These schemes went into
operation
on April 1, 1942.
Brady - Business as a System of Power
100 KOKUTAI AND CO-PROSPERITY
In addition to the cartel structure, there exists a series of central *'peak associations," so clearly dominated by the Zaibatsu and the large concerns grouped around and dependent upon them as to resemble more closely clubs or fraternities than actual trade asso- ciations. While there is, for foreign observers, no way whatsoever of now gauging their relative importance, they show tendencies quite similar to those underlying the growth and expansion of com- parable organizations abroad:
Almost all economic organizations in Japan have developed after the World War. Excepting chambers of commerce and industry, they have no legal basis, but as Governmental control of the national economy becomes stricter, the part played by these organizations is necessarily of greater importance. The most representative organizations, the mem- bers of which include all branches of the national economy are the Japan Chamber of Commerce and Industry, Nippon Kogyo Club, Nip- pon Keizai Renmeikwai, and Zensanren. ^^
The first of these, the Chamber of Commerce and Industry of Japan,^^ originated in 1928 under legislative sanction as the legally competent and officially recognized central federation of all the chambers of commerce and industry in Japan Proper, "organized according to the Law and the judicial persons and organizations in Chosen (Korea), Taiwan (Formosa), Karafuto (Japanese Sagha- lien), Kwantung Province and abroad, authorized by the Minister of Commerce and Industry. " ^^ It was successor to the Associated
Chamber of Commerce of Japan, organized in October, 1892, un- der authority of a "Chamber of Commerce Ordinance" promul- gated in 1890 when "chambers of commerce became official organ- izations of merchants and industrialists. " ^^
The nature of this quasi-governmental body has been described by an official representative as follows: *^
^^ Monthly Circular, issued by Mitsubishi Economic Research Bureau, Dec, 1937, written in response to query by the author.
37 These appear to have been modeled after the pattern of the German Chamber of Ck)mmerce and Industry, rather than after the type dominant in the United States and England, and thus to carry much greater weight with their constituencies than is the case in these latter countries.
38 From a typed summary prepared by the Assistant Secretary of the Japan Cham- ber of Commerce and Industry, Tokyo, Japan, in reply to direct questions by the author.
39 Mitsubishi Economic Research Bureau, Monthly Circular, Dec, 1937. 40 Summary, cited in footnote 38 above.
? KOKUTAI AND CO-PROSPERITY loi
The work of the chamber is conducted by a president and two vice- presidents elected every four years in the general meeting of the mem- ber chambers ^^ held once a year. The standing committee, consisting of representatives of 16 chambers of commerce and industry represent- ing industrial centers in Japan, meets monthly in place of convoking the general meeting. Of course, an extraordinary general meeting can be called when urgency is required. Twelve councils are commissioned from the leading businessmen and the crudities [sic] as the consultative organ.
The functions of the Chamber are, among others, to make representa- tion to the proper authorities in relation to commercial and industrial questions, to consider and execute the matters presented by the cham- bers and other business organizations, to issue reports and statistical information on commercial and industrial conditions, to organize and supervise commercial or industrial bodies, and to attend to business pertaining to the International Chamber of Commerce and the Inter- national Labor Conference. Assistance can also be rendered by per- forming the settlement by arbitration of disputes arising out of trade, commerce and manufacture, and by issuing certificates on this and other matters connected with trade, commerce and manufactures, such as the origin of goods, market price, and so on. Naturally the object of the Chamber is to promote and protect the trade, commerce and in- dustry of Japan and it is specially interested to act as the intermediary between foreign merchants and the commercial and industrial com- munities in Japan.
Power here would seem (1) to relate primarily to the general supply of information, general guidance, and general supervision, of member policies on problems of broad economic interest; (2) to possess some degree of officially granted authority in the exercise of its legally defined prerogatives; (3) to be centered in the hands of representatives of the chambers of commerce and industry resident in the great industrial cities; and (4) through relatively small mem- bership in these latter, to be readily subject to the control of the giant concerns clustered around the Zaihatsu.
