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Japan differs in that it is a democracy in which the politicians are chosen by the votes of the majority; its stability has rested on the ability of the ruling political party to forge a coalition of voters committed to economic growth and effective management. During high-speed growth this coalition reflected the widespread recognition of Japan's situational imperatives; during the early 1970's the coalition began to weaken markedly, but it appears to have been reinvigorated by the energy crisis and the acceptance of the need for a new shift of industrial structure. Until very recent times the Japanese also have not been hospitable to collaboration with foreign capital. The Korean developmental state, by contrast, seems to share some of the bureaucratic-authoritarian characteristics and should to that extent be distinguished from the postwar Japanese case.
Postwar Japan also differs from the market-socialist states (chiefly Yugoslavia and Hungary), where various experiments have been undertaken to try to synthesize market economics with political control. The contradictory tensions inherent in these systems are more like those of Japan during the period of attempted state control (the late 1930's and 1940's) than they are like Japan after it had regained its independence and launched high-speed growth based on public-private cooperation.
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In addition to occasional protest demonstrations, a probable further consequence of the capitalist developmental system will be the periodic occurrence of 'corruption' scandals. These arise because of the separation between reigning and ruling and because of the opportunities this condition gives some insiders to exploit the development programs. As long as these scandals occur primarily among politicians and not among bureaucrats, and as long as the development effort is proceeding to the benefit of the society as a whole, these scandals will be tolerated as unfortunate but not too serious imperfections in the overall system. However, if they occur among the bureaucracy, they signal the need for quick surgery and reconstitution of the system.
The third element of the model is the perfection of market-conforming methods of state intervention in the economy. In implementing its industrial policy, the state must take care to preserve competi-
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tion to as high a degree as is compatible with its priorities. This is necessary to avoid the deadening hand of state control and the inevitable inefficiency, loss of incentives, corruption, and bureaucratism that it generates. It is probable that the market-conforming methods that actually work cannot be discovered a priori but will have to emerge from conflict between the managers of the state and the managers of the privately owned strategic industries. A cooperative relationship between the state and private enterprise is not a natural one: the state inevitably will go too far, and private enterprise inevitably will resent state interference in its decisions. When either the state or private enterprise becomes clearly dominant over the other, as occurred in Japan during the late 1940's (state dominance) and during the early 1970's (private-enterprise dominance), development will falter. One clear lesson from the Japanese case is that the state needs the market and private enterprise needs the state; once both sides recognized this, cooperation was possible and high-speed growth occurred.
Japan offers a panoply of market-conforming methods of state intervention, including the creation of governmental financial institutions, whose influence is as much indicative as it is monetary; the extensive use, narrow targeting, and timely revision of tax incentives; the use of indicative plans to set goals and guidelines for the entire economy; the creation of numerous, formal, and continuously operating forums for exchanging views, reviewing policies, obtaining feedback, and resolving differences; the assignment of some governmental functions to various private and semiprivate associations (JETRO, Keidanren); an extensive reliance on public corporations, particularly of the mixed public-private variety, to implement policy in high-risk or otherwise refractory areas; the creation and use by the government of an unconsolidated 'investment budget' separate from and not funded by the general account budget; the orientation of antitrust policy to developmental and international competitive goals rather than strictly to the maintenance of domestic competition; government- conducted or government-sponsored research and development (the computer industry); and the use of the government's licensing and approval authority to achieve developmental goals.
Perhaps the most important market-conforming method of intervention is administrative guidance. This power, which amounts to an allocation of discretionary and unsupervised authority to the bureaucracy, is obviously open to abuse, and may, if used improperly, result in damage to the market. But it is an essential power of the capitalist developmental state for one critical reason: it is necessary to avoid overly detailed laws that, by their very nature, are never detailed
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enough to cover all contingencies and yet, because of their detail, put a strait jacket on creative administration. One of the great strengths of Japanese industrial policy is its ability to deal with discrete complex situations without first having to find or enact a law that covers the situation. Highly detailed statutes serve the interests primarily of lawyers, not of development. The Japanese political economy is strikingly free of lawyers; many of the functions performed by lawyers in other societies are performed in Japan by bureaucrats using administrative guidance.
The Japanese of course rely on law, but on short and highly generalized laws. They then give concrete meaning to these laws through bureaucratically originated cabinet orders, ordinances, rules, and administrative guidance. All bureaucracies, the Japanese included, are inclined to abuse this rule-making authority (compare, for example, the chaos of rules churned out by the American Internal Revenue Service); but the answer to this problem seems to lie in finding better bureaucrats, not in eliminating their discretionary powers. In the case of flagrant bureaucratic abuse, the offended party may have to turn to the courtssomething that the Japanese began to do during the 1970's more than in the past (for example, in the pollution suits and in the FTC's resort to the courts in the Yawata-Fuji merger case and the black cartel case). Nonetheless, compared to the participants in other systems, the Japanese seek to avoid litigation, relying instead on tailor-made government solutions to concrete problems (as in the Maruzen Oil Company case), and thereby avoiding legal impact on sectors that do not need it. At its best Japanese administrative guidance is comparable to the discretionary authority entrusted to a diplomat negotiating an international agreement. Success depends upon his skill, good sense, and integrity, and not on a set of legal requirements that no matter how well crafted can never truly tell a negotiator what to do.
The fourth and final element of the model is a pilot organization like MITI. The problem here is to find the mix of powers needed by the pilot agency without either giving it control over so many sectors as to make it all-powerful or so few as to make it ineffective. MITI itself came into being through a fortuitous process of accretion. MCI originated from the separation of agricultural and commercial-industrial administration. It developed by adding industrial functions while shedding commercial ones, obtained a planning capability when the Cabinet Planning Board was merged with its General Affairs Bureau in MM, and gained complete control over energy only when coal, petroleum, and electric power administration were com-
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bined during the MM era. The war also provided the ministry with micro-level intervention powers through its Enterprises Bureau. MITI itself finally resulted from the union of MCI and the apparatus for controlling international trade (the BOT). MITI has never had jurisdiction over transportation, agriculture, construction, labor, or finance, although it has had a strong influence over them, particularly over finance, through such institutions as the Japan Development Bank. The fight over Sahashi's Special Measures Law revolved primarily around MITI's efforts to extend its jurisdiction to cover industrial finance.
It is obviously a controversial matter to define the scope of the pilot agency. MITI's experience suggests that the agency that controls industrial policy needs to combine at least planning, energy, domestic production, international trade, and a share of finance (particularly capital supply and tax policy). MITI's experience also suggests the need not to be doctrinaire; functions can and should be added and subtracted as
