The Role of MITI in Post-WW2 Japan

The Ministry of International Trade and Industry (MITI) had an integral role in Post-WW2 Japanese economic development. While it is inaccurate to have called Japan a planned economy, during this era, it was definitely not a laissez faire economy. MITI had an important role in not only determining the route of Japan’s development, but in influencing Chalmers Johnson’s characterisation of Japan as a ‘developmental state’.

This essay will be discussing the role of MITI in Japan, the influence on Chalmers Johnson’s theory of the developmental state and presenting the case that gendered labour may have played a larger role in Japanese development than previously thought.

The essay will ultimately find that MITI played a crucial role as a facilitator of Japanese development.

MITI’s fundamental goal was to secure Japan’s economic development through achieving comparative and competitive advantage.[1] MITI acted as a think-tank to formulate industrial policy and then execute it.[2] While the Japanese government, through MITI, was intrusive in the private sector, its intervention conformed to the market and was done through cooperating with the private sector.[3] In particular, MITI had the following roles:

MITI made developmental forecasts which were used to prescribe goals and methods to the private sector, in order to maintain competitiveness.[4] It would determine which industries were needed for development and then allocate them capital through governmental and semi-governmental banks.[5] Industries were targeted as necessary for the betterment of the economy and policy was determined to promote development in the industry.[6] Finally, MITI formulated the strategies needed to revive or restore failing industries.[7]

Many academics, Chalmers Johnson (1985) argues, insist that Japan’s success is due to a vibrant private sector.[8] Even with MITI intervening in the economy, this is not untrue. MITI was a guiding force, cooperating with the private sector as a whole in order to raise the total competitiveness of the country. Private companies were still the driving force which made Japan successful; MITI only aided them through facilitating a business-friendly environment, pin-pointing crucial industries and disseminating knowledge to not level the playing field, but raise it up so all Japanese companies would be competing at a higher level.

MITI’s role in Japan influenced Chalmers Johnson’s theory of developmental economics. Chalmers, Onis argues, conceived the developmental state to be founded on economic development to achieve growth, productivity and global competitiveness to be the sole focus of the state.[9] Developmental economics is simply an emphasis on industrial policy that focuses on long term economic growth rather than initial profit. During this period, under MITI’s guidance, the majority of companies focused on long-term goals such as capital formulation, research and development and market penetration rather than profit.[10] Its industrial policy was recognition that Japan’s economy needed to focus for the long-term rather than short-term gain. In this way, Chalmers argues, the Japanese configuration is different from the Anglo-American model of development.[11]

MITI and its strategic industrial policy had a huge influence on the conception of developmental economics, which puts strategic top-down industrial policy as a central component of the theory.[12]

Gottfried and Hayshi-Kato argue that focusing on MITI in terms of Japanese development ignores the importance of gendered labour in the period.[13] Industrial policy was, they argue, formulated in such a way that the labour market was made flexible for female labour, to account for rising labour costs.[14] The reason this is not noted as strongly in other histories, according to them, is that the policy developed to get women to work as temporary workers, working only when Japan needed the labour.[15] After the need for increased labour ended, women were relegated to domestic positions.[16]

The position that female labour contributed strongly to Japanese growth may be compelling, but even if true, it rested upon MITI’s industrial policy which would have directed female labour accordingly. The contentious question is why MITI would have relegated women out of the economy. MITI has been characterised as focusing upon the needs and long-term prosperity of the economy, and women in the workforce has been determined to raise the general wealth of any society quite dramatically, according to a UN study.[17] The relegation of women out of the workplace may have been ideologically driven, but this would have been very uncharacteristic of MITI.

MITI played an integral role in Japanese development. Its role inspired Chalmers conception of the developmental economy. Regardless of the importance of women labour in Japanese development, the policy that led to it was an MITI initiative; the merit of ending the initiative is dubious, however.

Ultimately, Japan’s development should be studied closely, so developing economies can attempt to replicate the “miracle”.

 References

  • Facts and Figures: Economic Empowerment. UN Women. Accessed March 6, 2016. http://www.unwomen.org/en/what-we-do/economic-empowerment/facts-and-figures.
  • Gottfried, Heidi and Nagasa Hayshi-Kato. “Gendering work: Deconstructing the narrative of the Japanese economic miracle,” Work, Employment and Society 12, no. 1 (1998): 26-46.
  • Johnson, Chalmers. “The Institutional Foundations of Japanese Industrial Policy.” California Management Review 27, no. 4 (1985): 59-69.
  • Öniş, Ziya. “The Logic of the Developmental State.” Comparative Politics 24, no. 1 (1991): 109-126.

Footnotes

[1] Chalmers Johnson, “The Institutional Foundations of Japanese Industrial Policy,” California Management Review 27, no. 4 (1985): 62.

[2] Ibid., 62.

[3] Ibid., 61.

[4] Ibid., 66.

[5] Ibid., 66.

[6] Ibid., 67. These policies were determined on a case by case basis, with protectionism being an example of early tactics and incentives and tax breaks becoming a later strategy.

[7] Ibid., 67.

[8] Ibid., 63.

[9] Ziya Öniş, “The Logic of the Developmental State,” Comparative Politics 24, no. 1 (1991): 111.

[10] Johnson, “The Institutional Foundations of Japanese Industrial Policy,” 62.

[11] Ibid., 65.

[12] Ziya Öniş, “The Logic of the Developmental State,” 111.

[13] Heidi Gottfried and Nagasa Hayshi-Kato, “Gendering work: Deconstructing the narrative of the Japanese economic miracle,” Work, Employment and Society 12, no. 1 (1998): 25.

[14] Ibid., 37.

[15] Ibid., 41.

[16] Ibid., 27.

[17] Facts and Figures: Economic Empowerment, UN Women, accessed March 6, 2016, http://www.unwomen.org/en/what-we-do/economic-empowerment/facts-and-figures.