matter of hard experience and of the mobilization of a large majority of the population to support economic goals. The willingness of the Japanese to subordinate the desires of the individual to those of the group is markedly weakening as generations come on the scene who have no experience of poverty, war, and occupation. To date Japan has not faced the egalitarian problems of other states for the simple reason that all Japanese were made equally poor by the war and postwar inflation and because, for all practical purposes, it bans immigration into its social system.
The priorities of the Japanese state derive first and foremost from an assessment of Japan's situational imperatives, and are in this sense a product not of culture or social organization or insularity but of rationality. These situational imperatives include late development, a lack of natural resources, a large population, the need to trade, and the constraints of the international balance of payments. It may be possible to borrow Japan's priorities and institutions, but the situational nationalism of its people during the 1950's and 1960's is something another people would have to develop, not borrow. During the 1920's and 1930's Japan tried to solve the economic problems it faced by handing over to the state the responsibility for economic development. It goes without saying that what the state did during the 1930's made the situation worse, not better, but the fact that there may have been preferable alternatives to the ones adopted does not detract from the rationality of the priorities. The same situational imperatives still exist in Japan today, even though they have been mitigated by overseas investment, trade surpluses, diversification of markets, and so forth. Nurturing the economy has been a major priority of the Japanese state because any other course of action implied dependency, poverty, and the possible breakdown of the social system. Regardless of the drastic changes of political regime that have occurred during
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the course of the Showa * era, economic priorities have always been at or near the top of the state's agenda, and this is a constant that is unlikely to change.
Perhaps surprisingly, in light of the determined efforts of the American occupiers to change Japanese economic institutions, a considerable degree of continuity also exists throughout the Showa era in the means adopted by the state to achieve economic development. The great discontinuity is of course in the discredited reliance on military force to achieve economic security via imperialism. This failed so disastrously that after 1945 it was totally repudiated. But this does not mean that the strictly economic development policies attempted during the militarist era were or should have been repudiated. Instead of being rejected, they came to form a repertoire of policy tools that could be used again after peace and independence had been attained. There is actually nothing surprising about this: just as the activism of the postwar American state had its roots in the New Deal and just as the totalism of the postwar Soviet state had its roots in the Stalinism of the First Five Year Plan, so the developmentalism of the postwar Japanese state had its roots in the economic initiatives of the 1930's. In this sense the experience of the 1930's and the 1940's was not by any means totally negative for postwar Japan; these were the years in which the managerial tools of the developmental state were first tested, some being rejected and others proving useful. Overcoming the depression required economic development, war preparation and war fighting required economic development, postwar reconstruction required economic development, and independence from U.S. aid required economic development. The means to achieve development for one cause ultimately proved to be equally good for the other causes.
There are striking continuities among the state's various policy tools over the prewar and postwar years. Yoshino and Kishi discovered industrial rationalization during the late 1920's as a means to overcome the recession; their proteges Yamamoto, Tamaki, Hirai, Ishihara, Ueno, Tokunaga, Matsuo, Imai, and Sahashi applied it again during the 1950's and 1960's to achieve modern, competitive enterprises. During both periods the state attempted to replace competition with cooperation, while not totally losing the benefits of competition. Governmental control over the convertibility of currency lasted uninterruptedly from 1933 to 1964, and persisted even after that time in attenuated forms. The Petroleum Industry Law of 1934 is the precise model for the Petroleum Industry Law of 1962. The plans and planning style of the Cabinet Planning Board were carried over to the
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Economic Stabilization Board and the Economic Planning Agency, particularly in their use of foreign exchange budgets to implement their plans. MITI's unique structural featuresits vertical bureaus for each strategic industry, its Enterprises Bureau, and its Secretariat (derived from the old General Affairs Bureau of MCI and the General Mobilization Bureau of MM)date from 1939, 1942, and 1943, respectively. They continued to exist in MITI down to 1973 unchanged in function and even, in some cases, in name. Administrative guidance has its roots in the Important Industries Control Law of 1931. Industrial policy itself was, of course, as much a part of the Japanese governmental lexicon in 1935 as it was in 1955.
Perhaps the greatest continuity is in terms of the people who executed the state's industrial policy. Yoshino, Kishi, Shiina, Uemura, and virtually all other leaders of politics, banking, industry, and economic administration were prominent in public life before, during, and after the war. The continuities between MCI and MITI are not only historical and organizational but also biographical. The late 1970's marked the end of an era, but the change above all was a change of generations: the top leaders of the bureaucracy were no longer men who had experienced service during wartime and the postwar occupation. The new officers of MITI during the 1980's will be young Japanese born during the 1960's, and their easy familiarity with peace and prosperity makes them different from all other Japanese born during the preceding years of the twentieth century.
The wrenching changes that MITI was forced to undertake during the late 1970's were caused at least in part by the fact that the ideas of the people who had guided Japan's economy from approximately 1935 to 1965, the generation that is typified by Sahashi, were no longer adequate to the new problems facing the nation and the ministry. The old cadres had been first of all managers of heavy and chemical industrialization. But the 1970's and beyond demanded specialists in managing an already industrialized economy whose very weight gave it global responsibilities. It is to MITI's credit that it produced such leaders, and that they set out to engineer a new change of industrial structure, one that emphasized postindustrial 'knowledge-intensive' industries. The greatest assurance of their likely success in such a difficult venture, however, was the fact that they had been reared in an organization that had already changed the industrial structure once before.
The fundamental problem of the state-guided high-growth system is that of the relationship between the state bureaucracy and privately owned businesses. This problem erupted at the very outset of indus-
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trial policy in the schemes of Yoshino's Temporary Industrial Rationality Bureau, and it persisted uninterruptedly down to the Mitsubishi revolt and to the Fair Trade Commission's attack on MITI's administrative guidance cartel for the petroleum-refining industry. It is a problem that will never disappear; it is inherent in the capitalist developmental state. Over the past 50 years Japan developed and attempted to implement three different solutions to this problemnamely, self-control, state control, and cooperation. None of them is perfect, but each is preferable to either pure laissez faire or state socialism as long as forced development remains the top priority of the state.
Self-control means that the state licenses private enterprises to achieve developmental goals. The typical institution is the state-sponsored cartel, in which the state authorizes cartels in industries it designates as strategic but then leaves to the enterprises themselves the task of fashioning and operating the cartel. This was the approach adopted for the Important Industries Control Law of 1931, and for the steel industry from the public sales system of 1958 to the Sumitomo Metals Company incident of 1965. The primary advantage of this form of government-business relationship is that it affords the greatest degree of competition and private management in the developmental state system. Its greatest disadvantage is that it leads to control of an industry by the largest groups in it (as in zaibatsu domination), and to the likelihood of divergence between the interests of the big operators and the interests of the state (as, for example, in the wartime ''control associations'). This form of government-business relationship is the one typically preferred by big business.
State control refers to the attempt to separate management from ownership and to put management under state supervision. It was typically the form of the relationship preferred by the 'reform' (or 'control') bureaucrats of the late 1930's and by the whole
