MITI and the Japanese miracle

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trial policy in the schemes of Yoshino's Temporary Industrial Rationality Bureau, and it persisted uninterruptedly down to the Mitsubishi revolt and to the Fair Trade Commission's attack on MITI's administrative guidance cartel for the petroleum-refining industry. It is a problem that will never disappear; it is inherent in the capitalist developmental state. Over the past 50 years Japan developed and attempted to implement three different solutions to this problemnamely, self-control, state control, and cooperation. None of them is perfect, but each is preferable to either pure laissez faire or state socialism as long as forced development remains the top priority of the state.

Self-control means that the state licenses private enterprises to achieve developmental goals. The typical institution is the state-sponsored cartel, in which the state authorizes cartels in industries it designates as strategic but then leaves to the enterprises themselves the task of fashioning and operating the cartel. This was the approach adopted for the Important Industries Control Law of 1931, and for the steel industry from the public sales system of 1958 to the Sumitomo Metals Company incident of 1965. The primary advantage of this form of government-business relationship is that it affords the greatest degree of competition and private management in the developmental state system. Its greatest disadvantage is that it leads to control of an industry by the largest groups in it (as in zaibatsu domination), and to the likelihood of divergence between the interests of the big operators and the interests of the state (as, for example, in the wartime ''control associations"). This form of government-business relationship is the one typically preferred by big business.

State control refers to the attempt to separate management from ownership and to put management under state supervision. It was typically the form of the relationship preferred by the "reform" (or "control") bureaucrats of the late 1930's and by the whole state bureaucracy during postwar reconstruction and the early stages of high-speed growth. Its principal advantage is that the state's priorities take precedence over those of private enterprise. Its primary disadvantages are that it inhibits competition, and therefore tolerates gross inefficiency in the economy, and that it fosters irresponsible management. The closest Japanese approximations to it occurred in Manchuria, in the prewar and wartime electric power generating industry, in the wartime munitions companies, in the postwar coal industry, and in the hundred or more public corporations of contemporary Japan. The inefficiencies of state control are commonly blamed for the poor performance of Japanese industry during the Pacific War.