Ruins to riches: The economic resurgence of Germany and Japan after 1945.RaymondStokes, (Cambridge University Press,2024. Pp. 345. ISBN 9781316514528. Hbk £30).

We are in a time of extraordinary challenges to the established global order. Two of the states most likely to be affected are Japan and Germany, economic powerhouses reliant on foreign trade and global value chains. Ray Stokes's excellent comparative analysis of both countries’ fortunes explains how they achieved sustained success following the disastrous Second World War and suggests how well they might be positioned to confront future disruptions. Its coherent structure, balanced but often forceful judgements, and accessible style will make the book appealing to the general reader without diminishing its considerable scholarly substance. The 12 chapters are set within 4 chronologically ordered sections. In the first, ‘Rising from the Ashes of Defeat, 1945 to the Early 1950s’, we see the author's ability, evident throughout the book, to help us understand developments in the macro-environment through case studies of institutions and individuals, producing a persuasive combination of top-down and bottom-up perspectives. Here, we observe Adenauer and Erhard leading the institutional coordination and commitment to codetermination that were the essence of West Germany's cooperative capitalism. In Japan, the Ministry for International Trade and Industry played a similarly important role. These processes of deconstruction and reconstruction enabled, over time, two fundamentally reshaped systems of corporate capitalism. In the second, ‘Making Miracles, 1950–1973’, Stokes argues that manufacturing drove both countries’ rapid development. The transformation from military to civilian production is illustrated through the achievements of Volkswagen and Toyota – the first of numerous automotive examples – growing by implementing multiple manufacturing innovations that enabled flexible mass production. Though these and other large firms were central to each country's economic success, Stokes also explains the critical roles played by Small and Medium-sized Enterprise (SME)s, especially Germany's Mittelstand, both in enabling the success of large corporations and in mitigating the socially destructive effects of industrial dualism. Each population's fortunes were transformed through their consumption of increasing quantities of domestically produced goods. Stokes highlights the breathtaking growth in Japanese manufacturing and shows how in Western European markets, US manufacturers constrained by mass-production regimes failed to gain ground, whereas their German competitors relearned and retooled quickly to meet changing trends, focusing on quality and funded by the national preference for saving. Manufacturing also drove extraordinary export success, exemplified by each country's machine-tool industry. German companies led the world in Computer Numerical Control (CNC) technologies because they were close to their customers, watched their competitors, and were able to act on what they learned thanks to a supportive ecosystem of vocational training and research foundations. Japan's machine-tool manufacturers achieved even more rapid success, their initial backwardness forcing them to be open-minded in their learning, which was backed by extensive government research and development (R&D) support. The third section, ‘Sustaining Miracles, 1973–1989’, explores the serious negative consequences of these ‘economic miracles’ (a popular term that Stokes refutes: each country's extraordinary success happened because multiple stakeholders made it happen). Environmental harms grew considerably, and Stokes's established expertise in this area is evident in his exploration of the ongoing battles first to acknowledge, and later to mitigate them. Harms to each nation's moral standing emerged as well. He condemns their ‘grudging, late, and entirely inadequate’ (p. 158) responses to economic war-crimes and victims’ claims for compensation. His exploration of corporate scandals in both countries combines lively narrative and colourful characterizations, using Watergate as a heuristic for weighing judgement – a technique of helpful comparison with US examples employed elsewhere in the book. Though his conclusions on Japanese corporate morality in particular are scathing, his conclusion that the coordinated market economy variety of capitalism ‘requires actors and business practices that themselves enable and easily accommodate sustained corporate misbehaviour and corruption’ (p. 165) will provoke discussion, notwithstanding the various improprieties he explores. The final section, ‘Navigating Waves of Globalization, 1990 to the Present’, assesses each country's response to global economic shifts. A review of Outward Foreign Direct Investment (OFDI) over decades is enhanced by Stokes's skill in detailing firm-level failures and achievements in both the US and China. Japanese automotive firms successfully established themselves in the US through gradual investment culminating in manufacturing operations in non-unionized greenfield sites. VW's failed efforts to manufacture the Rabbit in the US are contrasted with the successes of other German companies there, including Mittelstand firms supported by their state governments, research institutes, and other elements of their home ecosystems. Similar successes followed in China. The end of the Cold War brought new challenges: for West Germany, the enormous difficulties of integrating East Germany's industries and population, and for Japan, a decade of recession and deflation. Both countries responded with efforts to address structural issues and position themselves for growth, but then faced what Stokes describes, in the title of his penultimate chapter, as ‘The Shock of the New Century: Three Crises (and a Near Miss)’. He is critical of German banks’ involvement in the global financial crisis – the first – but argues that high-value manufacturing exports to China, aided by government assistance for retaining skilled workers during the downturn, boosted Germany's recovery. In contrast, Japan's exports had declined and it had not restructured to meet the challenges of the global economy, concentrating instead on its domestic markets. The positive impact of Shinzo Abe is explored well here. The second crisis was Fukushima, which Stokes contextualizes in a history of both countries’ ongoing energy struggles. Clearly sceptical about future energy dependencies, he is much more positive about both countries’ response to coronavirus disease 2019 (COVID-19), the third crisis. German outcomes were better than those in most countries and Japan's better still, in both cases thanks to the interaction of social, institutional, and political responses that were characteristic of their respective systems of capitalism. In his conclusion, Stokes notes the ‘unusually high levels of influence’ (p. 275) over Japan and Germany exercised by the United States, which has ‘operated as a crucial conduit linking, challenging and shaping the two countries’ (p. 276). Whilst acknowledging this critical underpinning, he also reminds us of both countries’ independent strength and resilience. Their forms of capitalism have evolved since 1945, notably in two fundamental and influential ways. First, their institutional and organizational innovations, including vocational training and codetermination in Germany and just-in-time (JIT) manufacturing and statistical quality controls in Japan, and second, their adaptability in response to ongoing and newly emerging problems. Despite the ‘intractable dilemmas’ (p. 282) facing both of them – war, climate change, energy, the revolution in automative technology – Stokes concludes that ‘the track record of German and Japanese capitalisms as they have adapted to the vagaries of the global political economy since the end of the Second World War favours guarded optimism about the future’ (p. 284). The fine analysis that precedes it should, despite further global disruptions since the book's publication, persuade readers to share his judgement.