Chalmers Johnson - MITI and the Japanese miracle

On July 2, 1929, the Minseito* returned to power, and Prime Minister Hamaguchi appointed Inoue Junnosuke minister of finance. Inoue proceeded to carry out his plan to lift the gold embargo, but he and other members of the government now linked the step to the industrial rationalization movement. The gold standard would tie Japan's prices to world prices, they said, and industrial rationalization would strengthen the nation's international competitive ability. Prime Minister Hamaguchi himself argued to the Commerce and Industry Deliberation Council during 1929 that "industrial rationalization is not just a matter of timely policy but must be a movement of all the people."

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On January 11, 1930, Inoue lifted the gold embargo. Whatever the theoretical merits of this policy, its timing was terrible. To pursue a deeply deflationary policy during the early months of the deepest depression the modern world has ever known could only make conditions worse. On December 13, 1931, the gold embargo was reimposed, and Japan turned to a homegrown version of Keynesian economics, pulling itself through the depression by means of governmental deficit spending on armaments. During 1930 and 1931, however, the depression was at its worst in Japan, and the other half of the Hamaguchi cabinet's economic policy, industrial rationalization, began to take on new meaning.

The Commerce and Industry Deliberation Council lasted from 1927 to July 5, 1930. On November 19, 1929, it set up as a kind of subcommittee an Industrial Rationalization Deliberation Council (Sangyo* Gorika* Shingikai) within MCI. A month later this body produced a

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report on rationalization measures that were needed at once. Meanwhile, in response to the worldwide economic collapse, the cabinet on January 20, 1930, set up its own Emergency Industrial Deliberation Council (Rinji Sangyo * Shingikai) with the prime minister as chairman and the minister of commerce and industry as vice-chairman. This supreme body lasted only a few months, but it took notice of the work on industrial rationalization within MCI and ordered the creation there of a Temporary Industrial Rationality Bureau (TIRB; Rinji Sangyo Gori* Kyoku) to formulate and carry out concrete measures of rationalization. This bureau came into being on June 2, 1930, as a semi--detached organ of MCI with the minister of commerce and industry himself serving concurrently as the bureau's director. The TIRB, which lasted until 1937, was also the brainchild of Yoshino Shinji; and it was so successful that he was chosen vice-minister a year later mainly on the strength of TIRB's performance.

Yoshino deliberately created the TIRB as a detached bureau headed by the minister in order to prevent internal ministerial rivalries from crippling its activities. He involved all of the ministry's bureau and section chiefs in it and gave it an unconventional internal structure. Instead of sections, it had only two large departments, the first headed by Kido Koichi*, who was concurrent chief of the Documents Section in the Secretariat, and the second headed by Yoshino, who was concurrent chief of the Industrial Affairs Bureau.

These departments drew up plans for the control of enterprises, implementation of scientific management principles, improvements in industrial financing, standardization of products, simplification of production processes, and subsidies to support the production and consumption of domestically manufactured goods. Continuing the precedent set by the Commerce and Industry Deliberation Council, Yoshino involved civilian industrial leaders in the active duties of the bureau, even to the extent of providing them with offices in the MCI building. Okochi* and Nakajima from the council continued as the TIRB's most important advisers, but representatives of all the zaibatsu as well as academics and journalists actively participated. They all proved extremely useful to the ministry in gaining acceptance for its ideas within the business community and in defending its proposed laws in the Dietparticularly the landmark Important Industries Control Law of 1931.

The Japanese term

gorika

*literally "to make rational"was not well understood at the time Yoshino chose it for his new bureau. He was worried about its implications and therefore deliberately named the bureau the Sangyo Gori Kyoku instead of the wholly correct San-

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gyo Gorika * Kyoku. He explained that the "

ka

" worried him, since

kakyoku

means "old song," and he was afraid his critics and the opposition might turn this into a pun.

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There certainly were critics. On the day before the bureau was scheduled to open, a workman scribbled the character "

fu

" in front of

gori

* on its new office signboard, thus transforming it into the "Industrial Irrationality Bureau."

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Leftists and antizaibatsu elements were skeptical about the rationalization movement. They sometimes referred to it as "Japanese-style rationalization," meaning wage cuts, reductions in the number of employees, and a stretching out of working hours.

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There was also some international criticism to the effect that rationalization was a cover for "social dumping," a term of abuse that was especially applied to Japan at the time. During the early 1930's the International Labor Organization distinguished between what it called "commercial dumping"an unfair business practiceand "social dumping"a form of alleged exploitation of workers. Commercial dumping meant "an operation that consists in exporting goods at less than cost of production plus a fair profit, and at the same time, selling the same goods on the home market at a higher price than the cost of production plus a fair profit,'' whereas social dumping meant "the operation of providing the export of national products by decreasing their cost of production as the result of depressing conditions of labor in the undertakings which produce them or keeping those conditions at a low level if they are already at such a level."

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The Japanese always resented the charge of social dumping, believing they were in fact trying to take the measures necessary to eliminate it.

The idea of industrial rationalization circulated widely in many countries during the 1920's and 1930's. Japan's specific conception of it originated as a poorly digested amalgam of then current American enthusiasms ("efficiency experts" and "time-and-motion studies"), concrete Japanese problems (particularly the fierce competition that existed among the large number of native firms and the consequent dumping of their products), and the influence of Soviet precedents such as the First Five Year Plan (192833) and the writings of the Hungarian economist and Soviet adviser Eugene Varga. With regard to Soviet influence, it should be remembered that during the 1920's socialist ideas had an impact on nonsocialist and even antisocialist groups and nations, particularly in the non-English-speaking industrialized countries. Later I shall draw attention to the specific link between Soviet and Japanese planning of the 1930's and 1940's in terms of its conceptual foundations. However, in 1930 by far the greatest influence on the Japanese theory of rationalization came from the Ger-

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mans. Germany had been a powerful model for modern Japan ever since the Restoration, but in 1930 German precedents were introduced directly into the TIRB because of some unforeseen internal bureaucratic events. Such interaction between the demands of Japanese bureaucratic life and the policies that the Japanese government produced is a constant theme of this study.

During the year 1930 the ruling Minseito * government attempted to politicize MCI, much as the LDP would attempt to do to MITI some thirty years later. The industrial rationalization movement had made MCI an important center of policy, and the party clearly wanted to maneuver bureaucrats friendly to it into positions of leadership. The attempt ultimately failed, but it resulted in Yoshino Shinji's becoming vice-minister in 1931 and in Kishi Nobusuke's being sent to Germany to report back to the TIRB on the industrial rationalization movement there. The actual political incidents of 1930 are of slight importance in themselves, but they had consequences of lasting significance, among them the establishment of the so-called Yoshino-Kishi line in the ministry until 1936. Bureaucrats, like politicians, deal in power, and struggles for power are an inextricable part of bureaucratic life, regardless of what models organization theorists may have favored from Weber to the present.