MITI and the Japanese Miracle: the Growth of Industrial Policy, 1925-1975

Recently I have read the following book. Its main points in chapters one to three are as follows:

 Book Title: Johnson, Chalmers. 1982. MITI and the Japanese Miracle: the Growth of Industrial Policy, 1925-1975. Stanford: Stanford University Press.

Main points:

Ch. 1- by common agreement among the Japanese, the ‘miracle’ first appeared to them during 1962 and scholars began to search for the cause of the miracle. (p. 3) Between 1946 and 1976, the Japanese economy increased 55-fold. (p. 5)

-according to Johnson so far, Western scholars tried to see what the American could learn from Japan, instead of analysis what had caused this. One explanation of the miracle belonged to the socioeconomic school, i.e. anything but politics, for example national characters, the ‘unique-structural-feature’, or ‘the free-ride’ analysis etc. (p. 8)

-the goal of the book was to lay out some of the main Japanese institutions in economic field. (p. 8)

- as John Roberts had put it, Japan’s ‘miraculous’ emergence as a first-rate economic power in the 1960s had been described exhaustively by Japanese and foreign writers and yet little of these literature provided credible explanation of how it was done, or by whom. This study was an attempt to answer these questions. (p.11)

-the school which the author places himself was the school that stressed the role of the developmental state in the economic miracle. (p.17) The question was: to look at how the government intervened and for what purposed. In countries that were late to industrialization, the state led the industrialization drive, which took on developmental function. In terms of government-business relationship, the US was regulatory orientation, whereas Japan was mainly developmental orientated. (p.19)

-another way to distinguish the policy of a state was to see its priority in economic policy. In a plan-rational state, the government concerned the structure of domestic industry. For a market-rational state it would not have an industrial policy, it would stress rules and reciprocal concession. (p.20) Japan was a developmental, plan-rational state whose economic orientation was the key to industrial policy. (p.20) From about 1955, for Japan the goals had been high-speed growth. (p.20)

-within the developmental state, the center that exerted the greatest positive influence was the one that created and executed industrial policy. MITI’s dominance in this area had been characterized as the ‘pilot agency’. But its true power was its control of industrial policy. (p.26)

-a measurement of what MITI had achieved was a shift in ‘industrial structure’. In the first half of 1950s, about 30 percent of the export still consisted of fibers and textiles; only 14 percent was in the category of machines. The composition changed in the first half of the 1960s. Fibers and textile went down to 8 while machinery was 39 percent. (p.31) Johnson argues that this shift was the operative mechanism of the economic miracle. He asserts that Japanese government exercised a much greater degree of both in intervention and protection that other western European countries, and thus made the difference that led to the miracle. (p.31) Thus Johnson had a prima facie case for MITI’s role in the economic miracle.

-Johnson argues the time frame of 1925-75 was need for two reasons for his research. First MITI only realized very late that what they were doing had added up to an implicit theory of developmental stage; they had no theory or model of industrial policy in the 1960s, not until the creation of the Industrial Source Council in 1964. Second, there was a direct continuity between prewar and postwar official in MITI. MITI was the reincarnation of the wartime MCI and the MM. MITI. Modern Japanese industrial policy was linked to the reign of Emperor Hirohito. (p.33)

-Ch. 2- talks about the economic bureaucracy. The author was concerned to explain why the discrepancy between the formal authorities of either the Emperor (prewar) or the Diet (postwar) and the actual powers held by the state bureaucrat, and why this discrepancy contributed to the success of the developmental state. (p.35)

- Japan had long displayed a marked separation in its political system between reigning and ruling. (p.35)

- the origins of separation between power and authority could be found in Japan’s feudal past and in the emergence of the developmental state during the Meiji era. (p.36) Prewar bureaucrats were not “civil servants”, but rather “official of emperor” appointed by him and answerable only to him. (p.38)

- the success of the economic bureaucracy in preserving more or less intact its pre-existing influence was the perquisite to the success of the industrial policies of the 1950s. It did not simply preserve its influence, it expanded: its size increased, and that the political parties were too weak to exercise political power. (pp.44-5)

- quoting Kusayanagi Daizo, the book shows that all human relations in Japanese society were based on four key of ‘factions’: 1. the family and matrimonial cliques, 2. the clansmen or person from the same locality, 3. the same university graduates, and 4.the faction based on money. All these occurred in the bureaucracy, the first two was minor, and the last two was important. (p.55)

- a serious issue in Japan was not the occasional abuse of office by higher officials but a pattern of cooperation between the government and big business that might have unintended consequence. (p. 68)

- the re-employment of retired government bureaucrats (amakudari) on the board of industries designated as economically strategic also created many opportunities for hand-in-glove relationships. (p. 69)

-one reason for private sectors to accept amakudari was the extensive licensing and approving authority of the government. Companies believed that having former bureaucrats (amakudari) among their executives could facilitate obtaining licenses. (p.70)

- MITI had several characteristic that distinguished it from other economic bureaucracy. It was the smallest among the economic ministries in terms of personnel. MITI exercised control over money through its ability to approve credit or authorized expenditures done by the Japan Development Bank, the Electric power Development Company etc. The ministry supervised the spending of some Yen 160.9 billion. (p.79)

- Japanese analysts unusually characterized the basic outlook of MITI officials as ‘nationalistic’. (p.80) After the war MITI had always been hostile to American-style price completion and anti-trust legislation. (p.81)

Ch.3- talks about the history of the accomplishment of MITI. According to Johnson, the first phase of modern Japanese industry policy seemed related to the postwar economic miracle, but it was in fact directly relevant for several reasons: it faced same problems in these two different periods of 1920s and 1950s. That was the need to restore competitive ability in international trade.

-Japan did not experience a radical discontinuity in its civilian bureaucratic and economic elites since the 1920s. Many top leaders in the government were active in the organization and execution of industrial policy before, during, and after the war. (p.114)

-the theme of historical continuity also suggested the fact that industrial policy was rooted in Japan’s political rationality and conscious institutional innovation, not in Japanese culture, vestiges of feudalism, or any other special characteristics of Japanese society. (p.114)

- economic crisis gave birth to industrial policy. The long recession in 1918 led to the creation of MCI and the first attempt at industrial policy. Similarly the deflation panic of 1949 led to the creation of MITI and the renewal of industrial policy. (p.114) The suitably modified production version of the 1950s amazed the world by its performance. From this perspective the early years of industrial policy were a period of gestation and perfection in the Japanese institution and industrial policy. (p.115)

(to be continued)