September 18, 2021



The forgotten ancestors of East Asian developmentalism

2021 marked the centenary of the creation of the Chinese Communist Party, born of the May Fourth Movement of 1919. History textbooks tend to claim that the Movement emerged out of a widespread realization that China’s rights as a victorious power during WWI had been sold out at the Paris Peace Conference by the European Powers. Students were angered by elite collusion with Japan and the corruption of the early Chinese Republic—also known as the “Beiyang Regime.” The activists found hope in the new Soviet model, and May Fourth is credited with bringing Bolshevism to China and beginning its socialist phase.

In Japan, conversely, state-led economic development has often been attributed to a deliberate attempt to mimic the West industrially and militarily since the Meiji era. Japanese developmentalism is perceived, in contrast to the dramatic revolutionary politics in China, to be strategic and straightforward, enabled by the post-WWII foundation of free market capitalism.

In fact, the state-driven economic development models found in both countries are the products of a long and intertwined ideological history. In the late nineteenth century, Chinese and Japanese economists drew inspiration from Hamiltonianism (also known as the “American School”) and German State Socialism to pursue social reformist aims while managing rebellions from below. Developmentalist ideas formulated in this era formed the foundation for later revolutionary programs and postwar capitalist states across the region. Accurately historicizing these models is crucial to understanding their role in contemporary East Asian politics.

Friedrich List, the American School, and the birth of German State Socialism

Modern era developmentalism, which seeks to promote growth using the fiscal and administrative power of the state, originated in the Federalist economic policies of Alexander Hamilton. Inspired by Louis XIV’s Mercantilism, and penned by Hamilton’s secretary Tench Coxe, the policies advocated in Hamilton’s Report on Manufactures and two reports on public credit included import-substitution industrialization, funded by a national bank and high protectionist tariffs, in order to secure the economic independence of the nascent United States. These ideas formed the basis of the “American School” of economics.

Developmentalist ideas soon reached France through Henri de Saint-Simon, a French aristocrat who had fought in the American War of Independence and whose readers later included the Marquis de Lafayette, a member of Hamilton’s circle. (Saint-Simon and Hamilton had both taken part in the successful 1781 Siege of Yorktown.) After the Napoleonic Wars, Saint-Simon developed his vision of a society led by the productive industrial classes. In plans presented by Saint-Simon to the Viceroy of Mexico, and by his disciple Prosper Enfantin to Governor of Egypt Muhammad Ali, a global vision was developed—of huge infrastructural projects like the Panama and Suez Canals linking the countries of the world with a federalized Europe.

Saint-Simon’s death would motivate two interpretations of this vision. On the right, figures like the Pereire brothers pioneered industrial investment banking for large projects like railways. On the left, economist Constantin Pecqueur developed the first coherent vision of a State Socialist planned economy—where France was envisaged as an enormous, democratically organized workshop in which property would be nationalized, and each province assigned production targets based on consumption trends. Although its direct effect on the region is scant, this latter interpretation of Saint-Simonianism contained the primary ingredients of East Asian developmentalism. But these ideas would only arrive in the region via Germany.

Saint-Simon was not the only development theorist who was influenced by events in the United States. Towards the 1830s, the British began dumping goods in German markets, destroying Germany’s handicrafts industries. Surveying the situation was economist Friedrich List, who had lived in the US, been a protege of Lafayette’s and an associate of the Saint-Simonians, and who attributed the weak economic resistance of the German middle classes to their misguided faith in Adam Smith. The correct approach, he argued, was to mimic the “American System” by establishing a German Customs Union and developing domestic economic productivity. He also argued for the expansion of this union into what was later known as Mitteleuropa, to encompass central European states, eventually extending to the Middle East. List’s influence was extensive in both Germany and the US, forming the German Historical School and maintaining a guiding foundation on the American School. The former later gave rise to the Social Policy Association, a group of moderate academic social reformers.

Key among the followers of both Listianism and the American School was Otto von Bismarck. In the wake of the economic crisis of the 1870s, the growing workers’ movement across Europe challenged the stability of the conservative German state. Drawing on the theories of Friedrich List and the US economist Henry Charles Carey, as well the advice of social democratic leader Ferdinand Lassalle and Social Policy Association leaders such as Gustav von Schmoller, Bismarck raised tariffs, nationalized Prussia’s railways, and introduced workers’ insurance and pension schemes. Under Bismarck, the state had subsumed the ideas of socialism to its own advantage.

