MITI and the Japanese Miracle

MITI and the Japanese Miracle: The Growth of Industrial Policy, 1925-1975 (ISBN: 9780804712064) was written by Chalmers Johnson, published by Stanford University Press in 1982.

Industrial policy as economic nationalism

• "scientific management" (Frederick Taylor)
  • sharing technology, killing bad enterprises, etc.
• MITI believes domestic firms are too rigid, need intervention

Meiji Japan setup a strong PM and bureaucracy, weak emperor and parliament

• a power check against powerful provinces (Satsuma, Choshu)
• apolitical bureaucracy to broadcast 'European-ness'

Civil service exams are difficult but passing means a guaranteed career

• prestige of Todai Law
• Exam B passers become permanent staff
• Exam A passers circulate throughout bureaucratic division to gain experience
• typical age at retirement/amakudari: 50s
  • managed by vice ministers

Economic boom of 1930s resulted from Takahashi Korekiyo's "reflationary" expansive monetary policy.

• Ministry of Commerce and Industry (MCI) prioritized the balance of payments (BOP) because wartime Japan was necessarily a net importer
• MCI led monetary policy to be deflationary
• MCI used industrial cartels to arrange commerce despite limited liquid capital
• previously a Minister of Finance and Prime Minister, Takahashi Korekiyo was re-appointed MOF and reversed course
• led expansionary monetary policy and deficit spending
• divided MCI to create a Ministry of Agriculture and Forestry, effectively isolating the bureaucrats that favored trade isolationism
• briefly abandoned the gold standard
• Takahashi implemented effective embargoes by requiring approval for foreign exchange from the new Bureau of Trade, then Board of Trade, under military control

The military government came to disfavor the bureaucratic lineage that was forming in MCI

• new regime was installed
• MCI was divided into Ministry of Munitions, Ministry of Transport and Communications, etc.

• rising stars like Shinji Yoshino and Nobusuke Kishi were forced out

• in wartime MCI was re-taken by this faction, just in time for SCAP to enter
• MCI was briefly re-merged with Agriculture and Forestry to form the Ministry of Agriculture and Commerce

SCAP broke up the military, weakened parliament further, and put pressure on zaibatsu

• bureaucracy (except for Ministry of Home Affairs) left alone; now effectively an unchecked power
• bureaucracy grew 84% in 3 years
• policy written by shingikai
• ministers appointed by parliament; all other bureaucrats are careers
• Ministries of Agriculture and Education were politicized, but MCI avoided this

Japan saw rapid inflation as MCI led expansionary monetary policy and deficit spending.

• SCAP had to bring in Joseph Morrell Dodge to curb power of MCI
• Dodge Line guided next steps for policy, including dissolving the Reconstruction Finance Bank
• Part of Red Purge
• Bureau downsized from 13,000 to 3,000 staff
• Net effect is that MCI is left very powerful, but now ideologically homogeneous because politically- or differently-minded staff were purged, and rigidly hierarchical because all excess staff were let go

For more reasons than just avoiding politicization, MITI stands out.

• MCI reformed to become Ministry of International Trade and Industry (MITI) in 1949
• MITI oversees/controls many public corporations, including the Japan Development Bank (JDB) and Ex-Im Bank
• used control over financing to organize industrialist cartels
• hierarchy is Vice Minister, Chief of the Industrial Policy Bureau and Enterprise Bureau, Director-Generals of various agencies, then Chiefs of the other bureaus
• priority is technological competition, not profit competition

In 1961 MITI was forced to liberalize. Then ministry tried to find a middle way between planned and laissez-faire economy.

In 1964, Minster Hajime Fukuda broke tradition and appointed Imai Yoshie over Shigeru Sahashi for Vice Minister, creating a factional rift in MITI. Finally the bureaucratic lineage of Yoshino ended.

As Japan migrated towards a tertiary economy, MITI was sidelined

• Mitsubishi negotiating with the U.S. "Big Three" directly (i.e. outside of MITI influence) and then signing a deal with Chrysler was a signal of MITI's decline
• MITI became scapegoat for Nixon's foreign policy
• Oil shocks were the deathblow to this planned economy

CategoryRicottone