MITI and the Japanese miracle

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ESB was authorized to implement the Supply and Demand Law to achieve this distribution. Because the coal industry was a big steel user and steel production was itself dependent on coal, the committee designated steel as a second priority industry. It finally added fertilizer, which also uses coal, in order to try to expand food production.

Priority production was put into effect during the spring of 1947. Under Ishibashi's leadership and SCAP's orders that all ministerial planning functions be transferred to it, the ESB came to life. By May it had grown from a unit with 5 bureaus and 316 employees into a virtually new unit with a secretariat, 10 bureaus, 48 sections, and over 2,000 employees. MCI supplied the largest number of these new recruits. At the same time, the Diet enacted one law after another setting up the government corporations (kodan *) that under ESB orders purchased all major commodities from their producers at high prices and sold them to consumers at low prices, covering the difference with price subsidies from the general account budget. Table 12 summarizes the government's payments of subsidies and indemnities through the 1940's. It reveals that between 1946 and 1949 some 20 to 30 percent of all expenditures from the general account budget went to industry to cover operating costs and priority production.

SCAP liked the new economic institutions and the fact that the ESB had finally achieved authority (the Americans assumed that the real inspiration for the ESB was a comparable bureau they had set up in 1943 to supervise their own war economy), but SCAP still did not like the indifference to inflation of ESB Director Ishibashi.

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It therefore purged him. Several observers on the scene at the time have suggested that Yoshida got rid of Ishibashi as a political rival by suggesting his name to General Whitney as an appropriate purgee, even though Ishibashi's prewar and wartime career as president of the

Oriental Economist

Publishing Company (Toyo* Keizai Shimposha*) had much less to do with the war effort than Yoshida's own activities. Whatever the case, Yoshida and Ishibashi became political enemies. Ishibashi did not return to the government until December 1954, when he became MITI minister in the Hatoyama cabinet and proceeded to dismantle the restraints placed on the ministry by Yoshida's Foreign Office appointments.

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Shortly after Ishibashi's purge, the first Yoshida government fell and was replaced by the socialist cabinet of Katayama Tetsu. The Katayama cabinet continued and accelerated priority production, even though it no longer used that term since SCAP did not like it. The year from mid-1947 to mid-1948 was the high tide of priority production, during which the ESB, MCI, the Coal Agency, the kodan, and