The Overstretched Superpower
Does America Have More Rivals Than It Can Handle?
THOUGH Japan's industrial revolution began only towards the end of the nineteenth century, her progress since then has been remarkable. Within a relatively short time she has succeeded not only in assimilating but in some respects in improving upon the industrial and commercial technique of the West. In the eyes of the outside world this has tended to minimize the importance of agriculture in Japan's national economy. In reality, the cultivation of the soil still remains her leading industry. As one writer has put it, "Japanese agriculture employs nearly half of our population, occupies a substantial part of the land area of the country, has invested in it nearly half of the nation's industrial capital, an amount more than half as much again as that invested in manufacturing industry and commerce together, is an important factor in foreign trade, and is an almost exclusive provider of the nation's staple food." [i]
If Japanese agriculture were as prosperous as it is vital to the nation, it would be a thriving industry indeed. Actually, rural Japan cannot lay claim either to prosperity or progress. Long before the industrial slump of recent years the farmers found themselves in the throes of depression. In the early thirties, when Japan's industry and foreign trade scored some of their most notable advances, the countryside presented a picture of impoverishment, distress and social unrest. All this is to be attributed to the fact that agriculture in Japan "does not pay."
The outstanding natural factor that has given rise to Japan's agricultural crisis is the scarcity of land fit for cultivation. Less than 15,000,000 acres, or not quite 16 percent of her total area, are under crops. Despite the efforts of the last fifty years, the area under cultivation has increased by only about 25 percent while the population practically doubled. At present there is only a small amount of undeveloped land suitable for agricultural production: however hard the farmers may try they cannot appreciably increase the cultivated acreage.
The industrialization of Japan has absorbed many people from the rural districts, but not in sufficient numbers to relieve the pressure against the land. In 1936, 5,597,465 families, constituting an aggregate rural population of 27,000,000, were living on the land. The data on the areas cultivated by each family clearly indicate how land-hungry the Japanese farmers are. Nearly 69 percent of all the farm households cultivate less than 2½ acres per family, comprising a total of 33 percent of the arable land. On the other end of the scale there are 204,000 families, or less than four percent of the total, who cultivate 23 percent of the entire crop area.
Absentee landownership is very extensive in Japan, and for this reason the size of a holding which a farmer owns bears little relation to the land he cultivates. Thus half of the land is owned by 7½ percent of all the landowners, while one half of the landowners own but nine percent of the land. As a result of this unequal distribution of landownership, there are many farmers who own no land at all and must cultivate that of someone else; still others own so little land that in order to improve their economic position they must rent additional ground. Hence the widespread development of tenancy in Japan. In 1936 farm households cultivating their own land constituted 31 percent of the total number of farm families; 27 percent rented all the land they cultivated; and 42 percent was made up of those who were part-tenants and part-owners. The last two groups rent from the landowners a total of 7,200,000 acres, or 48 percent of Japan's total arable land.
The outstanding feature of the Japanese tenancy system is that the shortage of land and lack of alternative occupations bind the tenant to the land. The relations between landlord and tenant are largely determined by this fact. For this reason the competition for the limited agricultural area is so strong that rents have been pushed very high. Rents for rice lands are usually paid in kind and for the most part the amount is calculated on the basis of a given number of bushels of rice per unit of land. This throws the full burden of loss from a poor harvest upon the tenant unless he can obtain a reduction in his rent. In general the minimum rental for a one-crop field is about 55 percent of the crop, and for a two-crop field, 60 percent. The plight of the tenant is aggravated by the fact that the landlord's only responsibility is, generally speaking, to supply the land and pay the land tax; all expenditures connected with raising the crop, such as outlays for equipment, the all-important fertilizer, farm buildings and numerous other items, must be covered by the tenant, with the result that very often his net share amounts to not more than a third of the crop.