Bismarck was the first statesman to pursue such policies in a major country, and to also openly admit to their “socialistic” character. In a speech at the Reichstag in 1882, he declared “If you believe that you can frighten anyone or call up spectres with the word “Socialism,” you take a standpoint which I abandoned long ago, and the abandonment of which is absolutely necessary for our entire imperial legislation.”1 Bismarck was initially mocked by the social democrats whom he repressed: “State Socialism” was thus originally a derogatory term used to describe his approach. But when his policies began to prove successful, the term was proudly embraced by Bismarck’s followers, and it went global.

Economic statism in Japan

Listianism and the American School had reached Japan even before Bismarck’s reforms. In an 1874 memorandum, Meiji Restoration leader Ōkubo Toshimichi [大久保利通] argued that the state had a responsibility to “encourage and reward” industrial development; only once a strong industrial base had been formed would Japan possess the preconditions for free trade.2 This perspective, and the dirigiste decade that followed, was actively shaped by economists who followed Hamiltonian and Listian policies from the United States—the 1872 ten-year plan for Hokkaido, for example, was developed by ex-Commissioner of the US Department of Agriculture Horace Capron, who had been active in the Hamiltonian Whig Party circles. In 1881, finance bureaucrat Wakayama Norikazu [若山儀一] drew on List’s main work, National System of Political Economy, in his Memorandum on Protectionist Tariffs [保護稅說].3

List’s book itself was however not translated into Japanese until 1889, by educator and government translator Ōshima Sadamasu [大島貞益], working with ex-President of Bank of Japan Tomita Tetsunosuke [富田鐵之助]. The debt and inflation that the Japanese government had accumulated at the end of the 1870s gave way to a decade of austerity and deflation. Anticipating the third world deflationary policies of the 1980s, Japan’s new Finance Minister and later Prime Minister Matsukata Masayoshi [松方正義] privatized many state-controlled industries, selling them off to leading conglomerates such as Mitsui. Matsukata systematically ostracized Listians from government—he purged the US policy-influenced Tomita Tetsunosuke, who had advocated the creation of a government industrial investment bank. Matsukata also undermined Maeda Masana [前田正名], a young French-educated bureaucrat in the Japanese Ministry of Agriculture and Commerce who sought state promotion of agricultural development.

There was no alternative for the statists but to fight back. Tomita, Ōshima and finance bureaucrat Kōmuchi Tomotsune [神鞭知常] established in 1890 the National Association for Economics (NAE 國家經濟會) to champion Listianism and Bismarckian State Socialism. Their strategy worked, and would have a profound impact on Japan. In 1897, following the German example, Japanese academics set up the Association for Social Policy Studies. By 1906–7, Prime Minister Katsura Tarō [桂太郎—as head of a political party that had adopted many of the NAE’s policies and some of its members—nationalized Japan’s railways on Bismarck’s example. The Japanese state monopolized the post, telegraph, water, gas and steel industries, and began subsidizing shipping and banking. It managed to restore control over customs tariff rates after 1911, during treaty revisions following its war against Russia in 1904–5. At the time, Japan was referred to by the domestic press such as The Japan Times and western journalists such as Hamilton Holt, editor of The Independent in New York, as the most successful State Socialist country outside Europe, if not worldwide.4

But Holt was careful to state that “Japan has gone into these ‘socialistic’ measures, however, not from any conversion to the tenets of Socialism, but because she has wanted to make money.” It was precisely because of this that State Socialism in East Asia was primarily concerned with state ownership of industries and direction of growth. The welfare aspects of Bismarck’s model had been deemed irrelevant to East Asian development by members of the elite establishment. But with economic growth came labour and agrarian struggles. By ignoring social reformism, early twentieth-century East Asian political leaders were sowing the seeds of the revolutions that would shake the region to its core.

State Socialism goes to China

In 1898, following the failed Hundred Days’ Reform in Peking, Liang Qichao [梁啟超], a leading thinker during China’s turn-of-the-century “enlightenment” and a constitutional monarchist, fled to Japan. There, Liang grew acquainted with western statist theories through Japanese literature, notably written by NAE member Shiba Shirō [柴四朗], who had studied business and finance in the US. Shiba’s novel had a title that masqueraded the intensely political nature of its contents—Strange Encounters with Beautiful Women.5In it, Shiba tells through the voice of Colleen, an “Irish beauty”, that not only has Ireland been annexed by Britain, but that the Ottoman empire and India “are independent in name only and not in fact. Their trade is in imbalance year after year and bullion flows out of their borders. Although they are not tributary states of Britain, their situation is no different from offering as tribute to Britain the lipids [read: riches] that have been squeezed out of their own citizenry.”

