and two scholars, a steering committee of 30 members (including the communist firebrand Kyuichi Tokuda), and an overall membership of more than 130 members representing universities, corporations, political parties, the bureaucracy, social workers, and labor." US assistance totaled about US$1.9 billion during the occupation, or about 15% of the nation's imports and 4% of GNP in that period. About 59% of this aid was in the form of food, 15% in industrial materials, and 12% in transportation equipment. US grant assistance, however, tapered off quickly in the mid-1950s. US military procurement from Japan peaked at a level equivalent to 7% of Japan's GNP in 1953 and fell below 1% after 1960. A variety of United States-sponsored measures during the occupation, such as land reform, contributed to the economy's later performance by increasing competition. In particular, the post-war purge of industrial leaders allowed new talent to rise in the management of the nation's rebuilt industries. Finally, the economy benefited from foreign trade because it was able to expand exports rapidly enough to pay for imports of equipment and technology without falling into debt, as had a number of developing nations in the 1980s.

A 2018 study, using the synthetic control method whereby Japan is compared to "synthetic Japan" (a combination of which are similar to Japan but without the US alliance), found that the US alliance allowed Japan's GDP to "grow much faster" from 1958 to 1968.

"Gifts From Heaven"

In the wake of WWII, the Japanese citizenry was suffering from widespread exhaustion and despair from the war, known as "kyodatsu," causing large-scale dejection and despondency. The term "gifts from Heaven" was coined by cartoonist Kato Etsuro in his first illustrations under US military occupation. These gifts referred to the bloodless democratic revolution from above ushered in by US forces that put an end to a socially debilitating war. Of the many aspects of the revolution from above, the reforms extending the right to vote to women, strengthening labor unionization, and liberalizing the economy were some of the most enduring changes that stand to this day.

Following the 1947 elections, in which the Japan Socialist Party came in first, Prime Minister Tetsu Katayama formed a coalition government with the Democratic Party and the National Cooperative Party. One of the first and most significant economic reforms was the division and distribution of rural land to Japanese tenant farmers. Previously, property belonged to landlords and farmers worked on it in a feudal type system. Modern capitalist theory held that this feudal practice did not incentivize growth and the rural landlord class was dissolved. In addition to the dissolution of the landlord class, the massive business conglomerates known as "Zaibatsu" that had effectively controlled the Japanese economy for almost 100 years were also broken up and faced market competition. The Law for the Elimination of Excessive Economic Concentration (passed in December 1947) provided for the dissolution of any company considered to be monopolistic, while the "law on the expulsion of Zaibatsu-affiliated controls" of January 1948 enforced the resignation of Zaibatsu board members who were related closely to Zaibatsu families, while a measure was taken to ban on holding the concurrent board posts of their affiliated companies. In addition, a government employees law was enacted, the first group of Japanese Supreme Court justices was appointed, local government and the police were reorganised, the Ministries of Home Affairs, Navy, and War were abolished, extensive revisions were made to criminal law, and progress was made on land reform. Finally, the unionization of Japanese workers was encouraged by US occupying forces that forced companies to compete on technology and innovation.

Rebuilding

The early post-war years were devoted to rebuilding lost industrial capacity: major investments were made in electric power, coal, steel, and chemicals. By the mid-1950s, production matched prewar levels. Released from the demands of military-dominated government, the economy not only recovered its lost momentum but also surpassed the growth rates of earlier periods. Between 1953 and 1965, GDP expanded by more than 9% per year, manufacturing and mining by 13%, construction by 11%, and infrastructure by 12%. In 1965 these sectors employed more than 41% of the labor force, whereas only 26% remained in agriculture.

Japan's highly acclaimed post-war education system contributed strongly to the modernizing process. The world's highest literacy rate and high education standards were major reasons for Japan's success in achieving a technologically advanced economy. Japanese schools also encouraged discipline, another benefit in forming an effective work force.

