MITI and the Japanese miracle

Page 85

ries."

²

Matsukata launched a deflationary policy quite comparable to that carried out seventy years later by Joseph Dodge and Ikeda Hayato, and with almost equally propitious results. As Arthur Tiedemann observes:

By all measures what came to be known as the Matsukata deflation accomplished its objectives. After 1881 interest rates, wages, and prices all fell. By 1882 imports were down 6 percent and exports up 33 percent compared with 1880; there was an export surplus of ¥8.3 million. The cumulative trade surplus for 18821885 amounted to ¥28.2 million. By 1885, the paper currency had been reduced to ¥118.5 million and the paper-silver ratio stood at 1.05 to 1.00. The following year, in the midst of the greatest export prosperity Japan had ever enjoyed, the country went on the silver standard.

³

It must be understood that Matsukata's policy was not intended primarily as a new approach to economic development; it was instead a matter of hard necessityof the pressing need to bring imports and exports under control and to keep the government solvent. In its "hyper-balancing of revenues and expenditures," the government did not touch military expenditures, these being considered essential to the maintenance of Japan's independence.

⁴

As an alternative to the state investment that was no longer possible, the government began helping private entrepreneurs to accumulate capital and to invest it in ways that seemed to promote Japan's needs for military security and economic development. The government sold them its pilot plants, provided them with exclusive licenses and other privileges, and often provided them with part of their capital funds. Japan had few other choices open to it at the time (it did not regain control over its own tariffs until July 1911), and although it neither understood nor believed in laissez faire capitalism, the government's policies seemed to reassure foreigners that Japan was becoming "modern" (that is, like them). The beneficiaries of this new policy were the big merchant houses of Mitsui, Mitsubishi, Sumitomo, Yasuda, Furukawa, Okura*, and Asano, which later came to be known as the zaibatsu.

The relations that developed between the Meiji government and the private investors were not formal or official but, rather, personal and unofficial. They usually took the form of direct contacts between one or another of the oligarchs and an entrepreneur with access to him. Inoue Kaoru's services from within the government to Mitsui, for example, have been well documented.

⁵

Common clan origins and strategic marriages cemented many of these relations, and bribery and payoffs were not unknown. This working relationship between government and business needed a legal cover, however. In order to formalize and supervise the sale of government property, and also to