http://search.barnesandnoble.com/Bankrupting-the-Enemy/Edward-Stokes-...

Bankrupting the Enemy-

This book is a truly intriguing study.  I had long been interested in
the diplomacy and pressures in advance of the U.S. war with Japan, and
I had heard varying estimates of how severe an economic squeeze U.S.
economic measures put on Japan before Tokyo decided to lash out
against the western powers in 1941. I had typically heard that U.S.
economic measures (the oil embargo and asset freeze) were going to
lead to a stoppage of the Japanese economy and starvation in Japan in
a matter of months.  However, I also had heard a counterargument that
drastically downplays the significance of the oil embargo altogether,
that Japan's civilian economy was powered by coal and would be unhurt
by the U.S. oil embargo, which would mainly have the effect of running
down Japan's naval fuel reserve and crippling Japan's naval options.

(for example of this discussion on usenet, look here:
http://www.historykb.com/Uwe/Forum.aspx/what-if/10938/Japan-says-no-o...)

The analysis presented in chapter 18 of "Bankrupting the Enemy",
especially the section beginning on page 233, "A Probable Scenario,
1942-1943," does the best job I've seen describing what Japan would
have faced if it had stood pat in the face of the U.S. economic siege
instead of either retreating in compliance with U.S. political demands
or lashing out by occupying Southeast Asia and the western Pacific.
The scenario sketched out falls between the two extremes I outlined in
the paragraph above.

The book's discussion of a probable scenario did leave one important
loose end however, a comparison with the standard of living in Japan
in the actual history of 1942-1945, where Japan moved to seize its
empire in Greater East Asia and was exerting itself in a shooting war
with the U.S. and other western powers.
It seems to me that the data would be readily available to make an
educated comparison between Japan's real wartime economy of 1942-1945
and the hypothetical Japanese economy under a peacetime economic
(financial and trade) siege by the U.S. during the same years.

Southeast Asia and the Western Pacific did indeed pay off in the short
or medium term, of if in fact Tokyo's quest for autarchy never paid
off at all.
The "probable scenario, 1942-1943," limits Japanese trade to its
pre-1931 empire, plus Manchukuo, occupied China, Indochina and
Thailand.  The Japanese are only fighting a hot war on one frontier,
with the Chinese, which, though costly, is not as intensive in its
consumption of capital, fuel and metals as a war against fully
industrialized powers would be.

Real wartime Japan on the other hand, had the advantage of
*theoretically* getting to place Burma, the Philippines,  Malaya,
Singapore, the East Indies and portions of New Guinea  Oceania into
its trading bloc.  I say theoretically, because that is the data I am
unsure of and which I am trying to get: in the face of sabotage,
dislocation and later interdiction, how much of the desired raw
materials were Japan able to import? On the other hand, in the real
world Japan had the disadvantage of having to sustain high-intensity
military operations against industrialized naval opponents.

The broadened empire should have provided Japan with a lot more oil,
iron, tin and rice.  The Japanese also seized enemy merchant ships and
other loot.  However, I had heard somewhere that damage to Dutch East
Indies oil infrastructure, and Japanese shipping shortages, were such
that the Japanese did not get much oil out of the Indies for two years
after the conquest, and they fought with their prewar stockpiled fuel
reserves during that time.  Is that correct, to your knowledge? By the
time the Indies oil would have come back on-line, the flow was
beginning to be heavily attrited by U.S. submarine warfare.

This all would suggest that Japan was not really able to exploit its
conquests to support production or its standard of living, except
perhaps for a few months in the second and third quarters of 1944.
One could conclude from that, that Japan, under conditions of a
peaceful dollar freeze, would actually have been able to sustain about
the same level of production and living standards, or slightly better,
than real wartime Japan for 1942 and 1943, and for much of 1945.  So
then the question becomes did Japan actually suffer shortages of
fertilizer, clothing and deep seafood and other items contributing to
its standard of living in wartime?

If the post Pearl Harbor conquests made Japan no better off than they
would have been under a peaceful economic siege, it suggests that
although US economic warfare gave Japan a severe "itch", Japan was
incapable of using conquest to "scratch" that itch, even if you leave
out such unanticipated disasters as the US naval counteroffensive to
the Pacific Rim, the massive conventional bombing, the atomic bombs
and the Soviet attack.

Or does the analysis above, seriously underestimate the loot Japan
obtained from its post Pearl Harbor conquests?  I suppose that perhaps
launching the war might have improved Japan's food situation in at
least one respect.  Other than the initial rations they carried with
them, Japanese forces  which were transferred from the inner empire to
Southeast Asia probably lived off of local food supplies, somewhat
lightening the inner empire's food import requirements.  To the extent
that the southern occupation forces were drawn from occupied China,
they lightened the impact on that area as well.  Also, despite
apparent troubles with exploiting East Indies oil, I do not know if
the Japanese inner empire was a net importer of food from the post-
Pearl Harbor conquests.  If it was a net food importer, then conquest
of those areas was a nontrivial bonus from the food perspective.

So, my question fundamentally is this.  Based on what you know, did
Japan earn any net improvement in Japan's economic position by
launching its 1941-1942 offensive and occupying Southeast Asia and the
Western Pacific, or did it merely stay in place or fall behind at high
cost?

Nothing of the sort was on the horizon; however, the embargo threatened
Japan's strategic reserves of oil (notably for the navy) and scrap (for
industry and the war in China.)

Both of those were moot, as Japan was running out of foreign currency
reserves to pay for them anyway.

Konoye was told that Japan could be made self-sufficient in energy,
using coal and other fuels "if the war in China was stopped."

Much deleted.

