Spending in a time of “Retrenchment”

This chapter shows how the Matsukata reform brought about a shift in industrial policy. This indicated a move away from direct state intervention in the economy and toward the creation of a favorable institutional setting for the growth of private enterprise. Yet, for all of Matsukata's free enterprise rhetoric—“the Government should never attempt to compete with the people in pursuing lines of industry or commerce”—he deviated from classical economic liberalism by increasing industrial spending in fiscal 1881–1885 compared to the previous four years and by maintaining fairly heavy state involvement in the economy. Likewise, his industrial policy contrasts with the emphasis of neoliberal IMF orthodoxy on privatization insofar as the Meiji government sold off hardly any of its enterprises until late in the Matsukata financial reform. Although, the paucity of sales until mid-1884 was a function more of the shortage of buyers than of Matsukata's lack of commitment to supporting private initiative.