Mark Metzler has written a provocative and important book on the interrelationship of inflationary credit creation, high-speed growth, and collapsing debt bubbles in Japan's postwar financial system. With an analysis of economist Joseph Schumpeter's theories of capital and entrepreneurship and Schumpeter's direct intellectual influence on Japanese financial policymakers between 1945 and 1960, the book is a prophetic call for today's governments to learn from Japan's example and reform their banking policies or face increasingly damaging debt bubbles in the future.

Metzler states his main argument clearly at the start: “Japan's High-Speed Growth itself was a hypercapitalist type of industrial development of tremendous intensity.… The inflationary creation of credit by banks funded this industrial expansion, set its directions, and forced its pace. Credit-leveraged growth also has built-in insustainabilities, as reflected recently in the building up of debt bubbles on an unprecedented scale” (p. 1). Early chapters then introduce Joseph Schumpeter and his views on the relationship of capital and entrepreneurship, survey the wartime careers of Japanese leaders who consciously implemented Schumpeter's ideas in Japan's postwar recovery, and philosophize at some length on the nature of capital and the role of banks in its creation and direction.

The book's central case study begins in 1946 with Finance Minister Ishibashi Tanzan's pro-business policies and explicitly Keynesian deficit spending to invest in priority industries. With Joseph Dodge's famous Occupation-era stabilization policies, Ishibashi was purged and the Japanese state was forced to delegate industrial promotion to private banks. Nevertheless, as Metzler points out, the state retained a major influence over private banks through the Finance Ministry's continued control of the Bank of Japan. The story's protagonists are then Schumpeterian economic planners like Economic Planning Agency chief Ōkita Saburō and members of the Economic Deliberation Council Nakayama Ichirō and Tōbata Seiichi, who engineered the Japanese state's use of inflationary credit to stimulate strategic industries. Blending Schumpeter's theoretical insights into the narrative, Metzler skillfully explains both his subjects’ policy choices and Japanese high-speed growth in the context of exceptionally favorable global economic conditions. In Schumpeter's model of long business cycles, the 1940s marked the culmination of 1920s factory technological innovation, so the decades after 1950 were set to be the next long boom period. Japanese planner Gotō Yonosuke, who authored the 1956 White Paper, later stated that he had Schumpeter in mind when he recommended that Japan develop the technologies to take full advantage of the predicted economic upswing. By directing bank finance, the government promoted Ikeda Hayato's “Income Doubling” plan by encouraging an investment boom, which stimulated production, led to higher wages for workers, and created the conditions for high-speed growth. If this book were another 1980s-style account of the “Japanese Miracle,” high-speed growth would have likely marked the culmination of a planning success story. But after an economic slump lasting decades in Japan and in the wake of the 2007 global financial crisis, Metzler has something else in mind.

Credit-fueled growth is portrayed as a Faustian bargain with ominous consequences. In Schumpeter's vision, inflationary growth is followed by periods of deflationary correction, which destroy businesses that are no longer fit. However, distributing fairly the suffering of these downturns requires political will, which few capitalist democracies can muster. “Schumpeter's justification for “destruction” became in the 1990s an excuse for financial looting.… Thus, right through the crises of systemic restructuring in Japan in the late 1990s and early 2000s, what ended up being conserved and protected was the bankrupt core of the banking system, even as other formerly protected interests were sacrificed” (p. 220). Metzler argues that in advanced capitalist countries, with declining populations, environmental limits on future industrial production, and political difficulties when letting banks fail, “the type of banking system that funded the first great age of capitalism now functions more and more as a bubble machine, casually throwing up immense debts that act as a dead weight on everything else. In this dimension, the second age of industrial capitalism will need to be a post-Schumpeterian age” (p. 221). Metzler does not speculate on the nature of such an age, but encourages us to look at Japan's long struggle with deflation for signs of things to come.

This richly detailed study of the financial roots of Japan's high-growth era and meditation on the high costs of the ensuing bubble collapse is highly recommended for not only students of Japanese financial history, but anyone interested in the role of states and banks in the future of world capitalism.