Though the tenants have never been satisfied with their economic status, up to the World War their conservatism and ingrained feudal subservience to landlords kept friction at a minimum. During the last twenty years, however, this relationship has undergone a radical change, and the number of disputes has increased from 85 to nearly 6,000 a year. The underlying causes for this are manifold, of which two in particular must be noted: in the twenties it was due to excessive rents, more recently to the attempts of landlords to terminate leases and evict tenants from the land. In Japan the struggle between landlord and tenant has gradually centered upon the vital question of the tenant's right to cultivate the land. Upon the maintenance of this right -- not a legal one, to be sure, but one well established by custom -- depends the very existence of the tenant.
The unequal distribution of the land is not the only source of weakness in Japan's agricultural economy; the manner in which the land is utilized has its shortcomings as well.
In the main, Japanese agricultural income depends upon two products -- rice and cocoons -- both of which are subject to considerable price fluctuations. More than half of the entire arable land of Japan is under rice. During some sixty years the area under this crop increased over one-fifth, while the output practically doubled. This vast augmentation of the rice supply was chiefly the result of more intensive cultivation through the application of very expensive chemical fertilizers. However, during the past decade there has been no noticeable increase in rice yields despite the ever-growing utilization of these fertilizers. Japanese agriculture is thus proving to be a testing ground for the operation of the law of diminishing returns.
Foreign rice is sold in Japan at prices considerably lower than those of the domestic product, but it is so unpalatable to the Japanese that only the very poor eat it. The inelastic demand for the home product, the size of the crop, the difficulty of controlling imports from Korea and Formosa, and the inability to market any surplus abroad at a profit, all cause wide fluctuations in the price. The sharp decline in prices after the huge crop of 1930-31 intensified the distress of the Japanese rice producers; yet the very high prices following the poor crop of 1918 occasioned the "rice riots," considered to be among the most serious popular outbreaks that have ever occurred in Japan.
The divergence of interests between domestic producers and consumers with respect to the price of rice is largely absent in the case of cocoon prices, since 70 percent of the silk is sold abroad. Here the demand, as far as the producer is concerned, is all for high prices, since cocoon raising is one of the principal sources of cash income for more than a third of Japanese farmers. The fundamental difficulty, however, is that the price of cocoons is determined by the price of silk in one market, the United States, where over 90 percent of Japanese raw silk exports are sold and where silk prices fluctuate with business conditions. It is significant therefore that one of the two chief pillars of Japan's agricultural economy is at the mercy of forces over which the farmers, or for that matter the Japanese Government, have no control.
Japanese farmers have always groaned under a heavy tax load. It is generally agreed that taxation in Japan has not been equitably distributed, that it weighs more heavily on the land than on the mobile wealth of industry and trade. The industrialization of Japan was brought about in no small degree through government assistance. But this was done largely at the expense of agriculture, since it took the form of high tariffs and heavy taxes. Furthermore, this policy still continues despite the fact that Japan is long past the stage of industrial "infancy." According to an investigation made by the Imperial Agricultural Society in 1934, on an annual income of 300 yen a farmer paid 35 percent in taxes, a merchant 12½ percent, and a manufacturer only 1½ percent. These figures reveal the extent to which Japan's stricken agricultural economy is discriminated against in favor of her prosperous and expanding industry and trade.
Among the Japanese farmer's heavy burdens a close second to the tax load is the huge indebtedness under which he struggles. Prior to the World War the total was but 750 million yen, or 135 yen per household. Since then, and particularly since the early twenties, farm indebtedness has increased by leaps and bounds. Estimates of the total farm debt vary, but it is generally conceded that in 1936 it amounted to not less than six billion yen, or over 1000 yen per household. Worse still, interest rates are usurious, seven percent being the exception rather than the rule. According to official estimates the rates of interest being paid on an agricultural indebtedness amounting to over four billion yen are: 43 percent was contracted at a rate ranging from seven to ten percent, 51 percent at a rate from 10 to 15 percent, while six percent carries over 15 percent. There is evidence, however, that real rates are considerably above these official estimates. But even assuming that the total farm indebtedness is carried at an average interest rate of not more than ten percent, the yearly charge is around 600 million yen, or 31 percent of the net annual (average) value of agricultural production during the years 1931-1935.
