than the original control law as the thirties progressed, but for reasons the zaibatsu did not foresee; the militarists wanted them, and even though they did not like working with the zaibatsu, they had no other choice.
At the time the control law was deliberated and enacted, Yoshino clearly stood for self-imposed control in industry and for government cooperation with private control agreements. However, the year 1931 ended up giving self-control a bad name, particularly insofar as it involved the zaibatsu, and this led to powerful demands for its opposite, namely, state control (
*). The reason was the 'dollar-buying' scandal. On September 21, 1931, England announced that it was leaving the gold standard because of the depression. This should have signaled the failure of Inoue's policy; Japan could not maintain the gold standard if its main trading competitor did not also abide by it. However, the Japanese gold embargo was not reimposed until three months later, and in the interim the zaibatsu banks engaged in an orgy of dollar buying, using yen they knew were soon to be devalued. Mitsui alone is said to have made $50 million in international currency transactions. The speculation ended in December with the return to power of the Seiyukai* (the last political party regime until after 1945) and Takahashi's reversal of Inoue's policy.
The effect on Japanese public opinion of the zaibatsu's dollar buying during the height of the depression was one of outrage. Many groups concluded that the zaibatsu were so irredeemably avaricious they were quite prepared to debase their own country's currency in the
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name of profits. Right-wingers assassinated Dan Takuma, the chief executive officer of Mitsui, and he was succeeded by the Harvard-educated Ikeda Seihin, who became MCI minister in 1938. After taking over at Mitsui, Ikeda carried out a public
* (conversion to patriotism) on behalf of his company. One important reason Ikeda took this action was that the military and some members of the economic bureaucracy were beginning to think in terms not of working with the zaibatsu in cartels but of dominating themperhaps even nationalizing themthrough the exercise of state power.
On December 21, 1931, as part of the Seiyukai's* housecleaning after taking over from the Minseito*, Yoshino Shinji was named vice-minister. He held the post until October 7, 1936. Although the TIRB had been associated with the Minseito party, the Seiyukai* retained it because of the positive appeal of its ideology and because Yoshino, who was thought to have Seiyukai sympathies even though he was publicly neutral, was now in charge of the ministry.
Within trade and industry circles the years 1931 to 1936 came to be known as the era of the Yoshino-Kishi line. This meant government promotion of heavy and chemical industrialization and a stress on industrial rationalization as the main objective of MCI policy. During his vice- ministership, Yoshino first promoted Kishi to the post of chief of the Industrial Policy Section (January 1932, the month after Yoshino took office), then chief of the Documents Section (December 1933), and finally chief of the Industrial Affairs Bureau (April 1935). Kishi was clearly on the 'elite course,' and he was expected to advance to the vice-ministership shortly after his mentor gave it up. Kishi did eventually become vice-minister, but a three-year Manchurian interlude intervened first. For although there was an orientation within the ministry that could be called a Yoshino-Kishi line, there were also differences between the two men. If Yoshino will always be identified with industrial 'self-control,' Kishi will always be identified with ''state control' of industry.
The first phase of modern Japanese industrial policy seems remote from the postwar economic miracle, but it is, in fact, directly relevant to it for several reasons. During the 1920's Japan faced economic problems comparable in kind and in severity to those of the early 1950's: the need to restore competitive ability in international trade, the need to reorganize industry in order to achieve economies of scale and to take advantage of new technological developments, and the need to increase the productivity of the labor force. During the period from
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the creation of MCI to the passage of the Important Industries Control Law in 1931, the Japanese invented and experimented with the first of their three characteristic approaches to industrial policy, approaches that have remained in their repertoire to the present day. The first approach was the attempt to replace competition with self-control of an industry by the enterprises already established in it. The institutional form of this approach, state-licensed cartels, remains big business's preferred form of industrial policy down to the present day. Its major weakness, the tendency of cartelization to lead to zaibatsu domination and monopoly, was already fully visible by 1931; and this weakness in turn elicited demands for the opposite of self-control, namely, state control, that dominated the rest of the 1930's.
Another theme of this early period was the search for criteria of managerial and enterprise performance other than short-term profitability. Via the industrial rationalization movement, which began in the late 1920's but reached its full flowering only during the 1950's, the Japanese began self-consciously to think about how to build into enterprises and whole industries incentives to promote labor peace, job security, capital formation, increased productivity, and the development of new products. Although the earliest efforts at rationalization were largely frustrated by zaibatsu power and interests, a concern with rationalizationthe attempt to gain a competitive edge through superior organization, labor peace, and cost cuttingis the most consistent and continuous feature of Japanese industrial policy throughout the Showa * era. The greatest achievement of the early days of MCI was to begin seriously to forge a government-business relationship that was oriented to cooperation and development and that took the position of the whole Japanese economy vis-a-vis competitive foreign economies as its primary frame of reference.
The ideas and institutional innovations of this early period are not merely some 'heritage' that had to be transmitted from one generation to the next. The generation that was to lead industrial policy during the 1950's and 1960's was already on the scene during the late 1920's and early 1930's. One of the most startling facts about the history of Japanese industrial policy is that the managers of the postwar economic 'miracle' were the same people who inaugurated industrial policy in the late 1920's and administered it during the 1930's and 1940's. Unlike other nations defeated in World War II or torn by revolution in the wake of World War II, Japan did not experience a radical discontinuity in its civilian bureaucratic and economic elites. Men such as Yoshino Shinji, Kishi Nobusuke, Shiina Etsusaburo*, Uemura
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Kogoro *, and Inayama Yoshihiro were active in the formulation and execution of industrial policy before, during, and after the war. Equally important, all of MITI's vice-ministers during the 1950's entered the bureaucracy between 1929 and 1934. Thus, in studying the early origins of industrial policy, we are also studying the formative years of the officials who applied it with such seemingly miraculous effect during the 1950's. Not surprisingly, the institutions and policies first discussed in the Temporary Industrial Rationality Bureau bear more than a passing resemblance to the institutions and policies of the later period of high-speed growth.
This theme of historical continuity also draws attention to the fact that industrial policy is rooted in Japanese political rationality and conscious institutional innovation, and not primarily or exclusively in Japanese culture, vestiges of feudalism, insularity, frugality, the primacy of the social group over the individual, or any other special characteristic of Japanese society.
Economic crisis gave birth to industrial policy. The long recession following World War I, capped by the panic of 1927, led to the creation of MCI and to the first attempts at industrial
