37
On January 11, 1930, Inoue lifted the gold embargo. Whatever the theoretical merits of this policy, its timing was terrible. To pursue a deeply deflationary policy during the early months of the deepest depression the modern world has ever known could only make conditions worse. On December 13, 1931, the gold embargo was reimposed, and Japan turned to a homegrown version of Keynesian economics, pulling itself through the depression by means of governmental deficit spending on armaments. During 1930 and 1931, however, the depression was at its worst in Japan, and the other half of the Hamaguchi cabinet's economic policy, industrial rationalization, began to take on new meaning.
The Commerce and Industry Deliberation Council lasted from 1927 to July 5, 1930. On November 19, 1929, it set up as a kind of subcommittee an Industrial Rationalization Deliberation Council (Sangyo* Gorika* Shingikai) within MCI. A month later this body produced a
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report on rationalization measures that were needed at once. Meanwhile, in response to the worldwide economic collapse, the cabinet on January 20, 1930, set up its own Emergency Industrial Deliberation Council (Rinji Sangyo * Shingikai) with the prime minister as chairman and the minister of commerce and industry as vice-chairman. This supreme body lasted only a few months, but it took notice of the work on industrial rationalization within MCI and ordered the creation there of a Temporary Industrial Rationality Bureau (TIRB; Rinji Sangyo Gori* Kyoku) to formulate and carry out concrete measures of rationalization. This bureau came into being on June 2, 1930, as a semi--detached organ of MCI with the minister of commerce and industry himself serving concurrently as the bureau's director. The TIRB, which lasted until 1937, was also the brainchild of Yoshino Shinji; and it was so successful that he was chosen vice-minister a year later mainly on the strength of TIRB's performance.
Yoshino deliberately created the TIRB as a detached bureau headed by the minister in order to prevent internal ministerial rivalries from crippling its activities. He involved all of the ministry's bureau and section chiefs in it and gave it an unconventional internal structure. Instead of sections, it had only two large departments, the first headed by Kido Koichi*, who was concurrent chief of the Documents Section in the Secretariat, and the second headed by Yoshino, who was concurrent chief of the Industrial Affairs Bureau.
These departments drew up plans for the control of enterprises, implementation of scientific management principles, improvements in industrial financing, standardization of products, simplification of production processes, and subsidies to support the production and consumption of domestically manufactured goods. Continuing the precedent set by the Commerce and Industry Deliberation Council, Yoshino involved civilian industrial leaders in the active duties of the bureau, even to the extent of providing them with offices in the MCI building. Okochi* and Nakajima from the council continued as the TIRB's most important advisers, but representatives of all the zaibatsu as well as academics and journalists actively participated. They all proved extremely useful to the ministry in gaining acceptance for its ideas within the business community and in defending its proposed laws in the Dietparticularly the landmark Important Industries Control Law of 1931.
The Japanese term
gorika
*literally "to make rational"was not well understood at the time Yoshino chose it for his new bureau. He was worried about its implications and therefore deliberately named the bureau the Sangyo Gori Kyoku instead of the wholly correct San-
Page 105
gyo Gorika * Kyoku. He explained that the "
ka
" worried him, since
kakyoku
means "old song," and he was afraid his critics and the opposition might turn this into a pun.
38
There certainly were critics. On the day before the bureau was scheduled to open, a workman scribbled the character "
fu
" in front of
gori
* on its new office signboard, thus transforming it into the "Industrial Irrationality Bureau."
39
Leftists and antizaibatsu elements were skeptical about the rationalization movement. They sometimes referred to it as "Japanese-style rationalization," meaning wage cuts, reductions in the number of employees, and a stretching out of working hours.
40
There was also some international criticism to the effect that rationalization was a cover for "social dumping," a term of abuse that was especially applied to Japan at the time. During the early 1930's the International Labor Organization distinguished between what it called "commercial dumping"an unfair business practiceand "social dumping"a form of alleged exploitation of workers. Commercial dumping meant "an operation that consists in exporting goods at less than cost of production plus a fair profit, and at the same time, selling the same goods on the home market at a higher price than the cost of production plus a fair profit,'' whereas social dumping meant "the operation of providing the export of national products by decreasing their cost of production as the result of depressing conditions of labor in the undertakings which produce them or keeping those conditions at a low level if they are already at such a level."
41
The Japanese always resented the charge of social dumping, believing they were in fact trying to take the measures necessary to eliminate it.