The Nippon Kogyo Club (Industrial Club of Japan) is another World War baby. Having been established in 1917, it "exclusively represents the interests of large industries which developed during the World War, and thus constitutes a private organization of large
41 "When the Chamber of Commerce and Industry of Japan was organized, the number of the member chambers of commerce and industry was only 80. The num- ber has gradually increased, numbering at present 149, including 108 in Japan Proper, 4 in Karafuto, 13 in Chosen, 1 in Kwantung Province, 11 in Manchukuo, 5 in China, 4 in the United States, 2 in India and 1 in South America. " Idem.
? 102 KOKUTAI AND CO-PROSPERITY
industrialists. " ^^ In other words, it is a sort of "Union League Club" of the Zaihatsu circles, having for its objects, "to facilitate intimate intercourse among its members, . . . to investigate economic poli- cies from the standpoint of large industries . . . [to promote] the harmonization of the interests of capital and labor, and . . . [to serve as] the representative organization for Japanese industry in intercourse with foreign businessmen. "
Stimulated by problems of the great postwar depression to ex- pand its functions further, the Nippon Kogyo Club took the lead in forming two other organizations, Nippon Keizei Renmeikwai (The Japan Economic Federation) in 1922 and Zenkoku Sangyo Dantai Rengokai (Zensanren--National Federation of Industrial- ists) in 1931. The former was established ostensibly as a "branch of the International Chamber of Commerce. " In reality it appears to serve as a compact coordinating body of a limited number of na- tional business organizations, dominated in turn by a few of the giant concerns, and devoted primarily to the formulation of eco- nomic policies for the Japanese business community as a whole: *^
Members of this economic organization include 30 organizations, 216 judicial persons, and 427 individual businessmen. The managing or- gans are the General Meeting, councilors meeting, directions (sic), resi- dent directors, resident committee and councillors. The resident com- mittee is an organ to the chairman (sic), and is elected by the chairman among resident directors, directors and councillors. The work carried on by this organization is as follows: (1) Facilitating intercourse among businessmen, (2) Formation of an economic policy representative of businessmen, by investigation on the part of its own board and by out- side experts, (3) Representing Japanese business in relations with for- eign economic organizations. **
"Besides being the headquarters of the Japanese National Com- mittee for the International Chamber of Commerce, since its in- ception, the Federation now possesses within its organization, the Japanese American Trade Council, the Japan-British Trade Com- mittee, and, quite recently, the Japan-Italian Trade Committee . . . The Federation is rendering manifold services to the Govern- ment in the formulation and execution of important national eco-
42 Monthly Circular. 4S Idem.
44 See also the "constitution" of the Japan Economic Federation, dated April, 1937 (obtainable in English).
? KOKUTAI AND CO-PROSPERITY 103
nomic policies. Its position may well be compared with that of the Federation of British Industries in London and of the United States Chamber of Commerce in Washington, D. C. " *^ Presided over by the eminent Baron Seinosuke Goh,*^ the Federation is at least a blueprint for full and complete coordination of the economic, fi- nancial, and commercial policies of the island empire.
Zenkoku Sangyo Dantai Rengokai performs a like function in
the labor field for a parallel cross-section of the upper reaches of
Japanese big business. "The main objective of this association is
similar to that of employers association [sic], protecting the em-
ployers' interests against attack from the labor movement. It is
composed of five local associations--Kwanto, Kwansai, Middle,
West, and North--and these local bodies entertain relations with
chambers of commerce and industry, and manufacturers* associa-
^'
tions. "
In 1937 a supreme effort was made to bring together all cen-
tralized employers' and business confederations "which would con- centrate all the interests of businessmen" vis-a-vis the government. Thus was called into being on September 27, 1937, the Nippon Keizai Dantai Renmei (The Japanese League of Economic Or- ganizations) under the joint auspices of the Japan Economic Fed- erations, the National Federation of Industrialists, and the Japan Chamber of Commerce and Industry. Representatives were sent by individual organizations as follows:
Japan Chamber of Commerce and Industry Japan Economic Federation 8
*5 East Asia Economic News, published by the Japan Economic Federation, Aug. , 1939-
46 "His career as a businessman began in 1898 when he became the president of the Nippon Transportation Company. He became successively or concurrently the head of innumerable corporations, such as the Imperial Commercial Bank, the Tokyo Stock Exchange, the Nippon Iron Manufacturing Company and the Tokyo Electric Light Company. He has been the president of the Chamber of Commerce and Industry of Japan, and is the vice-president of the Society for International Cul- tural Relations. " Since becoming President of the Federation, "Baron Goh became the head of the Organizing Committee of the two big national corporations, the North China Exploitation Company and the Central China Development Company, which have been established in accordance with the fixed policy of the Japanese Government. " East Asia Economic News, July, 1939.