The mid-1960s ushered in a new type of industrial development as the economy opened itself to international competition in some industries and developed heavy and chemical manufactures. Whereas textiles and light manufactures maintained their profitability internationally, other products, such as automobiles, electronics, ships, and machine tools assumed new importance. The value added to manufacturing and mining grew at the rate of 17% per year between 1965 and 1970. Growth rates moderated to about 8% and evened out between the industrial and service sectors between 1970 and 1973, as retail trade, finance, real estate, information technology, and other service industries streamlined their operations.

Japanese consumerism continued to grow throughout the 1960s, giving rise to a well-known saying that the "three treasures" which all Japanese families needed to have was a refrigerator, a washing machine, and a television set. By 1962, it was estimated that 79.4% of all urban homes and 48.9% of rural homes in Japan had television.

Oil crisis

Japan faced a severe economic challenge in the mid-1970s. The 1973 oil crisis shocked an economy that had become dependent on imported petroleum. Japan experienced its first post-war decline in industrial production, together with severe price inflation. The recovery that followed the first oil crisis revived the optimism of most business leaders, but the maintenance of industrial growth in the face of high energy costs required shifts in the industrial structure.

Changing price conditions favored conservation and alternative sources of industrial energy. Although the investment costs were high, many energy-intensive industries successfully reduced their dependence on oil during the late 1970s and 1980s and enhanced their productivity. Advances in microcircuitry and semiconductors in the late 1970s and 1980s led to new growth industries in consumer electronics and computers, and to higher productivity in pre-established industries. In 1978, Japan's Ministry of International Trade and Industry provided subsidies, which was illegal under international law, to help Japanese semiconductor companies sell their chips at artificially low prices in the United States while keeping prices high in Japan, a trade practice known as dumping The net result of these adjustments was to increase the energy efficiency of manufacturing and to expand knowledge-intensive industries. The service industries expanded in an increasingly postindustrial economy.

Structural economic changes, however, were unable to check the slowing of economic growth as the economy matured in the late 1970s and 1980s, attaining annual growth rates at only 4–6%. But these rates were remarkable in a world of expensive petroleum and in a nation of few natural resources. Japan's average growth rate of 5% in the late 1980s, for example, was far higher than the 3.8% growth rate of the United States. Despite more petroleum price increases in 1979, the strength of the Japanese economy was apparent. It expanded without the double-digit inflation that afflicted other industrial nations (and that had bothered Japan itself after the first oil crisis in 1973). Japan experienced slower growth in the mid-1980s, but its demand-sustained economic boom of the late 1980s revived many troubled industries.

Factors of growth

Complex economic and institutional factors affected Japan's post-war growth. First, the nation's prewar experience provided several important legacies. The Tokugawa period (1600–1867) bequeathed a vital commercial sector in burgeoning urban centers, a relatively well-educated elite (although one with limited knowledge of European science), a sophisticated government bureaucracy, productive agriculture, a closely unified nation with highly developed financial and marketing systems, and a national infrastructure of roads. The buildup of industry during the Meiji period to the point where Japan could vie for world power was an important prelude to post-war growth from 1955 to 1973, and provided a pool of experienced labor.

Second, and more important, was the level and quality of investment that persisted through the 1980s. Investment in capital equipment, which averaged more than 11% of GNP during the prewar period, rose to about 20% of GNP during the 1950s and to more than 30% in the late 1960s and 1970s. During the economic boom of the late 1980s, the rate still hovered around 20%. Japanese businesses imported the latest technologies to develop the industrial base. As a latecomer to modernization, Japan was able to avoid some of the trial and error earlier needed by other nations to develop industrial processes. In the 1970s and 1980s, Japan improved its industrial base through licensing from the US, patent purchases, and imitation and improvement of foreign inventions. In the 1980s, industry stepped up its research and development, and many firms became famous for their innovations and creativity.

