Chalmers Johnson - MITI and the Japanese miracle

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Less flagrant but possibly more important have been incidents of

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seeming wholesale payoffs by the government to business interests with preferential access or advance knowledge: the "dollar-buying scandal" of 1931, the payments to munitions companies immediately following the defeat in 1945, and the Bank of Japan's dollar-buying policies at the time of the August 1971 "Nixon shock" (in the face of certain knowledge that the yen would be revalued). On August 27, 1971, alone the government paid out some $1.2 billionsix times the amount involved in 1931to purchase dollars that had already been devalued on the rest of the world's foreign exchange markets. Total Bank of Japan dollar purchases in 1971 came close to $6 billion at ¥360 = $1 instead of ¥308 = $1; this represented a gift to business concerns of almost $1 billion. Some writers have called this "institutionalized corruption"; others have argued that it was the government's attempt to soften the blow for industries that would henceforth be selling their products at less advantageous prices.

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The reemployment of retired government bureaucrats on the boards of industries currently designated as economically strategic also creates many opportunities for hand-in-glove relationships. A classic case was the so-called Hakone railroad war of the late 1950's between two big private railroad systems, Seibu and Tokyu*. The issues involved the development of tourist railroads and bus franchises in and around the Mount Fuji area, a rail route from Ito* to Shimoda, and tourist boats between Atami and Oshima* Island. In every instance the Ministry of Transportation gave approval or issued licenses to Tokyu. The explanation of informed observers was that the president of Tokyu, Goto* Keita (18821959)one of the pioneers of the railroad, hotel, and department store businesses in Japanwas also a former official of the government railways and a minister of transportation in the Tojo* cabinet. The vice-president of Tokyu and president of the Tokyu*-backed Toei* Film Company was Okawa* Hiroshi, also a veteran of the Japanese National Railways. The executive director of Tokyu and also president of Tokyu Rolling-Stock Company was Yoshitsugu Toshiji, who had served in the old Railroad Ministry for more than twenty years. In addition, Karasawa Tsutomu, the Tokyu managing director; Kawahara Michimasa, president of the Tokyu-affiliated Keihin Rapid Transit Company; Torii Kikuzo*, vice-president of the Tokyu-affiliated Sagami Railroad Company; Shibata Ginzo*, president of the Tokyu-affiliated Hakone-Tozan* Railroad Company; Kajiura Kojiro*, president of the Tokyu-affiliated Enoshima-Kamakura Electric Railway Company; and Kawai Kentaro*, president of the Tokyu-affiliated Shizuoka Railway Company, were all former officials of the Ministry of Railways or its postwar successor, the Ministry of Transporta-

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tion. It has been suggested that these "seniors" might have had some influence over the transportation officials who had to review Tokyu's * plans. Some incumbent officials might even have been thinking of entering the Tokyu* empire when they retired.

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Thus one reason for the private sector's participation in amakudari is the extensive licensing and approval authority (kyoninkaken) of the government. Companies believe that having former bureaucrats among their executives can facilitate obtaining licenses from the ministries. The Ministry of Construction exercises licensing authority over the building industry, the Ministry of Transportation over rail and air transport and the bus and taxi business, the Ministry of Finance over the banks, and MITI over the key industriessteel, electric power, and chemicals in the 1950's, automobiles and appliances in the 1960's, advanced electronics in the 1970's, computers, robots, and new sources of energy in the 1980's. With this in mind it becomes understandable that whereas during the 1950's and 1960's very few ex-MITI officials joined foreign-affiliated firms, during the 1970's, with MITI's new commitment to the "internationalization" of the Japanese economy, ex-MITI officials began to appear in Matsushita-America, IBM Japan, and Japan Texas Instruments.

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It is misleading to consider this type of government-business relationship a form of "corruption"; it is, rather, an adaptation by private business to a particular governmental environment. The same adaptation occurs in other countries, although in the United States the preferred insiders are ex-congressmen rather than ex-bureaucrats (except in the defense industries). Thus, during the 1970's Albert Gore, Sr., a former senator, became a lawyer for Occidental Petroleum; Paul Rodgers, former chairman of a House public health subcommittee, became a member of the board of Merck and Company; and Brock Adams, former congressman and secretary of transportation, became a lawyer for Trans World Airlines.

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This preference for congressmen rather than bureaucrats in the United States merely reflects the market rationality of the American system as contrasted with Japan's plan rationality.

Preferential access to the government for the strategic industries in Japan is not an unintended consequence of the developmental state; it is in fact an objective of the developmental state. This is the true significance of amakudari. A cost of the system is occasional misuse of access to gain some private advantage. Nonetheless, from the Japanese point of view, the advantages of amakudari for smooth policy formulation and execution outweigh this cost. The Japanese refer to consultations between ex-bureaucrat seniors and their incumbent

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juniors as "digging around the roots" (

nemawashi

), that is, preparing the groundwork for a government-business decision. To outsiders it often looks like "consensus."

The most senior amakudari positionsfor example, the postretirement landing spots of MITI's vice-ministers (see Table 6)are bases from which to coordinate the strategic sectors. At this level the Western distinction between public and private loses its meaning. As Eleanor Hadley remarks about the prewar zaibatsu, "The combines' strength was regarded as national strength but their profits were seen as private property."

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In the postwar world this relationship persists, except that the weight of the government is much stronger. Sato* Kiichiro*, former president of the Mitsui Bank, observes that "during and after the war, . . . Japan's economy was controlled until it has become second nature with us to uphold a planned, controlled economy."

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At the level of the supreme leadership of the business community, the primary concern is that the relationship between government and business be managed effectively for the good of all. Amakudari is significant here only in that it contributes to a common orientationas does education at Todai*, golf club memberships (MITI's Amaya acknowledges that "they do other things than play golf at golf courses"), and the common experience of the war and its aftermath.

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Of the five postwar presidents of Keidanren (the Federation of Economic Organizations)Ishikawa Ichiro* (18851970), Ishizaka Taizo* (18861975), Uemura Kogoro* (18941978), Doko* Toshio (b. 1896), and Inayama Yoshihiro (b. 1904)three are former bureaucrats (one at Communications, two at Commerce and Industry) and four are graduates of Todai (one in engineering, one in economics, and two in law). It would be difficult, however, to correlate their backgrounds with their policies, except to say that all five worked closely with the government. Ishikawa (a nonbureaucrat engineer), Uemura (an exbureaucrat), and Inayama (an ex-bureaucrat) were most cooperative; Doko (a nonTodai engineer) was less so; and Ishizaka (a Todai law exbureaucrat), perhaps surprisingly, was the least cooperative.