47 Monthly Circular. "In view of the history . . . it is clear that the Federation was organized to present a united front of capitalists against the labor class. " Trans- Pacific (weekly). May, 1940, p. 11.
9
? KOKUTAI AND CO-PROSPERITY
National Federation of Industrialists 6
Tokyo and Osaka Clearing Houses
Trust Company Association 2 Life Insurance Company Association 2 National Association of Local Bankers 2
Nine commissions were established, "six of which were to spe- cialize on control over commodities such as textile raw materials, fuels, metals including iron and steel, rubber and hides, lumber, and paper respectively. One commission will investigate price prob- lem [sic] while another will supervise the supply of labor and tech- nicians. The last commission will supervise industrial finance. " ^^
Apparently the new organization has worked very closely with the government, constituting as it does, a sort of private "National Defense Council" for business enterprise. With the possible excep- tion of the National Association of Local Bankers, every one of the member peak or central associations is directly or indirectly dom- inated by the Zaibatsu.
Schematically, it would be hard to imagine a much higher degree of policy-determining power than is indicated by the combination of the Zaibatsu and its concentric cartel and federational machin- ery. The hierarchy of business control seems well-nigh complete. Even further importance is lent by the closeness of the tie binding the system, almost from the start and from center to circumference, with the government.
ZAIBATSU AND KOKKA NO TAME
As with the great eighteenth-century European mercantilistic states in their times, Japan's entrance onto the world stage wit- nessed a deliberate and systematic dovetailing of the power require- ments of army and navy, the Realpolitik of imperial expansion, and the swiftly unfolding needs of monopoly-oriented industrial, commercial, and financial capitalism. That the state should take the lead was both natural and inevitable.
With a view to the speediest possible modernization of her in- dustrial apparatus, the state established up-to-date factories and workshops, and promoted by every means at its disposal the ex- pansion of national industries. Many of the thriving industries of
48 Idem.
104
4
? KOKUTAI AND CO-PROSPERITY 105
present-day Japan--arsenals, chemical works, iron and steel plants, cotton spinning, power-loom weaving, silk filatures, shipbuilding, railways, paper mills, glass works, type-casting, the manufacture of safety matches, coke, gas, bricks--may be traced back to the initia- tive, encouragement, and guidance of the Meiji Government. The state also established trade and industrial schools, seamen's training institutes, and imported foreign technicians and advisors--as early as 1875 more than 500 foreign experts were so employed. On the financial side the state loaned mechanical equipment or capital to private entrepreneurs at low rates of interest, or granted outright large subsidies for the creation of mills and factories, foundries and dockyards. Kokka no tame, ''for the state," was the term used to encourage industrialism. A competent foreign investigator, com- menting on these practices, writes: *^
The part played by the government cannot be overemphasized. Japa- nese industry of the present day owes its state of development primarily to the efforts of a highly paternalistic central government.
In the period 1867-83, the state assumed direct responsibility for the industrial and financial development of Japan. Increasingly thereafter it endeavored to withdraw from direct participation in the industries aided as soon as possible, and turned its holdings over to private companies. ^?
In some cases (railroads, communications, iron and steel, dock- yards) this policy has not been entirely feasible, and the state has continued as an active agent in manufacturing. ^^ Private capitalis- tic enterprise, however, developed apace, and the close association of state and private capitalism has continued in unbroken sequence to the present day. The granting of subsidies, for example, has be- come so firmly entrenched as an integral part of governmental
49 John Orchard and Dorothy Orchard, Japan's Economic Position (New York, 1930), p. 90. See also, Moulton, Japan, in particular Chapter XVII, "The Government in Relation to Economic Enterprise. "
60 The extent to which this disposal of government properties stimulated private enterprise may be shown by the case of the Miike coal mines in Kyushu. In 1886 the government sold these mines to the Mitsui family for 4,550,000 yen. "Within a year the Mitsuis not only had recovered the 4,550,000 yen but made a handsome profit. One conservative estimate is that the mine has averaged 3,000,000 tons a year at ten yen a ton for fifty years. On the basis of thirty percent clear net profits, the Mitsuis in a half-century have realized 450,000,000 yen on a 4,550,000-yen investment. " Rus- sell, The House of Mitsui, pp. 223-24.
