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31 Mar 2016

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What role did natural capital play in the Japanese economic miracle that took place after the Meiji restoration/revolution of 1868? That is the question explored in research by Jean-Pascal Bassino, Kyoji Fukao and Osamu Saito, to be presented at the Economic History Society’s 2016 annual conference in Cambridge.

It is well known that Japan emerged unexpectedly as the first non-western industrial nation in the late nineteenth century, an accomplishment almost as important, in the economic history of the world, as the emergence of Britain as the first industrial nation from the late eighteenth century.

The standard interpretation of Japanese economic growth in the late nineteenth and early twentieth centuries is that it was essentially driven by institutional changes and the diffusion of advanced technologies imported from Europe, with an absorptive capacity explained by the high level of human capital accumulation.

But this interpretation overlooks the fact that, in the total wealth of Japan (measured using the methodology of World Bank (2006)), the value of the stock of natural capital remained much higher than the value of the stock of produced physical capital (machinery and infrastructures) well until the beginning of the twentieth century.

Taking into account the stock of natural capital is critical. From a theoretical viewpoint, the relevant indicator of sustainable wellbeing, and therefore of its improvement, is not a flow (gross or net per capita domestic product, or genuine saving) but a stock: the value of comprehensive wealth per capita (Dasgupta 2001, 2009).

Population growth results in a ‘dilution’ of comprehensive wealth, particularly its natural capital component (the human and physical capital components can be accumulated at a pace exceeding demographic growth; this is rarely the case for natural capital).

In a lower income society, such as Japan in the nineteenth century, the stock of natural capital is usually a major component of the total national wealth. Its sound management is therefore essential in order to ensure a steady improvement of living standards.

Initial (pre-Meiji) conditions were characterised by an exceptionally efficient use, by the international standards of the time, of very scarce natural resources, especially in forestry, including silviculture (Totman 1989; Saito 2009, 2014). In spite of their scarcity, natural assets played a critical role in the initial phase of Japanese economic transformation, in the late Tokugawa and early Meiji.

Silk, tea and coal accounted for a large share of Japanese exports during that period. The steady rise in land productivity of Japanese agriculture in the late nineteenth and early twentieth centuries made it possible to feed a growing population using exclusively domestic resources. The nutritional status of the population improved markedly although import of foodstuffs remained negligible until the 1920s.

But the evidence suggests that dramatic changes introduced in early Meiji in the institutional arrangements had a negative impact on the sustainability of the management of natural assets, in particular in forestry; institutional changes introduced during the Second World War also had destructive consequences.

Although initial conditions were characterised by extremely resource efficient practices, the adoption and local adaptation of imported technologies resulted in a shift toward a more resource intensive economic development trajectory during the course of the twentieth century.


Making the most of scarcity? Japanese natural assets since the 1870s 


Jean-Pascal Bassino

Professor of economics, ENS Lyon, University of Lyon

Email: jpbassino@gmail.com

Kyoji Fukao,

Professor of economics, Institute of Economic Research, Hitotsubashi University

Email: k.fukao@r.hit-u.ac.jp

Osamu Saito

Professor of economics (emeritus), Institute of Economic Research, Hitotsubashi University

Email: o-saito@ier.hit-u.ac.jp



Dasgupta, P (2001). Human well-being and the natural environment. New York, Oxford University Press. 

Dasgupta, P (2009). The welfare economic theory of green national accounts. Environmental and Resources Economics, 42, 3-38. 

Saito, O (2009). Forest history and the great divergence: China, Japan, and Europe. Journal of Global History, 4(3), 379-404. 

Totman, Conrad. 1989. The Green Archipelago; Forestry in Pre-Industrial Japan. Berkeley, University of California Press. 

World Bank (2006), Where is the Wealth of Nations? Measuring Capital for the 21st Century, Washington, DC, World Bank. 

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