law, since it gave the state control over all commodities, not just over trade. The ESB duplicated the CPB's functions and techniques, and employed many of its personnel. And the Coal Agency was the old Fuel Bureau, reborn without its seconded military officers. The creation of the ESB and the enactment of the Supply and Demand Law also forced the reorganization of MCI on November 9, 1946, into vertical bureaus for each industry, just as the creation of the CPB and its materials mobilization planning had done in 1939. As Jerome Cohen noted at the end of his study of the wartime economy, 'The wartime control system with its vestiges of cartel domination was abolished, but the substitute allocation system had a very familiar appearance.'
53
The obvious flaw in priority production was its effect on inflation, but an equally serious problem was the fact that it was carried out in the hothouse atmosphere of a blockaded economy. As the indices of economic activity for 1949 and 1950 indicate (see Table 13), great progress had been made toward the restoration of prewar levelsexcept in one area, foreign trade. The raw materials of Japanese industry, particularly raw cotton for the textile industry, plus petroleum and
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TABLE
13
(193436 = 100)
Category
1949
1950
Real national income
82
97
Mining and manufacturing
72
94
Agriculture, forestry, fishing
97
100
Exports (including SCAP purchases)
15
35
Imports
30
39
Private plant and equipment investment
70
82
Per capita real national income
69
80
SOURCE
: Japan Development Bank,
*
(A ten-year history of the Japan Development Bank), Tokyo, 1963, p. 18.
food, were being supplied by the United States. In 1949 Joseph Dodge contended that U.S. aid was one of the two 'stilts' on which Japan's rigged economy rested; the other was RFB financing. According to SCAP, 'The realization of a self-supporting status [for Japan] by 1953 requires a 700 percent increase in the volume of exports over 1948 with no more than a 120 percent increase in the volume of imports.'
54
In 1949 Japanese exports were running at about $500 million per annum and imports at $900 million, with the difference being covered by disbursements from the U.S. Treasury.
According to the terms of the Potsdam Declaration, which Japan had accepted at its surrender, SCAP exercised complete control over all exports or imports of goods and services, as well as all foreign exchange and financial transactions. The little Japanese foreign trade that SCAP allowed was conducted government to government until September 1947, when
