Birth of the Zaibatsu: Meiji Industrial Modernization

Abstract

After one and a half century of the Japanese Modernization entitled Meiji Ishin (Meiji Restoration) we are still studying, learning, and analyzing every aspect of that extraordinary Asian success in our noble national quest for the hopeful Arab renaissance. The Japanese insightful leadership seized the opportunity to develop many of Tokugawa institutions and had the unique experience of shaping a modern nation-state through the cautious selection of the best characteristics of Western: government, society and economy. Economic growth depends on an advanced industry. This study entitled: Birth of the Zaibatsu: Meiji Industrial Modernization, will try to explore that Eastern pioneering initiative by foxing on one factor which is linked to the economy, hoping to shade the way to reveal the essential role of those large capitalist enterprises, which was managed and directed by the elite Samurai families, in the success of the first Asian - Japanese miracle. The Meiji administration tried at first to create a national industry to produce particular goods or services. The lack of funds forced the Japanese authorities to turn these industries over to a loyal private business sector that in return for extraordinary privileges would accommodate the government's objectives. This was the origin of the Zaibatsu. The four main Zaibatsu were Mitsui, Mitsubishi, Sumitomo, and Yasuda, but there were many smaller concerns as well. While those monopolies holding companies directed the enterprise complexes in a pyramid fashion, stockholding relations cemented together with the companies within Zaibatsu complexes. The stock of members was seldom sold by other members to third parties. Beneath this structure of Cross Holding of Stocks, Zaibatsu drove the finance, heavy industry and shipping sectors that manufactured the heart of Japan's economy. During the imperial expansion, the Zaibatsu economic power inundated the sectors of finance, trading and many major large–scale industries. From 1914 to 1929, three Zaibatsu (Mitsui, Mitsubishi and Sumitomo) controlled 28% of the total resources of the top 100 Japanese institutions. Indeed, as of 1945, the same complexes possessed 22.9% of the total resources of all Japanese stock companies. After the end of World War II, the Allied occupation authorities ordered the Zaibatsu dissolved. Stock possessed by the parent companies was put up for sale, and individual companies of the Zaibatsu realms were freed from the control of mother-companies. After discussing the conditions that led to the rise and fall of those giant family enterprises, then analyzing the different circumstances that made the outcome, we hope to provide answers that highlight the reasons for the success of the Japanese Industrial Modernization to learn from, in our national hope for a better future.