The Economic Rise of Japan and OPEC
Japan, OPEC, and their Increased Influence in World Affairs
May 10, 2009
Throughout the 18th and 19th centuries, Western Europe enjoyed almost unprecedented dominance of the global economy. By the dawn of the 20th century, a new nation was beginning to exert overwhelming power internationally; the United States. For the early and middle part of the 20th century, American corporations and industry flourished globally with little or no competition. In spite of this, during the 1960’s and 1970’s, particular nations came to realize their economic potential, and began making determined efforts to fundamentally change the global economy. Two such groups were the Japanese, with their so-called "economic miracle", following their utter destruction after World War II, and the Arab states which formed the organization known as OPEC (Organization of Petroleum Exporting Countries), and exerted enormous power over the price and demand globally of one essential resource; oil.
Japan: An Economic Power After WWII
Following the Second World War, Japan was in ruins. The atomic bombs had decimated two of the countries manufacturing centers, and killed hundreds of thousands. Many thought it would be safe to assume that the Japanese would not become a viable competitor in the global economy for generations. However, Japan defied most economists and began to surge forward. The Japanese elected a British-style cabinet system, the Emperor renounced his status, and a new constitution came into effect in 1947. Japan went on to limit military spending, and promoted exportation of Japanese products. Japan became a pioneering nation with respect to developing new technologies, and even refining those designed elsewhere. They drastically increased funding for research and development, and soon became a major technology exporter all over the globe, with the emergence of very powerful and successful companies like Sony.
Even during the OPEC crisis of the early 1970's, Japan began developing alternative energy sources – hydroelectricity for example – and for developing more fuel-efficient cars. They also moved away from most heavy industries, such as ship building, which demanded a lot of energy to run.
Japan even became major innovators when dealing with worker-employer relations. All over the world, workers would complain of the almost unbearable working conditions they had to endure; stifling heat on the assembly floor, lack of modern equipment to improve productivity, and how the managerial offices were much more comfortable than those of the average worker, a major influencing factor on worker moral. Yet, in Japan great strives were made to improve the conditions of the average worker. For example, back in the 1950's, the Japanese air-conditioned their factories before the offices. Given the ingenuity, and sensible funding of the Japanese government, Japans economy grew exponentially, and became a true competitor on the global market throughout the latter half of the twentieth century, and into today.
OPEC: The Economic Rise of an Oil Empire
As Japan was working diligently to achieve economic independence from the Western World, oil consumption throughout the globe rose drastically from the end of WWII to the 1970’s; from 4 billion barrels in 1953 to 20.5 billion barrels in 1973. Demand was spurred by economic advances all over the world. Nonetheless, despite this enormous global demand, prices were kept low because they were set by huge multi-national companies, mostly base in America.
In the 1970’s, a groups of Middle-Eastern nations known as OPEC shocked the world as they quadrupled oil prices throughout the world in 1973, and again in 1979. These nations (most notably Saudi Arabia, Iraq, and Kuwait) decided to use oil as a political tool.
The Yom Kippur war had just broken out between Israeli and Arab forces, and the OPEC nations decided to support Egypt and Syria by ceasing to supply the USA with oil, because the USA was supplying the Israeli’s with weapons. They combined this oil embargo with cuts to production globally, and forced oil prices extremely high. The fundamental belief of OPEC nations is that oil pricing must be decided upon by the legal owners of the oil. The OPEC nations discovered the immense weapon that oil gave them for combating the USA, and they felt that by raising prices they could help correct the world economy, despite the initial pain of doing so.
Many economists thought that OPEC had committed a major blunder; that they would price themselves out of the market. However, the small size of non-OPEC oil reserves around the globe, combined with the high costs of alternative-energy sources and the constant threat of global oil shortages, the OPEC oil prices stayed firm with little response or reaction from other nations; the non-OPEC nations were simply forced to pay the high prices, or were forced to innovate their industries (as Japan had).
The Lessons We Can Learn From Two Very Different Economies
So, in these challenging economic times the world currently faces, we can clearly see two very different methods in which two struggling groups managed to overcome the economic power held by the Western world, and create their own sphere of power and influnce. Power and influence which still remains to this day. Japan is still a major economic powerhouse, and Oil continues to drive our economy.
Overfield, James H. Sources of Twentieth-Century Global History, Boston, USA: Houghton Mifflin Company, 2002
“A Ten-Year Retrospective: OPEC and the World Oil Market” Journal of Economic Literature, Vol. 22, No. 3 (Sept, 1984) pp 100-1114
