The Occupation of Japan

Economic Policy and Reform

The Proceedings of a Symposium

Sponsored by the MacArthur Memorial

April 13-15, 1978

Edited by Lawrence H. Redford

The MacArthur Memorial

Norfolk, Virginia 1980

Mr. Sodel: Thank you, professor Rice, for your comments. Our second discussant, Mr. Robert Fearey, is almost a legend to students of the Occupation. He served as private secretary to Ambassador to Japan Joseph Grew at the time of the attack on Pearl Harbor. He has been involved in Japanese affairs for a long time on many major issues such as land reform and the formulation of the Japanese peace treaty. We can hardly wait until his memoirs come out--Mr. Robert Fearey.

Mr. Fearey: What I should like to do is tell you about the origins of the land reform program in Washington and in Tokyo. I apologize for the personal element in my remarks. My role in the land reform was brief: it was no great thing. I simply happened to be the person with the right interest at the right time, and in the right place to be able to do something about it. During the war I worked with George Blakeslee, Hugh Borton and others on planning for the Occupation of Japan, and for other parts of the Far East. Japan, however, was the focus of our efforts. We authored over a period of years a series of papers that formed the basis of the final, official papers, the State War Navy Coordinating Committee (SWNCC) directives, to General MacArthur. Blakeslee, Borton and I worked on all sorts of matters, including the Emperor, de-concentration, the constitution, war criminals, and education.

Throughout that period I was bothered by the fact that agrarian reform was receiving no attention. So I started to read up on the Japanese agrarian problem and agrarian reform programs around the world. I soon came upon the name Wolf Ladejinsky. After reading some of his pieces, I got to know him. I had many pleasant evenings in his apartment (he was a bachelor and a music lover; we used to listen to music and talk about the Japanese agrarian situation).

Then I started to write. I showed him successive drafts of an analysis of the Japanese farm problem and proposed reform measures. He suggested some of the things that could be done about the matter during the forthcoming Occupation.

As I worked on this, I sought to interest some of my colleagues. Blakeslee and Borton were very interested, but some of the older Japan political hands in the planning group--Gene Dooman, Joe Ballantine, and others--were from the outset skeptical of this interest. Their reservations were based on long experience, and on concern that if we disrupted Japanese agriculture we might have to import more food during the Occupation to feed starving Japanese. I kept studying, and they kept objecting.

When Ronald Dore was writing his book, Land Reform in Japan, he wrote me to ask what I could tell him about this period. The quickest way for me to indicate to you the picture at that time would be to read from a paragraph of a letter that I wrote to Dore in February of 1958:

You ask if I might give an account of the origins of the reform program, including the pessimism of other State Department officials concerning the desirability and feasibility of a land reform program in Japan . . . . Some of those concerned with postwar planning for Japan were skeptical of the feasibility and advisability of the Occupation's attempting to tamper with the deeply rooted and longstanding Japanese agrarian problem. They doubted whether we would get the cooperation of the Japanese, including the passive and inarticulate tenant class, and feared that an imposed program would disrupt Japanese agriculture, lead to a reduction in the output of food during the occupation period, and open the way to extreme solutions of the admittedly unsatisfactory farm situation, including Communism. Others recognized these difficulties but felt that a carefully designed and executed program, in the context of the overall program for the democratization of the Japanese political, social and economic structure, had a reasonable chance of surviving after we left, and that leaving things as they were would ultimately pose the greatest threat of Communism. The same sort of debate took place on the Zaibatsu dissolution program. Looking back, I would say that that program was directed by Washington while agrarian reform was not, because of the notoriety which the Mitsui, Mitsubishi and other combines had achieved in the U.S., because of our own antitrust background, and because of the belief that breaking up a dozen or so big industrial combines was a more feasible operation than transferring land ownership to millions of tenants.