After a tour of the US in 1903, Liang wrote in a travelogue that he had been converted to State Socialism, “an ideology that becomes sounder by the day”, which “uses an extremely autocratic method of organization to put into practice a spirit of extreme equality, which miraculously matches the nature of Chinese history.”6 Liang saw the nationalization of railways, mines, and factories as the policies of a future China. Elsewhere, he advocated the cartelization of industries on the American model, believing it to be a necessary reaction to nineteenth century laissez-faire. And, presaging the “State Monopoly Capitalism” of the postwar period, Liang argued that such cartels would have to come under government control. A “State Capitalist Trust” thus formed would secure government command of the economy through the private sector.

Friedrich List’s developmentalism had also begun to find an audience among Chinese students. Sections of List’s work were published in Chinese as early as 1901 in a student journal in Tokyo whose editors included Cao Rulin [曹汝霖] and Zhang Zongxiang [章宗祥]–two Beiyang bureaucrats who would later be labelled pro-Japan collaborators by the May Fourth Movement. In 1908, the Japanese-educated student leader Yang Du [楊度] was invited to lecture Manchu nobles at the Summer Palace in Beijing on the topic of Japanese “economic militarism.” To his audience’s embarrassment, he argued for a constitutional monarchy, but not only that—he also proposed that the Empire be reformed into an enlightened industrializing regime prioritizing production if it was to avoid a socialist uprising. Since 1908, generations of Chinese politicians and activists have pursued variations of this regime. Indeed, by the 1930s, Yang Du had been converted to revolutionary socialism and became a member of the CCP.

In 1906–7 the Chinese Revolutionaries and Constitutional Monarchists held a protracted discussion on State Socialism. Despite their differences, both sides agreed on key State Socialist principles. Among the revolutionary theorists, Feng Ziyou [馮自由] argued that a post-revolutionary military government should implement German and Japanese-styled State Socialism alongside land reforms. While the gentry-led Constitutional Monarchists opposed land reform, they agreed that industrial nationalization could be implemented under a constitutional empire under the auspices of “Social Reformism.” In 1908, Sheng Xuanhuai, [盛宣懷] head of China’s largest steelworks at Hanyang and soon to be Minister of Communications, visited Japan and had a long conversation with Prime Minister Katsura Tarō. Under Katsura’s influence he sought to implement a railway nationalization policy in 1911, which involved the forcible purchase of the shares of local railway companies, in which many members of the budding gentry-bourgeoisie had invested. The proposal ignited the widespread protests that culminated in a Republican revolution.

But after the revolution, Sun Yat-sen, the Provisional President of the Chinese Republic, surprised the public by announcing that he would not reverse railway nationalization. He championed State Socialism against revolutionary socialism, arguing that limiting the growth of private capital would prevent class conflict at the foundations. Indeed, he announced that State Socialism was equivalent to the “Doctrine of Popular Livelihood,” one of the founding principles of the Chinese Republic alongside Nationalism and Democracy. China, he argued, should learn from Germany in this regard. It should embark on a vast railway construction program with a target of 100,000 kilometers; he expected optimistically that the railways’ revenue would adequately fund all public expenditure.

Following Sun’s resignation, the new Republic came under the guidance of a group of ex-Imperial bureaucrats who had visited or studied in Japan. They were known as “Beiyang bureaucrats,” after the North Sea military establishment which modernized much of Northern China under Viceroy Yuan Shikai [袁世凱]. Yuan Shikai succeeded Sun Yat-sen as President of the Republic. His Finance Minister Zhou Xuexi [周學熙] had been the “industrial tsar” of Tianjin (Tientsin), where the empire’s light industries had been concentrated, and upon assuming office announced the enactment of State Socialism and the development of a dozen key industrial sectors. Minister of Agriculture and Commerce Zhang Jian [張謇] was credited with building Nantong [南通] as China’s first company town, with successful textile production predicated on adequate provisions for workers. Zhang, too, approved of State Socialism, and his “Cotton and Iron Doctrine” [棉鐵主義] promoted import-substitution and export orientation through cotton, iron, and wool production.

The Corrective Revolution and the Beiyang Leap Forward

Though the Beiyang Regime—the early Chinese Republic—has often been characterized as a “warlord regime,” throughout its existence it tried, ultimately unsuccessfully, to cling onto the appearance of a constitutional representative government. In summer 1917 the fractious Chinese Parliament was dissolved, and Puyi’s monarchy briefly restored before it was repressed by German-trained General Duan Qirui’s [段祺瑞] republican troops. Duan initially formed a cabinet with Liang Qichao and his Progressive Party. These men conceived of their coup d’état as something akin to what mid-twentieth-century Arab leaders would come to call a “Corrective Revolution,” in which traditionalist reaction, political pluralism and radicalism, and economic liberalism would be swiftly replaced by a centrist monolithic developmental regime that granted traditional elites a place in the new socioeconomic order.

