Lessons from Japan’s rapid economic growth

Japan’s economy recovered quickly after the devastations of WWII. During the war Japan’s lost 40 percent of its industrial capacity and was subsequently occupied by the United States that made important political and economic changes. The economic system was liberalized. Economic recovery received priority in part in an attempt to contain the expansion of communism in Asia. The security and economic umbrella provided to Japan by the US accelerated economic growth.

Additionally Japan’s political and economic leaders were determined to join the club of industrialized countries. Ipso facto they rejected the comparative advantage of engaging in the production of low wage and instead embraced capital-intensive and high-tech production. The government largely through the Ministry of Trade and Industry (MITI) and Ministry of Finance played a significant role in directing the economy. This involved setting priorities and protecting infant or ailing industries through subsidies, guiding investments and managing the foreign trade process.

The government mobilized resources for industrial growth. Industrial protection was accompanied by strict protection of domestic markets for finished products. Japan products also benefited from relatively open access to foreign markets.

“More important were efforts [by government] at organizing industries to achieve lower costs, defining national priorities in technological development, and developing national plans to share the risks associated with corporate decisions”(Thomas D. Lairson and David Skidmore 1997). A large pool of trained and retained human power also helped in this Japanese rapid economic growth. How much of this is currently being done in developing countries including Uganda?