MITI and the Japanese miracle

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and conflict among ministries. In the market-rational system, change will be marked by strenuous parliamentary contests over new legislation and by election battles. For example, the shift in Japan during the late 1960's and throughout the 1970's from protectionism to liberalization was most clearly signaled by factional infighting within MITI between the "domestic faction" and the "international faction." The surest sign that the Japanese government was moving in a more open, free-trade direction was precisely the fact that the key ministry in this sector came to be dominated by internationalistic bureaucrats. Americans are sometimes confused by Japanese economic policy because they pay too much attention to what politicians say and because they do not know much about the bureaucracy, whereas Japanese have on occasion given too much weight to the statements of American bureaucrats and have not paid enough attention to Congressmen and their extensive staffs.

Looked at historically, modern Japan began in 1868 to be plan rational and developmental. After about a decade and a half of experimentation with direct state operation of economic enterprises, it discovered the most obvious pitfalls of plan rationality: corruption, bureaucratism, and ineffective monopolies. Japan was and remained plan rational, but it had no ideological commitment to state ownership of the economy. Its main criterion was the rational one of effectiveness in meeting the goals of development. Thus, Meiji Japan began to shift away from state entrepreneurship to collaboration with privately owned enterprises, favoring those enterprises that were capable of rapidly adopting new technologies and that were committed to the national goals of economic development and military strength. From this shift developed the collaborative relationship between the government and big business in Japan. In the prewar era this collaboration took the form of close governmental ties to the zaibatsu (privately owned industrial empires). The government induced the zaibatsu to go into areas where it felt development was needed. For their part the zaibatsu pioneered the commercialization of modern technologies in Japan, and they achieved economies of scale in manufacturing and banking that were on a par with those of the rest of the industrial world. There were many important results of this collaboration, including the development of a marked dualism between large advanced enterprises and small backward enterprises. But perhaps the most important result was the introduction of a needed measure of competition into the plan-rational system.

In the postwar world, the reforms of the occupation era helped modernize the zaibatsu enterprises, freeing them of their earlier fam-