Duan and Liang fell out in late-1917, and Duan governed until August 1920 through the “Anfu Club” [安福俱樂部], a coalition of bureaucratic and parliamentary factions most of whose leaders were educated abroad. Electoral laws were rewritten to vastly increase the property requirements for voting and for candidacy. A bill was proposed which would have turned the Chinese Senate into a corporatist chamber complete with economic representatives. The gentry-literati empowered by these reforms were expected by Liang to develop into an industrial class that would form the future bedrock of the Republic. Duan’s industrial policy, formulated with help from Liang Qichao, was shaped by the war-induced global commodity boom and the economic successes of Japan. Through “Economic Investigation Committees” [經濟調查會] at both national and local levels, and by empowering technocrats in the Ministry of Agriculture and Commerce previously hired by Zhang Jian, Duan and Liang tried to assemble reliable statistics using large scale geological, industrial, and agricultural surveys.

The economic plans of Duan’s Regime culminated in the rollout of “Nishihara Loans,” named after Nishihara Kamezō [西原龜三], secretary to the Japanese Prime Minister Terauchi Masatake [寺內正毅]. As a student of Kōmuchi Tomotsune, Nishihara was steeped in the NAE’s Listian tradition. Both the Prime Minister and his secretary opposed reckless military intervention in China, believing that it would only invite rivalry with the European powers in East Asia. In January 1918 Nishihara began to use economic intelligence available to the Prime Minister to compile a State Socialist reform manifesto, Strategy for Economic State-Building [經濟立國策]. In it, Nishihara argued that China’s rise was not to be feared; that its prosperity would form the basis of Japan’s future development, and consequently that Japan should treat China as a credible partner and assist its economic growth.

Nishihara’s approach was a tremendous change to the bullying tactics of Terauchi’s predecessor, Prime Minister Ōkuma Shigenobu, who notoriously raised 21 demands against China after sending an army to occupy the German colony of Qingdao (Tsingtao). These demands would have reduced China to the status of a protectorate. Duan and Liang, delighted to see this change of attitude on the part of the Japanese, and desperate to participate in WWI in order to gain a place in the postwar peace conference and reclaim the right to raise the customs tariff rate, welcomed Nishihara’s loan package with open arms. Cao Rulin (a member of Anfu’s Club Council, its de facto Central Committee) and Zhang Zongxiang, the Beiyang bureaucrats who had published List’s writings in their student journal, became responsible for negotiating and handling the Japanese loans.

Nishihara’s vision revolved around the formation of an “East Asian Economic League” [東亞經濟同盟], which included Marshall Plan-style Japanese investment in China, and the pegging of China’s currency to the gold-coupled Japanese yen. Nishihara also advocated the return of foreign railway concessions and the Boxer Indemnity, which would be used to fund industrial expansion and occupational education. The Chinese cabinet was to set up an “Industrialization Board” to coordinate the use of these funds.

Building on Zhang Jian’s “Cotton and Iron Doctrine,” Nishihara based his plans on those of the European-trained Chinese technocrats Ding Wenjiang [丁文江] and Weng Wenhao [翁文灝] in the formulation of a “Great Leap Forward.” The plans were sweeping. In Pukou, on the opposite bank of the Yangtze to Nanking, a “National First Steelworks of the Republic of China” [中華民國國立第一製鐵廠] would be built and steel production would rise from 30,000 to 112,500 tons by 1921. Cotton production would rise to 907,500 tons by introducing American crops. Wool would be extensively produced in the northwest by importing new breeds of sheep. A vast new “Central Asian Transversal Railway” [中央亞細亞橫斷鐵道], based on Chinese plans, would link Qingdao on China’s eastern seaboard with the Mediterranean.7 This was to be an economically-based, globalizing Pan-Asianism with a farsightedness rarely matched until after WWII.

The Japanese Army, which operated semi-independently of the government, resented Nishihara’s rapprochement. When he lent some 145 million yen to China’s Beiyang Regime through Japan’s state-owned banks (the bulk of Japan’s earnings from the wartime trade boom), officers like Vice Chief of Staff Tanaka Gi’ichi [田中義一] felt that Japan had placed all of its eggs in one basket. Tanaka’s men had long been funding insurgents against Yuan Shikai and later Duan Qirui. Sun Yat-sen set up his base in Guangzhou and launched a war to reconquer the north, accepting vast sums of money from Germany. Civilian and military factions of the Japanese government thus attempted to turn the Chinese civil war into a proxy war amongst themselves. Duan had no choice but to squander Nishihara’s funds on a protracted war with the south, although a substantial portion also went to repay foreign debt.

