MITI and the Japanese miracle

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and how tax incentives for exports function to enlarge external markets at the point of domestic sales saturation. Kodama Fumio has calculated mathematically the gaps between the real trajectory and the policy-off trajectory of the Japanese automobile industry during its infant, growing, and stable phases (the data are of course not yet available for a future declining phase).

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His measures are also tools for analyzing the appropriateness and effectiveness of the various governmental policies for the automobile industry during these phases.

The controversy over industrial policy will not soon end, nor is it my intention to resolve it here. The important point is that virtually all Japanese analysts, including those deeply hostile to MITI, believe that the government was the inspiration and the cause of the movement to heavy and chemical industries that took place during the 1950's, regardless of how one measures the costs and benefits of this movement. A measurement of what MITI believes and others consider to be its main achievement is provided by Ohkawa and Rosovsky: ''In the first half of the 1950s, approximately 30 percent of exports still consisted of fibres and textiles, and another 20 percent was classified as sundries. Only 14 percent was in the category of machinery. By the first half of the 1960s, after the great investment spurt, major changes in composition had taken place. Fibres and textiles were down to 8 percent and sundries to 14 percent, and machinery with 39 percent had assumed its position of leading component, followed by metals and metal products (26 percent)."

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This shift of "industrial structure" was the operative mechanism of the economic miracle. Did the government in general, or MITI in particular, cause it to occur? Or, to put it more carefully, did they accelerate it and give it the direction it took? Perhaps the best answer currently available is Boltho's comparative appraisal: "Three of the countries with which Japan can most profitably be compared (France, Germany, and Italy) shared some or all of Japan's initial advantagese.g., flexible labor supplies, a very favorable (in fact even more favorable) international environment, the possibility of rebuilding an industrial structure using the most advanced techniques. Yet other conditions were very dissimilar. The most crucial difference was perhaps in the field of economic policies. Japan's government exercised a much greater degree of both intervention and protection than did any of its Western European counterparts; and this brings Japan closer to the experience of another set of countriesthe centrally planned economies."

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If a prima facie case exists that MITI's role in the economic miracle