Thus the close cooperation between government and business began. This was the origin of "Japan Incorporated." The coalition was absolutely necessary to make major business in vestments and create a dynamic modern state. Some people think of "Japan Incorporated" as a recent phenomenon, a setup created after World War II between big business and government, as symbolized today by the Ministry of International Trade and Industry. But this is not correct. It originated in the early days of the Meiji era.
The old feudalistic order proved to be a wonderful nursery for the Meiji bureaucracy to grow. "Selfless devotion to the group," which had been the moral code of the feudal society—the esprit de corps of the Japanese—became the impetus for the efficient growth of bureaucracy and the diligent efforts of workers in the modernized Meiji organizations. Efficiency and diligence in turn accelerated the industrialization process.
The whole nation ran as an extended bureaucratic family. It was a conforming, communal-minded culture with an authoritarian hierarchy. The Meiji government took the initiative to invest in big business ventures because it could not wait for the growth of small businesses and cottage industries across Japan. This is another distinctive contrast with modern Europe, where industrial development was achieved through the growth and expansion of small-scale industries. Textiles and ammunitions were among the first projects of the Meiji government; later, shipbuilding and other heavy industries were introduced, promoted, and protected. However, the government realized that its attempt at rapid economic development, running so many projects by its own hands, was overburdening and decided to pass the projects on to private entrepreneurs. Mitsui, Mitsubishi, and other zaibatsu (giant business combines) rose rapidly as conglomerate business empires. Their successes were mainly attributable to their political connections with the government.
When the zaibatsu were dissolved after World War II, the politicians slowly but surely renewed their link with big business to reconstruct the national economy. The bureaucrats, as the nation's rigid backbone, were entrusted with reconstruction and further development. It was their task to defend and promote the national economy. On the other hand, it was essential for business companies to have good relations with the government in order to secure protection, promotion, and even financing. In the postwar days these contacts established a close relationship between the government and the business circle. Thus a nexus similar to the one in the Meiji era was created with even greater solidity and effectiveness and was openly dubbed "Japan Incorporated."
Today the Ministry of International Trade and Industry (the notorious MITI to its foreign counterparts), which manipulates business through its administrative guidance, seems to have a kind of corporate directorship over the whole Japanese economy. As the spokesman of big businesses, the Federation of Economic Organizations (Keidanren) represents about a thousand major companies and a hundred trade associations. Its president and committees have considerable influence on government policy. The Japan Chamber of Commerce, representing medium-size and small businesses, also has some influence on the government. The Japanese Federation of Employers Association (Nikkeiren), with much the same membership as Keidanren, deals largely with labor-management relations in defense of the national economy. There are also organizations for smaller businesses (shopkeepers, farmers, fishermen, and so on) which ensure that the message of each particular group gets through.
Another administrative mechanism which is even more effective in supporting the functions of "Japan Incorporated" is the central government's system of transferring leading officials to high posts in the rural sector or to related private organizations. This custom in personnel administration is called amakudari (literally, "descending from heaven") and is similar to the practice in the Tokugawa period of appointing officials in Edo to posts in rural fiefs. Leading bureaucrats are usually graduates of the most prestigious universities, especially Tokyo University, who have qualified for their posts through the Higher Civil Servants Examinations. They are officials with a bright future and constitute a truly elite corps—apparently the cream of the Japanese educational system.
Shortly after their appointment, most of these young, promising elites are promoted to section chief. Only a few unfortunates are assigned simply to "chief" posts of subagencies or related branch offices. When some section chiefs are subsequently promoted to department managers, their remaining peers are shipped off to important posts in rural governments or subsidiary agencies, or even to private companies. The same action takes place when a limited number of department man agers are promoted to bureau directors, and when one from among the bureau directors finally reaches the top bureaucratic post of vice minister. Through this series of eliminations, the vertical society maintains the necessary staff at various levels, with some elite officials disposed to rural posts at each step. The transfer of officials is partially the "right of the promoted"—to keep their rivals off the ladder—but more important, it is an unwritten rule of the vertical society that both winners and losers should not be made uncomfortable by having to be in the same office.
There is another form of amakudari which ties the bureaucrats even more closely to business. A bureaucrat who has looked after an industrial circle and therefore become familiar with it will be brought into a certain company after he has retired (or upon early retirement) as an adviser or counselor. This business strategy is designed mainly to utilize the former bureaucrat's connections with the ministry. In Japan, connections are the key to the social game. Through these transferred higher civil servants, who are scattered all over Japan as decision makers or wire pullers of a decision-making circle, the central government rein forces its links with the local governments and industries, smoothes administrative operations, and exercises vigilant watch over local activities, much as the Bakufu did in the Tokugawa era. The official connections netted by this system are largely responsible for the smooth working of "Japan Incorporated" and its fine synchronization of economic efforts. Even politicians of the ruling party sometimes take advantage of this nationwide system to collect electoral votes.
Subcontracting Systems
Still another social structure that makes "feudalistic capitalism" so vigorous is the pyramid-style subcontracting system. Most of the large Japanese firms operate in several locations, and they are eager to locate their head offices in Tokyo—near the headquarters of "Japan Incorporated," near the sources of capital and credit, and near the labor market of good, educated workers. A head office usually controls several plants, one or two laboratories, and a dozen sales offices, which are scattered throughout the country. Each local manufacturing plant usually hires a number of subcontractors in the area to produce the necessary components for assembling its final products. In addition, each subcontractor usually has several secondary subcontractors to carry out the production of semi-finished parts. The secondary subcontractors, in turn, rely on small manufacturers to take on the preliminary stage of production. Sometimes even those tertiary subcontractors make use of outside hands, and the system goes down the line further. It is not unusual, at the bottom of the system, to find cottage industries and family enterprises that produce very small parts like pins, pegs, screws, and nuts, to be fitted into the products assembled at upper levels.