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One of the big events of the period was the 1961 'Machine Industry ?3 Trillion Annual Production Memorial Congress,' held at Harumi Pier in Tokyo with the Emperor in attendance. According to the sponsor of the Congress, Heavy Industries Bureau Chief Sahashi, the industry had already broken through the ?4 trillion mark by the time the congress opened.
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Not everything was perfect, however. Alarm bells had started ringing in Washington and Western European capitals, and MITI officials dared not ask for whom they were ringing. In the autumn of 1959 the IMF met in Washington, and in December GATT held its general conference in Tokyo. Both gatherings resounded with demands that Japan move at once to free convertibility of its currency and open its domestic market to foreign products. MITI officials knew that their high-growth system would not work with large numbers of foreigners participating in it, and they were worried about the kind of 'invasion of American capital' that appeared to have taken place in Europe. Perhaps most important, they were concerned about what role they could play in a 'liberalized' economy. They did not have too much time to think about it. On June 24, 1960, as its last official act before resigning, the Kishi cabinet, beleaguered by some 300,000 demonstrators surrounding the Diet building during the security treaty riots, adopted a 'Plan for the Liberalization of Trade and Exchange.'
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By mid-July Kishi was gone, Ikeda had become prime minister, and the age of 'liberalization'' had dawned.
Reflecting on the critical attributes of the postwar high-growth economies, Alfred Chandler concludes, 'The German and Japanese miracles were based on improved institutional arrangements and cheap oil.'
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It is the first of these two causes that is of interest to us here, since the second was available to any nation that was clever enough to exploit it, not just to Japan and Germany. Chandler defines institutional arrangements as formal and informal, explicit and implicit social structures 'developed to coordinate activities within large formal organizations such as corporations, governmental bodies, and universities and to link those organizations to one another.' This comment is refreshingly different from the numerous explanations of Japanese achievements (or failures) in terms of nature, environment, culture, or other ineluctable forces. It contributes to a long overdue
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demystification of the Japanese high-growth system. That system, it seems to me, resulted from three things: a popular consensus favoring economic priorities, one that was dictated by the harsh conditions of the 1940's and by Japan's situational imperatives; an organizational inheritance from the first 25 years of the Showa * era; and conscious institutional manipulation starting from the Dodge Line and Korean War periods. All of these political and institutional alignments were aimed at national mobilization to achieve high-speed economic growth, and that is precisely what they brought about.
Japan's priorities are not hard to fathom. As was discussed in the previous chapter, the Pacific War had already imposed on the Japanese some of the harshest conditions endured by the civilian population of any belligerent nation, and the postwar inflation merely exacerbated these conditions. In addition to providing ample incentive to economic mobilization, the misery of the 1940's also provided one other structural support; it made all Japanese equally poor. The high-speed growth of the 1950's was therefore not socially divisive in the sense of benefiting one group or class at the expense of another. Those who gained from the egalitarianism of the 1950's were the Japanese born in the 1960's: the part of the profits of high- speed growth that was distributed was portioned out more or less equitably, and a large proportion was not distributed at all but reinvested. Strongly bolstering the priorities of the Japanese themselves, the United States encouraged Japan to regain its economic strength and did everything an ally could do to help.
The organizational heritage of the Showa era is somewhat more complicated. I am thinking of such social supports for public-private cooperation as the experience of failure of both self-imposed and state control, the convergence of views about the nature of economic management among bureaucrats and entrepreneurs as a result of common or very similar educational experiences (for instance, at Todai* law school), and an extensive cross- penetration of elites as a result of the recruitment of politicians and managers from among the ranks of former government officials. These features of Japanese society are not purely cultural givens, although they would be hard to duplicate in other societies since they reflect what Japan was able to salvage from the rubble of the early Showa era. A nation that wished to adopt them might have to reexperience Japan's modern history. The famous Japanese 'consensus' appeared only during the 1950's; it did not yet exist during the 1930's and 1940's, which suggests that it was based on changes in historical circumstances and political consciousness and not on unique social values.
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The 'improved institutional arrangements' have already been discussed in this chapter. In addition to the two-tiered banking system, FILP, an elaborate trade promotion apparatus, high levels of competition among the bank groups, total control of foreign exchange, total screening of foreign capital, and a tax system that made Japan a businessman's paradise, there were all the other institutional arrangements mentioned in Chapter 1. These include a work force made docile by enterprise unionism, extensive subcontracting, 'lifetime' employment, massive internal migration from farms to factories, freedom of managers from interference in their programs by corporate stockholders, a system of forced savings due to weak or nonexistent welfare commitments (further powered by government incentives to save through the postal system, which fed its accumulation of funds directly into Ministry of Finance accounts), and many other examples of ad hoc harnessing of seemingly unrelated social institutions to the high-growth system. And it should not be forgotten that the government actively promoted and popularized these innovations through such public-private forums as the Industrial Rationalization Council.
The most important 'improved institutional arrangement' of them all was MITI. It has no precise counterpart in any other advanced industrial democracy to play its role as 'pilot agency' or 'economic general staff.' Ironically, its effectiveness was improved by the loss of its absolute powers of state control following the expiration in 1952 of the Temporary Materials Supply and Demand Control Law. MITI did not lose all controlsit still exercised complete control over foreign trade and the introduction of foreign technologybut after 1952 it had to learn to employ indirect, market-conforming methods of intervention in the economy. This differentiated it from both the Ministry of Finance and the Ministry of Agriculture and Forestry, and promoted a form of true public-private cooperation in the industrial sector that preserved the advantages of both self-control and state control while mitigating their disadvantages.
The period 1952 to 1961 was the ministry's golden age. Using FILP, the Development Bank, the Industrial Rationalization Council, and several other powerful institutions, the Enterprises Bureau single-mindedly turned the Japanese industrial structure from light, labor-intensive industries to steel, ships, and automobiles, of which Japan is today the world's leading producer. To find comparable achievements by governmental bureaucracies in other nations, one would have to look to cases like the wartime Manhattan Project in the United States, or to NASA's sending a manned rocket to the moon. Although it is obvious that MITI could not have accomplished what it did with-
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out a mobilized people, without innovation and competition in the private sector, nor without the supplementary programs of other agencies of the government, it is equally true
