MITI and the Japanese Miracle

MITI and the Japanese Miracle: The Growth of Industrial Policy, 1925-1975, Chalmers Johnson (Stanford University Press, 1982).

I've been interested in East Asian economic planning bureaucracies ever since reading Joe Studwell's How Asia Works (briefly glossed in my review of Flying Blind). But even among those elite organizations, Japan's Ministry of International Trade and Industry (MITI) stands out. For starters, Japanese people watch soap operas about the lives of the bureaucrats, and they're apparently really popular! Not just TV dramas; huge numbers of popular paperback novels are churned out about the men (almost entirely men) who decide what the optimal level of steel production for next year will be. As I understand it, these books are mostly not about economics, and not even about savage interoffice warfare and intraoffice politics, but rather focus on the bureaucrats themselves and their dashing conduct, quick wit, and passionate romances... How did this happen?

It all becomes clearer when you learn that when the Meiji period got rolling, Japan's rulers had a problem: namely, a vast, unruly army of now-unemployed warrior aristocrats. Samurai demobilization was the hot political problem of the 1870s, and the solution was, well…in many cases it was to give the ex-samurai a sinecure as an economic planning bureaucrat. Since positions in the bureaucracy were often quasi-hereditary, what this means is that in some sense the samurai never really went away, they just hung up their swords — frequently literally hung them up on the walls of their offices — and started attacking the problem of optimal industrial allocation with all the focus and fury that they'd once unleashed on each other. According to Johnson, to this day the internal jargon of many Japanese government agencies is clearly and directly descended from the dialects and battle-codes of the samurai clans that seeded them.

This book is about one such organization, MITI, whose responsibilities originally were limited to wartime rationing and grew to encompass, depending who you ask, the entire functioning of the Japanese government. Because this is the buried lede and the true subject of this book: you thought you were here to read about development economics and a successful implementation of the ideas of Friedrich List, but you’re actually here to read about how the entire modern Japanese political system is a sham. This suggestion is less outrageous than it may sound at first blush. By this point most are familiar with the concept of “managed democracy,” wherein there are notionally competitive popular elections, culminating in the selection of a prime minister or president who’s notionally in charge, but in reality some other locus of power secretly runs things behind the scenes.

There are many flavors of managed democracy. The classic one is the “single-party democracy,” which arises when for whatever reason an electoral constituency becomes uncompetitive and returns the same party to power again and again. Traditional democratic theory holds that in this situation the party will split, or a new party will form which triangulates the electorate in just such a way that the elections are competitive again. But sometimes the dominant party is disciplined enough to prevent schisms and to crush potential rivals before they get started. The key insight is that there’s a natural tipping-point where anybody seeking political change will get a better return from working inside the party than from challenging it. This leads to an interesting situation where political competition remains, but moves up a level in abstraction. Now the only contests that matter are the ones between rival factions of party insiders, or powerful interest groups within the party. The system is still competitive, but it is no longer democratic. This story ought to be familiar to inhabitants of Russia, South Africa, or California.

The trouble with single-party democracies is that it’s pretty clear to everybody what’s going on. Yes, there are still elections happening, there may even be fair elections happening, and inevitably there are journalists who will point to those elections as evidence of the totally-democratic nature of the regime, but nobody is really fooled. The single-party state has a PR problem, and one solution to it is a more postmodern form of managed democracy, the “surface democracy.”

Surface democracies are wildly, raucously competitive. Two or more parties wage an all-out cinematic slugfest over hot-button issues with big, beautiful ratings. There may be a kaleidoscopic cast of quixotic minor parties with unusual obsessions filling the role of comic relief, usually only lasting for a season or two of the hit show Democracy. The spectacle is gripping, everybody is awed by how high the stakes are and agonizes over how to cast their precious vote. Meanwhile, in a bland gray building far away from the action, all of the real decisions are being made by some entirely separate organ of government that rolls onwards largely unaffected by the show.

Losers and haters are perpetually accusing the United States of being a surface democracy. Enemies of the state ranging from Ralph Nader to Vladimir Putin are constantly banging on about it, but this is a Patriotic Substack and we would obviously never countenance such insinuations about our noble republic. So there’s absolutely no chance it’s even the slightest bit true of the US, but…what about Japan?

Well, awkwardly enough, it turns out that the central drama of preindustrial Japanese history was the growing power of unofficial rulers (the shoguns) who ran the country in reality while the official rulers (the emperors) gradually devolved into puppets and figureheads. A “surface monarchy,” if you will. Of course that all ended with the Meiji Restoration of 1868 (c’mon, it says “restoration” right there in the name) which returned the emperor to being fully in charge…which is why when the Japanese declared war on America in 1941, neither the Emperor Hirohito nor the parliament was even consulted. Hang on a minute!

In fact, yes, prewar Japan may have been reigned over by a monarch, but it was ruled by the deep state — especially the career military general staff and the economic planning bureaucracies. I know it’s hard to believe that drab agencies regulating coal and steel production were able to go toe-to-toe with General Tojo, but just imagine that they were all being staffed by fanatical clans of demobilized samurai or something crazy like that. When MacArthur rolled in with the occupation forces, he had a goal of creating total discontinuity with Japan’s past and utterly bulldozing the government. But a guy needs to pick his battles, and so he obviously focused on getting rid of all those nasty generals and admirals he’d just spent years fighting. The harmless paper-pushers, on the other hand, how much trouble could they be? Maybe they could even help organize the place.

