What role did patents play in the Japanese economic miracle?

After the end of World War II, the Japanese economy lay in ruins in the truest sense of the word. American carpet bombing leveled hundreds of factories and businesses across the country, and the last nails driven into the coffin of the once mighty empire were the atomic bombs dropped on Hiroshima and Nagasaki. Millions of people were left homeless, hundreds of thousands of repatriates expelled from former colonies were added to them.

If we talk about numbers, then the industry produced six times less goods than before the war, and exports fell nine times. But after a couple of decades, Japan became the second most powerful economy in the capitalist world and held this position until the beginning of this century, when it was removed from the pedestal by China, which adopted a lot from its neighbor. How did the defeated country manage to accomplish what would later be called the “economic miracle”? And what role has intellectual property played in this? We will talk about this in our material.

American Shock Therapy

Already at the end of 1946, a detailed plan for the restoration of the Japanese economy was adopted by the government. He proposed to identify two industries that are key to the recovery of the entire economy, and then throw all the scarce currency there. In this case, it was the coal industry and metallurgy. By mutually nourishing each other, they would pull the rest of the industry with them. The author of the project was a professor of economics at the University of Tokyo, Hiromi Arisawa.

The steel industry pushed construction and shipbuilding. In addition to metallurgy, a lot of money was invested in light industry: in the production of clothing, fabrics, and small household items. Fuel oil, iron ore, and cotton were bought abroad, and at first, not very high-quality, but still finished products were exported, which gave the country much-needed currency.

In 1949, Detroit banker Joseph Dodge put an end to the first stage of Japanese economic reform. He was appointed adviser to the commander-in-chief of the Allied occupation forces, General Douglas MacArthur. In his press conference in February 1949, he stated: “The Japanese economy is a man on stilts. One stilt is American aid, the other is hidden budget subsidies to enterprises. They have become too high for you – you will fall, and this will paralyze the economy.

As a result, all unsecured subsidies were deleted from the budget. Hyperinflation, which reached 200% per year, stopped. But unemployment has risen.

No less cardinal was the agricultural reform. Another adviser to MacArthur, the American economist Wolf Ladejinsky, carried out agrarian reform. Landownership was abolished, the peasants became the owners of the land. These measures helped defeat hunger and abolish the rationing system.

The dissolution of the zaibatsu, the financial and industrial groups that controlled the Japanese economy, played a significant role. They were replaced by keiretsu. The dissolution of the zaibatsu and the ban on the concentration of economic power was a measure that helped create a competitive industry. 18 large companies were dissolved. For example, Japan Steel Corporation was split into Yamata Steel and Fuji Steel. One clan at the top has been replaced by horizontal links between small firms that are part of a conglomerate (keiretsu).

In the summer of 1950, the Korean War began, which became a catalyst for the development of the economy. Japan received huge commissary orders from the American army for textiles, wire, cables, cement, and so on. Currency poured into the country. But not all enterprises got it.

Borrowed and improved innovations

In the 1950s, absolute foreign exchange control by the state was introduced in Japan. All export proceeds went to the state foreign exchange account, and the enterprises were issued under strictly stipulated transactions – for the purchase of raw materials for priority industries, the latest foreign equipment or licenses. The last aspect was especially important. The priority was the import of technology, not goods, which the country itself began to produce in huge quantities with a continuous increase in their quality.

In the 1950s and 1970s, Japanese companies bought over 15,000 patents and licenses (mostly from their sworn friend in the United States). Instead of spending money and time on research, they bought the rights to the product, and then improved it. Thus, the American corporation DuPont has been developing the production of nylon for 11 years, having spent a total of $25 million. The Japanese company Toyo Rayon simply bought out the patent for $7.5 million, but received $90 million in revenue from the export of nylon.

But the most striking example, of course, is Sony Corporation. Its founder Morita Akio spent half a year knocking on the thresholds of the Ministry of Foreign Trade and Industry (MVTP) in the hope of knocking out the currency to purchase a patent for a transistor in America. Officials did not believe in the prospects of the idea and did not give money. Yes, and Sony then was a small company, not a powerful corporation. But Morita still insisted on his own. The patent was bought, and a research team led by Leo Esaki began to work on improving the transistor. Quite quickly, the scientist was able to develop tunnel diodes with a transition width of only three dozen atoms, which led to the creation of generators and detectors of high-frequency signals. What did this mean in practice?

Sony and Japan pioneered the mass application of transistors in radio electronics. The world was flooded first with compact radios, and then other goods. For my opening Leo Esaki was awarded the Nobel Prize in Physics in 1973. But much more important was the scientific contribution to the Japanese economy, whose average GDP growth in the 1960s reached 10% per year, in the 1970s – 5%, in the 1980s – 4%. Exports grew even faster: 17% per year in the 1960s, 21% in the 1970s, and 11% in the 1980s. Japanese exports, starting at $4.1 billion a year in 1960, reached $287 billion by 1990.

Subsequently, other Asian countries followed the Japanese path. The most striking examples are South Korea and China. But these cases deserve separate articles. And Japan itself, already in the 1980s, became one of the leaders in the number of patents granted for inventions. True, this country did not save the country from a protracted economic crisis.

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