51 See Hahn, Die Industrielisierung Japans, pp. 104-7.
? io6 KOKUTAI AND CO-PROSPERITY
policy that it not only persists but has been expanded and gen- eralized until its influence spreads throughout the major industries of the country. The government not only extends such aid to infant industries, but also to practically all the older industries whether experiencing tangible difficulties or not. ^^ Throughout the twen- tieth century an expanding system of autarchic aids, direct and indirect, has been elaborated on the subsidies model; accordingly, tariffs, import quotas, export bounties, currency depreciation and manipulation, foreign-exchange controls, not to speak of an in- creasing monopolization of colonial trade resulted in the creation
of the Yen-bloc.
While the state has not only encouraged industrial growth but
also directed it along particular channels, it has not seriously inter- fered with the conduct nor the private profits of the dominating business concerns. "Japanese large-scale industry," the Lederers write,^^
has taken on the character of modern enterprise without having gone through a period of transition from feudalism. In its origins the patron- age of the State was of decisive importance. . . . Frequently the State intervened to assist families in danger of bankruptcy, supporting them by credit grants, perhaps even through many years. The greater the name and the closer its connection with politically influential parties the more securely could the firm count on being tided over periods of heavy losses. Small people, however, families without connections, were lost if they could not make their own way. ^*
It would be a mistake, however, to conclude that such intimate relationships between government and business enterprise are merely of the order of ''growing pains" involved in "catching up" by forced draft methods. To be sure, "Mercantilism was introduced at the beginning of the Meiji Era and it is still the ruling force at
52 Cf. Herbert M. Bratter, "The Role of Subsidies in Japan's Economic Develop-
ment," IV (May, 1931), 377-93.
5^ Japan in Transition, pp. 238-39.
6* Even the emergence of a war economy in Japan since 1937 and the institution
of some severe restrictive measures has not interfered with profit-making opportuni- ties. The Oriental Economist index for the profit rate of joint stock companies shows a sustained average of about 20% per annum for 1937 and 1938, and it is noted that the war influences on the profit rate are "so negligible that the general condition may be regarded as stationary. " Oriental Economist, Supplement, "Japan Prepares for Ck)ntinental Construction," Oct. , 1939; see also ibid. . Supplement for 1939-40, p. 30, and the issue of Oct. , 1941, pp. 509-10.
? KOKUTAI AND CO-PROSPERITY
the present time. " ^^ Yet so to summarize present trends is to greatly oversimplify the story. What is being accomplished is the gradual rounding out of a highly coordinated Fascist-type of totalitarian economy dominated by an ideology which a Japanese authority declares to be increasingly that of the army bureaucracy: "nation- alistic, expansionist, anti-capitalistic, anti-individualistic, anti- factional, anti-communistic, and socialistic. " ^*
Even the phraseology here is almost identical with the customary Nazi and Fascist propaganda offerings. The Oriental Economist terms the system
State Capitalism. . . . Japan married socialism to capitalism and its offspring was state capitalism. The term is an arbitrary one for want of a better. It means the people, through the state, put up part of the money for some important national enterprise, and private capital the rest, usually about half and half. The state restrains capital, and capi- tal spurs the state. The one gives the national interest with a check on profit, and a sharing by the people as a whole. The other restrains such weaknesses as bureaucracy and nepotism. State capitalism is the nexus. ^'^
It is significant that the writer of these lines is thinking directly and specifically of great "mixed" enterprises (owned partly by government and partly by private interests). There are a number of these, and the pattern of control seems to be gaining steadily in both official and business favor. Mention has already been made of the great Japan Iron and Steel Company, which produces about half of the total Japanese output, and which under most recent plans is owned about half and half by governmental and by private interests. But on a similar plane a whole series of new colonial, transportation, and communication works are being developed.
c5 Professor Eijiro Kawai, "Neue politische Kriifte des wirtschaftlichen Aufbaues," Weltwirtschaftliches Archiv, XLVI (July, 1937), 62-78.