Japan's labor force contributed significantly to economic growth, because of its availability and literacy, and also because of its reasonable wage demands. Before and immediately after World War II, the transfer of numerous agricultural workers to modern industry resulted in rising productivity and only moderate wage increases. As population growth slowed and the nation became increasingly industrialized in the mid-1960s, wages rose significantly. However, labor union cooperation generally kept salary increases within the range of gains in productivity.

High productivity growth played a key role in post-war economic growth. The highly skilled and educated labor force, extraordinary savings rates and accompanying levels of investment, and the low growth of Japan's labor force were major factors in the high rate of productivity growth.

The nation also benefited from economies of scale. Although medium-sized and small enterprises generated much of the nation's employment, large facilities were the most productive. Many industrial enterprises consolidated to form larger, more efficient units. Before World War II, large holding companies formed wealth groups, or zaibatsu, which dominated most industry. The zaibatsu were dissolved after the war, but keiretsu—large, modern industrial enterprise groupings—emerged. The coordination of activities within these groupings and the integration of smaller subcontractors into the groups enhanced industrial efficiency.

Japanese corporations developed strategies that contributed to their immense growth. Growth-oriented corporations that took chances competed successfully. Product diversification became an essential ingredient of the growth patterns of many keiretsu. Japanese companies added plant and human capacity ahead of demand. Seeking market share rather than quick profit was another powerful strategy.

Finally, circumstances beyond Japan's direct control contributed to its success. International conflicts tended to stimulate the Japanese economy until the devastation at the end of World War II. The Russo-Japanese War (1904–05), World War I (1914–18), the Korean War (1950–53), and the Second Indochina War (1954–75) brought economic booms to Japan. In addition, benign treatment from the United States after World War II facilitated the nation's reconstruction and growth.

The changing occupational structure

As late as 1955, some 40% of the labor force still worked in agriculture, but this figure had declined to 17% by 1970 and to 7.2% by 1990 and under 5% in the 21st century as Japan imported more and more of its food and small family farms disappeared.

Japan's economic growth in the 1960s and 1970s was based on the rapid expansion of heavy manufacturing in such areas as automobiles, steel, shipbuilding, chemicals, and electronics. The secondary sector (manufacturing, construction, and mining) expanded to 35.6% of the work force by 1970. By the late 1970s, however, the Japanese economy began to move away from heavy manufacturing toward a more service-oriented (tertiary sector) base. During the 1980s, jobs in wholesaling, retailing, finance, insurance, real estate, transportation, communications, and government grew rapidly, while secondary-sector employment remained stable. The tertiary sector grew from 47% of the work force in 1970 to 59.2% in 1990.

1980s

Throughout the 1970s, Japan had the world's third largest gross national product (GNP)—just behind the United States and Soviet Union—and ranked first among major industrial nations in 1990 in per capita GNP at US$23,801, up sharply from US$9,068 in 1980. After a mild economic slump in the mid-1980s, Japan's economy began a period of expansion in 1986 that continued until it again entered a recessionary period in 1992. Economic growth averaging 5% between 1987 and 1989 revived industries, such as steel and construction, which had been relatively dormant in the mid-1980s, and brought record salaries and employment. In 1992, however, Japan's real GNP growth slowed to 1.7%. Even industries such as automobiles and electronics that had experienced phenomenal growth in the 1980s entered a recessionary period in 1992. The domestic market for Japanese automobiles shrank at the same time that Japan's share of the United States' market declined. Foreign and domestic demand for Japanese electronics also declined, and Japan seemed on the way to losing its leadership in the world semiconductor market to the United States, Korea and Taiwan.

Unlike the economic booms of the 1960s and 1970s, when increasing exports played the key role in economic expansion, domestic demand propelled the Japanese economy in the late 1980s. This development involved fundamental economic restructuring, moving from dependence on exports to reliance on domestic demand. The boom that started in 1986 was generated by the decisions of companies to increase private plant and equipment spending and of consumers to go on a buying spree. Japan's imports grew at a faster rate than exports. Japanese post-war technological research was carried out for the sake of economic growth rather than military development. The growth in high-technology industries in the 1980s resulted from heightened domestic demand for high-technology products such as electronics, and for higher living, housing, and environmental standards; better medical care and more welfare; expanded leisure-time facilities; and improved ways to accommodate a rapidly aging society.

