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TABLE
18
Growth Rates, 19551965
(percent change over previous year)
Year
Real Gross
National Product
Civilian plant and equipment investment
1955
8.8
-3.2
1956
7.3
39.0
1957
7.4
25.1
1958
5.6
-4.7
1959
8.9
16.9
1960
13.4
40.9
1961
14.4
36.8
1962
7.0
3.4
1963
10.4
5.3
1964
13.2
20.0
1965
5.1
-6.4
SOURCE
: Arisawa Hiromi, ed.,
Showa
*
keizai shi
(Economic history of the Showa* era), Tokyo, 1976, p. 371.
vestment among the firms in the industryin this case, the "Petrochemical Cooperation Discussion Group," established by MITI on December 19, 1964.
80
There could, of course, be variations on this pattern. Some new industries, such as electronics, were created under a new "temporary measures law"; and if the business was simply too risky or expensive for private enterprise to undertake, a joint public-private corporation might be createdfor example, the Japan Synthetic Rubber Corporation, established by law number 150 of June 1, 1957. During approximately the first half of the 1950's, MITI concentrated on steel, electric power, ship-building, and chemical fertilizers. It then fed into the economy, as it deemed them ready for commercialization, synthetic textiles (basic MITI policy adopted in April 1953), plastics (June 1955), petrochemicals (July 1955), automobiles (law of June 1956), electronics (law of June 1957), and so forth.
The results were impressive. The 1956 edition of the EPA's
Economic White Paper
included the famous line "We are no longer living in the days of postwar reconstruction," and the 1961 edition said, "Investment invites more investment."
81
Between the appearance of these two catch phrases, the Japanese economy experienced an average annual industrial investment rate of better than 25 percent, and of over 35 percent during three years (see Table 18). At the end of January 1961 the Enterprises Bureau estimated that the 1,500 "important"
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companies that reported to it had plant and equipment investment plans worth ¥1.795 trillion, a 30.3 percent increase over the ¥1.377 trillion of fiscal 1960, which was itself a 59.5 percent increase over the ¥863.4 billion of fiscal 1959. The Bureau planned to cool this down to a mere 20.4 percent (¥1.658 trillion) for 1961.
82
One of the big events of the period was the 1961 "Machine Industry ¥3 Trillion Annual Production Memorial Congress," held at Harumi Pier in Tokyo with the Emperor in attendance. According to the sponsor of the Congress, Heavy Industries Bureau Chief Sahashi, the industry had already broken through the ¥4 trillion mark by the time the congress opened.
83
Not everything was perfect, however. Alarm bells had started ringing in Washington and Western European capitals, and MITI officials dared not ask for whom they were ringing. In the autumn of 1959 the IMF met in Washington, and in December GATT held its general conference in Tokyo. Both gatherings resounded with demands that Japan move at once to free convertibility of its currency and open its domestic market to foreign products. MITI officials knew that their high-growth system would not work with large numbers of foreigners participating in it, and they were worried about the kind of "invasion of American capital" that appeared to have taken place in Europe. Perhaps most important, they were concerned about what role they could play in a "liberalized" economy. They did not have too much time to think about it. On June 24, 1960, as its last official act before resigning, the Kishi cabinet, beleaguered by some 300,000 demonstrators surrounding the Diet building during the security treaty riots, adopted a "Plan for the Liberalization of Trade and Exchange."
84
By mid-July Kishi was gone, Ikeda had become prime minister, and the age of "liberalization'' had dawned.
Reflecting on the critical attributes of the postwar high-growth economies, Alfred Chandler concludes, "The German and Japanese miracles were based on improved institutional arrangements and cheap oil."
85
It is the first of these two causes that is of interest to us here, since the second was available to any nation that was clever enough to exploit it, not just to Japan and Germany. Chandler defines institutional arrangements as formal and informal, explicit and implicit social structures "developed to coordinate activities within large formal organizations such as corporations, governmental bodies, and universities and to link those organizations to one another." This comment is refreshingly different from the numerous explanations of Japanese achievements (or failures) in terms of nature, environment, culture, or other ineluctable forces. It contributes to a long overdue
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demystification of the Japanese high-growth system. That system, it seems to me, resulted from three things: a popular consensus favoring economic priorities, one that was dictated by the harsh conditions of the 1940's and by Japan's situational imperatives; an organizational inheritance from the first 25 years of the Showa * era; and conscious institutional manipulation starting from the Dodge Line and Korean War periods. All of these political and institutional alignments were aimed at national mobilization to achieve high-speed economic growth, and that is precisely what they brought about.
