MITI and the Japanese miracle

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the creation of MCI to the passage of the Important Industries Control Law in 1931, the Japanese invented and experimented with the first of their three characteristic approaches to industrial policy, approaches that have remained in their repertoire to the present day. The first approach was the attempt to replace competition with self-control of an industry by the enterprises already established in it. The institutional form of this approach, state-licensed cartels, remains big business's preferred form of industrial policy down to the present day. Its major weakness, the tendency of cartelization to lead to zaibatsu domination and monopoly, was already fully visible by 1931; and this weakness in turn elicited demands for the opposite of self-control, namely, state control, that dominated the rest of the 1930's.

Another theme of this early period was the search for criteria of managerial and enterprise performance other than short-term profitability. Via the industrial rationalization movement, which began in the late 1920's but reached its full flowering only during the 1950's, the Japanese began self-consciously to think about how to build into enterprises and whole industries incentives to promote labor peace, job security, capital formation, increased productivity, and the development of new products. Although the earliest efforts at rationalization were largely frustrated by zaibatsu power and interests, a concern with rationalizationthe attempt to gain a competitive edge through superior organization, labor peace, and cost cuttingis the most consistent and continuous feature of Japanese industrial policy throughout the Showa * era. The greatest achievement of the early days of MCI was to begin seriously to forge a government-business relationship that was oriented to cooperation and development and that took the position of the whole Japanese economy vis-à-vis competitive foreign economies as its primary frame of reference.

The ideas and institutional innovations of this early period are not merely some "heritage" that had to be transmitted from one generation to the next. The generation that was to lead industrial policy during the 1950's and 1960's was already on the scene during the late 1920's and early 1930's. One of the most startling facts about the history of Japanese industrial policy is that the managers of the postwar economic "miracle" were the same people who inaugurated industrial policy in the late 1920's and administered it during the 1930's and 1940's. Unlike other nations defeated in World War II or torn by revolution in the wake of World War II, Japan did not experience a radical discontinuity in its civilian bureaucratic and economic elites. Men such as Yoshino Shinji, Kishi Nobusuke, Shiina Etsusaburo*, Uemura