Learning from the japanese economic miracle

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Learning From The Japanese Economic Miracle:

What Factors Lead To Economic Growth?

By James Redelsheimer

Robbinsdale Armstrong High School

Plymouth, Minnesota



In this lesson students will learn about the history of Japan's "miracle" economic growth following the devastation of World War II. Students will learn about what led to Japan's economic miracle, and learn about the factors that can lead a country to increase its economic growth and standard of living.


A nation's Gross Domestic Product is not only an indicator of a nation's income, but also is positively correlated with many human development standards, such as life expectancy, infant mortality, and levels of education. For example, in the year 2000, the United States real GDP had tripled since the year 1950. The value of goods and services available to the average US resident was three times greater than in the year 1950. Life expectancy and average education levels also dramatically rose during this time. Therefore, it is important students understand the ingredients that lead to economic growth. An excellent way to learn about the factors that lead to economic growth is to study the Japanese "Economic Miracle" that took place after World War II.


Grades 7 - 12


Gross Domestic Product

Economic Growth

Human Capital

Capital Goods

Interest Rates


Students will:

- Identify the factors that lead to economic growth.

- Understand how an increase in real Gross Domestic Product can lead to and can increase the quality of life in a country.

- Learn about the history of Japan after World War II and

developments in Japan that led to the "Economic Miracle."


40 - 50 Minutes


  • One copy of Activity 1 for each student.

  • PowerPoint Presentation: "The Japanese Economic Miracle."


  1. Begin by asking the class a series of anticipatory questions:

    1. How could anyone determine if a country is “wealthy”?

    2. What factors might lead to one country having higher standards of living than another?

  1. If not already covered in class, explain that Gross Domestic Product is the measure of a nation's annual economic output or a nation's income.

  1. Go through the first 4 slides of the PowerPoint on Japan's Economic Miracle. Be sure to highlight that from 1950 to 1975 no nation had ever experienced such a rapid rise in its citizens' standard of living as Japan.

  1. On slide 5, there is a link to display the gapminder website: http://graphs.gapminder.org/world/ to the class. Play the chart that has life expectancy on thy Y axis, and GDP per capita on the X axis. Ask students to notice any trends between GDP and life expectancy. Point out that most countries that have higher life expectancy likely have a high GDP per capita. Changing the variable on the Y axis to infant mortality rates, or others, also may be shown to the class.

  1. Point out that a country's standard of living depends on its ability to produce goods and services. Go over the list of several factors that can lead a country to increased productivity and economic growth found on slide 6 of the PowerPoint. The following can allow a country to increase its standard of living:

a. Investment in capital goods, research and technology: This leads to production becoming more efficient, allowing for more output without any additional inputs.

b. Investment in human capital: education and skills. Investment in human capital is an essential means of increasing labor productivity and income. This investment is very important to a country's long term economic success.
c. Savings and Investment:

An increase in savings rates leaves more funds available, lowering interest rates which can encourage investment in an economy.

d. Public Policy: free trade and competition: Most economists agree that engaging in trade with the world and policies that promote property rights and competition lead to high rates of economic growth.
6. Finish remainder of the PowerPoint.
7. Have students read Activity 1, and discuss the answers in small groups. Then have the groups share their answers with the class. Here are some possible answers to the discussion questions: #1. The strong Japanese work ethic and dedication to success was key to the rapidly increasing worker productivity, production and incomes. Worker productivity is a key ingredient of economic growth. The high Japanese investment in human capital paid large dividends. #2. The high savings rate led banks to have ample money to lend to industrialists. This enabled Japanese businesses to obtain massive amounts of funds for expansion very cheaply between 1950 and 1975. #3. As Japan embraced trade, they found many new markets for their products, one of the ways trade leads to economic growth. #4. The investment in research and development allowed the Japanese to create new inventions, technologies, and production techniques that promoted economic growth. #5 The intense competition resulted in increased efficiency and product quality. As Japanese companies were competing for business, product quality improved and businesses were forced to innovate to succeed.

Murphey, Rhoads. East Asia: A New History (4th Edition). New York: Longman, 2006.
Mankiw, Greg. Principles of Economics. (4th Edition) USA: Thompson South-Western, 2007.

Activity #1

Learning From The Japanese Economic Miracle:

What Factors Lead To Economic Growth?

The Japanese economy was devastated after World War II ended in 1945. The Japanese had lost much of their productive capacity; factories were destroyed and about 3 million Japanese had died. Yet amidst this dire situation, the Japanese economy, between 1950 and 1975, had the world's most impressive record of economic growth ever seen at the time. Incomes for the average Japanese were rising rapidly, and soon many of Japan's goods became the best in the world market, especially cars, cameras, and electronics. Shortly after this "economic miracle" began, Japan had the second largest economy in the world after the United States.

Questions for Discussion: How do you think these factors contributed to Japan's rapid economic growth?

  1. Japan had and continues to have one of the world's best educated workforce, and the Japanese workforce dedicated themselves to hard work, organization, and group effort.

  1. The Japanese were saving a high percentage of their incomes, which provides banks and other financial institutions with cheap money to lend to businesses for investment.

  1. Japan embraced global trade, and their high-tech and industrial goods became popular throughout the world, due to their high quality.

  1. The Japanese made large investments in research and development, and applying efficient production techniques.

  1. Within Japan, competition in such industries as motorcycles, automobiles, and consumer electronics was fierce.

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