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

Recently I have read the following book. Its main points from chapter four to the end 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.4 - talks about how the economic general staff (economic bureaucrat) behaved before and during the War, in particular to see how they coped with the military.

-the main contribution of the 1930s to the postwar economic ‘miracle’ was to create and install in the government an economic general staff. Such an agency could be effective until the political problems of determining who was to reign were resolved. The economic general staff never relinquished its power or retreated from its mission. Before 1945, the economic general staff could not unleash the developmental forces of the society by breaking the hold of the military. (p.155)

Ch. 5- talks about the establishment of the Munitions Ministry (MM).  Virtually all Japanese regarded the defeat of 1945 as the most important watershed in modern Japanese history since the Meiji restoration. However from the point of view the history of industrial policy, Johnson believes that the 1940s was a continuous era: the period of high tide of state control. The state dominated virtually all economic decisions. (p.195)

-true state control did not last long after 1949. Its primary contribution to the later high-growth system was the irreversible establishment of economic general staff at the heart of all Japanese economic policy-making and administration. In the years after the occupation the economic bureaucracy shared its power with the big business and consulted them on all important issues. (p.196)

Ch. 6- talks about the institutions of high-speed growth. During the period 1949 to 1954 the Japanese forged the institutions of their high-growth-system (p.198). Some of the elements of what became MITI’s high-growth-system derived from the government’s selection of industries for “nurturing”, and perfection of measures to commercialize the products of these chosen industries, and the regulation over the competition.

-the tool in hands of the economic bureaucrats included control over all foreign exchanges and the import of technology. (p.199) The system began to be forged during the Dodge Line era that tried to end the inflation. Yet with the outbreak of the Korean War, US armed forces placed orders with Japanese firms for trucks that worth nearly $13 million, thus reviving the Japanese automotive industry. (p.200). The Japanese industrial system took on one of the most distinctive character. The pattern of dependencies on borrowings that exceeded what the individual company could repay was seen. The bank in turn over-borrowed from the Bank of Japan who acted as the guarantor. As such, it had completed control over the policies and lending decision on private banks. (p.203)

- in its fully elaborated form, in the late 1950 the MITI system in nursing new industries included the following measured. First, to do investigation, second to authorize foreign currency allocation, third, to grant licenses for the import of foreign technology, fourth,  to designate the industry as strategic, fifth, to provide it with land to build its installation, sixth, the industry was given key tax break, and lastly seven, MITI created an administrative guidance cartel to regulate completion and coordinated investment amount among the firms in the industry. (p.236)

- reflecting on the critical attribute of the postwar high-growth economic Alfred Chandler concluded that the Japanese miracles was based on improved institutional arrangement and cheap oil. To Johnson, the Japanese system was resulted from three things: first, a popular consensus favoring economic priorities, second, an organization inheritance from the first 25 years of Showa era. Third, the conscious institutional manipulation starting from the Dodge Line (aimed at cutting government subsidies etc.) and the Korean War. (p.239)

-the most important ‘improved institutional arrangement’ was MITI. It had no precise counterpart in any other advanced industrial democracy: it played the role of “pilot agency” or “economic genera staff”. (p.240)

- just as a nation mobilized for war needs a military general staff, so a nation mobilized for economic development needed an economic general staff. The men of MCI, MM, and MITI had been preparing to play this role since the late 1920s. (p.241)

Ch. 7- talks about the administrative guidance. There was nothing mysterious about administrative guidance. It referred to the authority of the government which was contained in the laws that established the various ministries to include powers to issue directive, request, warnings, suggestion, and encouragement to the enterprises or clients within a particular ministries’ jurisdiction. (p.265)

- the demobilization of the Japanese economy really began during the early 1960s, with trade and exchange liberated. This chapter shows that administrative guidance became a salient feature of the Japanese government-business relationship. The power of administrative guidance greatly enhanced the ability of Japanese economic officials to respond to new situations rapidly and flexibly. (p.273)

-thanks to MITI, more than any other nation in the world, Japan came to possess more knowledge and more practical experience on how to phase out old industries and to phase in new ones. (p.274)

Ch. 8 - talks about internationalization. Despite the turmoil around the MITI ministry during the 1970s, by the end of the decades its leaders had reasons to be satisfied. Japan had more than fulfilled the long-range goal that its bureaucrats had set for the country after the war. It had caught up with the Western Europe and North America. (p.303)

Ch. 9- talks about whether to use Japan as a model in economic development. In Japan one of the most powerful social supports for private corporation managers was that Japanese manager performance was not being judged solely in term of short-term financial performance. In the US, managers’ performance was judged by short term success. (p.313)

- the point was that Japan’s more flexible means of evaluating manner contributes to smoother labor-management relation. These Japanese practices came into being as a result of postwar condition. There was nothing in Japanese history to suggest that smooth labor manage relations came naturally. The postwar leveling of all Japanese’s income made possible a relative equality of rewards.

- specialist on modern Japan would differ as to the precise element of the Japanese model. The first element of the model was the existence of small, inexpensive, but elite bureaucracy; the state was run by the best managerial talent in the system. The majority of the bureaucracy were generalists, they were not professional, and as a general rule professionals performed poorly in managing. (p.315)

- the second element of the model was a political system in which the bureaucracy was given sufficient scope to take initiative and operate effectively. (p.315) The third element of the model was the perfection of market-conforming methods of state intervention in the economy. (p.317) The fourth and final element of the model was a pilot organization like MITI. (p.319)

- the development of MITI was a harrowing process. Its special characteristic and the environment in which it worked arose from the special interaction of the Japanese and society. The Japanese built on known strengths: their bureaucratic, their zaibutsu, their banking system, their homogeneous society and the markets made available to them. Such postwar freedoms appeared when the military was eliminated from politics. The rationalization of the zaibatsu, the strengthening of the Diet, and the equalization of social classes were also important factors. (p.323)