Japan's priorities are not hard to fathom. As was discussed in the previous chapter, the Pacific War had already imposed on the Japanese some of the harshest conditions endured by the civilian population of any belligerent nation, and the postwar inflation merely exacerbated these conditions. In addition to providing ample incentive to economic mobilization, the misery of the 1940's also provided one other structural support; it made all Japanese equally poor. The high-speed growth of the 1950's was therefore not socially divisive in the sense of benefiting one group or class at the expense of another. Those who gained from the egalitarianism of the 1950's were the Japanese born in the 1960's: the part of the profits of high-speed growth that was distributed was portioned out more or less equitably, and a large proportion was not distributed at all but reinvested. Strongly bolstering the priorities of the Japanese themselves, the United States encouraged Japan to regain its economic strength and did everything an ally could do to help.
The organizational heritage of the Showa era is somewhat more complicated. I am thinking of such social supports for public-private cooperation as the experience of failure of both self-imposed and state control, the convergence of views about the nature of economic management among bureaucrats and entrepreneurs as a result of common or very similar educational experiences (for instance, at Todai* law school), and an extensive cross-penetration of elites as a result of the recruitment of politicians and managers from among the ranks of former government officials. These features of Japanese society are not purely cultural givens, although they would be hard to duplicate in other societies since they reflect what Japan was able to salvage from the rubble of the early Showa era. A nation that wished to adopt them might have to reexperience Japan's modern history. The famous Japanese "consensus" appeared only during the 1950's; it did not yet exist during the 1930's and 1940's, which suggests that it was based on changes in historical circumstances and political consciousness and not on unique social values.
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The "improved institutional arrangements" have already been discussed in this chapter. In addition to the two-tiered banking system, FILP, an elaborat
e trade promotion apparatus, high levels of competition among the bank groups, total control of foreign exchange, total screening of foreign capital, and a tax system that made Japan a businessman's paradise, there were all the other institutional arrangements mentioned in Chapter 1. These include a work force made docile by enterprise unionism, extensive subcontracting, "lifetime" employment, massive internal migration from farms to factories, freedom of managers from interference in their programs by corporate stockholders, a system of forced savings due to weak or nonexistent welfare commitments (further powered by government incentives to save through the postal system, which fed its accumulation of funds directly into Ministry of Finance accounts), and many other examples of ad hoc harnessing of seemingly unrelated social institutions to the high-growth system. And it should not be forgotten that the government actively promoted and popularized these innovations through such public-private forums as the Industrial Rationalization Council.
The most important "improved institutional arrangement" of them all was MITI. It has no precise counterpart in any other advanced industrial democracy to play its role as "pilot agency" or "economic general staff." Ironically, its effectiveness was improved by the loss of its absolute powers of state control following the expiration in 1952 of the Temporary Materials Supply and Demand Control Law. MITI did not lose all controlsit still exercised complete control over foreign trade and the introduction of foreign technologybut after 1952 it had to learn to employ indirect, market-conforming methods of intervention in the economy. This differentiated it from both the Ministry of Finance and the Ministry of Agriculture and Forestry, and promoted a form of true public-private cooperation in the industrial sector that preserved the advantages of both self-control and state control while mitigating their disadvantages.
The period 1952 to 1961 was the ministry's golden age. Using FILP, the Development Bank, the Industrial Rationalization Council, and several other powerful institutions, the Enterprises Bureau single-mindedly turned the Japanese industrial structure from light, labor-intensive industries to steel, ships, and automobiles, of which Japan is today the world's leading producer. To find comparable achievements by governmental bureaucracies in other nations, one would have to look to cases like the wartime Manhattan Project in the United States, or to NASA's sending a manned rocket to the moon. Although it is obvious that MITI could not have accomplished what it did with-
Page 241
out a mobilized people, without innovation and competition in the private sector, nor without the supplementary programs of other agencies of the government, it is equally true that the developmental effort itself required management. This is what MITI supplied.
In 1945, amid the ruins of Osaka, a group of businessmen lamented to an American observer that the militarists had "started the war twenty years too soon."
