| Summary: | During the Great Depression and World War II, the ideology of developmentalism - characterized by a nationalistic perspective, a production orientation, a strategic view of the economy, constraints on market competition, and rejection of the profit principle - emerged and strongly influenced policy innovation in Japan and institutional reforms in its economy. As a result, the Japanese experience of the great transformation of modern capitalism resembled that of Germany and Italy but differed significantly from the liberal capitalism represented by the New Deal in the United States. Liberal capitalism in the postwar era eliminated the military nature of the Japanese economy, and forced developmentalism to adapt to democratic political institutions and the free trade regime. Nevertheless, the economic principles that served to combat the Great Depression and sustain the total war from 1931 to 1945 survived.
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