Incidentally, the Central Asian Transversal Railway proposals led to a major crisis for Sino-Japanese relations and the Anfu Regime. The “Shandong Question,” concerning the right to build and manage the first section of the line, exploded at the Paris Peace Conference. This led to the May Fourth Movement in 1919. The Beiyang bureaucrats—who were more concerned with keeping industrial plans secret from China’s wartime enemies than with their propaganda value within China, or with the potential backlash of opinions against receiving Japanese loans—became targets of early rebellion. Cao Rulin’s mansion was burnt down and Zhang Zongxiang severely injured when he was beaten up by an angry mob of students. Nishihara’s “East Asian Economic League” collapsed, becoming a lost opportunity for the two countries to cooperate constructively; the inability for China to return any of the loans would in future prevent Japanese politicians sympathetic to China from making financial overtures to China, which left only military solutions to continental problems. From the late-1920s onwards, opponents of the Nishihara Loans such as the military strongman Tanaka Gi’ichi would come to have the upper hand in deciding China Policy, and this led directly to the military expansionism of the 1930s onwards. Nishihara remained adamantly opposed to the Japanese invasion of China in the 1930s-40s, writing in his autobiography that he regretted his inability to prevent Japan’s slide into war and fascism.8

This was not the end of the Beiyang Regime’s engagement with State Socialism. On July 8th, two months after the student protests, the Anfu Club held a meeting for its parliamentarians. Its chief whip Wang Yitang insisted that socialism had become a dominant political force after the Great War, and that as the governing party, the Club was responsible for the nation’s livelihood. The Club’s party newspaper published reports on social reforms in Japan including workers’ housing in Osaka, and advanced gradual social policy against communism and anarchism. That month, the cabinet’s Postwar Economic Investigation Commission (PEIC) [戰後經濟調查會] passed a “Labour Protection Ordinance” [保護勞工條例]9 10 which made Sundays a holiday, ordered factory owners to set up night schools, banned unsanitary and unsafe factories from hiring workers, and made workers’ insurance and pensions compulsory. This overlooked ordinance could be seen as the first Chinese official statement on labour rights. That same year, in response to the Bolshevik threat, Duan also sent his ablest lieutenant, Xu Shuzheng [徐樹錚], to lead a Japanese-trained expeditionary army into Outer Mongolia where he proposed a Saint-Simonian package of railways, mines, and animal husbandry.

In 1920, the PEIC reformed itself into the Economic Investigation Bureau [經濟調查局]. Massive industrialization, hydro-electrification and motorways were planned for the Peking region. The state began to openly advocate the cooperativization of the peasantry, handicraft artisans, and industrial laborers. President Xu Shichang, [徐世昌] also an ex-imperial bureaucrat, announced his wish to prevent “social class warfare.”[^classWarfare] Under this plan, “Peasant-Worker Banks” were established across the country to provide credit to farmers, allowing them to avoid usurers. In addition, a cartel of national and semi-national banks was also proposed, so as to reduce China’s dependence on foreign finance. This second wave of industrial proposals in 1920 was a substantial improvement on the first one from 1917, in its focus on domestic investment and preventative measures. All of this was to be aborted by the July 1920 civil war which toppled the Club Regime. The next year, in summer 1921, the Chinese Communist Party was formed, and the country would now follow a very different trajectory towards socialism.

State Socialism and Modern East Asia

During WWI, Walther Rathenau, head of the Raw Materials Section of the German War Ministry and son of the founder of AEG, created the first planned economy in modern history. Rathenau used punch card computers made by the German subsidiary of IBM to coordinate large amounts of data. He installed “War Corporations” that coordinated state demands with each sector. And he instituted a system of collective bargaining and argued for the breaking up of landed estates for collectivized agriculture. He also resurrected the proposals for a Mitteleuropa. Conceived and instituted during wartime, these efforts were key to his vision of a collectivist society.

