Government Policy and Economic Development in Germany and Japan: A Skeptical Reevaluation

Abstract

Recent studies, when taken together, suggest that the bureaucratic elites of nineteenth-century Germany and Japan were much less successful in stimulating economic development than has been traditionally asserted. Direct government investment was neither extensive nor successful. Government-sponsored institutional change, notably in financial structures, had little if any beneficial impact. Development in both nations resulted from the gradual emergence of a commercial culture, and on world factors exogenous to government policy. The bureaucratic elites failed to adjust to changed circumstances, instead leading both nations into disastrous wars. These results call into question development strategies based on central government control.