Description:
Nineteenth-century Japan remains a void in the literature on institutions and growth. Developmental institutions evolved in Japan after the Meiji Restoration despite the absence of political participation. Authoritarian change agents usually face a trade-off between reform and stability: they have coercive power to remove underproductive institutions, but at the risk of inviting instability, as politically influential deprivileged elites may engage in counteraction to recover what they perceive as their entitlement. Many authoritarian regimes, thus, coopt elites by allowing them access to rent, but such buying-off inevitably compromises institutional improvement. How did Meiji Japan overcome this dilemma and liberate major fiscal and administrative spaces for productive players who generate wealth and increase the size of the economic pie for society? This article presents a model that it calls ‘elite redeployment’ to answer this puzzle. In lieu of elite bargains in participatory polities in Europe, the revolutionary authoritarian regime in Japan coercively deprivileged traditional elites and redeployed those with financial or human capital among them in productive institutions. By doing so, the Japanese authoritarian change agents dismantled the incumbent institutions in an irreversible manner and swiftly built new institutions such as modern administrative, educational, financial, and commercial sectors, while maintaining stability.