During the 1980s, the Japanese economy shifted its emphasis from primary and secondary activities (notably agriculture, manufacturing, and mining) to processing, with telecommunications and computers becoming increasingly vital. Information became an important resource and product, central to wealth and power. The rise of an information-based economy was led by major research in highly sophisticated technology, such as advanced computers. The selling and use of information became very beneficial to the economy. Tokyo became a major financial center, home to some of the world's major banks, financial firms, insurance companies, and the world's largest stock exchange, the Tokyo Securities and Stock Exchange. Even here, however, the recession took its toll. In 1992, the Nikkei 225 stock average began the year at 23,000 points, but fell to 14,000 points in mid-August before leveling off at 17,000 by the end of the year.

Since the end of the Cold War

1989 Economic Bubble

In the decades following World War II, Japan implemented stringent tariffs and policies to encourage the people to save their income. With more money in banks, loans and credit became easier to obtain, and with Japan running large trade surpluses, the yen appreciated against foreign currencies. This allowed local companies to invest in capital resources more easily than their overseas competitors, which reduced the price of Japanese-made goods and widened the trade surplus further. And, with the yen appreciating, financial assets became lucrative.

With so much money readily available for investment, speculation was inevitable, particularly in the Tokyo Stock Exchange and the real estate market. The Nikkei stock index hit its all-time high on 29 December 1989 when it reached an intra-day high of 38,957.44 before closing at 38,915.87. The rates for housing, stocks, and bonds rose so much that at one point the government issued 100-year bonds. Additionally, banks granted increasingly risky loans.

At the height of the bubble, real estate was extremely over-valued. Prices were highest in Tokyo's Ginza district in 1989, with choice properties fetching over US$1.5 million per square meter ($139,000 per square foot). Prices were only slightly less in other areas of Tokyo. By 2004, prime "A" property in Tokyo's financial districts had slumped and Tokyo's residential homes were a fraction of their peak, but still managed to be listed as the most expensive real estate in the world. Trillions were wiped out with the combined collapse of the Tokyo stock and real estate markets.

With Japan's economy driven by its high rates of reinvestment, this crash hit particularly hard. Investments were increasingly directed out of the country, and Japanese manufacturing firms lost some degree of their technological edge. As Japanese products became less competitive overseas, some people argue that the low consumption rate began to bear on the economy, causing a deflationary spiral.

The easily obtainable credit that had helped create and engorge the real-estate bubble continued to be a problem for several years to come, and as late as 1997, banks were still making loans that had a low guarantee of being repaid. Loan officers and investment staff had a hard time finding anything to invest in that would return a profit. Meanwhile, the extremely low interest rate offered for deposits, such as 0.1%, meant that ordinary Japanese savers were just as inclined to put their money under their beds as they were to put it in savings accounts. Correcting the credit problem became even more difficult as the government began to subsidize failing banks and businesses, creating many so-called "zombie businesses". Eventually a carry trade developed in which money was borrowed from Japan, invested for returns elsewhere and then the Japanese were paid back, with a nice profit for the trader.

The time after the bubble's collapse (崩壊, hōkai), which occurred gradually rather than catastrophically, is known as the "lost decade or end of the 20th century" (失われた10年, ushinawareta jūnen) in Japan. The Nikkei 225 stock index eventually bottomed out at 7603.76 in April 2003, moved upward to a new peak of 18,138 in June 2007, before resuming a downward trend. The downward movement in the Nikkei is likely due to global as well as national economic problems.