Nishihara Kamezō [西原龜三]

The Japanese military translated Rathenau’s lectures and, along with other intelligence, they reached Nishihara. Having consulted the opinions of the professors who led the Association for Social Policy Studies, he began to write a manifesto for social reform. In his 1918 Strategy for Economic State-Building,11 he called for the establishment of a Controlled (i.e. Planned) Economy in Japan, as a precondition to setting up the “East Asian Economic League,” and to increase Japan’s per capita national income from 60 yen to 200. A single “Imperial Commodities Corporation” [帝國商品株式會社] would replace the whole retail sector with city-centre department stores, and this corporation would be linked to a collectivized agricultural and handicrafts sector. Land reform would distribute two hectares to each peasant family, and these would later be collectivized. Local administration would be run cooperatively, hydro-electric power stations and grids would be constructed throughout the country, and worker housing would be constructed in industrial zones using increased corporate taxes. China’s rapid industrial development, made possible by Japanese finance, was meant to be complementary to Japan’s own State Socialist transformation—it would have ushered in a new State Socialist era for all of East Asia. (To a certain degree, it was the failure to implement these reforms that cost Prime Minister Terauchi his power, when “rice riots” erupted across the country in summer 1918 due to inflation.)

But an economic and social system based on Rathenau’s model would emerge first not in Japan, but in the Soviet Union. Amongst the admirers of List and Bismarck was Sergei Witte, the Tsarist Finance and Prime Minister credited for having laid the foundations of Russia’s heavy industries and later, Soviet economic power. Vladimir Lenin followed German developments closely and thought that Rathenau’s system of “State Monopoly Capitalism,” combined with proletarian soviet power, would provide all the necessary conditions for a transition to socialism.12 The Rathenau model and Witte’s industrial legacy thus became the basis of “War Communism” and later, Stalinist industrialization.

Nishihara continued to advocate a Controlled Economy into the 1920s. With the onset of the Great Depression, the Stalinist model gained appeal, and Nishihara’s associates argued for a Five Year Plan which was nearly implemented in 1932 by Prime Minister Inukai Tsuyoshi [犬養毅], who himself had translated the works of Henry Charles Carey. Inukai was soon murdered by army officers for refusing to recognize the Japanese occupation of Manchuria (otherwise known as Manchukuo, the puppet state they had created). It was in Manchukuo however that Japan’s Soviet-inspired “reform bureaucrats” and many left-wing intellectuals fleeing from domestic repression found their chance to experiment with economic planning. Satō Daishirō [佐藤大四郎], an ex-member of the Japanese Communist Youth League, spearheaded a campaign to collectivize the Manchurian peasantry, until he too was arrested and killed for his activism. From 1936 onwards the leader of the reform bureaucrats (and a future Japanese Prime Minister), Kishi Nobusuke [岸信介], oversaw the implementation of two Five Year Plans aimed at rapid heavy industrialization, which ironically built up the necessary industrial might for the Chinese Communists to conquer the country in the late-1940s and to end in a draw with the US-led troops in Korea in 1953.

During the 1930s Japan’s economy was gradually placed under government control and subject to Keynesian investment under the auspices of Maeda Masana’s erstwhile protege, the Finance Minister Takahashi Korekiyo, [高橋是清] who continued Inukai’s plan without calling it as such. In 1940 a “New Economic System” was proclaimed. Under a war economy, the government attempted to assume managerial powers of privately-owned firms. After 1945, many Japanese technocrats returned from Manchuria to head post-war Japan’s Liberal Democratic Party and the leading economic departments, including the Ministry of International Trade and Industry (MITI) and the Economic Planning Agency. The result was a highly-planned capitalist economy, which would come to influence both South Korea and China. Through a practice known as “amakudari,” retired MITI bureaucrats were even inserted into the board of directors of leading enterprises, thus ensuring government direction over private businesses. This came alongside labor strikes and student protests which grew into the 1970s, reflecting the pressure of ordinary life under State Monopoly Capitalism.

Manchurian experiences also influenced both Koreas. North Korea developed the heavy industrial and hydro-electricity-based policies and the network of rural cooperatives established by the colonial government. These cooperatives had been established by Governor Ugaki Kazushige in 1932 on the advice of Nishihara and others, and had been a source of inspiration for Satō’s experimental collectives in Manchukuo. Japanese technicians who remained in North Korea after 1945 were amazed by the effect that Communist ideology had on the Korean workers’ performance compared to high-pressure colonial policies that had previously forced laborers to toil under brutal conditions. Some of the Japanese were even awarded “labor hero” medals.

