The Japanese economy's rapid growth after the Second World War has been an important focus of study for both political scientists and economists all over the world. Everything from the country's human resource management system to various cultural attributes have been used to explain the economic success story, and a Keio Business Review once found it necessary to half-jokingly dispel the notion that the consumption of miso may have been one of the factors stimulating growth. However, of the many alternative explanations given, perhaps the most respected one was presented by American Chalmers Johnson's "MITI and the Japanese Miracle", which pointed out the Ministry of International Trade and Industry (MITI) as responsible for achieving the Japanese success. Johnson's 1982 study is surprisingly consistent with a Weberian perspective on the state's role in influencing economic growth. The book does, in other words, argue for the Weberian idea concerning the "fundamental value of bureaucracy as one of the institutional foundations of capitalist growth". This paper will primarily focus on one of Johnson's opening statements: "Although it is influenced by pressure groups and political claimants, the elite bureaucracy of Japan makes most major decisions, drafts virtually all legislation, controls the national budget, and is the source of all major policy innovations in the system". Before presenting some criticism of the author's thesis, a summary of Johnson's main arguments will be given. Then, an assessment will be presented of the extent to which the above statement correctly characterises the high-growth period. While it will be argued that the statement holds much truth to it, a particular focus will be on Johnson's underestimation of market forces. In conclusion, this paper will show that bureaucracy may have outlived its positive role in the economy, and that reform is inevitable if Japan is to revitalise itself.

In a speech made in 1998, 16 years after the publishing of his classic study on Japanese bureaucracy, Chalmers Johnson summarised what he believes to constitute the Asian model: "I think of the East Asian model as consisting of Asian values, priority given to the community over the individual, and government guidance of a nonetheless privately owned and managed market economy, with economic growth tied above all to exports". The author appreciates the important role played by Japanese institutions as the "lifetime" employment system, the seniority wage system, enterprise unionism, amakudari, the keiretsu, and others. Yet, the emphasis of his work is on the superiority of the plan-rational state over the market-rational state given certain conditions, particularly the existence of commonly agreed goals for society. In the same manner as Weber's earlier stated views on the role of bureaucracy, Johnson thereby opposes the classical view of government as the enemy of growth as soon as it goes beyond protecting property rights, an argument dating back to Adam Smith.

The Japanese developmental state is a term often used to describe how a devastated Japan after the Second World War concentrated all energy on catching up with the developed world. Some historic factors did evidently help Japan achieve rapid growth at auspicious times, such as the Korean War 1950-53. Equally important was the Yoshida-doctrine that emphasised economic growth as the number one goal of the nation and limited defence spending. The latter issue continues to enrage American politicians, and a 1995 study ranked Japan 138^th out of 166 nations in the proportion of GDP devoted to defence spending. Still, Chalmers Johnson builds up his case focusing on the close-knit relationship of Japanese bureaucrats dating back to the era of the samurais, after which a bureaucratic career became the most important route to political power. Tokyo University students provide the major bulk of students entering the MITI and the MOF, and the todai students stay in touch with graduates that make careers in other ministries and regular businesses. Perhaps the most interesting part of Johnson's book discusses MITI's origin in the wartime Ministry of Munitions, which during the war had permission to order any enterprise to convert to munitions production. As the MM accumulated numerous powerful functions during the war, the author interestingly writes that "The chief significance of MM for later industrial policy is that MITI managed to retain all of the functions - including electrical power, aeroplane manufacture, and industrial planning - that had first been brought together in MM". Consequently, Johnson considers the post-war period as a mere continuation of the state's influential role in the economy, and that the MITI and MOF after the war were to dominate most economic decisions.

Many people would be surprised to hear that textiles constituted around 30% of Japanese exports in the 1960s, and that Nike's first overseas factory was in Japan. Since then, the Japanese have continuously used the profits of simpler industries to advance to higher value-added production. The failure during the last decade or so to continue this process must take some of the blame for the severe economic challenges now facing the island nation. Yet, before discussing the current problems concerning the Japanese economy and the bureaucrats' failure at reinvigorating it, an evaluation of Johnson's statement concerning the power of the elite bureaucracy during the high-growth era will be discussed.

Hayato Ikeda, one of Japan's more influential post-war Prime ministers, believed that "the government was the only available source of capital for industry, and he was a supporter of the activities of such governmental financial institutions as the Industrial Bank". He was not alone, and the bureaucrats apparently shared this sentiment. The Japanese banking system was not well developed during the 1950s and 1960s, and this evidently enabled the government to channel the limited funds available to specific industries. Through the private savings deposited with the post office, which Koizumi is now attempting to privatise, the government controlled a major part of the private savings deposits. Johnson explains how the MITI would attempt to influence company policies and investments, an argument strengthened by the fact that companies in Japan in contrast to their competitors in the United States still today continue to be financed through loans rather than private capital. One important result of the absence of stockholder demand for short-term profits, notes Johnson, is that Japanese companies thus could concentrate on long-term profits, foreign market penetration, quality control, and long-term product development.