I think that what I said to Dore was the essence of the picture back in Washington. Then I was assigned to work with George Atcheson, who was Political Advisor to General MacArthur. The office was a tiny one. I think that Jack Service, John Emmerson, and Max Bishop were the only "Japan hands" there at the time. Atcheson was a "China hand." I asked Atcheson if he would give me a few days to polish the Japanese agrarian reform study that I had written with Wolf's inspiration. Atcheson asked me to let him look at it; I did, and he afforded me the time to polish it up. He read it, and said that we would send it to General MacArthur. So, I drafted a brief covering memorandum for him to use for that purpose.

I remember that several days later I was in my office when a couple of colonels from Supreme Commander Allied Powers (SCAP) came bursting through the door. One of them said, "Are you Fearey?" (I wondered what I had done wrong.) I said, "Yes." He said, "General MacArthur took your farm reform program home last night and was very taken by it. He has asked us to work with you on a directive ordering the Japanese government to carry out a land reform program on the lines recommended in your study."

Actually, I had little to do with the directive. It was written in SCAP Headquarters. I faded out of the picture, as I had no real Japanese land reform experience. But that is how the Japanese land reform program was conceived.

Mr. Sodel: Thank you, very much, Mr. Fearey, for your most interesting remarks.

Mr. Sackton: I want to speak briefly about Robert Fearey's comments. He is entirely too modest. General MacArthur said several times, "Robert Fearey is one of the heroes of land reform."

Sometimes writing jointly, sometimes separately, Frank S. Williams and Robert A. Fearey, neither one a trained economist but each claiming some Japan expertise, from June through mid-November completed papers such as "The Economic Effects upon Japan of a Possible Loss of Control Over its Present Dependencies," "The Economy of Japan," "The Post-War Readjustment of Japan's Economy," "American-Japanese Trade in the Pre-War and Post-War Periods," and "Japanese Reparations (preliminary)." Williams, after a long teaching and business career in China, had arrived in Japan in 1933 as a commercial attaché. Shortly after his repatriation in 1942 with Ambassador Joseph C. Grew and the rest of the Embassy staff, Williams was assigned to the Japan desk of the Division of Far Eastern Affairs. Fearey's prewar experience in Japan was much briefer. A graduate of Groton and Harvard, as was Grew, he was selected in 1941 at the age of twenty-one to serve as the ambassador's private secretary. Fearey had been in Tokyo only eight months when Pearl Harbor was attacked. Following internment and repatriation, he entered the Department of State in late 1942 as a divisional assistant (a low level research job) and was promoted to country economic analyst in 1944, although he had little formal schooling in economics. Ranging from the restoration of peaceful industry and commerce to the resumption of international trade, the Williams-Fearey papers, especially those authored by Fearey, consistently displayed concern for a defeated Japan's economic welfare.

Although young and politically insignificant, Fearey was energetic in gathering information all over Washington and in seeking advice from senior Japan experts, especially those he had known well in Tokyo, such as Eugene Dooman, Counselor of Embassy from 1937-41, and a father-figure to him during the difficult days and months of internment. On the specific issue of Japan's large monopolies, the zaibatsu, Fearey underwent intellectual gyrations during 1943-1944 but finally settled into a supportive position, mixing respect for the accomplishments of big business in Japan with a call for mild reform. That final opinion is very important, for although it lost out in 1945, it reflected the consensus of leading Japan hands and would resurface in 1947-48 with broad and powerful support.

In his first paper, "The Economy of Japan," completed at the end of June, Fearey dwelled on the vast power of Japan's giant combines. "The internal structure and organization of ownership and control in the hands of a very few wealthy and powerful family concerns." The houses of Mitsui, Mitsubishi, Sumitomo and Yasuda were preeminent in industry, commerce, and finance; "conducted approximately a third of Japan's foreign trade"; and possessed close ties with the state and the two major political parties. Obviously, there was in Japan less respect for competition than in Europe and the United States, but worldwide depression had made planning either by the state or big business an important part of economic life in all industrial societies, not only Japan's. He furthermore believed there were "strong competitive rivalries" among the zaibatsu and their constituent firms.

