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All of these motives influenced Meiji Japan, and there were others that were peculiar to Japan. Among these was one deriving from the treaties Japan was forced to conclude after its first contacts with Western imperialism in the nineteenth century: Japan did not obtain tariff autonomy until 1911. This meant that Japan was not able to aid its developing industries by the protective duties and other practices recommended by the market-oriented theories of the time, and the Meiji government consequently concluded that it had to take a direct hand in economic development if Japan was ever to achieve economic independence.
52
A second special problem for Japan lasted until the late 1960's, when it temporarily disappeared only to return after the oil crisis of the 1970's; this was a shortage in its international balance of payments and the resultant need for the government to manage this most implacable of ceilings in a country with extremely few natural resources. As early as the 1880's, Tiedemann writes that in order to keep foreign payments in balance with customs receipts, 'all agencies were required to prepare a foreign exchange budget as well as their normal yen budget.'
53
Such a foreign exchange budget came into being again in 1937 and lasted in one form or another until 1964, when trade liberalization was carried out. In the era of high-speed growth, control of the foreign exchange budget meant control of the entire economy. It was MITI that exercised this controlling power, and foreign currency allocations were to become its decisive tool for implementing industrial policy.
The political nature of plan rationality can be highlighted in still other ways. MITI may be an economic bureaucracy, but it is not a bureaucracy of economists. Until the 1970's there were only two Ph.D.'s in economics among the higher career officials of the ministry; the rest had undergraduate degrees in economics or, much more commonly, in public and administrative law. Not until Ueno Koshichi* became vice-minister in June 1957 was modern economic theory even introduced into the ministry's planning processes (Ueno studied economics during a long convalescence from tuberculosis before assuming the vice-ministership). Amaya Naohiro reflects this orientation of
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the ministry when he contrasts the views of the scholar and of the practitioner and notes that many things that are illogical to the theorist are vital to the practitionerfor instance, the reality of nationalism as an active element in economic affairs. Amaya calls for a 'science of the Japanese economy,' as distinct from 'economics generally,' and pleads that some things, perhaps not physics but certainly economics, have national grammars.
54
One further difference between the market-rational state and the plan-rational state is thus that economists dominate economic policy-making in the former while nationalistic political officials dominate it in the latter.
Within the developmental state there is contention for power among many bureaucratic centers, including finance, economic planning, foreign affairs, and so forth. However, the center that exerts the greatest
influence is the one that creates and executes industrial policy. MITI's dominance in this area has led one Japanese commentator to characterize it as the 'pilot agency,' and a journalist of the
who has often been highly critical of MITI nonetheless concedes that MITI is 'without doubt the greatest concentration of brain power in Japan.'
55
MITI's jurisdiction ranges from the control of bicycle racing to the setting of electric power rates, but its true defining power is its control of industrial policy (
*
). Although the making and executing of industrial policy is what the developmental state does, industrial policy itselfwhat it is and how it is doneremains highly controversial.
Industrial policy, according to Robert Ozaki, 'is an indigenous Japanese term not to be found in the lexicon of Western economic terminology. A reading through the literature suggests a definition, however: it refers to a complex of those policies concerning protection of domestic industries, development of strategic industries, and adjustment of the economic structure in response to or in anticipation of internal and external changes which are formulated and pursued by MITI in the cause of the national interest, as the term 'national interest' is understood by MITI officials.'
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Although this definition is somewhat circularindustrial policy is what MITI says it isOzaki makes one important point clear: industrial policy is a reflection of economic nationalism, with nationalism understood to mean giving priority to the interests of one's own nation but not necessarily involving protectionism, trade controls, or economic warfare. Nationalism
mean those things, but it is equally possible that free trade will be in the national economic interest during particular periods, as was true of Japan during the 1970's. Industrial policy is, however, a recognition that the global economic system is
to be understood in
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terms of the free competitive model: labor never moves freely between countries, and technology is only slightly more free.
There are two basic components to industrial policy, corresponding to the micro and macro aspects of the economy: the first the Japanese call 'industrial rationalization policy' (