Deflation from the 1990s to present

Deflation in Japan started in the early 1990s. On 19 March 2001, the Bank of Japan and the Japanese government tried to eliminate deflation in the economy by reducing interest rates (part of their 'quantitative easing' policy). Despite having interest rates near zero for a long period, this strategy did not succeed. Once the near-zero interest rates failed to stop deflation, some economists, such as Paul Krugman, and some Japanese politicians spoke of deliberately causing (or at least creating the fear of) inflation. In July 2006, the zero-rate policy was ended. In 2008, the Japanese Central Bank still had the lowest interest rates in the developed world and deflation continued.

Systemic reasons for deflation in Japan can be said to include:

  • Fallen asset prices. There was a large price bubble in both equities and real estate in Japan in the 1980s (peaking in late 1989).
  • Insolvent companies: Banks lent to companies and individuals that invested in real estate. When real estate values dropped, many loans went unpaid. The banks could try to collect on the collateral (land), but due to reduced real estate values, this would not pay off the loan. Banks have delayed the decision to collect on the collateral, hoping asset prices would improve. These delays were allowed by national banking regulators. Some banks make even more loans to these companies that are used to service the debt they already have. This continuing process is known as maintaining an "unrealized loss", and until the assets are completely revalued and/or sold off (and the loss realized), it will continue to be a deflationary force in the economy.
  • Insolvent banks: Banks with a large percentage of their loans which are "non-performing" (loans for which payments are not being made), but have not yet written them off. These banks cannot lend more money until they increase their cash reserves to cover the bad loans. Thus the number of loans is reduced sooner and less funds are available for economic growth.
  • Fear of insolvent banks: Japanese people are afraid that banks will collapse so they prefer to buy gold or (United States or Japanese) Treasury bonds instead of saving their money in a bank account. People also save by investing in real estate.

The Economist has suggested that improvements to bankruptcy law, land transfer law, and tax law will aid Japan's economy. In October 2009 the Japanese government announced plans to increase tobacco and green taxes while reducing rates for small and medium-sized companies, according to NHK.

In 2011 Japan under Yoshihiko Noda decided to consider joining the Trans-Pacific Strategic Economic Partnership.

The global economic recession of the late 2000s significantly harmed the economy of Japan. The nation suffered a 0.7% loss in real GDP in 2008 followed by a severe 5.2% loss in 2009. In contrast, the data for world real GDP growth was a 3.1% hike in 2008 followed by a 0.7% loss in 2009.

Economic policy over the past several quarters in Japan has been influenced by the 'Abenomics' debate, with the government pursuing aggressive government infrastructure spending hikes and significant yen devaluations.

Prior to the global COVID-19 recession, the 2019 4th quarter GDP shrank an annualized 7.1% from the previous quarter due to two main factors. One is the government's raise in consumption tax from 8% to 10%. The other is the devastating effects of Typhoon Hagibis, also known as the Reiwa 1 East Japan Typhoon (令和元年東日本台風, Reiwa Gannen Higashi-Nihon Taifū), or Typhoon Number 19 (台風19). The 38th depression, 9th typhoon and 3rd super typhoon of the 2019 Pacific typhoon season, it was the strongest typhoon in decades to strike mainland Japan, and one of the largest typhoons ever recorded at a peak diameter of 825 nautical miles (950 mi; 1529 km). It was also the costliest Pacific typhoon on record, surpassing Typhoon Mireille's record by more than US$5 billion (when not adjusted for inflation). In the resort town of Hakone, record rainfall of almost a meter (942.3 mm, 37.1 inches) fell in only 24 hours. This adds to the effects of the COVID-19 pandemic on people's lives and the economy, the prime minister unveiling a "massive" stimulus amounting to 20% of GDP. In April 2020, Prime Minister Shinzo Abe announced that COVID-19 pandemic in Japan, which also forced a national state of emergency, gave the nation its worst economic crisis since the end of World War II. Jun Saito of the Japan Center for Economic Research stated that the pandemic delivered the "final blow" to Japan's long fledging economy, which also resumed slow growth in 2018. Two stimulus packages, in April and May 2020, injected 234 trillion yen (US$2.2 trillion), or almost 40% of Japan's GDP.

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