Capitalist Politicians, Socialist Bureaucrats? Legends of Government Planning from Japan

Abstract:     
The debate over the role bureaucrats played in the postwar Japanese economy has been the wrong debate. To date, it has been a debate about effectiveness: the government tried to promote growth through interventionist policies, but did it succeed? In fact, the government never tried. Majority voters did not want interventionist bureaucrats, and consistently rejected communist and socialist candidates offering interventionist approaches. Instead, they chose candidates from the centrist, decidedly non-interventionist party. Reflecting those electoral market exigencies, politicians in power seldom gave their bureaucrats the authority to alter market investment and production decisions.

To explore these issues, we first investigate the tools Japanese politicians gave their bureaucrats. We find that bureaucrats lacked the mechanisms they would have needed to shape significantly production or investment. Second, we reexamine the central anecdote behind the legend of Japanese bureaucratic power: the 1965 showdown between Sumitomo Metals and MITI. We find that Sumitomo rather than MITI won the battle. Last, we survey the case law on bureaucratic power, and find that Japanese courts strictly restricted bureaucratic discretion.

There is a broader moral here, and it goes to the perils of relying on secondary research. For obvious reasons, Japanese politicians and bureaucrats encouraged stories that disguised ordinary pork-barrel policies as growth-enhancing intervention. Although the tales they told differed little from the self-serving accounts politicians tell everywhere, in the 1960s most Japanese social scientists were Marxists. Understandably, they had little sense of how markets worked, and no skepticism at all about the powers of governments to plan. Yet it is their accounts on which modern observers rely for their picture of the postwar Japanese political economy. Had modern scholars done more than recount the conclusions in the secondary literature, they would have noticed that they were merely adding academic gloss to political sloganeering. Unfortunately, they never tried.

JEL Classifications: B14, E61, K21, K23, L13, L43, L52

Accepted Paper Series