A month later, apparently after further reading and discussion, Fearey had second thoughts. In a paper dated July 21, "Japanese Post-War Economic Considerations," he again described the zaibatsu as having an unparalleled degree of economic power in Japan and in the world but acknowledged that the results were harmful. "Extreme concentration of wealth and income" in the hands of very few individuals obviously meant that labor and the people had obtained less than their "due share" of the benefits of economic progress. He likened the zaibatsu not to a General Motors or a General Electric or a United States Steel,

but to a super holding company controlling all of these industrial giants--and Standard Oil of New Jersey, DuPont, and the Chase National Bank, and a host of other both large and small concerns besides.

Their distinguishing characteristic was "this sweeping 'cross-industry,' horizontal structure of monopoly control." If the masses of the Japanese people were ever to share more equitably in the national wealth and income, then "removal of the zaibatsu from the Japanese industrial scene is scarcely less important to the nation's future economic welfare than agrarian reform." As possible approaches to dissolution, Fearey suggested expropriation of zaibatsu property by the state, nationalization, or heavy taxation of inheritances.

This stern recommendation, however, had appeared in a paper which discussed far larger issues of rehabilitation and reconstruction. Fearey's introduction had listed the three schools of thought "already discernible" on the subject of American postwar economic policy toward Japan. One group, in the belief that the temperament and ideology of the Japanese led inevitably to an aggressive foreign economic policy, wished to destroy Japan's entire modern industrial plant, cut off its foreign trade, and force its reversion to an agricultural country. Others would permit the retention of light industries and, in time, the resumption of foreign trade but insisted on the "liquidation" of heavy industries and the surrender of the merchant marine. The third group opposed extreme interference with the Japanese economy as self-defeating, arguing that the best security against future Japanese aggression would be disarmament accompanied by a program of reform and rehabilitation directed at the revival of peacetime industry and trade and the regaining of "a tolerable living standard, at least equal to that which prevailed there before the war."

Fearey's sympathies in the paper, as he developed each of the arguments, were overwhelmingly with the third view, a position which was also endorsed by former Ambassador Grew in a complimentary letter to the young analyst in August. To reduce Japan to an agricultural handicraft economy, Fearey claimed, would impoverish at least 13 million people. Moreover, it was not entirely altruistic, he insisted, to support decent living standards in Japan, for the restoration of Japanese-American trade would be "of considerable practical importance to us" as a market for goods. The essence of this reasoning at this early stage of planning was that reforms in industry and agriculture, whether undertaken by the Japanese themselves or by the United Nations, were necessary to expand the domestic market and move the farm population into new occupations.

Perhaps because of the thorny nature of the problem he confronted, Frank Williams took a harsher position, briefly, in a paper authored in September--"Possible Immediate Post-War Japanese Contributions to the Rehabilitation for the Far East." More consideration, he declared, should be given to the people who had suffered under Japan's aggression than to Japan's own economic difficulties. It would be justifiable, for example, to deplete Japan's reserve stocks "to the bare minimum" for the relief and rehabilitation of devastated areas in the Pacific and permit the Japanese only a planned austere economy in the immediate postwar period. However, in a joint paper which he and Fearey finished in early October, "The Post-War Readjustment of Japan's Economy" (in effect, a summation of previous work on numerous concrete problems), both men endorsed the adage "live and let-live" for both the victors and vanquished as the only means to a lasting peace. After a period of cooling off, there should be "fundamental changes," Fearey and Williams conceded, in the political, industrial, and general economic conditions of Germany, Italy and Japan. But in Japan's case, they further believed that

certain basic facts must be recognized and accepted. These are: (1) the Pacific will never be pacific without a viable, contented and peace-abiding Japan; (2) Any attempt to crush 73 million energetic, patriotic, long-suffering, aggressive, industrious and productive Japanese people not only will be abortive, but will terminate in a festering sore which would contaminate and nullify any program designed to bring peace and prosperity to Asia; (3) A law-abiding and economically satisfied Japan can make many valuable contributions in many spheres of international activity, particularly those spheres centered in the Far East.

In November, in a preliminary paper he was assigned to write on reparations, Fearey restated succinctly the basic point: A viable Japanese economy is to be considered a first prerequisite of lasting peace in the Pacific."

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