Remember Pearl Harbor? Jude Wanniski May 16, 2001

Memo To: Junichiro Koizumi, prime minister
From: Jude Wanniski
Re: Thinking About Japan

I see in your very first press conference you mentioned World War II: “Why did Japan go to war? It’s because it was isolated from the international world.” It is good that you did this, I think, because enough time has elapsed since your country’s attack on Pearl Harbor for history to be revised, to take into account the forces leading to that decision. I’d actually made that historical revision myself more than 20 years ago, in the course of researching my 1978 book, The Way the World Works. I’d discovered that the 1929 stock market crash had been caused by the United States Senate, in those October weeks, shifting from opposition to support of the Smoot-Hawley Tariff Act, which became the first step toward the Great Depression when President Hoover signed it into law in June 1930. It became clear the American political establishment -- replacing Great Britain as the global leader after the First World War -- had failed its first test. The economic imperiousness of the tariff led directly to the rise of the Nazis, as Germany felt the early blows of the global contraction. As for your country, Americans today have little recollection of how U.S. political leaders of both parties early in the last century behaved with an active animus toward the people of Japan. On October 18, 1988, I wrote to my clients about this context at a time when this animus once again was showing itself, as both political parties here began complaining vigorously about Japan’s trade surplus. Our political pressure then led to the long economic decline Japan has since experienced, and which you hope to reverse. Here is some of what I wrote in 1988, in “Thinking About Japan”:

One of the problems of our time is that Japan has no choice but to seek survival through colonization of more hospitable lands. We think of Nazi Germany when we hear the word lebensraum, but it has been much more apt in this century to equate Japan with cramped living quarters. There are 125 million people living on an island the size of California, but without California’s natural resources. The mountainous island is near saturation, unable to support much more life without squeezing living standards or converting its tiny agricultural base to higher value-added economic activities, freeing the ricelands. Emigration from Japan is well over 2 million annually, ‘colonies’ spreading especially in Brazil, Australia and the U.S., plus millions of businessmen and students living ‘temporarily’ in most countries around the world.

The problem was not much different for Japan in the 1930s, when it had but 65 million people. It could solve its...problem by exporting people, capital or high value-added goods. Immigration quotas prevented emigration from Japan to the U.S. in any meaningful numbers. In 1913, California passed a law restricting land ownership to Japanese awaiting citizenship, intending to prevent the Japanese, as Gov. Hiram Johnson put it, ‘from driving the root of their civilization into California soil.’ The perceived threat to the people of Japan was real.

The United States had been its main hope, its Asian neighbors with few exceptions tied to one or another of the colonial powers. When the Smoot-Hawley Tariff Act was enacted in 1930, it was as if the United States established barriers to all three of the Japanese solutions. The trade walls prevented them from trading higher value-added goods for lower value-added grains, timber, oil and minerals. They also prevented Japan from acquiring the capital to invest in the Planet U.S. After all, it had to run a trade surplus in order to acquire productive U.S. assets for reasons of national survival, not mercantilism.

The emergence of the militarists grew out of this dilemma. The invasion of Manchuria was initiated in September 1931, a year after Smoot-Hawley began impacting Japanese exports, the military wresting power from civilian leadership. Emulating the European powers, it would ruthlessly impose a quasi empire, the Greater East Asia Co-Prosperity Sphere. When President Roosevelt responded by further isolating Japan, his oil embargo shutting off an important source of Japan’s energy, the die was cast. It’s hard to argue with history, but it should be no surprise that the current wave of historical revisionism in Japan is taking place. Younger Japanese are rejecting the U.S. explanation of Pearl Harbor as a simple act of pure military aggression. The failure of U.S. leadership in dealing with Japan from the early days of the century paved the road to the Japanese attack

Robert L. Bartley, the editor of The Wall Street Journal and a key member of the American political establishment, in his Monday column, “Thinking Things Over,” also took note of your press conference mentioning WWII and Japan’s isolation at the time. Reading it, you can tell that he understands the grave errors our government made that contributed to your isolation. He uses the example to warn our current political leaders against isolating China from our market with punitive trade legislation. In his column, he noted that four months after Hoover signed the 1930 tariff act, the “Japanese price of silk, the export and cash crop for farmers, stood at a 34-year low.” Perhaps he did not have space to make the connection between the price of silk and the rise of militarism, but it is my recollection that the Hoover tariff imposed a 100% duty on silk imports, even though no silk was produced in America. Why? Reed Smoot of Utah, chairman of the Senate Finance Committee, could not win over the Senators from the textile states with higher tariffs, as they were already heavily protected, so he won their votes with the prohibitively high duty on Japanese silk. As you surely know, Mr. Prime Minister, practically every farm in Japan made ends meet with silk worms tended by the farmer’s wife. Closing off the silk market was an outrageous hammer blow, one that drove inexorably toward Pearl Harbor.

Our only excuse was that we were new at global leadership and the mistakes we made were stupid, but innocent. Now that we are thoroughly established as the leader in this unipolar world, there is no room for excusing similar mistakes.