The idea of industrial rationalization circulated widely in many countries during the 1920's and 1930's. Japan's specific conception of it originated as a poorly digested amalgam of then current American enthusiasms ("efficiency experts" and "time-and-motion studies"), concrete Japanese problems (particularly the fierce competition that existed among the large number of native firms and the consequent dumping of their products), and the influence of Soviet precedents such as the First Five Year Plan (192833) and the writings of the Hungarian economist and Soviet adviser Eugene Varga. With regard to Soviet influence, it should be remembered that during the 1920's socialist ideas had an impact on nonsocialist and even antisocialist groups and nations, particularly in the non-English-speaking industrialized countries. Later I shall draw attention to the specific link between Soviet and Japanese planning of the 1930's and 1940's in terms of its conceptual foundations. However, in 1930 by far the greatest influence on the Japanese theory of rationalization came from the Ger-
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mans. Germany had been a powerful model for modern Japan ever since the Restoration, but in 1930 German precedents were introduced directly into the TIRB because of some unforeseen internal bureaucratic events. Such interaction between the demands of Japanese bureaucratic life and the policies that the Japanese government produced is a constant theme of this study.
During the year 1930 the ruling Minseito * government attempted to politicize MCI, much as the LDP would attempt to do to MITI some thirty years later. The industrial rationalization movement had made MCI an important center of policy, and the party clearly wanted to maneuver bureaucrats friendly to it into positions of leadership. The attempt ultimately failed, but it resulted in Yoshino Shinji's becoming vice-minister in 1931 and in Kishi Nobusuke's being sent to Germany to report back to the TIRB on the industrial rationalization movement there. The actual political incidents of 1930 are of slight importance in themselves, but they had consequences of lasting significance, among them the establishment of the so-called Yoshino-Kishi line in the ministry until 1936. Bureaucrats, like politicians, deal in power, and struggles for power are an inextricable part of bureaucratic life, regardless of what models organization theorists may have favored from Weber to the present.
Two Minseito politicians served their party as MCI minister between 1929 and 1931one a weak politician, Tawara Magoichi in the Hamaguchi cabinet (July 1929 to April 1931), and one a strong politician, Sakurauchi Yukio in the second Wakatsuki cabinet (April to December 1931). (On November 14, 1930, Prime Minister Hamaguchi Osachi was seriously wounded by a right-wing assassin. He remained in office and continued to serve as president of th
e Minseito until April, when he and his cabinet resigned. He died August 26, 1931, of his wounds. Wakatsuki Reijiro*, prime minister at the time of the financial panic in 1927, returned to power as president of the Minseito after Hamaguchi's resignation.) Dominating both MCI ministers was the powerful Minseito leader and minister of finance in both cabinets, Inoue Junnosuke. During 1930 Inoue became irritated by the growing influence of MCI in general, and of Yoshino Shinji in particular, because the activities of both impinged upon his own ministry's traditional bailiwick. He did not resist MCI directly. He served as a member of the Commerce and Industry Deliberation Council, and he supported industrial rationalization as the reverse side of his own policy of deflation through restoration of the international gold standard. But he wanted some changes made.
On July 2, 1930, a month after the creation of the TIRB, the vice-
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minister of MCI, Mitsui Yonematsu, resigned to take up positions as president of the Godo * Fishing Company and of the Karafuto (Sakhalin) Mining Company. He had worked for many years in fishing and mining administration during the MAC and early MCI eras, but he had not intended to resign in 1930. Inoue and Tawara eased him out when he inquired about a shift to director of the Patent Bureau, since he was not fully in tune with Yoshino's TIRB and its policies. As Mitsui's replacement Inoue directed Minister Tawara to appoint Tajima Katsutaro*, class of 1906, and Tawara did sothough with a considerable loss of face to himself personally.
Tajima was an unusual appointment. He had had no experience in any of the ministry's home office bureaus, having spent the later part of his career as head of the Fisheries Bureau during the MAC era, then as a transferee to the Tokyo metropolitan government, and most recently as chief of the Fukuoka Mine Inspectors Bureau. The last was the key to his appointment. Fukuoka was an important post since it exercised supervision over Japan's main coal fields, which supplied fuel to the Yawata steel works. The bureau chief there had to work closely with the powerful zaibatsu coal mine operators. Tajima had apparently developed something of a constituency in Fukuoka and was known to be ambitious to enter politics as a member of the Minseito* party. After his retirement as vice-minister in December 1931, he did join the Minseito and was elected to the Diet as a member from Fukuoka for some three terms. Tajima's appointment in 1930 appeared to the bureaucracy and to the political world as an attempt by the Minseito to take over the MCI. It was partly to overcome the rumors that Vice-Minister Tajima lacked the appropriate political independence for an Imperial bureaucrat that the succeeding Seiyukai* government ousted him and appointed Yoshino in his place. It was rumored that Takahashi Korekiyo himself had a hand in recommending Yoshino, even though Yoshino was only 43 years old and so had to be passed over nine of his seniors and three of his classmates.
During 1930, when Tajima was still vice-minister, Yoshino requested permission to go abroad to investigate the industrial rationalization movement in other countries. He was turned down on the grounds that Finance Minister Inoue thought it inopportune for the actual chief of the TIRB to be out of the country and therefore refused to pay for the trip. Yoshino countered with a proposal that his protégé, Kishi, go in his placeand this was readily approved for other bureaucratic reasons. On October 15, 1929, as part of the Minseito's* deflationary program, the Hamaguchi cabinet had ordered a 10 percent pay cut for all civil and military officials. The idea was very popular
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with the public, but it led to organized protests by the bureaucrats. Within MCI Kishi, then an assistant section chief in the Documents Section, led the opposition.
