MITI and the Japanese miracle

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Kogoro *, and Inayama Yoshihiro were active in the formulation and execution of industrial policy before, during, and after the war. Equally important, all of MITI's vice-ministers during the 1950's entered the bureaucracy between 1929 and 1934. Thus, in studying the early origins of industrial policy, we are also studying the formative years of the officials who applied it with such seemingly miraculous effect during the 1950's. Not surprisingly, the institutions and policies first discussed in the Temporary Industrial Rationality Bureau bear more than a passing resemblance to the institutions and policies of the later period of high-speed growth.

This theme of historical continuity also draws attention to the fact that industrial policy is rooted in Japanese political rationality and conscious institutional innovation, and not primarily or exclusively in Japanese culture, vestiges of feudalism, insularity, frugality, the primacy of the social group over the individual, or any other special characteristic of Japanese society.

Economic crisis gave birth to industrial policy. The long recession following World War I, capped by the panic of 1927, led to the creation of MCI and to the first attempts at industrial policy, just as the need for economic recovery from World War II, capped by the deflation panic of 1949, led to the creation of MITI and to the renewal of industrial policy. All of the political and bureaucratic problems of the developmental stateincluding conflict between the bureaucracy and the central political authorities, and conflict among elements of the bureaucracy itselfappeared in this early period, just as they would reappear during the 1960's and 1970's. That the Japanese solved (or suppressed) these problems more effectively during the postwar period than during the 1930's is greater testimony to their ability to profit from experience than to any fundamental change in the situation they faced.

During the late 1920's the Japanese began to build new forms of state intervention in the economy, forms that differ in critical ways from those of either the command economy or the regulatory state. These initial efforts were soon overwhelmed by recurring crisesand contained unforeseen consequences that dismayed their inventors. As a result, the leaders of industrial policy were led to attempt a different approach, direct state control of the economy, that carried them to disaster. The bitterness of the era of the Yoshino-Kishi line was more than enough to warn those who managed both the state and private enterprise after the war that catastrophes could occur if they did not transcend both self-control and state control in favor of gen-