Fukuda’s Middle Way (Social Democratic Liberalism) and After: The Roots of Welfare State Ideas

A major British New Liberal, J. A. Hobson, was favorably received not only in the progressive United States, but also in a backward Japan because of his economics of social reform and ethical economics of welfare. Unlike Ishibashi (discussed below), Fukuda was inspired by Hobson’s welfare economic studies and his ideas on the distribution of wealth and unearned income. Fukuda proposed reform of capitalist society through social policy or welfare economy (practical welfare economics): inspired by the Liberal reforms of old-age pensions and unemployment insurance, he pursued a third way between capitalism and socialism, comparable to the British welfare state thinking.⁸

Social policy to ensure the right to a normal life was at the root of Fukuda’s welfare economic studies and virtually provided the basis for Japanese welfare policymaking from the 1950s onward.⁹ Article 25 of the Japanese constitution of 1946 states that “all Japanese people have the right to a minimum healthy and cultural life,” which accords with Fukuda’s ideas, although there seems to be no direct link between the text of the constitution and his position. Fukuda’s disciples, particularly Nakayama Ichiro and Yamada Yuzo, developed and elaborated his ideas in theory and in practice. Nakayama tackled the issue of labor disputes, playing the leading role in the Central Labour Committee and Japan Productivity Centre for institutionalization of the Japanese approach to industrial management. His “Proposal for Doubling Wages” (Yomiuri, January 1, 1959),¹⁰ probably inspired by Fukuda’s ideas, provided an intellectual basis for Ikeda’s national income-doubling plan. Nakayama was also responsible for the Minimum Wages Act (1959).¹¹ National insurance and national pensions were also institutionalized in Japan at this time. Yamada was instrumental in these developments and was chairman of the income-doubling plan section of the Economic Advisory Council. He was also responsible for retranslation of the Beveridge report for the Health Ministry.¹²

Fukuda discussed the struggle for the socialization of surplus value through class struggle, labor disputes, minimum wages, workers’ insurance, and public unemployment insurance—ideas developed by people such as Tsuru Shigeto (at Hitotsubashi). Fukuda’s ideas of welfare, close to those of Ruskin and Hobson, were largely qualitative and concerned the basic needs and the quality of life. This was also true of Tsuru, who praised Ruskin’s critical acumen, arguing for human welfare rather than economic growth, to enhance people’s quality of life. He insisted repeatedly that these aspirations should be the focus of economic policy.¹³ Tsuru was active in calling for “welfare rather than growth.”

Universal national insurance and national pension systems started in 1961 (the Minimum Wages Act had been introduced in 1959), the culmination of the recommendations of 1950 by the Advisory Board of the Social Security System. It gave substance to Article 25 of the constitution. The policy was promoted by the LDP, the program of which made explicit reference to “the fulfillment of a welfare society.” It fitted with the income-doubling and highspeed economic growth policies of the governments of Kishi, Ikeda, and after. The system was developed further after 1973, called “the first year under the welfare system.” The phrase “from (economic) growth to (social) welfare” was repeated by Tsuru. This was also around the time when Limits to Growth (1972) appeared. However, after the oil crisis policies began to change.

While Nakayama and Yamada developed Fukuda’s social philosophy, they were on the borderline between social liberalism and neoliberal thinking. The neoliberal Yamamoto’s book Economic Calculation: Fundamental Problems of Economic Planning (1932, revised ed. 1939) had been submitted as his Ph.D. thesis at Hitotsubashi University (though he graduated from Kyoto), and was examined by Nakayama (and probably Yamada). Yamada’s graduation dissertation was on Carl Menger, and he studied with Morgenstern in Vienna in 1935-36 and later wrote on Ordo, Eucken, and Ropke, as well as Myrdal.

Yamada inspired people like Koga Katsujiro (Waseda University), who published some pioneering studies on Hayek in Japan, as we will discuss below. Koga was a leading scholar of Hayek studies together with Nishiyama Chiaki (Rikkyo University) and Kiga Kenzo (Keio University and a member of the Mont Pelerin Society). Nakayama’s connection was much broader; he studied with Schumpeter, recruited Tsuru to Hitotsubashi, and reviewed Ropke’s Civitas Humana in 1946. It was he who made possible Japanese Mont Pelerin Society founder Nishiyama’s long interviews with Hayek.