To ascertain soldiers’ potential status as wage labourers, this chapter discusses the process of initial enlistment and the ensuing terms of service, questioning especially whether soldiers enlisted of their own accord and retained their free status. It emerges that, from the reforms by Philip II of Macedonia onwards, political circumstances dictated a strong drift towards greater and at times complete reliance on so-called voluntary troops, who enlisted in exchange for pay. Thus, while the bulk of troops under Philip and Alexander were conscripts, these armies from the outset encouraged the enlistment of hired, voluntary troops in both elite and ordinary divisions. The lines between different troop types were blurred significantly under Alexander, whose conscript forces re-enlisted as hired men mid-way through his campaign. The Successors, whose often fickle claims to territory complicated the conscription of troops, were almost wholly reliant on voluntary troops. Accordingly, it is at this point that the epigraphic record attests military contracts, in which soldiers’ continued freedom of movement is guaranteed, alongside other terms of service. In the subsequent Hellenistic kingdoms, we see a return to conscription, especially in times of greatest need, alongside an enduring preference for professional, hired soldiers to man the standing armies.

In the summer of 323, the Athenian Assembly voted to embark on the Lamian War, a somewhat impromptu attempt to liberate Greece from the Macedonian hegemony following the ominous news of Alexander’s death. According to the historian Diodorus Siculus, however, this decision was not the result of a renewed desire for freedom, but rather a consequence of the large number of citizens in the Assembly that day who had become accustomed to make their livelihood through war.1 In effect, earlier that summer, 8,000 men are said to have gathered at Cape Taenarum in the southern Peloponnese, where they were awaiting military employment – soldiers, who would soon find themselves among the ranks of passing warlords for decades to come.2

These men and their search for employment typify the sweeping military and economic changes that engulfed the eastern Mediterranean from the rise of Macedonia onwards.

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.

West Germans and the Japanese became increasingly proficient during the first quarter-century after 1945 at manufacturing things and selling them abroad. This translated by the 1970s into growing balance of trade surpluses with much of the rest of the world, especially the United States and UK. But there was a puzzle in terms of perceptions, in the United States in particular: US trade deficits with the two countries posed similar levels of political and economic risk. Yet, it was the Japanese who became the primary target of the wrath of the Americans because the US trade deficit with Japan by that time was larger than that with Germany, even though that diverted attention from a much more important problem, the loss of US manufacturing markets to German competition in third countries; Americans viewed the Japanese domestic market as far less open than Germany’s; and Japanese exports to the United States were highly visible. German exports tended to flow directly to manufacturers of other things, thus rendering them largely invisible. The growing prominence of Japanese products and names in highly visible sectors such as consumer electronics and motorcycles led to the conclusion that the Japanese were unfairly eroding American industrial dominance.

As a result of mounting balance-of-trade surpluses for Germany and Japan with the United States by the 1970s, the US federal government exerted pressure on Germany and Japan to decrease the countries’ trade surpluses. Private German and Japanese firms stepped in to accommodate the wishes of their own and the US governments, although they did so in different ways. There has been a recognisable pattern to Japanese foreign direct investment (FDI) in the post-war period, one with its roots in culture and in the history of Japan’s relationship with the target country for the firms’ investments. And there is a distinctly German one, too. The same has been true of the countries’ FDI in the People’s Republic of China since the late 1970s. Relocation of expensive labour-intensive production has formed one strand of this, cultivation of new markets another, and concern for protection of intellectual property related to the design and production of goods a third important strand. German firms have often done better at cultivating the new Chinese market and cooperating with Chinese producers than Japanese companies for a variety of reasons, not least because of animosities arising from before 1945.

The Cold War constituted one of the most significant factors in the meteoric rise of the German and Japanese economies after 1945. It was a primary motivation for the US redefinition of both countries as partners rather than pariahs, and both could then leverage the institutions and structures of the US-led capitalist world to maximum advantage. The United States also provided military protection for the two countries, enabling them to recalibrate their political–economic systems decisively away from their pre-war national security orientation to a commercial one. However, the end of the Cold War changed everything rapidly and fundamentally. The opening of the old Soviet bloc along with the rise of China presented extensive market opportunities, but simultaneously produced potential new competitors, while Anglo-Saxon neoliberalism has challenged German and Japanese cooperative capitalisms. For Germany in particular, the post-Cold War landscape has involved expensive reunification along with growing numbers of refugees. Globalisation has thus been a double-edged sword, undercutting the high-wage societies of Deutschland AG and Japan, Inc. Scaling back of US military commitments, moreover, have also led to Germany and Japan spending more money defending themselves, as well as to deployment of troops for the first time since 1945.

For paid military service to constitute wage labour, soldiers’ labour power ought to be acquired on a labour market. Such a market develops when multiple employers compete over the labour of the same pool of workers and workers can negotiate their terms of service. As argued in this chapter, during the campaign of Alexander soldiers not only leveraged their collective voice to improve their conditions of service but were also promoted up the ranks when their skill set warranted it. These phenomena laid the foundations for the development of a market for labour during the Wars of the Successors, when multiple employers had to vie for the service of the same group of soldiers. Increasingly motivated by monetary gains and not restricted by political allegiance, these soldiers enlisted with the highest bidder, thereby driving the price of military labour upwards.

