MITI and the Japanese miracle

Page 27

terms of the free competitive model: labor never moves freely between countries, and technology is only slightly more free.

There are two basic components to industrial policy, corresponding to the micro and macro aspects of the economy: the first the Japanese call "industrial rationalization policy" (

sangyo

*

gorika

*

seisaku

), and the second, "industrial structure policy" (

sangyo

kozo

*

seisaku

). The first has a long history in Japan, starting from the late 1920's, when it was quite imperfectly understood, as we shall see later in this book. MITI's

Industrial Rationalization Whitepaper

(1957) says that industrial rationalization subsumes a theory of economic development in which Japan's "international backwardness" is recognized and in which "contradictions" in the areas of technology, facilities, management, industrial location, and industrial organization are confronted and resolved.

Concretely, according to the

Whitepaper

, industrial rationalization means: (1) the rationalization of enterprises, that is, the adoption of new techniques of production, investment in new equipment and facilities, quality control, cost reduction, adoption of new management techniques, and the perfection of managerial control; (2) the rationalization of the environment of enterprises, including land and water transportation and industrial location; (3) the rationalization of whole industries, meaning the creation of a framework for all enterprises in an industry in which each can compete fairly or in which they can cooperate in a cartellike arrangement of mutual assistance; and (4) the rationalization of the industrial structure itself in order to meet international competitive standards.

⁵⁷

(The last element of the definition was included before the concept of "industrial structure" had been invented by MITI. After about 1960 it was no longer included in the concept of industrial rationalization.)

The short definition is that industrial rationalization means state policy at the micro level, state intrusion into the detailed operations of individual enterprises with measures intended to improve those operations (or, on occasion, to abolish the enterprise). Nawa Taro* says that in its simplest terms industrial rationalization is the attempt by the state to discover what it is individual enterprises are already doing to produce the greatest benefits for the least cost, and then, in the interest of the nation as a whole, to cause all the enterprises of an industry to adopt these preferred procedures and techniques.

⁵⁸

Industrial rationalization in one form or another is an old and familiar movement going back to Frederick W. Taylor's system of "scientific management" of the progressive era in the United States (18901920); it exists or has appeared in every industrialized country, although it probably lasted longer and was carried further in Japan than in any