Under ex-Manchukuo bureaucrat Chong Hyon-chun [鄭顯準] and a group of US advisors, South Korea drew up a Five Year Plan for 1949-53 but the plan was aborted due to the Korean War in 1950. Syngman Rhee later unsuccessfully proposed a Seven Year Plan. Park Chung-hee, [朴正熙] who seized power in a 1961 military coup and became head of the junta, was a former Manchukuo officer. Under his aegis, the effectively single-party South Korean state began to implement the first of seven Five Year Plans, fueling a “forced-paced industrialization” of the nation aimed at realizing what Park called “Miracle on the Han River” and turning the country into one of the Four Asian Tigers. It has also been argued that the “New Village” or “Saemaeul” Movement of the 1970s, where Park Chung-hee invested in the reconstruction of a semi-collectivized rural economy, was in fact a continuation of the cooperative policy of the 1930s. Park was assassinated in 1979 amidst a wave of nationwide student and worker protests.

Nishihara died in 1954. His influence permeated the post-war period through Ikeda Hayato [池田勇人], head of MITI and the Finance Ministry in the late 50s and Prime Minister by 1960. Under Ikeda, who wrote the calligraphy on Nishihara’s grave, Japan signed trade agreements with China and North Korea, and implemented a “National Income Doubling Plan”, realizing Nishihara’s “growthist” goals from 1918. Tsushima Juichi [津島壽一], in 1918 a young Finance Ministry bureaucrat who helped Nishihara write his State Socialist manifesto, survived to be President until 1962 of the Japanese Olympics Committee, which oversaw the 1964 Tokyo Games. His protégé was Ōhira Masayoshi, [大平正芳] who became Prime Minister in 1978-80 under the help of Liberal Democratic Party faction leader Maeo Shigesaburo [前尾繁三郎]. Maeo had hailed from Nishihara’s Kyoto region and had been under his immense influence during his youth, reading the original translation of List as done in 1889 by Oshima and Tomita, as well as other books on State Socialism. Maeo and Ōhira formulated a policy to provide developmental aid funding Deng Xiaoping’s open-door reforms. Indeed, Ōhira’s choice of foreign minister was the former lead planner of the Economic Planning Agency, Ōkita Saburō [大来佐武郎], who subsequently became advisor to the Chinese government. The Finance Ministry had also set up a group to re-examine the Nishihara Loans in the 1960s and came to favourable conclusions.

Deng himself had been a product of the First World War, soon after which he was chosen to study and work in France, following the example of the Chinese laborers sent there during the hostilities. He returned from France as a radical, joining the CCP as well as the Kuomintang. In 1928 the Beiyang Regime fell to Kuomintang troops, which had received Soviet support. Despite a fall out in 1927 with the Communists and a decade-long purge of the left, the Stalinist model also came to inspire the Kuomintang single-party regime, which announced a Five Year Plan in 1930 and a Four Year Plan in 1932. Both came to nothing. Regional warlords such as Yan Xishan [閻錫山] started to propose plans for single provinces. China reclaimed the right to set its customs tariff rates in 1933. By 1934 the Kuomintang had decided on a Planned Economy, and started a “National Economic Construction Movement.” In 1935, ex-Beiyang technocrats Ding Wenjiang and Weng Wenhao were named leaders of the “National Resources Commission” (NRC 國民政府資源委員會) which was placed in control of most of the state-owned industries. With Nazi assistance they produced in 1936 a “Heavy Industrial Development Five Year Plan” which focused on defense industries and electricity, until it too was cut short by Japanese invasion.

As early as 1946 Weng Wenhao announced that the work of the NRC was to build up state capital, conforming with international socialist tendencies. They had also inherited many of the Japanese staff, and the huge industrial complexes built by the Japanese authorities, in North China and Manchuria. The NRC thus became a left-wing bastion within the anti-Communist regime which fell in 1949. Around 90 percent of the NRC’s staff subsequently defected to the new Communist regime. Some remained on the frontlines of economic reform until the 1980s. One of them, Qian Changzhao [錢昌照] even helped plan special economic zones and write Hong Kong’s Basic Law. Others went to Taiwan, and although some of them were executed for their Communist sympathies, the island ultimately blossomed under what the Kuomintang termed a “Planned Free Economy” [計劃自由經濟], merging state-direction with market mechanisms.

It has often been argued that China, since the reforms of the 1980s, has abandoned revolutionary socialism. There is consequently little consensus as to what China has now really embraced in its place. What the history of planning in the region suggests is that China’s model owes much to this older ideology of State Socialism. Even today, the legacy of State Socialism and the Saint-Simonian spirit can still be felt in the 14th Five Year Plan, now under execution in China, and its “Belt and Road Initiative,” which aims to link up the world with rapid infrastructural development. It is also instructive to note that Japan’s late-1980s economic bubble and the subsequent “lost decades” coincided with the dismantling of economic planning and controls, whilst South Korea after the 1997 financial crisis has strengthened economic controls.

