The 2008 meltdown of global finance hit Japan hard. To be sure, its banking system was fairly well insulated from the worst of the damage, but the subsequent worldwide recession took the Japanese economy down with it. The institutions of economic security that had bought political peace for a half-century began visibly crumbling, and the electorate responded by sweeping the ruling Liberal Democratic Party out of power for the first time since it was founded in 1955. And yet, a decade later, the ldp is back in charge with no serious political challenge on the horizon. The populism of right and left that has roiled Europe and the United States is nowhere to be seen and, while the economy may not be what it was in the days of the ‘Japanese Miracle’, it has not been in terribly bad shape either—particularly in contrast to its peer economies, Germany, France and Britain. This is remarkable considering that in 2011 Japan endured an earthquake-cum-tsunami that has been accounted the most expensive natural disaster ever, a cataclysm which sidelined the nuclear-power plants that had supplied a third of the country’s energy requirements. What happened, or perhaps didn’t happen, that allowed Japan to muddle through these manmade and natural disasters relatively unscathed—and relatively unchanged?

To answer that question, we should start by looking at the people who run Japan. In doing so, it may be instructive to bear in mind Orwell’s comment about the uk upper crust:

One thing that has always shown that the English ruling class are morally fairly sound is that in time of war they are ready enough to get themselves killed . . . That could not happen if these people were the cynical scoundrels that they are sometimes declared to be. It is important not to misunderstand their motives, or one cannot predict their actions. What is to be expected of them is not treachery or physical cowardice, but stupidity, unconscious sabotage, an infallible instinct for doing the wrong thing. They are not wicked, or not altogether wicked; they are merely unteachable.footnote1

Japan’s ruling class—unlike its American, if not its European, counterparts—is still morally ‘fairly sound’. Its members live materially comfortable lives, but they do not gin their country’s politics and finance to divert rivers of money into their pockets. They do not revel in obscene displays of wealth; you will not find new clusters of matchstick towers in Tokyo, as you do in New York, from which the rich lord it over everyone else. Like upper-class parents everywhere, Japan’s decision-makers obsess over the credentialing of their children, and shell out wads of yen for private tutoring and cram schools. But they cannot buy their kids’ way through the official gates into the ruling elite by donations to the Law Faculty of the University of Tokyo. The youngster either passes the entrance examination or doesn’t.footnote2 For the people who run Japan see themselves as genuine patriots and usually, they act like it. Many are direct descendants of the samurai who constituted Japan’s de jure ruling class in the pre-modern era, and were effectively turned into bureaucrats by the Tokugawa Shogunate (1603–1867). With one notable break, bureaucrats have pretty much run the country ever since. ‘Samurai’ literally means ‘one who serves’, and today’s samurai, if you will—bureaucrats in the elite ministries; senior executives in establishment banks and corporations—inherited the obsession with reputation and the contempt for flashy, commercial values that characterized their institutional—and, in many cases, biological—ancestors.footnote3

The break in bureaucratic rule lasted from 1868, when a small group of disgruntled lower-ranking samurai from western Japan engineered a coup d’état, until the 1920s, when the last of them died off. During that period, these samurai-turned-oligarchs ran the country. Everyone knew who they were. They controlled the major political institutions—ministries, political parties, national legislature (the Diet), Army, Navy and police; together with their allies, they owned and ran most of the important economic institutions including the sprawling zaibatsu conglomerates. The oligarchs’ passing led to the re-emergence of bureaucratic rule and murderous power struggles among competing bureaucracies. The victors were, predictably, bureaucracies with the means of coercion at their disposal: the Imperial Army and the Naimushō (Interior Ministry), which ran the police. But their triumph was not total. The Army never succeeded, for example, in bringing the Navy under its purview, with disastrous results for Japan’s efforts in World War Two. Capital accumulation remained partly in private hands.

It took the twin blows of war-time devastation and us Occupation to complete the bureaucratization of the commanding heights of Japan’s economy. By the late 1940s, the country’s inherited wealth had largely been destroyed. What the us Air Force hadn’t wiped out, American Occupation officials—in thrall to the unexamined notion that a capitalist-militarist alliance had led Japan to war—proceeded to expropriate through land reforms, abolition of the titled nobility and stripping the zaibatsu founding families of their holdings. But the elite’s social capital remained intact—and, to this day, the people who constitute that elite bequeath their social capital through the habits they inculcate in their children: hard work, respect for education, disdain for ostentation—and palpable devotion to the national interest, as they conceive it. That helps explain why these high officials and company men own no bolt holes in Vancouver, Sydney or London; why they keep their money inside their country’s banking system; why they would probably even still be ‘ready enough’, in Orwell’s phrase, to get themselves (or their kids) killed, although they haven’t been asked to do so for some 75 years now. They surrender their personal lives—family, hobbies—to what they understand is the good of their country, putting in long, gruelling hours in spartan offices for modest paychecks (albeit with the promise of comfort and prestige in their later years). That they confuse the interests of their class with those of their country hardly sets them apart from other elites, and doesn’t make them ‘morally unsound’ or ‘wicked’. It may, however, make them unteachable.

Though the us Occupation had destroyed the Japanese military and broken up the Naimushō, it left the economic bureaucracies—principally the Ministry of Finance and the Ministry of Munitions, renamed Ministry of International Trade and Industry—intact. With its control of the treasury and the collapse or destruction of so many competing power centres, the mof ended up as the most powerful of them all. Economic methods that had been employed in bureaucrat-run colonial Manchuria in the 1930s were adapted to encompass much of the Japanese economy. Chief among these were the divorce of nominal ownership from managerial decision-making, state-organized credit-ordering via centralization of the banking system under close mof supervision, and rationing of access to the American dollars needed for essential imports. The mof moved to ensure that former zaibatsu owners could not re-assert control by the device of forcing households to disgorge shares and then lodging those shares with other companies and banks. The upshot of these cross-holdings was that companies and banks ended up ‘owning’ each other, which meant that no one really owned anything. It was under this institutional structure that the country emerged in the post-war period as an export-led manufacturing ‘miracle’, its rapid ascent up the value chain aided by the preferential access to us markets accorded to a frontline Cold War ally.footnote4