Although current scholars have the benefit of hindsight when criticising Johnson's 1982 study, there were those that were quick at pointing out shortcomings in the author's assessment of MITI. Mentioning that MITI did not encourage Honda and Mitsubishi to build cars, for not to mention discouraging Sony's purchase of American transistor technology, financial planner C. Brandon Crocker wrote in 1988: "MITI has not had any real power over Japanese industry since the Japanese government lost its near monopoly on the supply on credit in the early 1970s". Mr Crocker would certainly not be alone at arguing that Johnson overlooks Japanese entrepreneurs like Sony-founder Akio Morita, described by former PM Keizo Obuchi as "the engine that pulled the Japanese economy". The latter characterisation is certainly an exaggeration, but so is Johnson's notion that Japan's elite bureaucracy makes all the major decisions in the country. "In fact", writes Crocker, "the argument could be made that the Japanese economy has flourished despite the activities of agencies such as MITI".

Despite Crocker's criticism in the late 1980s, Johnson had an obvious advantage due to Japan's incredible growth that apparently could not be explained by anything but an almost supernatural bureaucracy making only bright decisions. Many foreign politicians, such as 1984 presidential candidate Walter Mondale, argued for the implementation of a Japanese-style industrial policy in the United States. Currently, however, political and economic commentators adjust their views to the fact that the tides have changed. The Japanese policy of loan-financing worked as long as the country was experiencing rapid growth, but now no one seems to know the extent to which Japanese banks will have to write off bad loans. Liberal foreign commentators at The Economist and the Wall Street Journal are enjoying a field day ridiculing formerly mighty Japanese bureaucrats, the latter desperately trying to defend their positions in foreign newspaper columns. Recently, though, even Japanese commentators do not hesitate to attack the country's economic policy makers. Writes Taro Yayama, a political commentator for the Sankei Shimbun: "Bureaucrats control the government's 500 trillion yen fiscal investment and loan program, which has been used to implement major projects without competition regardless of cost and efficiency. The current recession shows the decline of a bureaucrat-controlled socialist-style state". It should almost not be necessary to argue that the influence of Japanese bureaucrats have decreased after over a decade of dismal economic performance, but a few additional comments need to be made.

Koichi Ono, an analyst at Daiwa Research Institute, argues that Japan will cease to be a strong trade centre if the country does not move from the current cheap, mass-production system to a sophisticated one producing high value-added services and goods. It can be discussed to what extent Japanese bureaucrats will be able to influence the necessary reforms that will have to be implemented, but Japanese politicians and the electorate do not seem to hold much faith in the magic of MITI and MOF anymore. Catching up with developing countries and achieving economic targets may be possible with state intervention, but the current economic challenges appear to be best handled by market forces. Writes an American economist on the situation of bureaucrats in the late 1980s: "Lacking a clear goal and sensing their growing irrelevance, the nationalism which had provided such a powerful disciplining force began to fade". He then continues to argue that the rise in corruption among bureaucrats has a partial origin in this sense of lost purpose, but adds that Japanese bureaucrats may be able to reinvigorate themselves if a new goal for industrial policy is found.

Japanese politicians appear to be slowly realising that the days where politicians could simply reign while bureaucrats ruled are over, and that the country's economic policy should be influenced by modern Akio Moritas rather than todai-trained mandarines. The formation of Diet member policy tribes (zoku) may imply that politicians are attempting to strengthen their position versus the bureaucrats, but it can on a more negative note be considered just another attempt at delivering pork-barrels to various important constituencies. Still, as Mr Koizumi seems to have realised, the declining economic fortunes will not leave much room for wasteful economic public works projects, which Yayama comments have only been exceeded by former communist countries in relative GNP terms. On the need for reform, Berkley professor Steven K. Vogel comments on Japanese bureaucrats that "they advocate deregulation in all areas except those under their own jurisdiction". Oddly enough, Japanese consumers do not appear particularly pro-deregulation either, but the situation may have changed a little since Vogel wrote his article. Although commenting from a different political angle, Johnson appears to share this negative outlook on Japan's ability to reform. The only way to influence Japan to take the right steps, he argues, is for Japan to cut "its apron strings to the U.S.". Consequently, Chalmers Johnson argues that the United States should withdraw its military troops from Japan.

Considering this generally disbelief in Japan's ability to reform, it would be a folly to believe that Japanese bureaucrats are not influential. Mr Koizumi faces an ardent task at convincing his own party members on the need for reform, but the fight against the country's powerful and at times arrogant bureaucrats may prove an even harder battle. Bevacqua recounts the story of former MITI hotshot Nakano, who in a drunken stupor bragged that he was worth 2 billion yen. If Nakano was one of the bureaucrats who, according to Johnson, made most major decisions, drafted virtually all legislation, and controlled the national budget, the reason for Japan's current economic malaise certainly becomes much easier to grasp.

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