Japan actually maintained a decent standard of living until the US
bombings got severe and supplies were effectively cut by the US
subs.

It wwas, however, enough to consume almost all of the resources
descibed above.

A bigger problem was that the PI and other colonial areas had then-current
economies geared to trade with their Western overlords, and often did
not produce what the Japanese economy required. The PI in particular
produced a great deal of sugar, which was almost useless to Japan.

To be clear, the US did not practice "economic warfare" against the
Japanese. They were relatively content to let the Japanese go their
own way for much of the 30s, but when it became clear that
1) Japanese interests and American interests would collide sooner, rather
   than later
2) the Japanese were going to require, in essence, that the US underwrite
   the Japanese war effort in China (see above about foreign reserves)
3) the Japanese were going to maintain an alliance with Nazi Germany, whom
   the US WAS trying to fight
the US began ramping up embargos.

Yes; the "provision locally" aspect of it greatly exacerbated the
problems Japan had in holding these territories, as it would come at
the expense of the local populations.

Nope. Burned through their various stashes a lot sooner than they would
have otherwise, when they could have leveraged a continuing neutrality
to extract various concessions from the US and UK.

Mike

On Sep 26, 12:17 am, mtfes...@netMAPSONscape.net wrote:

A-ha, you know that's the point of Miller's book.

One reason the U.S. did not freeze Japanese assets earlier is that
they assumed Japan was going to be out of foreign currency by early
1942 or late 1941.  But, the Japanese had managed to hide sizeable
secret dollar accounts in US banks, and when Treasury agents
discovered them, they learned their calculations were off by a couple
years.  Based on Japan's dollar hoard, they could afford essential
imports at least for a couple more years.  It was this discovery that
then motivated a very rapid freeze of Japanese assets in August, to
prevent the Japanese from using these dollars.

The other interesting thing is that Japan also had massive gold
reserves in its vaults.  But they were apparently not relevant to
Japan's predicament.  Apparently anybody who sold anything Japan
needed (at least outside of its existing empire in China and
Indochina), like oil exporters in the East Indies or Venezuela or
Mexico or Arabia, or metals dealers in Chile, did not want payment in
gold or gold-backed yen, but only wanted U.S. dollars.  Miller could
have explained why the dollar was king and gold was irrelevant better
in his book.  I can only suppose that any producer of materials Japan
wanted, probably got any of its essential inputs from US producers who
priced their goods in dollars and could not own gold.

Basically, the power of US Treasury controls to deny Japan all
liquidity it required for international trade, showed how much the US
monopolized financial power in 1941, far more so than in later
decades.  The US had the financial equivalent of the atomic monopoly
at this time.

:) If Ron Paul had been in FDR's place, we never could have put Japan
into this predicament.

Are we sure Japan's war in China itself was really so metal and fuel-
hungry?

First of all, from 1939 on, there were not that many sweeping ground
movements as the Japanese had occupied pretty much all the Chinese
territory they considered worth having.  Also, the Chinese had hardly
any armor or motorized forces, so Japan did not need to be supplied at
European levels to defend its holdings.  Surely if the Germans
demotorized most of their supply and relied on horses more than
trucks, this would have been even more the case for Japan, which must
have supplied almost all its ground forces with animal transport aided
by coal-steam-rail, and not trucks.  Japan could outmatch Chinese
forces without consuming European levels of resources mainly by
relying on their superior training, tactics, C2 (based on their less
fragmented politics and more centralized military training regime) and
consistency of domestically-produced weapons systems.

ah-yes, the Brazilian sugar ethanol techniques of more recent times
were not invented yet.

Miller speaks to this in the book, he finds that easily available
sugar, although not required in the quantities available, could at
least substitute for the calories Japanese might have gotten from
certain other grains and potatoes not being imported.  Sort of throws
'em back to the early industrial revolution British workingman's
predicament, his wages pay for less meat, poultry and bread (and
beer), but you can keep him working with more doses of sugared tea.

See above how that was not quite imminent.

Oh yes, provisioning locally was bad for these relations, although
given the history of Japanese military insubordination, I could see
how Tokyo might be alot more frightened at the prospect of Japanese
junior officers facing a higher cost of living.  Add that to their
madcap bushido spirit and its pretty dangerous and likely to get some
minister sliced with a katana.

the definite impression they were not making bank from their moves,
and their concept of empire as a solution to economic problems was
quite amateurish.

Haven't read, so no, I don't.

I would find this difficult to believe; it flies in the face of what
Beasley writes, and...

I would doubt this; certainly the time to use this would have been postwar,
but no effort of this sort was made.

The IJN was certainly sure, and discussions of Konoye's cabinet
so indicate.

I could point out that in a much more modern setting, the US occupied
pretty much all of Iraq we considered worth having, yet surprising this
exacerbated a fuel and budget problem, not alleviated it.

And the Japanese didn't want them, hence the effort to force the PI
to change their crops.

Empire likely could have helped quite a bit; however, the emphasis should
have been on developing current resources (especially Manchuria) and not
on expanding military activities, and certainly picking fights with every
major power in the area.

Mike

On the issue of Edward Stokes Miller's interpretations versus W.G.
Beasley's:

Miller's work is based on more recent research among various relevant
bank and treasury records, and his synthesis was first published in
2007.  From a quick scan of these authors on amazon and google, it
appears that Professor Beasley's main publications came in the 90s or
earlier, his last publication was in 2001, and he passed away in
2006.  What Beasley title in particular work you working from though?

As I recall occupying U.S. forces conmfiscated this gold right after
the war and moved it to Fort Knox, so nope, it was not available to
the Japanese government postwar. I don't know if any defeated axis
power was left with precious metal reserves of any kind after the war,
I doubt it.