Yet the legacy of the East Asian variant of State Socialism, with its dedication to the cause of industrialization combined with near total neglect for social welfare, haunts the region. Worker protests continued to grow throughout the 1980s–90s. Recent decades have seen the institutionalization of comprehensive systems of medical insurance, and increased resources devoted to environmental protection. Understanding the origins of East Asian developmentalism allows us to effectively situate these efforts within a broader struggle for development, and to see how East Asia, often thought of as an exception, is but an integral part of the global evolution of economic policy.

  1. William Harbutt Dawson, Bismarck and State Socialism. London : Swan Sonnenschein & Co., 1891. 63-64.

  2. Okubo Toshimichi, “Shokusan Kōgyō ni kansuru Kengisho” [殖產興業に關する建議書] summarized in Byron K. Marshall, Capitalism and Nationalism in Prewar Japan – The Ideology of the Business Elite. Stanford : Stanford University Press, 1967. 16-17; Iwata, Masakazu. Okubo Toshimichi – The Bismarck of Japan. Berkeley and Los Angeles : University of California Press, 1964. 236-238.

  3. MITI, [通商產業省] ed. Shōkō Seisaku Shi (History of Commercial and Industrial Policy), vol. 5 [商工政策史:卷五] Tōkyō : Shōkō Seisaku Shi Kankōkai [商工政策史刊行會] 1965. 203-204.

  4. “Japan Today,” The Japan Times, May 26, 1912.

  5. Donghai Sanshi (Tokai Sanji), [東海散士] Jiaren zhi Qiyu. (Strange Encounters with Beautiful Women) [佳人之奇遇] Shanghai : Zhongguo Shuju, [中國書局] 1935.29.

  6. Liang Qichao, Ouyou Xinyinglu ; Xindalu Youji. (Reflections on My Travels in Europe ; An Account of My Travels in the New World) [歐遊心影錄;新大陸遊記] Beijing : Dongfang Chubanshe, [東方出版社] 2012. 266.

  7. Archival Documents at the Modern History Institute, Chinese Academy of Social Sciences: Mianye Jihuashu. [棉業計畫書] CASS-MHI, Jia-350.160; Nongshangbu Mian Mao Tie Deng Jian [農商部棉毛鐵等件], CASS-MHI, Jia-250.163; Zhongguo Tieye Jihuashu, [中國鐵業計畫書] CASS-MHI, Yi-G54; Nishihara, Kamezō. [西原亀三] Keizai Rikkoku Saku (Strategy of Economic State-Building). [經濟立國策] Tōkyō: Yuhikaku. [有斐閣] 1918; Yamamoto, Shirō, [山本四郎] ed. Terauchi Masatake Naikaku Kankei Shiryō. [寺内正毅内閣関係史料] 2 vols. Kyoto: Kyōto Women’s University, [京都女子大學] 1985.

  8. Nishihara, Kamezō. [西原亀三] Keizai Rikkoku Saku (Strategy of Economic State-Building). [經濟立國策] Tōkyō: Yuhikaku. [有斐閣] 1918.

  9. “Baohu Laogong Fa’an” (Labour Protection Act) [保護勞工法案], in Gongyan Bao (Fair Comment) [公言報] 1919-07-21/22.

  10. “Nongshangbu Zhuzhong Quanguo Minsheng zhi Buzi” (Ministerial Proclamation by the Ministry of Agriculture and Commerce on Emphasising National Popular Livelihood) [農商部注重全國民生之部諮], in Gongyan Bao (Fair Comment) [公言報] 1920-03-12.

  11. Nishihara Kamezō, Yume no Nanajyu yonen – Nishihara Kamezō Jiden (A Seventy-something year Dream – The Autobiography of Nishihara Kamezō) [夢の七十余年 - 西原亀三自伝] Kitamura Hironao, [北村敬直] ed. Tōkyō : Heibonsha, [平凡社] 1965, 278.

  12. Roman Szporluk, Communism & Nationalism. New York : Oxford University Press, 1988; Lenin, “Can We Go Forward if We Fear to Advance Towards Socialism?”, in “The Impending Catastrophe and How to Combat It”. In Lenin’s Collected Works, vol. 25. Moscow : Progress Publishers, 1977.

Like the world system as a whole, segregated cities in the United States have their own finance driven core-periphery dynamics.

Read the full article

Though the lockdown in 2020 threw many workers out of work, the big fiscal stimulus, fueled by government debt and an unprecedentedly large monetary expansion, offered stimulus checks and elevated…

Read the full article

What does the US dollar’s continued dominance in the global monetary and financial systems mean for geo-economic and geo-political power?

Read the full article