Kishi obtained about 50 signed letters of resignation from a few higher officials and from several noncareer officials. He threatened to present these to the minister if the pay cuts were not rescinded. Kishi's motives do not appear to have been primarily monetary; he was also concerned about the welfare of the noncareer employees and about the government's austerity measures as they applied to the military. During 1930 Yoshino and the minister worked out a compromise to paper over the dispute, and Yoshino used his first opportunity to get Kishi out of the country in order to let tempers cool. Kishi spent seven months (MayNovember 1930) in Berlin reporting on the industrial rationalization movement, and his reports directly influenced the path it took in Japan. One of Kishi's reports, that of July 13, 1930, was addressed to Kido Koichi * as one of the two department chiefs in the TIRB; it is of such interest in relation to the history of industrial policy that it was reprinted in
Chuo
*
koron
* in September 1979, almost fifty years after it was written.
42
Kishi said that German industrial rationalization, like the movement elsewhere, was devoted to technological innovation in industries, to the installation of the most up-to-date machines and equipment, and to generally increasing efficiency. What distinguished the German movement was its emphasis on government-sponsored trusts and cartels as the main means of implementing reforms. The Japanese translated this to mean that rationalization implied a lessening of economic competition, an approach that seemed plausible to them given the cutthroat competition and dumping of exports that existed in the medium and small enterprises sector.
In Japan rationalization came increasingly to emphasize that competition among enterprises should be replaced by "cooperation" (
kyocho
*), and that the purpose of business activities should be the attempt to lower costs, not make profits. Yoshino himself has written,
Modern industries attained their present development primarily through free competition. However, various evils [of the capitalist order] are gradually becoming apparent. Holding to absolute freedom will not rescue the industrial world from its present disturbances. Industry needs a plan of comprehensive development and a measure of control. Concerning the idea of control, there are many complex explanations of it in terms of logical principles, but all one really needs to understand it is common sense.
43
This view of economic competition has been characteristic of Japan's
Page 109
trade and industry bureaucrats from 1930 to at least the 1960's, and perhaps beyond. Sahashi Shigeru often made stronger statements when he was vice-minister about the evils of "excessive competition." One scholar of industrial policy concludes that around 1931 the term industrial rationalization in Japan became synonymous with the spirit of control as a substitute for the spirit of competition, which many people believed had caused the disasters of the 1920's and 1930's.
44
At the time of the TIRB's founding, the main question for policy-makers thus became Control by whom?
The first modern Japanese answer to this question was the Important Industries Control Law (Juyo* Sangyo* Tosei* Ho*, law no. 40, introduced in the Diet on February 25, 1931, passed April 1, 1931, and in effect from August 16, 1931). It was the most important product of the TIRB and the single most important piece of industrial legislation until the National General Mobilization Law of 1938 and the Important Industries Association Ordinance of 1941, which was based on the mobilization law. According to the 1931 law, control was to be exercised within an industry by the enterprises themselvesthat is, the law legalized so-called self-control (
jishu
tosei
*) in the form of treaty-like cartel agreements among enterprises to fix levels of production, establish prices, limit new entrants into an industry, and control marketing for a particular industry. The 1931 law took as its model the unions of medium and smaller enterprises of 1925; however, it strengthened government approval powers over such unions and extended them to big business.
45
The result, as Eleanor Hadley puts it, was a "cordial oligopoly" in the large-scale advanced sectorsas contrasted with the "cutthroat oligopoly" of the post-World War II period.
46
The law was drafted in the Control Committee of the TIRB, where civilian and zaibatsu rep
resentation was strong, and the committee itself constitutes an early instance of the government's providing the auspices for private enterprises to help themselves, something it did often in the 1950's and 1960's. Within the committee, the term "control" (
tosei
) generated a good deal of discussion. In retrospect one can see that the use of the term in the title of the law was probably unfortunate. Yoshino has often said that by "control" he and his colleagues meant the attempt to create "industrial order" and not bureaucratic supervision of industry. Although the MCI bureaucrats were aware that the army used the term in many different contexts, they specifically deny that their law had military implications or was influenced by the military in any way. Yoshino also argues that although the law authorized cartels, the purpose of the cartels was ''order," not indus-
Page 110
trial profits, and that therefore the law was in the public's interest and not simply a way of making life easier for the zaibatsu.
47
Whatever he may have had in mind, however, the zaibatsu profited most from "control" and "industrial order."
The Important Industries Control Law was a relatively short statute of only ten articles. According to its terms, when two-thirds of the enterprises in a particular industry agreed to a cartel, MCI would examine its contents and, if it approved, then authorize (
MITI and the Japanese miracle Page 18