For many years prior to the depression of the late twenties and thirties Japanese agriculture labored under severe strains and stresses, the full effect of which was not revealed, chiefly because of the relatively high prices for rice and cocoons. The first downward tendency was noted in 1926, and during the following years prices declined so sharply that Japan's agriculture reached a critical stage. By 1931 the value of her farm products had slumped to 2,046 million yen, as against 3,521 million yen in 1929. Prices registered a marked rise in 1935 and particularly in 1936, the total value of agricultural products in the latter year being estimated at 3½ billion yen. Though this was equal to the 1929 level, it was nearly a billion yen less than that of 1925. But, though this advance in prices attenuated the acuteness of some of the problems created by the depression, it was obviously insufficient to alleviate all the basic difficulties to which Japanese agriculture has been subjected for many years.
The currency devaluation in 1932 failed to cause an immediate rise in agricultural prices comparable with that in industrial prices: the marked advance of the former occurred only in 1935. Furthermore, whereas depreciation of currency, low wages and a highly rationalized industrial organization have given Japanese exports an important price advantage in foreign markets, there has been no such escape for agriculture. In fact, agriculture has failed to benefit even indirectly from this expansion of manufacturing and trade because those exports which have risen rapidly are cotton goods, rayon and a variety of miscellaneous manufactured articles, the raw materials for which are imported.
The significance of these difficulties in terms of the farmers' economic well-being was revealed in a survey of farm incomes for the period 1913-1934. This survey brought out that "with the single exception of 1913, agricultural receipts fell short of meeting household expenditures, i.e., cost of living, and forced the farmers to fall back upon nonagricultural income to make up the deficit." [ii] In many cases, however, the income from all sources was less than expenditures. When one considers also that a farmer's budget does not always include even the bare necessities -- the exception being such inelastic items as taxes, rents and fertilizer costs -- it is apparent that he lives in a state of destitution.
While the importance of relieving agricultural distress has been recognized for some time, the need for immediate action became obvious only after the affair of May 15, 1932, when a group of army officers put Premier Inukai to death. The seething discontent in rural Japan and the fact that more than half of the army, both officers and men, come from the villages played no small part in the violent outbreak. Agricultural reform became the watchword of every important group in Japan. The army wanted a contented and peaceful village, not only because of the close ties binding the two, but also because, as General Araki put it, "the agricultural population constitutes Japan's first line of defense." The manufacturing interests also realized that they too were suffering as a result of the sharp decline in the farmer's purchasing power and therefore approved agricultural reform, the more so because they wanted to dispel the belief that industrial progress had been achieved at the expense of agriculture.
Numerous programs were therefore drawn up to ease the farmers' lot. These plans called for such fundamental reforms as the readjustment of prices for agricultural products, the equalization of the tax burden and the reduction of farm indebtedness and land tenancy. But efforts to assist the farmers through price control were only partially successful. Despite the heavy financial loss sustained by the government in the attempt to maintain the price of rice within a fixed range, rice prices were often insufficient to cover costs of production, much less to leave a margin of profit. Even less successful were its attempts to raise the price of cocoons. Such devices as loans, subsidies, government purchases of raw silk and restrictions on silk output failed to raise prices for either cocoons or silk. The principal factor that can bring prosperity to Japanese sericulturists would still seem to be a rising curve of economic activity in the United States.
Most observers believe that agricultural recovery in Japan depends on a downward adjustment of farm indebtedness. Yet the government has confined itself to settling a relatively small portion of the farm debt -- the financial assistance which it has rendered in the form of loans amounts to only 200 million yen. In the end the government's principal contribution has been to advise that debts be scaled down by "making a more active use of the tradition of neighborly fellowship and mutual aid." [iii] But this assumption that creditors would become so imbued with good will toward the debtors that debt settlements would take place without ado had no basis in fact. On March 30, 1936, debts actually adjusted amounted to 157 million yen, or only three percent of the total estimated farm debt. Considering also the fact that the contemplated reorganization of the country's taxation system, with the object of equalizing its burden, did not go through, it would be difficult to underestimate the seriousness of the financial plight of Japanese farmers.
