Imposed Efficiency of Treaty Ports: Japanese Industrialization and Western Imperialist Institutions

Abstract

An intrinsic feature of a pre-modern society is in its fragmentary markets. Fragmentary markets are more likely to fail in the coordination of resource allocation. However, if a concentrated market is exogenously formed and the market could provide the only price to local markets, the market can work as a pivot of coordination for development. Treaty port markets imposed on nineteenth-century Japan worked as the pivot and ignited Japan's industrialization. We examine the silk-reeling industry, which was the major export industry and which led to Japanese industrialization, and the role of treaty ports in its development.

‘By a Silken Thread’: Regional Banking Integration and Pathways to Financial Development in Japan's Great Recession

“…Once in Yokohama, the silk would usually be sold on directly to the foreign trading companies, whose representatives were not allowed to source silk outside Yokohama directly. Nakabayashi (2009) studies the price dynamics for silk in the Yokohama market and the New York market, showing that these two markets were very highly integrated. Hence, market segmentation mainly existed between the Yokohama market and the silk-producing regions within Japan, and the Yokohama silk merchants acted as export intermediaries for the many small silk reeling firms.…”

“…There is no significant link between silk and the density of bank branches in a region. Total lending relative themselves only through the private city banks (see Nakabayashi (2009)). …”

“…In fact, mechanization made only slow progress throughout the 1860s and 1870s, in spite of significant government support aimed at the improvement of silk quality. The exogenous shock that changed this was the decline in the price of hand-woven silk in the 1880s following the French depression, coupled with the huge demand for mechanically reeled silk in the US (see Nakabayashi (2009)). 36 Table 7 shows that it was not the general development of the silk sector per se but rather its mechanization that is closely related to the development of regional vs. city banking.…”

“…Thus, mechanization could, in principle, be afforded by even small firms or groups of silk farmers. 36 As a prime example, Nakabayashi (2009) reports the attempt of the Meiji government to install a role-model plant in the village of Tomioka in Gunma prefecture in the 1870s. This plant was very successful in training skilled workers but did not become economically viable.…”

Honesty, Diligence and Skill: Risk Sharing and Specialization in the Kiryu Silk Weaving Cluster, Japan

“…Japan became the world's largest exporter of raw silk in the 1910s and of cotton goods in the 1930s. Thus, the silk‐reeling industry based on the factory system, along with the cotton spinning industry, was a driving force behind the country's industrialization (see Nakabayashi, , ). At the same time, industrialization and urbanization created a new demand for a greater variety of high quality, but not expensive kimono brocades.…”