The international comparison of historical patterns of economic development, as manifested in living standards and levels of output, is a far from straightforward business. Only scattered pieces of quantitative data on wages and output remain from times when no one collected the material for what we now know as national income statistics. Even where we have such data, what sets of prices and exchange rates should we use to convert money values into comparable real measures? And all this is before we can start to think about the issues raised by the different forms, across time and cultures, in which output is produced, income generated and goods consumed. Yet in recent years economic historians have become increasingly interested in trying to carry out this difficult task. It is this work that Saitō Osamu surveys and analyses in a book that challenges a whole range of common presuppositions about the economic growth of both the East and the West.
The recent rise of comparative global and East/West economic history as a hot academic topic can largely be attributed to the publication in 2000 of Kenneth Pomeranz's The Great Divergence, which argued that, contrary to received opinion, there were at least parts of eighteenth-century China in which output per person and living standards, together with the spread of the market and its institutions, were not significantly less developed than in those areas of northern Europe where the industrial revolution was to take off. This chimed in with other quite long-standing work demonstrating the significance of proto-industrialization and consumer-driven “industrious” revolutions in early-modern Europe (though Saitō is keen to point out that these concepts do not map neatly onto Japanese experience). However, it was Pomeranz's extension of his argument to its logical conclusion – that pre-existing economic and institutional conditions could not explain why Europe and China “diverged” at the industrial revolution – that sparked large-scale debate and renewed interest in comparing historical patterns of economic development across Eurasia.
Pomeranz brings Japan into his picture as far as he can, as another Asian society, alongside China, that appears to have achieved significant increases in living standards in the pre-modern period, based on the spread of the market. But beyond this, within Pomeranz's framework Japan can only be treated as an exception: the one country on the eastern side of the Great Divergence that did go on to achieve significant modern industrialization before World War II. Through his use of a comparative theoretical framework and vast knowledge of the economic history of both Japan and Europe, Saitō seeks to remedy this, using the Japanese case to modify, complicate and ultimately go well beyond the Great Divergence picture.
For a number of scholars, what Pomeranz's work in fact demonstrated was the potential, on both sides of Eurasia, for so-called Smithian (after Adam Smith) growth. This involves increases in output through division of labour and specialization on the basis of the spread of the market, rather than the kinds of large-scale capital investment and dramatic technical change implied by the standard story of the industrial revolution. Saitō explains how Smith's framework challenged the pessimism of Malthus and others who thought that population growth and diminishing returns would prevent any long-run increases in living standards. He surveys the evidence that this form of gradual growth, based on small-scale, specialized, interconnected businesses, was also important in Europe, even if its role eventually got forgotten in the conventional industrial revolution narrative of steam engines and Satanic mills. In bringing Japan into the framework of Smithian growth, however, Saitō argues that its underlying dynamic, rooted in particular institutional structures, was not the same everywhere and that this has significant, path-dependent implications for the long-term pattern of economic development.
On this basis, Saitō sets out to compare incomes and living standards in Tokugawa Japan with those of pre-industrial Europe. He argues that existing ways of measuring and comparing labour productivity and living standards have been designed on the assumption of a model of the economy in which there is a vertical division into specialized classes of capitalists and managers, on the one hand, and the wage workers they employ on the other. This gives a distorted picture if applied to economies principally made up of household units that combine income from a range of sources, including cultivation of their own land, home-based manufacturing or craft production and possibly also wage work outside the home. In such economies, wage rates – typically the only indicator of living standards for which data can be found – and the labour market in which they are determined do not have the same function and meaning as in economies in which most households are supported by the wage employment of the head. Saitō therefore uses snippets of quantitative information available for Tokugawa Japan to try to produce indicators of levels of output, labour productivity and incomes that reflect the ways in which Japan's pre-modern economic structure differed from that of north-western Europe, especially Britain.
Although this does undoubtedly involve the creative use of a very limited amount of regionally specific data, it surely is the best that can be done, given currently available sources, and it yields conclusions that are just as valid as those derived on the Western side of the Great Divergence. Saitō argues that Japan did experience slow but significant pre-modern growth in output and labour productivity, that income distribution was significantly more equal than in Europe, and that these forces combined to produce steady improvements in living standards, avoiding the apparent paradox of rising GNP per capita and falling real wages (hence ordinary incomes and living standards) observed over a long period in the West. He thus confirms that there may indeed have been no significant pre-modern divergence in growth and living standards between Japan and southern and rural Europe at least, if not the most advanced urban areas in the north-west.
However, the analysis necessary to produce this conclusion also reveals how, as Saitō puts it, the convergence of living standards at both ends of pre-modern Eurasia was based on a structural divergence. Smithian growth was clearly occurring on both sides of the divide but the economic and institutional structures underlying such growth were not the same. The persistence in Japan of the multi-functional household unit, typically continuing to cultivate its land but simultaneously supplementing its income with members' earnings from other work, within and outside the home, created a quite different pattern of Smithian growth. This growth was certainly labour-using, and in this Saitō follows Sugihara Kaoru's argument for an alternative “labour-intensive path of industrialisation”. However, Saitō places much more emphasis on the skill requirements of this form of growth and on the capacity of the household unit, based in agriculture, to meet these. The key, for him, lies in the relation between Japanese-style Smithian growth and the strengths of the small-scale rural household, as a result of which the income gap between the mass of cultivating households and both the commercial classes and the samurai elite remained relatively small.
The long-term importance of this emerges as Saitō turns, in the last part of the book, to modern industrialization itself, arguing that divergent pre-industrial structures led to divergent forms of modern industrial economy. Revisionist work on the classic British model of the industrial revolution – involving the application of coal-derived steam power to the production of intermediate goods such as cotton thread – has shown that it by no means resulted in dramatic increases in output, productivity or living standards and was not necessarily the key to Britain's economic strength. Significant areas of the economy even of Britain, but even more so of other parts of Europe, remained the province of small-scale producers of differentiated products, benefiting from cheaper factory-made inputs but still relying on skilled workers, local and regional interconnections and geographically based brand identities. For Saitō, the modern industrial growth experienced beyond the world of capital-using, energy-intensive, skill-saving, mass production that originated in the British industrial revolution (and was perfected in the United States) should not be viewed as a process of catching up and converging on that model, but rather as the development of alternative paths of structural change heavily conditioned by local patterns of pre-industrial growth and institutional evolution. Hence, for him, there is a distinctive Japanese model of industrial growth and organization and its roots lie in the multi-functional rural household and its ability to generate labour- and skill-intensive Smithian growth.
All Saitō's arguments are backed up by detailed empirical evidence, and the book brings together in an accessible form (at least to Japanese readers) a wide range of recent research – both Saitō's own and that of many other Japanese and non-Japanese scholars – on the economic and demographic history of East and West, fitting it all into the context of theoretical and empirical debates in both the Japanese- and English-language literature. It is extremely rare to find a scholar who is willing and able to present Japan in a global comparative and theoretical framework in this way to a Japanese readership, but the benefits are clear to see and it is a pity that, although those who do not read Japanese can pick up some of Saitō's ideas from his English-language publications, the comprehensive picture presented here is denied them. Above all, Saitō's conclusions are, though subtly expressed, an important challenge to conventional understanding of development and industrialization: bringing Japan into the picture doesn't so much provide an explanation for the Great Divergence as make it irrelevant by suggesting that industrial revolutions as we once knew them – the kind that Britain had and China didn't – are not the sine qua non of becoming a developed nation. There is more than one historically conditioned path to development and more than one form in which a modern industrial society can emerge. Economic historians – at least of Saitō's kind – do therefore, after all, have something to teach us about the world in which we live.
