At the end of WWII, the US took charge to reshape Japan’s government and economy. The Allies punished Japan for its past militar
ism and expansion by convening war crimes trials in Tokyo. At the same time, the Japanese Army was dismantled, and former military officers were banned from taking roles of political leadership in the new government. In the economic field, land reform was introduced, designed to benefit the majority tenant farmers and reduce the power of rich landowners, many of whom had advocated for war and supported Japanese expansionism in the 1930s. MacArthur, the US general in charge of the occupation also tried to break up the large Japanese business conglomerates, or zaibatsu, as part of the effort to transform the economy into a free market capitalist system. In 1947, Allied advisors essentially dictated a new constitution to Japan’s leaders. Some of the most profound changes in the document included downgrading the emperor’s status to that of a figurehead without political control and placing more power in the parliamentary system, promoting greater rights and privileges for women, and renouncing the right to wage war, which involved eliminating all non-defensive armed forces. In response to these changes, there was an increase in the cooperation of manufacturers, suppliers, distributors, and banks in closely knit groups called keiretsu. Additionally, good relations between unions and government bureaucrats led to the guarantee of lifetime employment in big corporations. Japan quickly became the second largest economy in the world during and sometime after the Cold War (excluding the USSR). Which of the following concepts best describes all of these changes made in post-war Japan that lead to Japan's economic achievement?
Inclusive economic institutions
Creative Destruction
Virtuous circle
Rule of Law
Daron Acemoglu explains on his book titled 'Why Nations Fail' the roots and causes of economic development. For this author the most important component of progress is the stablishment of economic institutions which permits the integration and cooperation of society, defined by inslusive economic instituions instead of extractive ones.
In this particular case, the US autorities implemented a free market economy which correspond to an inclusive institution and replacing the old economy.
