Surveying the devastation in Germany or Japan in 1945, few could have predicted how rapidly reconstruction would ensue, or that it would be followed rapidly by breathtaking and sustained economic growth. The post-war economic and technological performance of the two nations has generated marvels and, not surprisingly, also a desire in many other countries to imitate them. To some degree, they are, however, inimitable. After all, prior to 1945, each of the two nations had already developed distinctive capabilities, organisations, behaviours, political traditions, and social norms. The revolutionary changes to the German and Japanese versions of capitalism that followed defeat therefore emerged from highly unusual circumstances. Recognising this, however, does not mean that lessons cannot be learned from looking at their post-war history. There are two broad sets of lessons. First, a number of institutional and organisational innovations developed in the two countries after 1945 can serve as inspiration for similar innovations in other countries. Second, analysis of their responses to issues such as globalisation, energy policy, and national security can yield useful insights for others. Overall, the track record of German and Japanese capitalisms in adapting to the global political economy since 1945 favours guarded optimism about the future.

This book starts with what seems an uncontroversial observation: in spite of impressive economic and technological successes through the first four decades of the twentieth century, it became abundantly clear by 1945 that the German and Japanese brands of capitalism had not worked out very well. Both countries had industrialised more or less effectively. But they remained relatively poor compared with Britain and the United States. They also suffered from extreme social tensions. These factors were both cause and effect of the countries entangling themselves in a war that they could not win, and which made their social and economic situations horrendous, at least initially. Yet, in stark contrast, from the early 1950s onwards, German and Japanese forms of capitalism have played out surprisingly well, with increasing levels of wealth, which was distributed more equitably, and substantially eased social tensions, all of this without any bellicose behaviour. What is more, this remarkable performance has been sustained over an extraordinarily long period of time. The primary question posed in this book, then, is this: Why, in general, have things worked out so much better the second time around? The chapters that follow seek to provide an answer to that simple question.