Capital as Will and Imagination: Schumpeter’s Guide to the Postwar Japanese Miracle by Mark Metzler (review)

Mark Metzler’s Capital as Will and Imagination is a highly original investigation into the philosophical underpinnings of the postwar Japanese miracle. It seeks to explain how economists and planners in postwar Japan employed the ideas of Joseph Schum-peter to propel economic reconstruction in their drive toward high-speed growth. Central to the endeavor was the notion of “inflationary creation of credit,” whereby new kinds of purchasing power are generated by investment-focused inflation. Put simply, Japan’s inexorable postwar reconstruction, like the stupendous “Greater East Asia War” (Daitōa Sensō) itself, proved to be impossible without inflationary finance. Significantly, though, Japan is presented here not as a “comparative case” (p. 1) but as an under-recognized archetype in a process of modern capitalist development that has profound global significance—a significance that leads us to question the future of global capitalism itself.

The book consists of twelve clearly defined chapters in three conceptual parts. Chapter 1 starts out by providing a historical backdrop to the great wartime inflations of the twentieth century. Chapter 2 introduces the cast, which, as in Metzler’s groundbreaking Lever of Empire (University of California Press, 2006), features a striking array of characters, from Schumpeter’s Japanese students Nakayama Ichirō and Tōbata Seiichi to leading academics like Ōuchi Hyōe and Tsuru Shigeto to even the students of these men, such as Arisawa Hiromi and the technocrat-turned-economist Ōkita Saburō. The inflation-busting Joseph Dodge, American Banking Association president and financial adviser to the Supreme Commander of the Allied Powers, is considered alongside the arch-inflationist Ishibashi Tanzan. Metzler also shines a light on the financial bureaucrat, “political entrepreneur,” and 1960–1964 prime minister Ikeda Hayato, perhaps the most important figure associated with high-speed growth, and identifies Ichimada Hisato, Bank of Japan governor from 1946 to 1954, as Japan’s postwar “arbiter of credit” (p. 5). Chapter 3, “What Is Capital?,” then cuts to the core of the argument with close reference to Schumpeter’s seminal 1912 treatise The Theory of Economic Development. Chapter 4 further considers the questions raised by the flow and storage of capital using the understudied ecological-economic approaches of Frederick Soddy and Vaclav Smil.

Building on the extensive and careful introduction provided by these first four chapters, chapters 5 through 11 explicitly focus on episodes in Japan’s particular post-war economic experience from 1945 to 1960, such as “reconstruction inflation,” the Allied Occupation’s anti-inflationist Dodge Line, the Income Doubling Plan of 1960, and the process of fueling high-speed growth itself. Chapter 5 fleshes out the extent to which Japanese capitalism was diminished and destabilized by the country’s participation and loss in war. The menacing Three D programs of the immediate post-war Occupation (demilitarization, democratization, and, most pointedly, economic deconcentration, or decartelization) represented an existential threat to big business and industrial combines, but, as explained in chapter 6, the thrusts of these “antitrust” initiatives were skillfully ameliorated by Ishibashi Tanzan’s inflationary reconstruction policies. Chapter 7 takes up the mission of Joseph Dodge to “restore” the Japanese economy to Anglo-American financial orthodoxy through the induction of large-scale deflation, balanced budgets, and a dramatically lower, fixed exchange rate for the yen; chapter 8 meanwhile details how Dodge’s credit-restriction directives were effectively subverted by Japan’s elite financial bureaucracy, resulting in a system of “superdirect” Schumpeterian finance. Chapter 9 considers the end of inflationary reconstruction and its relationship to the beginning of the subsequent “Schumpeterian boom.” Finally, chapters 10 and 11 examine the economic foundations of the High-Speed Growth system, which, as Metzler notes, has since been widely reproduced across eastern Asia.

Chapter 12, the last conceptual part of the book, once again returns to the question of capital. What are credits, what are debts? Capital as Will and Imagination is a Schumpeterian guide to the postwar...