86
Although the figure should probably be more like forty years than twenty, it is nonetheless true that from about 1941 to 1961 the Japanese economy remained on a war footing. The goal changed from military to economic victory, but the Japanese people could not have worked harder, saved more, or innovated more ruthlessly if they had actually been engaged in a war for national survival, as in fact they were. And just as a nation mobilized for war needs a military general staff, so a nation mobilized for economic development needs an economic general staff. The men of MCI, MM, and MITI had been preparing to play this role since the late 1920's. During the 1950's the trumpet finally sounded.
Page 242
Seven
Administrative Guidance
Sahashi Shigeru was born April 5, 1913, in Toki city, Gifu prefecture, a small ceramics center about an hour and a half by train from Nagoya. He came from a family of modest means (for some 60 years his father operated a small photographic studio near Toki station), and the fact that he ultimately graduated from the Law School of Tokyo University reflects the considerable openness to talent, regardless of financial capability, of the educational system before the war. Sahashi attended Tokai * Junior High School in Nagoya, commuting daily on the 5:00 a.m. train; after passing the entrance examination to the Eighth Higher School (Hachiko*), in Nagoyacomparable to an American liberal arts collegehe received the support of his father in attending the famous prep school, despite the economic difficulties the family faced in helping him. From Hachiko he went on to Todai*, where he graduated in the class of 1937. Sahashi failed in an attempt during his junior year to pass the Higher-level Public Officials Examination, but he succeeded as a senior. Because of his lack of connections, he applied to all the ministries. He was accepted by both Finance and MCI, and he chose Commerce and Industry on the grounds that even if the country went socialist (as seemed possible during the depression), MCI would have a role to play.
1
Four months after Sahashi joined the ministry, Japan was at war with China, and four months after that Sahashi was drafted and dispatched to the central China front. Most graduates of the Imperial universities in this period were found unfit for military service on physical grounds, but Sahashi always had a strong constitution and passed the exam easily. As a Todai graduate he experienced a good deal of physical abuse in the army, but the experience seemed to have hardened himhe participated in the battle for Wuhanand to have
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contributed to his growing self-confidence. He completed his military service and returned to MCI during the same month that Kishi took over as minister (October 1941). He notes in his autobiography that during his absence the ministry had been completely transformed: the old Industrial Affairs Bureau he had joined in 1937 had been replaced by half-a-dozen industry-specific vertical bureaus, each of them devoted to fostering and controlling its industry for war production. He worked throughout the war in various MCI and Munitions Ministry bureaus until November 1946, when he received his first appointment as a section chief (see Appendix C).
Sahashi Shigeru was destined to become the best-known and certainly the most controversial of MITI's vice-ministers. His background, outlook, and personality all contributed to his reputation as an "exceptional bureaucrat" (
ishoku
kanryo
*), a "samurai among samurai," an "official who uses force" (
gebaruto kanryo
), the "monster Sahashi" (
kaijin Sachan
) in the press's amused term, the undisputed leader of the ''nationalist faction" within MITI, and, in Suzuki Yukio's words, the leading "industrial nationalist" of his time.
2
As chief of the Enterprises Bureau and later as vice-minister, he presided over the ministry's initial response to economic liberalization, and his policies laid the groundwork for the extremely rapid industrial growth of the late 1960's. Through his actions and his strongly enunciated opinions he set off a series of explosions that sent shock waves not only through the worlds of bureaucracy, industry, and finance, but also through the world of politics. His career offers what is probably the best Japanese example of the inseparability of bureaucratic interests and substantive issues of policy when the state dominates administration of the economy.
As one measure of his influence, Sahashi and his era have been made the subjects of at least three popular novelsone of which (by Shiroyama Saburo*) Sahashi liked and one of which (by Akaboshi Jun, the pseudonym of Nawa Taro* of the
Asahi shimbun
) deeply irritated him; all of them reflect the public's fascination with his spirited, "high posture" defense of MITI's handling of the economy. Among his many achievements, intentional and inadvertent, he institutionalized "administrative guidance" (
gyosei
*
shido
*) as MITI's main means of implementing industrial policy after it lost its control over foreign exchange; and the internationalization of the ministry that followed in the wake of his vice-ministership was as much a reaction to him personally as to the policies he espoused.
*
*
&
nbsp; The novels are Shiroyama's
Kanryo-tachi
*
no natsu
(The summer of the bureaucrats; 1975), Akaboshi's
Shosetsu
*
Tsusan-sho
* (A MITI novel; 1971), and Akimoto Hideo's work
(footnote continued on next page)
MITI and the Japanese miracle Page 38
