REMAKING JAPAN The American Occupation As New Deal By Theodore Cohen Edited by Herbert Passin Macmillan. 533 pp. $27.50

THE AMERICAN occupation of Japan after the Second World War was arguably the most successful instance of military government ever undertaken by the United States abroad. Compared with the occupation of other countries, ranging from Mexico in the 1840s to Germany in the 1940s, it would seem that the six-year regime (1945-1951) in Japan created a legacy that provided the basis for what developed into a close relationship across the Pacific.

Whether that relationship is eroding, due to the current acrimonious trade dispute, is a matter of serious concern not only to the two countries but also to the world at large. Anyone interested in the future of U.S.-Japanese relations would be well advised to read this book and ponder the rich ramifications of America's postwar rule over defeated Japan.

Theodore Cohen, a young official trained in labor history and economics, was one of the hundreds of civilians assembled by Gen. Douglas MacArthur's headquarters (GHQ) to carry out an occupation policy that had been formulated in Washington toward the end of the war. There is a voluminous literature on the making of the occupation policy, and on the paths that led to the peace treaty of 1951. Many biographies of Gen. MacArthur also exist. But this book -- published posthumously and ably edited by Herbert Passin, the Columbia sociologist -- is unique in its focus on middle-ranking occupation administrators and their interactions with the Japanese. In these interactions the author sees the origins of the postwar record of cooperation and goodwill between the two peoples.

Because Cohen specialized in labor affairs, the book is particularly rich in descriptions of how occupation authorities perceived and dealt with Japan's working population. Fundamental to his perspective, which was shared by some but not all of his colleagues in GHQ, was the assumption that the United States had a historic mission to perform in Japan. The latter was to be "remade" in the image of New Deal America. The distinction between traditional liberalism and New Deal reformism was crucial in such a context. As Cohen saw the situation right after the war, the United States, in punishing militaristic Japan, faced two choices: either to encourage a "liberal restoration" or to undertake a "radical reform." The first alternative, favored by the State Department's Japan specialists as well as "Old Japan Hands" in business and journalism, would bring back prewar Japanese "liberals" -- businessmen, politicians, and others little tainted by militarism. Japan's conservative elite, of course, welcomed such an approach.

Cohen and other "radical reformers" rejected that alternative and pushed for a more thoroughgoing change in the Japanese social structure through "economic democratization." From their point of view, it would not do merely to purge war criminals or revise the constitution; such measures alone would not alter the fact that Japan was dominated by a powerful and wealthy elite, whereas the rest of the population -- farmers, workers and ordinary citizens -- had long been deprived of economic opportunities and were scarcely aware of their basic rights. To reformers like Cohen, the New Deal provided an inspiration and a precedent for remaking society through redistribution of land and income, unionization and collective bargaining, and reduction of rents and debts. For espousing such causes, the GHQ reformers were castigated by conservatives and anti-New Dealers back home and even within GHQ, but, says Cohen, General MacArthur -- himself a "populist" -- never wavered in his support. And the Japanese masses, of course, were captivated by the vision of their liberation. Labor leaders and left-wing politicians, even including Communists, eagerly sought Cohen's and his colleagues' support and guidance.

The result, the book argues, was a remarkable case of transferring one country's historical experience to another. By early 1947, barely 17 months after the Japanese surrender, land redistribution had been launched and important laws had been enacted to ensure workers' rights. These and other measures paved the way for creating "a domestic mass market for consumer goods for the first time in Japanese history." The consumer-oriented mass society, which is the foundation of Japanese economic life, would not have emerged, Cohen concludes, without "American radical reform," applied by MacArthur and his officials.

This is a persuasive argument, but it will provoke controversy. Some will refuse to see Gen. MacArthur as a sincere advocate of radical reform, while others will contend that the radical reforms, whatever their origins and merits, lasted but briefly and were rescinded or reversed once the Cold War set in and there developed an anti-radical crusade both in Washington and Tokyo. To these criticisms Cohen offers a good response. The scenario that would have the United States cavalierly abandoning reform in order to build Japan up as a bulwark against the Soviet Union is, in his words, "just too cynical, and too simple besides." MacArthur and his aides saw democracy as the best weapon to prevent the spread of communism, so there was no contradiction between Japanese democratization and American foreign policy.

BUT THE BOOK'S main contribution is in uncoupling the history of the occupation from that of the Cold War, reminding us that U.S.-Soviet confrontation was not all that mattered in the immediate postwar period. In such a perspective, occupation history is seen in terms of its own momentum. Certainly, there were ups and downs, and Cohen recognizes that after 1948, as Washington came to assert itself over MacArthur's GHQ and decided to give top priority to Japanese economic recovery through a tight monetary policy, the very masses whom the initial reforms had liberated began questioning American intentions. But such development did not undo the reforms. The emergence of a society in which the bulk of the population enjoys unprecedented levels of prosperity and considers itself middle class would seem to support the author's contention.

But the implications of the book go farther. To the extent that Cohen's descriptions can be accepted, Japan's postwar development as an economic power owes its origins to the energy, initiative and perseverance of American occupation personnel on the one hand, and to a receptive and appreciative Japanese public on the other. Here was laid a solid foundation for an unusual partnership across the Pacific, a partnership that suggests that certain shared values and ideals can bridge cultural and political gaps.

That perspective ultimately gives hope for the future. Trade disputes between the two countries were almost preordained once the United States took it upon itself to champion the causes of Japan's working population. But this very transformation created a Japanese middle class oriented toward American values. Without it the U.S.-Japanese alliance would be far more fragile. In this sense, the future would depend to a large extent on the health of this middle class and its commitment to democracy. To understand where the American-induced transformation of Japanese society started, this excellent book provides an invaluable guide.

Akira Iriye, professor of history at the University of Chicago, is the author of "The Origins of the Second World War in Asia and the Pacific," and other books.