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Capital as Will and Imagination

Schumpeter’s Guide to the Postwar Japanese Miracle

by Mark Metzler

Publication Year: 2013

With this book, Mark Metzler continues his investigation into the economic history of twentieth-century Japan that he began in Lever of Empire. In Capital as Will and Imagination, he focuses on the successful stabilization of Japanese capitalism after the Second World War. How did a defeated and heavily damaged nation manage reconstruction so rapidly? What economic beliefs resulted in the "miracle" years of high-speed economic growth? Metzler argues that the inflationary creation of credit was key to Japan's postwar success-and its eventual demise due to its instability over the long term.

To prove his case, Metzler explores heterodox ideas about economic life , in particular Joseph Schumpeter's realization that inflation is intrinsic to capitalist development. Schumpeter's ideas, widely ignored within standard American neoclassical economic theory, were shaped by his experience of Austria's reconstruction after 1918. They were highly influential in Japan, and Metzler traces their impact in the period from the Allied Occupation, starting in 1945, through the Income Doubling Plan of 1960. Japan after defeat, Metzler argues, illustrates the critical importance of inflationary credit creation for increased production.

Published by: Cornell University Press


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p. 1-1

Title Page, Copyright Page

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pp. 2-7


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pp. vii-x

List of Tables

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pp. xi-xii

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pp. xiii-xiv

The collective enterprises of language and thought are life movements of which we all partake, and we perceive only glimmers of the sources of all we are given. Here I can acknowledge only the most visible help, starting with an appreciation of the field I’ve been working in. ...


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pp. xv-xvi

Note on Terms and Conventions

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pp. xvii-xviii

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Introduction: Inflation and Its Productions

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pp. 1-7

This book investigates the financial fountainhead of modern capitalist development: inflationary credit creation. For empirical material, it uses the experience of Japan in the fifteen years after World War II, from the period of postwar recovery to the onset of “High-Speed Growth” in the second half of the 1950s. ...

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1. The Revolution in Prices

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pp. 8-19

The twentieth century was the most inflationary century in history. This distinctive aspect becomes clearer as we leave the century further behind. Partly this had to do with the financing of great wars. Partly it had to do with the nature of modern capital creation. This book is mainly about the second question, but it is important to consider the first one as well. ...

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2. Dramatis Personae

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pp. 20-35

After World War II, the thought leaders of the generation who directed economic reconstruction and stabilization looked back reflexively to the problems that had followed World War I, which they had witnessed in their youth. In Japan, several influential members of this generation had absorbed these lessons in postwar Germany itself. ...

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3. What Is Capital?

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pp. 36-52

The ideas advanced by Joseph Schumpeter are now enjoying boom times. His conceptions of entrepreneurship and innovation have had more influence in thinking about those subjects than those of any other scholar. Schumpeter pioneered the study of economic development and of technological “paradigm shifts,” ...

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4. Flows and Stores

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pp. 53-64

Schumpeter’s theory of capital focuses attention on the “two flows” of the economy: on the one hand flows of materials and energy and on the other flows of financial claims. Economic activity is “a combination of two unavoidable circulations,” Schumpeter wrote, “which express two irreducible forms of activity,” industry and finance.1 ...

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5. Japanese Capitalism under Occupation

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pp. 65-81

As a consequence of the war, energetic and material flows were constricted to famine levels. Sources of basic materials were cut off, and transportation and supply infrastructure was in a shambles. Essential foodstuffs and other materials that did continue to flow increasingly did so through illegal channels. ...

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6. Inflation as Capital

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pp. 82-108

Was the postwar inflation caused by shortages or by overspending? This is the way the question was often posed; and even after the fact, the productionoriented Ministry of International Trade and Industry (MITI) and the fundingoriented Ministry of Finance tended to come down on opposite sides of it. ...

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7. Interlude (Deflation)

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pp. 109-136

War time planning, succeeded by recovery planning, went far beyond the hitherto normal operations of capitalist markets. In Japan, the war time control system came much closer—in detail—to the Soviet model of centralized planning than is generally realized. ...

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8. The State-Bank Complex

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pp. 137-157

The relationship between the state and the banking system constitutes a defining feature of a national political-economic system, with implications for many other things. The previous chapter described how U.S. authorities reversed political course in Japan and enforced a policy of credit-capital restriction in 1948–49. ...

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9. The Turning Point

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pp. 158-172

It was Schumpeter, in Business Cycles, who first clearly conceptualized economic development as a succession of industrial revolutions, each based on a set of core technologies, organizational forms, and ideologies. His idea of coherent waves of industrial reorganization continues to provide a starting point for thinking about the succession of technological and organizational paradigms, ...

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10. High-Speed Growth: The Schumpeterian Boom

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pp. 173-187

Even inside Japan, the novelty of High-Speed Growth was theoretically underregarded. It still is underregarded by most Western analysts. In fact, it was the beginning of a new epoch in world industrial history. In the prior history of world industrialization, rates of increase in national production had never reached the level of double-digit annual percentage increases ...

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11. High-Speed Growth: Indication and Flow

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pp. 188-203

In 1963, flush with the spectacular overfulfillment of the Income Doubling Plan, Prime Minister Ikeda’s economic adviser Shimomura Osamu declared that when he heard commentators persist in describing Japan as a “lesser-developed country,” with its “dual structure” (e.g., Arisawa) and its “low wages” and “income gaps” (e.g., Nakayama), ...

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12. Conclusions: Credere and Debere

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pp. 204-224

Schumpeterian capital—credit-capital as the counterpart of innovation—can be described as prescriptive or prefigurative capital. This description highlights both its virtuality—its socially imagined quality—and its aspect as the willful calling into existence of new forms and productions. ...


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pp. 225-232


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pp. 233-258


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pp. 259-286


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pp. 287-296

E-ISBN-13: 9780801467912
E-ISBN-10: 0801467918
Print-ISBN-13: 9780801451799
Print-ISBN-10: 0801451795

Page Count: 312
Publication Year: 2013

Edition: 1