Chalmers Johnson - MITI and the Japanese miracle

The disarray that developed during the 1930's in the system of government inherited from the Meiji era provided the opportunity for the rise of the economic bureaucracy, and the political problems of the

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time called it forth. Through the direct and terrorist actions of the military and the ultranationalists, men in uniform took over the government. They co-opted the legitimacy of the Imperial institution and largely neutralized the influence of its managers, and they also weakened and nearly discredited the elected politicians of the Diet. But they could not destroy the interests the politicians representedprimarily those of the zaibatsuand the zaibatsu undertook, in self-defense, to enter the government and represent themselves: they stopped working through politicians. Moreover, the military had neither the capacity nor the leadership ability to formulate and administer the "second-stage industrialization" (that is, capital-intensive industrialization, in contrast to the labor-intensive industrialization of the Meiji period) that its aggressive empire-building plans necessitated.

It was in this context that MCI transformed itself from a lowly commercial bureaucracy whose primary task was to represent the interests of capital in the government into a task-oriented planning, allocating, and managing agency for heavy and chemical industrialization. Its officials learned how to introduce new, advanced-technology industries, first in Manchuria and then in Japan itself, and they also learned that they could not accomplish much of anything unless they worked in conjunction with the zaibatsu. Throughout the 1930's MCI was torn by its political alliances. On the one hand, it rose in power vis-à-vis its better established rivals such as the Finance and Foreign Affairs ministries by cooperating with the military and the reform bureaucrats. On the other hand, it also fought against military arrogance and interference in its development plans and kept its ties to the zaibatsu, which were the only sources of capital and managerial ability for second-stage industrialization. The economic bureaucrats never resolved these problems in the politics of the government-business relationship until the true capitalist developmental state came into being after the war.

The main contributions of the 1930's to the postwar economic "miracle" were to create and install in the government an economic general staff, and to demonstrate to the satisfaction of all parties concerned that such an agency could not be effective until the political problems of determining who was to reign were resolved. Once installed, the economic general staff never relinquished its new powers or retreated from its mission; Japan would never again return to the laissez faire policies of the first thirty years of the twentieth century. But, equally important, the economic general staff could not really unleash the developmental forces of the society until the defeat of 1945 had broken the hold of the military completely and had tipped the balance of

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power decisively away from the zaibatsu and in favor of the bureaucrats. Just as World War I had led European nations to assign to the state new tasks of economic mobilization and developmentand to remove these tasks from the agendas of parliamentsso the crises and wars of the 1930's led to the same thing in Japan. But it took the catastrophe of the Pacific War to supply the political prerequisites of the developmental state. By the 1950's Takahashi Korekiyo's observation that "it is much harder to nullify the results of an economic conquest than those of a military conquest" had become not uncommon wisdom but simple common sense.

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Five

From the Ministry of Munitions to MITI

As Japan entered the Pacific War, the Ministry of Commerce and Industry could look back on a decade of considerable accomplishment in terms of planned industrial expansion. Between 1930 and 1940 Japan's mining and manufacturing production had more than doubled, and, equally important, the composition of manufacturing had changed drastically from light industries (primarily textiles) to heavy industries (metals, machines, and chemicals). In 1930 heavy industries accounted for approximately 35 percent of all manufacturing, but by 1940 this proportion had grown to 63 percent. Another way to visualize this shift of industrial structure is to look at the top ten companies in terms of their capital assets in 1929 and 1940 (see Table 10). Whereas at the end of the 1920's three of Japan's ten largest enterprises were textile companies, a decade later only one was. Interestingly enough, the top ten of 1940 bear a much greater resemblance to the top ten of 1972 than they do to the top ten of 1929 (Japan Steel, Mitsubishi Heavy Industries, Hitachi, and Toshiba * were ranked first, second, fourth, and eighth respectively in both 1940 and 1972, whereas only Mitsubishi was even on the list in 1929).

Not much further expansion of total output occurred during the Pacific War, but the shift from textiles and food products to mining, nonferrous metals, and machines continued and accelerated. The war caused a change of industrial structure almost as profound as Japan's original industrialization, and it decimated Japan's medium and smaller enterprises as well as its previously dominant textile industry. The immediate cause of this shift was the enterprise readjustment (kigyo* seibi) movement, a set of government policies that came to be

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so heartily disliked by the public that after the war even the phrase was dropped from the lexicon of trade and industry bureaucrats, although they of course invented new euphemisms for the same thing. The wartime shift of industrial structure was emphatically not a byproduct of the working of market forces but was, instead, the invention and the responsibility of MCI. The ministry's pursuit of enterprise readjustment led in 1942 to the creation of the Enterprises Bureau (Kigyo * Kyoku), which still exists today under the title of Industrial Policy Bureau, to be the control center for both the ministry and the Japanese industrial world.

Writing at the end of the war, Jerome B. Cohen concluded, "All the evidence indicates . . . that the major [Japanese] reliance for the war-time economic effort, as it was conceived at the outbreak of war, was to be placed upon a further shift in resources from nonwar to war uses rather than upon a lifting of the whole level of output."

1

Similarly, the authors of MITI's authoritative

History of Commercial and Industrial Policy

comment that the second Productivity Expansion Plan, written by the CPB and approved by the cabinet on May 8, 1942, was

TABLE

10

The Top Ten Japanese Mining and Manufacturing Corporations, 19291972

Name

a

Total capital in yen

Remarks

I. 1929

(Thousands)

1. Kawasaki Shipbuilding (14)

239,848

Est. 1896. Today Kawasaki Heavy Industries.

2. Fuji Paper ()

159,642

Est. 1887. Merged with Oji* Paper

1933.

3. Oji Paper

154,228

Est. 1873. Today Jujo* Paper (63), Oji Paper (69), and Honshu* Paper (88).

4. Kanegafuchi Textiles (47)

145,989

Est. 1887. Today Kanebo*, Ltd.

5. Karafuto Industries ()