Emil Lederer, Japan in World Economics (1937)

Emil Lederer’s journal article explains Japan’s industrial expansion during the world depression through the interaction of population growth, agricultural limits, industrial rationalization, low wages, and imperial policy. Its four sections move from population and agriculture through foreign trade and industrial organization to Japan’s prospects. The central argument is that the “Japanese Miracle” cannot be explained by currency depreciation alone: demographic pressure and changes in production enabled exports to expand without corresponding increases in workers’ incomes. This economic success nevertheless intensified dependence on foreign markets precisely when those markets were becoming less accessible.

Lederer first challenges comparisons that treat Japan’s population growth as a repetition of nineteenth-century European development. Japan’s growth remained rapid at a later stage of industrialization, while its agricultural resources were exceptionally restricted. Increased rice yields had sustained a growing population, but cultivation was approaching its technical limits. Further intensification through artificial fertilizers would itself require costly imports. Consolidating farms might improve productivity per worker, yet would displace families without providing alternative livelihoods. The problem was therefore not simply producing more food, but finding employment outside agriculture.

Agriculture no longer offers any opportunity for the increasing population; the whole increase, and even more than that, must earn its living elsewhere.

This conclusion makes industrialization a structural necessity rather than merely an aspiration to higher consumption. Because Japan also lacked essential industrial raw materials, absorbing population growth meant expanding international exchange. Colonial supplies of rice did not eliminate this dependence: manufactures sent to the dependencies in payment contained imported materials, which ultimately had to be financed through foreign sales.

The second section distinguishes trade volume from monetary value. Between 1929 and 1935, export quantities rose by approximately 85 per cent even while their gold value fell sharply. Depreciation and low domestic prices allowed Japanese goods to occupy more foreign “market-space” while yielding comparatively little revenue. Lederer’s account of this “aggressive” trade describes a system compelled to sell increasing quantities to finance its requirements, including armaments. The collapse of raw-silk prices sharpened that compulsion. Silk exports required no imported material; replacing their receipts with cotton manufactures required both new raw-cotton imports and substantially greater gross exports. Industrial diversification was thus partly a response to the vulnerability of an export structure dependent on one luxury commodity.

Territorial expansion offered no straightforward escape. Trade with China, Kwantung, and Manchukuo together had not regained its 1925 value by 1935, and political hostility obstructed potential markets. Moreover, exports financed by Japanese investment in Manchukuo did not generate funds for purchasing imports elsewhere.

Thus the Japanese experience with Manchukuo again proves the rule that political domination as such does not guarantee an improvement in economic relations.

The third section locates Japan’s competitive strength in its distinctive industrial organization. Factory statistics omitted much production in small workshops, where family labor, low overheads, and adjustable remuneration made costs unusually flexible. Farms and family enterprises also absorbed displaced factory workers. Larger establishments reproduced aspects of this organization through subcontracting and dormitory labor, especially that of young women. Initially, low wages coexisted with low efficiency. Rationalization changed this relationship: improved equipment, management, standardization, and coordination increased productivity without equivalent wage gains.

Lederer therefore explains export competitiveness through the combination of greater output per worker, depressed wages, and depreciation. Agricultural distress supplied labor to industry, while weak unions limited workers’ bargaining power. Recovery raised profits and state revenues more reliably than workers’ purchasing power. Although aggregate real income increased, its distribution shifted toward entrepreneurs and the financing of producers’ goods and armaments.

In the recovery of Japan, as in that of Germany, the workers' lower incomes paid for a great part of the increase in production, because the situation on the labor market did not allow for increases of real wages along with increasing production.

The final section asks whether this mechanism could continue to accommodate population growth. Lederer uses Germany’s earlier industrialization to estimate the possible scale of Japan’s trade expansion, but qualifies the analogy: protectionism, currency controls, and entrenched claims to markets had produced an “ossification” of world economics. Productivity gains could strengthen exports without creating enough employment, while foreign restrictions threatened the sales needed to finance imports.

His discussion of living standards adds a cultural qualification. Commodity consumption alone, he argues, cannot measure welfare across different ways of life. Japanese aesthetic traditions and family arrangements could sustain dignity at low monetary incomes and help preserve low wage costs. This account contains idealized national generalizations and a dismissive characterization of African cultures; these should not be mistaken for neutral economic findings. Its analytical point is that cultural differences and labor-market institutions prevent any automatic equalization of wages as productivity converges.

The theory that in the long run equal work demands equal wages is a myth, and it will be increasingly understood as a myth when Chinese industries too begin to compete in foreign markets.

Lederer closes by reconnecting economics with imperial ideology. Population pressure provided a justification for expansion, but domination of China would also encourage Chinese industrialization and nationalism. Anti-Bolshevism served, in his interpretation, to defend Japan’s ruling order against both domestic unrest and the anticipated appeal of Soviet development. His favorable expectations of Soviet planning belong to this political diagnosis, not to an established forecast. Economic cooperation among Japan, China, and Russia offered the alternative to conquest. The article’s enduring relevance lies in its explanation of how export-led recovery can combine technical advance with unequal distribution, and how militarization can aggravate rather than resolve the dependencies it claims to overcome.