MITI and the Japanese miracle

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long war with the United States had dawned on the military. It is of no great relevance to postwar industrial policy to recall that the Japanese government did not begin to mobilize fully for World War II until after the battle of Midway and the American landings on Guadalcanal (August 1942), but it is of considerable relevance that when the government took action, its policies injected economic bureaucrats much more intimately into the affairs of individual enterprises than they had ever been before. Botched though it surely was, the wartime enterprise readjustment movement lies at the beginning of the path that leads to the Industrial Rationalization Council of the 1950's and to the Industrial Structure Council of the 1960's and 1970's.

As early as 1937 Professor Arisawa Hiromi, who in 1975 was one of the leaders of the Industrial Structure Council, had argued against the prevailing wisdom that medium and smaller enterprises were essential to Japan's export capability. Citing the work of the economist and Cabinet Planning Board official Minoguchi Tokijiro *, Arisawa contended that, contrary to MCI policy, fostering and protecting smaller enterprises was a mistake because they were of only incidental importance to Japan's long-term export prospects, although he did acknowledge that they provided work for a large proportion of Japan's labor force.

³

He would have preferred to see all of these small factories organized into large productive units, or at least made subcontractors of large enterprisesan idea that the zaibatsu found quite congenial. One important legacy of the enterprise readjustment movement is today's pattern of extensive subcontracting between large, well-financed final assemblers and innumerable small, poorly financed machine shops.

⁴

The problem of converting and closing small enterprises emerged concretely as a result of the failure of the first materials mobilization plan in mid-1938. The Cabinet Planning Board scrapped its original plan in part because it discovered that much of the country's imported materiel was being used not by large enterprises for creating munitions or exports but by medium and smaller enterprises that manufactured for domestic consumption. The CPB's revised plan radically cut imports for these types of businesses, which drove a large number of them into bankruptcy but also raised for the government the question of what to do with the workers who had been forced out of work. In September 1938 MCI took its first steps to come to grips with the problem by creating the Tengyo* Taisaku Bu (Industrial Conversion Policy Department).

The idea behind the department was that through a combination of