Chalmers Johnson - MITI and the Japanese miracle

117,353

Est. 1913. Merged with Oji Paper

1933.

6. Dai Nippon Textiles (55)

116,398

Est. 1889. Today Unitika, Ltd.

7. Mitsubishi Shipbuilding (2)

112,341

Est. 1917. Today Mitsubishi Heavy Industries.

8. Mitsui Mining (74)

111,827

Est. 1911. Today Mitsui Mining and Mitsui Metal Industries.

9. Toyo* Textiles (48)

111,490

Est. 1914. Today Toyobo*, Ltd.

10. Taiwan Sugar ()

109,539

Est. 1900.

(table continued on next page)

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TABLE

10 (cont.)

Name

a

Total capital in yen

Remarks

II. 1940

(Thousands)

1. Japan Steel (1)

1,242,321

Est. 1934. Today New Japan Steel.

2. Mitsubishi Heavy Industries (2)

969,491

3. Oji * Paper

562,088

4. Hitachi Seisakusho (4)

552,515

Est. 1920. Today Hitachi, Ltd.

5. Japan Mining (30)

547,892

Est. 1912.

6. Japan Nitrogenous Fertilizer ()

540,344

Est. 1906. Postwar Chisso, Ltd.

7. Kanegafuchi Textiles

434,716

8. Tokyo Shibaura Electric (Toshiba*) (8)

414,761

Est. 1904.

9. Mitsubishi Mining

(53)

407,555

Est. 1918.

10. Sumitomo Metals (7)

380,200

Est. 1915.

III. 1972

(Millions)

1. New Japan Steel

2,113,335

2. Mitsubishi Heavy Industries

1,648,235

3. Nippon Kokan* (Steel Pipe)

1,162,308

Est. 1912.

4. Hitachi, Ltd.

1,036,178

5. Ishikawajima-Harima

982,021

Est. 1889.

6. Nissan Motors

949,029

Est. 1933.

7. Sumitomo Metals

930,197

8. Toshiba, Ltd.

852,999

9. Kawasaki Steel

843,838

Est. 1950.

10. Kobe Steel

683,629

Est. 1911.

SOURCE

: History of Industrial Policy Research Institute,

Waga kuni

daikigyo

*

no keisei hatten katei

(The formation and development of big business in our country), Tokyo, 1976, pp. 26, 38, 56.

a

Numbers in parentheses are the rank in 1972 of those corporations still in existence in that year.

oriented solely to the maximum use of existing facilities rather than to investment in new installations.

2

Although Cohen and the Japanese analysts are critical of this policy, it is hard to imagine what alternatives were available to MCI, given the fact that Japan had already entered the war, thereby endangering its most vital imports, before the industrial implications of a

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long war with the United States had dawned on the military. It is of no great relevance to postwar industrial policy to recall that the Japanese government did not begin to mobilize fully for World War II until after the battle of Midway and the American landings on Guadalcanal (August 1942), but it is of considerable relevance that when the government took action, its policies injected economic bureaucrats much more intimately into the affairs of individual enterprises than they had ever been before. Botched though it surely was, the wartime enterprise readjustment movement lies at the beginning of the path that leads to the Industrial Rationalization Council of the 1950's and to the Industrial Structure Council of the 1960's and 1970's.

As early as 1937 Professor Arisawa Hiromi, who in 1975 was one of the leaders of the Industrial Structure Council, had argued against the prevailing wisdom that medium and smaller enterprises were essential to Japan's export capability. Citing the work of the economist and Cabinet Planning Board official Minoguchi Tokijiro *, Arisawa contended that, contrary to MCI policy, fostering and protecting smaller enterprises was a mistake because they were of only incidental importance to Japan's long-term export prospects, although he did acknowledge that they provided work for a large proportion of Japan's labor force.

3

He would have preferred to see all of these small factories organized into large productive units, or at least made subcontractors of large enterprisesan idea that the zaibatsu found quite congenial. One important legacy of the enterprise readjustment movement is today's pattern of extensive subcontracting between large, well-financed final assemblers and innumerable small, poorly financed machine shops.

4

The problem of converting and closing small enterprises emerged concretely as a result of the failure of the first materials mobilization plan in mid-1938. The Cabinet Planning Board scrapped its original plan in part because it discovered that much of the country's imported materiel was being used not by large enterprises for creating munitions or exports but by medium and smaller enterprises that manufactured for domestic consumption. The CPB's revised plan radically cut imports for these types of businesses, which drove a large number of them into bankruptcy but also raised for the government the question of what to do with the workers who had been forced out of work. In September 1938 MCI took its first steps to come to grips with the problem by creating the Tengyo* Taisaku Bu (Industrial Conversion Policy Department).

The idea behind the department was that through a combination of

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subsidies and governmental pressure, the depressed medium and smaller enterprises could be shifted to production of munitions, production for export, or production of import substitutes. Officials of the department also used techniques learned in the rationalization movement to promote joint management and enterprise mergers for large numbers of firms. The workers who could not be easily reorganized were encouraged and paid to emigrate to Manchuria and China. The Unemployment Policy Department of the new Welfare Ministry also sponsored such emigration in order to help prevent social unrest among the unemployed.

In the reorganization of MCI on June 16, 1939, the Industrial Conversion Policy Department was renamed and continued as the Promotion Department (Shinko * Bu). It is not clear who thought of the term ''promotion" or what was meant by it, but the "promotion department" was perpetuated in the MITI era as a component of the Medium and Smaller Enterprises Agency, created on August 2, 1948. MITI historians see in the reorganization of 1939 a fundamental change of function for the ministry; until then commercial and industrial policy had been carried out without reference to the scale of enterprises, but after 1939 policy was explicitly committed to the nurturing of largescale enterprises.