11.3 percent of GNP, and its imports at 10.2 percent, whereas the OECD European figures were 21.2 percent and 20.9 percent respectively.
37
There is no question that Japan, as a heavily populated resource-deficient country, has to export in order to pay for its vital imports, but foreign sales were not the main factor driving its economic activity during high-speed growth.
Home demand led Japan's growth for the twenty years after 1955. The demand was there, of course, before 1955, but with the coming to power of the Ishibashi government in December 1956 and Ikeda Hayato's return to the post of minister of finance, Ishibashi and Ikeda launched the policy of 'positive finance.' Under the slogan 'a hundred billion yen tax cut is a hundred billion yen of aid' as the basis for the fiscal 1957 budget, Ikeda opened up domestic demand as it had never been opened before.
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Balance of payments problems slowed positive finance during the 'bottom-of-the-pot' recession (with its trough in June 1958), but the economy responded quickly to government discipline and rebounded in the Iwato Boom (July 1958-December 1961), during which Ikeda became prime minister and launched the Income-doubling Plan. The propelling force of the economy in this and later periods was private corporate investment nurtured by favorable expectations for the longer term that were created by the government; it was not export sales.
Technology transfersthe third alleged 'free ride'were not exactly free, but there can be no question that they were crucial to Japanese economic growth and that the prices paid were slight compared with what such technology would cost today, if it could be bought at any price. Japan imported virtually all of the technology for its basic and high-growth industries, and it imported the greater proportion of this technology from the United States. But it is trivial and misleading to refer to this movement of patent rights, technology, and know- how across the Pacific and from Europe as a 'free ride.' It was, in fact, the heart of the matter.
The importation of technology was one of the central components
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of postwar Japanese industrial policy, and to raise the subject is to turn the discussion to MITI and the Japanese government's role. Before the capital liberalization of the late 1960's and 1970's, no technology entered the country without MITI's approval; no joint venture was ever agreed to without MITI's scrutiny and frequent alteration of the terms; no patent rights were ever bought without MITI's pressuring the seller to lower the royalties or to make other changes advantageous to Japanese industry as a whole; and no program for the importation of foreign technology was ever approved until MITI and its various advisory committees had agreed that the time was right and that the industry involved was scheduled for 'nurturing' (
).
From the enactment of the Foreign Capital Law in 1950 (it remained on the books for the next thirty years), the government was in charge of technology transfers. What it did and how it did it was not a matter of a 'free ride' but of an extremely complex process of public-private interaction that has come to be known as 'industrial policy.' MITI is the primary Japanese government agency charged with the formulation and execution of industrial policy.
Thus I come to the final school, in which I place myself, the school that stresses the role of the developmental state in the economic miracle. Although the rest of this book is devoted to this subjectand to some of the nonmiracles produced by the developmental state in its quest for the miracleseveral further points are needed by way of introduction. What do I mean by the developmental state? This is not really a hard question, but it always seems to raise difficulties in the Anglo-American countries, where the existence of the developmental state in any form other than the communist state has largely been forgotten or ignored as a result of the years of disputation with Marxist-Leninists. Japan's political economy can be located precisely in the line of descent from the German Historical Schoolsometimes labeled 'economic nationalism,'
, or neomercantilism; but this school is not exactly in the mainstream of economic thought in the English- speaking countries. Japan is therefore always being studied as a 'variant' of something other than what it is, and so a necessary prelude to any discussion of the developmental state must be the clarification of what it is not.
The issue is not one of state intervention in the economy. All states intervene in their economies for various reasons, among which are protecting national security (the 'military-industrial complex'), insuring industrial safety, providing consumer protection, aiding the weak, promoting fairness in market transactions, preventing monopolization and private control in free enterprise systems, securing the
Page 18
public's interest in natural monopolies, achieving economies of scale, preventing excessive competition, protecting and rearing industries, distributing vital resources, protecting the environment, guaranteeing employment, and so forth. The question is how the government intervenes and for what purposes. This is one of the critical issues in twentieth-century politics, and one that has become more acute as the century has progressed. As Louis Mulkern, an old hand in the Japanese banking world, has said, 'I would suggest that there could be no more devastating weakness for any major nation in the 1980s than the inability to define the role of government in the economy.'
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The particular Japanese definition of this role and the relationship between that role and the economic miracle are at once major components and primary causes of the resurgent interest in 'political economy' in the late twentieth century.
Nowhere is the prevalent and peculiarly Western preference for binary modes of thought more apparent than in the field of political economy. In modern times Weber began the practice with his distinction between a 'market economy' (
) and a 'planned economy' (
). Some recent analogues are Dahrendorf's distinction between 'market rationality' and ''plan rationality,' Dore's distinction between 'market-oriented systems' and 'organization-oriented systems,' and Kelly's distinction between a 'rule-governed state' (
) and a 'purpose-governed state' (