The Axis defeat in 1945 ushered in a lengthy American-dominated Allied military occupation in Germany and Japan, which started in a highly punitive mode. The occupation authorities focused on rooting out the purveyors of Nazism and ultranationalist Japanese ideology. The occupiers also sought to eliminate the military and to dismantle or severely restrict industrial capacity. The unintended consequences of these punitive measures were, however, momentous in the medium and long term. In their quest to eliminate the massive concentrations of economic power of monopolistic corporations, American trustbusters redefined the competitive landscape, mostly for the better. And the Allied ban on the aviation industry in both countries caused aeronautical engineers and managers to seek employment in other quarters, above all in the automobile industry. They and the companies they worked for swiftly applied to car manufacturing what they had learned about quality control and efficiency from supplying airplanes to the Luftwaffe and the Japanese military. The result was high-quality mass production, which soon extended to other industries. In Japan, moreover, teams of former aviation engineers and managers were hired by the Railway Ministry, where they applied their stubbornness and can-do attitude in developing the bullet train.

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.

During the quarter-century following their defeat, Germany and Japan gradually conquered world markets with goods they designed and manufactured. In the process, Germans and Japanese households became steadily more affluent, directing a considerable amount of their newfound wealth into savings, but also using it to purchase their way into mass consumer society. Together, these factors drove their economies forward in a virtuous circle, and Germany and Japan entered the highly select club of the richest nations. As a direct result of this success, however, Germany and Japan confronted new and different challenges. Harrowing experiences of heavy industrial pollution and consumer waste crises associated with extremely rapid industrialisation and growth of consumerism stimulated social and political change both in Germany and in Japan. More recently, they also prompted innovation as many German and Japanese companies embraced green technology for growth, especially in foreign markets. The other side of the coin, however, is that industrial pollution and waste continue to plague both countries, with the added realisation of the challenges of climate change coming to the fore since the 1990s. Environmental scandals and legacy, moreover, have formed a key dimension of the recurring need to deal with the unmastered past for both countries.

Making the transition after 1945 from heavily military to predominantly civilian production proved less of a stretch for large firms in Germany and Japan than might have been expected: by the middle of the twentieth century, it had become almost impossible to distinguish clearly between arms-related and civilian-oriented industry. In other words, opportunities for recovery and growth abounded for manufacturing industry in both countries as the 1950s loomed. At the same time, however, wartime production had also served as a stress test for large-scale, high-tech industry, with the experience highlighting one overriding issue in each case. In Germany, large-scale firms built on long traditions and experience to produce high-quality goods for the war effort. But they had considerable difficulty manufacturing in quantity, and even more so in maintaining adequate levels of quality in the process. Most Japanese companies, on the other hand, found quality production challenging during the war regardless of quantity. Both countries developed the capabilities they lacked, developments epitomised at Volkswagen, founded in the Nazi period, but which became the first German-owned auto firm to engage in mass production of the iconic Beetle only after the war; and at Toyota, which eventually achieved high-quality flexible mass production.

Transforming German and Japanese capitalisms required fundamental changes in small and medium-sized enterprises (SMEs), which were often far less developed technologically. That meant confronting the intractable problem of industrial dualism, with its negative social and political fallout. During the war, there had actually been considerable movement by some SMEs towards substantially higher levels of technological performance and productivity. Supplier networks to serve larger, technologically sophisticated producers, especially in the aircraft industry, forced SME companies to up their game. This mechanism for doing away with dualism disappeared in defeat. Only gradually, in the context of fundamental reorientation towards civilian technologies, did companies resurrect these networks. Proactive company action on the one hand and various combinations of state policy and support on the other, meant industrial dualism narrowed dramatically between the 1950s and the 1970s in both Germany and Japan. SMEs in both countries – the German Mittelstand – engaged in manufacturing have since formed buffers, providing larger firms with flexibility and stability, and also drove post-war economic development, complementing the performance of larger and more well-known firms. The resurgence of the two nations’ economies between 1945 and 1970 can be understood only by reference to the synergies between the two types of companies.

The new millennium started on an anxious note, although the much-feared millennium bug proved uneventful. What followed, though, was a series of crises until 2020 involving financial meltdown, a nuclear disaster, and a pandemic. Japan and Germany, like the rest of the world, emerged bruised and battered by the first and last of these calamities. Japan suffered the middle one on its own, although Fukushima also galvanised Germany’s opposition to nuclear power. This in turn reinforced the European country’s longstanding overreliance on Russian gas, a folly laid bare when Russia invaded Ukraine in spring 2022. Taken together, the crises exposed some of the vulnerabilities and deficiencies of Japanese and German capitalisms as they have evolved since the Second World War. But they also highlighted key sources of strength, not least resilience and adaptability in the face of extreme adversity. On balance, the two countries therefore weathered the crises better than most.