Overshadowing all other agricultural problems with which the Japanese Government must cope is the land tenure system. Much of the social unrest that has pervaded rural Japan, especially in recent years when the depression fell heaviest upon the tenant farmers, may be attributed to this cause. Out of the welter of discussions, disputes, charges and countercharges, two measures finally emerged. One, the Conciliation of Tenancy Disputes Act of 1924, provides for the settlement of conflicts between landlords and tenants through an arbitration committee. More than 60 percent of these disputes are now settled this way. The other and more fundamental measure aims gradually to eradicate tenancy by helping tenants to become proprietors through subsidies granted from the State Life Insurance reserve fund. During the years 1926-33 nearly 120,000 tenants were aided in buying 126,000 acres, or slightly over one acre per tenant. But the land thus acquired represented less than one percent of the entire rented area.
Realizing that at such a rate it would take several centuries to convert all the tenants into landed proprietors, the Japanese Government in 1932 drew up another plan on a larger scale and embodied it in a Peasant Proprietors' Agricultural Land Bill. This called for an expenditure of 2.8 billion yen with which to purchase, during a period of 35 years, nearly one-third of the land now rented. This bill failed to pass. We may therefore say that to date no significant reform has been made in the tenancy system. Conciliation boards help to settle disputes after they arise, but little has been done to remedy the causes underlying the conflicts. Any attempt to convert the tenants into independent farmers calls for great concessions on the part of the landlords or larger expenditures by the government, or both. Neither, however, is willing or financially able to undertake such a task.
Japan's agrarian crisis is not a depression phenomenon that can be cured by makeshift measures. The depression merely brought into sharp relief forces that have been undermining the country's agricultural economy for many years. It is apparent that the government cannot bring radical and sudden relief to the problem of "many men on little land." Manchuria, with its vast tracts still unoccupied, is not likely to relieve population pressure in the home country since Japanese farmers have shown little, if any, inclination to migrate to the continent. The rural population is thus bound to grow and hence to reduce the size of the average farm unit still further, and along with it the already notoriously low standard of living.
Nevertheless, in spite of all these discouraging tendencies, some of the burdens under which Japanese agriculture suffers could be removed or at least eased to a considerable degree. But to do this calls for a recognition by the government that the farmers cannot bring about economic rehabilitation unaided. A reduction in the debt burden, establishment of better credit facilities, changes in the discriminatory taxation system, and a real attempt to solve the tenancy problem -- all involve huge outlays, which the farmers are in no position to supply. The government, since 1931 hard-pressed for funds to further its expansionist policy in Manchuria and China, is also unable to undertake large expenditures to safeguard the country's agricultural economy.
Yet one wonders if a realistic approach to Japan's agrarian problem can be postponed indefinitely. Rural unrest indicates that the farmers are not in a mood to go on accepting indefinitely the lowly status of "perpetual poor relations in the national family." The government is well aware of this as was shown by the remark of the present Premier of Japan -- "How can the army be indifferent to farmers' difficulties when it is largely composed of farmers' sons?" Obviously, it cannot. And when one considers the importance of the army in the national scheme of things, the Japanese Government may yet be compelled to treat the country's agricultural economy, the backbone of its economic and political life, with the care and consideration it deserves.
[i] Shiguchi Mayeda: "Our Stricken Agriculture," Contemporary Japan, September 1932, p. 269.
[ii] Hidetashi Isobe: "Labor Conditions in Japanese Agriculture," Bulletin of the Utsunomiya Agricultural College, Section B, vol. 2, no. 1, 1937, p. 66.
[iii] Yoshinosuke Yagi: "The Problem of Farm Debt Adjustment," Kyoto University Economic Review, July 1937, p. 65.