The chapter about the post-war occupation is one of the deadpan funniest in Johnson’s book. The American occupiers are genuinely trying to create a liberal democracy out of the ashes, but have no idea that the friendly, helpful bureaucrats they’ve enlisted in this quest were the secret rulers of the regime they'd just conquered. The stats bear this out — of all the officials who controlled Japan’s wartime industry, only a few dozen were ever purged by the Americans. The most striking example of continuity has to be Nobusuke Kishi, but there were countless others like him. These were the men charged with translating the occupiers' desires into policy, reconstructing Japanese society, and finally drafting a new constitution. Then eventually the Americans sailed off, and the bureaucrats smiled and waved, and went back to ruling as they'd done for hundreds of years, behind the scenes.

Okay, but how well does that version of history line up with the reality of Japanese government in the second half of the 20th century? Johnson brings a lot of evidence to back up his claim that Japan is still secretly ruled by the bureaucracies, chief among them MITI. He points out, for example, that hardly any bills proposed by individual legislators and representatives go anywhere, while bills proposed by MITI itself are almost always instantly approved by the parliament. But MITI’s authority isn’t limited to the government, it's pretty clear that they control the entire private sector too. That might seem tautological — if MITI’s will always becomes law, then they can unilaterally impose new regulations or mandates that can destroy any company, with zero recourse, so everybody will naturally do what MITI says. But it’s subtler than that — the real mechanism is tangled up in MITI’s dynastic and succession customs.

Remember, this may look like an economic planning bureaucracy, but it’s actually a secret samurai clan. So they’re constantly doing the kinds of stuff that any good feudal nobility does. For instance, the economic planning bureaucrats frequently cement their treaties by marrying off their sister/daughter/niece to a mentor or to a protegé. They also sometimes legally adopt each other, ancient Roman-style. Naturally they also have an extremely complicated set of rules governing their internal hierarchy, rights of deference, etc. But remember, this isn’t just a secret samurai clan, it’s also a government agency! Agencies have rules too — explicit rules written down in binders, rules governing promotion and succession and all the rest. Sometimes, the official rules and the secret rules conflict, butt against each other, and out of that friction something beautiful emerges.

The highest rank in MITI is “Vice-Minister” (the “Minister” is one of those elected political guys who don't actually matter). But it's also the case that somebody who's been at MITI longer or who's older than you (these are actually the same thing, because everybody joins at the same age) is strictly superior to you in seniority. But that can create a paradox! What happens if a young guy becomes Vice-Minister? He would then be more senior than his older colleagues by virtue of office, but they would be more senior by virtue of tenure, and that would mean either an official rule or a secret rule being broken. To resolve this impossible conflict, the instant a new Vice-Minister is selected, everybody who's been in the bureaucracy longer than him resigns immediately, so that his absolute seniority is unambiguous and unquestionable. And then...the first act of the new Vice-Minister is to give everybody who fell on their swords powerful jobs as executives and board members of the biggest Japanese corporations. The entire process is called amakudari, which means “descent from heaven.”

Amakudari is really a win-win-win-win: the new Vice-Minister has unchallenged power within the agency and a whole host of new friends in the private sector, the guys who resigned all have cushy new jobs that come with better pay and perks, the companies that are descended upon now have an employee with great connections to the agency that controls their fates, and MITI as a gestalt entity can spread its tentacles throughout the economy, aided by cadres of alumni who think its way and help translate policy into reality.

I joked before about refusing to tolerate speculation about the US being a surface democracy like Japan, but joking aside I think even the staunchest defender of the reality of popular rule would concede that things have moved in that direction on the margin. Compare the power of agency rulemaking, federal law enforcement, spy agencies, or ostensibly independent NGOs now to where they were even 10 years ago. It would be a stretch to say that the electorate didn’t have influence over the American state, but can they really be said to rule it? Regardless of exactly where you come down on that question, it’s probably safe to say that you'd give a different answer today than you would have twenty, fifty, or a hundred years ago. Moreover, the movement has been fairly monotonic in the direction of less direct popular control over the government. And in fact this phenomenon is not unique to the United States, but reappears in country after country.

by John Psmith, Mr. and Mrs. Psmith’s Bookshelf |  Read more:

Image: uncredited

[ed. When I was coordinating the cleanup of the Exxon Valdez oil spill, every once in a while I had to brief visiting dignitaries/representatives on topics ranging from the length of commercial and sport fisheries closures, to seafood tainting and testing, to the biological implications of various cleanup methods/products and other issues. These briefings included everyone from U.S. Senators/Representatives, to the shipping insurer Lloyds of London, to national journalists (NY Times, Rolling Stone, Scientific American), and large environmental groups (Sierra Club, Audubon, Wilderness Society, etc.) and anyone else who had enough standing at the time to disrupt my schedule (not trying to sound self-important here, it was just an extremely busy time). Of all such briefings, the most intense involved a trade delegation from Japan (Lloyds, maybe second). I believe they were with or mostly affiliated with the Japanese Commerce Dept. or Trade industry somehow, it wasn't clear. Of course, Alaskan seafood products at the time represented quite a significant segment of the Japanese market - in the hundreds of millions, if not billions. I don't know if the dozen or so people who grilled me for a couple of hours were MITI, but who else? Secret samurai businessmen! Ha! Definitely some serious people.]