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anese basic values are different from those of the Western world, but this needs to be studied, not posited; and explanations of social behavior in terms of basic values should be reserved for the final analysis, that is, for the residue of behavior that cannot be explained in other more economical ways. Actually, the explanation of the Japanese economic miracle in terms of culture was more prevalent a few years ago, when the miracle had occurred only in Japan. Now that it is being duplicated or matched in the Republic of Korea, Taiwan, Hong Kong, and Singaporeand perhaps even in some non-East Asian nationsthe cultural explanation has lost much of its original interest.
13
Exemplars of the "no-miracle-occurred" school of analysis do not literally assert that nothing happened to Japan's economy, but they imply that what did happen was not miraculous but a normal out growth of market forces. They come from the realm of professional economic analyses of Japanese growth, and therefore in their own terms are generally impeccable, but they also regularly present extended conclusions that incorporate related matters that their authors have not studied but desperately want to exclude from their equations. Hugh Patrick argues, "I am of the school which interprets Japanese economic performance as due primarily to the actions and efforts of private individuals and enterprises responding to the opportunities provided in quite free markets for commodities and labor. While the government has been supportive and indeed has done much to create the environment for growth, its role has often been exaggerated."
14
But there is a problem, he concedes. "It is disturbing that the macro explanations of Japanese postwar economic performancein terms of increases in aggregate labor and capital inputs and in their more productive allocationleave 40 percent plus of out put growth and half of labor productivity growth unexplained."
15
If it can be shown that the government's industrial policy made the difference in the rate of investment in certain economically strategic industries (for instance, in developing the production and successful marketing of petrochemicals or automobiles), then perhaps we may say that its role has not been exaggerated. I believe this can be demonstrated and I shall attempt to do so later in this study.
Many Japanese would certainly dispute Patrick's conclusion that the government provided nothing more than the environment for economic growth. Sahashi Shigeru, former vice-minister of MITI (the Ministry of International Trade and Industry), asserts that the government is responsible for the economy as a whole and concludes, "It is an utterly self-centered [businessman's] point of view to think that the government should be concerned with providing only a favorable en-
Page 10
vironment for industries without telling them what to do."
16
There have been occasions when industries or enterprises revolted against what the government told them to doincidents that are among the most sensational in postwar politicsbut they did not, and do not, happen often enough to be routine.
Discussions of the Japanese economy in purely economic terms seem to founder on their assumptions rather than on their analyses. It is assumed, for example, that the Japanese developmental state is the same thing as the American regulatory state. Philip Trezise argues, "In essentials, Japanese politics do not differ from politics in other democracies."
17
But one way they differ is in a budgetary process where appropriations
precede
authorizations and where, "with the single exception of 1972, when a combination of government mishandling and opposition unity led to small reductions in defense spending, the budget has not been amended in the Diet since 1955"; before that there was no pretense that the Diet did anything more than rubber-stamp the bureaucracy's budget.
18
Another difference between Japan and the United States is to be found in the banking system. Before the war the rate of owned capital of all corporations in Japan was around 66 percenta rate comparable to the current U.S. rate of 52 percentbut as late as 1972 the Japanese rate of owned capital was around 16 percent, a pattern that has persisted throughout the postwar period. Large enterprises obtain their capital through loans from the city banks, which are in turn over loaned and therefore utterly dependent on the guarantees of the Bank of Japan, which is itselfafter a fierce struggle in the 1950's that the bank lostessentially an operating arm of the Ministry of Finance. The government therefore has a direct and intimate involvement in the fortunes of the "strategic industries" (the term is standard and widely used, but not in the military sense) that is much greater than a formal or legal comparison between the Japanese and other market systems would indicate. MITI was not just writing advertising copy for itself when in 1974 it publicly introduced the concept of a "plan-oriented market economy system," an attempt to name and analyze what it had been doing for the previous twenty years (the twenty years before that it had spent perfecting the system by trial and error).
19
The plan-oriented market economy system most decidedly includes some differences from "politics in other democracies," one of them being the care and feeding of the economic miracle itself.
The "no-miracle-occurred" school of miracle researchers agrees that Japanese economic growth took place but insists that this was because of the availability of capital, labor, resources, and markets all
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interacting freely with each other and unconstrained in any meaningful ways. It rejects as contrary to economic logic, and therefore as spurious, all the concepts that the Japanese have invented and employed continuously in discussing and managing their economysuch concepts as "industrial structure," "excessive competition," "coordination of investment," and ''public-private cooperation." Most seriously, from a historical point of view, this explanation short-circuits attempts to analyze what difference the government's intervention has actually made by declaring in advance and as a matter of principle that it made no difference. The result is, as John Roberts has put it, that Japan's " 'miraculous' emergence as a first-rate economic power in the 1960s has been described exhaustively by Japanese and foreign writers, and yet very little of the literature provides credible explanations of how it was done, or by whom."
20
This study is an attempt to answer these questions.
The third prevalent type of analysis of the Japanese miraclestressing the influence of unusual Japanese institutionsis by far the most important of the four I have isolated, and the one that has been most thoroughly discussed in Japan and abroad. In its simplest form it asserts that Japan obtained a special economic advantage because of what postwar Japanese employers habitually call their "three sacred treasures"the "lifetime" employment system, the seniority (
nenko
*) wage system, and enterprise unionism.
21
Amaya Naohiro of MITI, for example, cites these three institutions as the essence of what he terms Japan's
uchiwa
(all in the family) economic system; and in reporting to the Organization for Economic Cooperation and Development's Industry Committee during 1970, the former MITI vice-minister Ojimi* Yoshihisa referred to various "typically Japanese phenomena" that had helped Japan to obtain its high-speed growththe phenomena again being the three sacred treasures.