56 Chitoshi Yanaga, "Recent Trends in Japanese Political Thought," Pacific Af- fairs, June, 1940. The author adds, somewhat quaintly, "Japanese ideas are at once radical and conservative. " "Anti-capitalistic," of course, means, "anti-liberal," anti- free-competition, and anti-laissez faire. But in no other sense. Other Japanese writers refer to the new order more simply as "Japanese National Socialism. "
57 George Gorman, "Japan's Three Principles," Oriental Economist, March, 1940. The expression "state capitalism" is unfortunate, since it suggests (a) ownership by the state and (b) pursuit of nonproperty ends. Neither is borne out by the facts. State ownership is supplementary and additional to private capital; there is no sign of desire to expropriate private interests, and the results of government activity re- dound to the advantage of ruling-class circles and private business enterprise. See pp.
113-19, following.
107
? io8 KOKUTAI AND CO-PROSPERITY
The model here has been the semigovernmental South Manchurian Railway. ^^ Others are the new China Federal Reserve Bank,^^ the North China Development Company,^^ and the Central China Development Company. ^^ Industrial enterprises taken over or newly established in the conquered territories are being handled in a similar fashion, when they are not included directly in the interest radii of the "development companies. " ^^ Thus the army has brought in Y. Aikawa, now allied to the Zaihatsu, to take over the Showa Steel Company. Recent schemes for a national electric power grid comparable to the British Central Electricity Board are being laid out on a similar basis. The newly formed International Electric Communication Company ^^ is being governed much as
58 Capital 800,000,000 Y (yen); assets valued (1936) at 2,000,000,000 ? . "Controls nearly all the railways in Manchuria, North China and part of Korea, and is com- parable, in many ways, with the Canadian Pacific, the Trans-Siberian and other great lines . . . it has developed most of Manchuria's coal, iron and gold mining, gas, electricity, and water supplies, docks, engineering works, modern hotels and news- papers. " Smith, "Japan's Business Families. " Since December, 1937, a great propor- tion of South Manchurian Railway's property in the heavy industries has been transferred to the Manchurian Industrial Development Corporation, headed by Y. Aikawa. The M. I. D. C. 's capital of 450,000,000 yen is contributed equally by the Manchukuo Government and the Japan Industry Company, one of the smaller Zaibatsu. See Japan-Manchoukuo Year Book, 1940, pp. 860-66, for a description of the M. I. D. C.
59 Capital 50,000,000 ? ; half provided by the Yokohama Specie Bank, the In- dustrial Bank of Japan, and the Bank of Korea; balance by various Chinese banks.
60 Capital, 350,000,000 Y, one half contributed by the Japanese government,
61 Capital {Oriental Economist, May, 1940) 173,000,000 Y, owned about half and half by government and private business interests. Its operations include salt, min- ing, textiles, fishing, railroad, housing projects and properties.
62 Under these schemes, Japan was divided into nine regional blocs with a mo- nopoly distribution company in each bloc.
These schemes went into operation on April 1, 1942.
There are other "mixed enterprises" which are mainly syndicates. These are the Japan Rice Co. , capital 30,000,000 ? , Japan Fertilizer Co. , capital 50,000,000 ? , and the Japan Coal Co. , capital 50,000,000 Y. In each case, the government contributes half of the capital, besides passing out many forms of subsidies. All three have complete monopoly over the buying and selling of the commodity concerned. An- other group of "mixed companies" is concerned chiefly with the development of mining. These are: Imperial Fuel Development Co. , capital 20,000,000 Y, Japan Gold Production Co. , capital 20,000,000 Y, and the Imperial Mining Development Co. , capital 30,000,000 Y. Half of the capital is contributed by the state. Colonial and transportation development companies not mentioned previously are: South Seas Transportation Co. , Japan Transportation Co. , capital 20,900,000 Y, Korea and Manchoukuo Development Co. , 8,000,000 Y, Formosa Development Co. , 18,000,000 Y, South Seas Development Co. , 15,300,000 ? , and the Manchuria Development Co. , 33,300,000 Y.
63 The new company "is a national policy communication company which came into being through the consolidation of the former Nippon Wireless Telegraph Com-
? KOKUTAI AND CO-PROSPERITY 109
though it were a "mixed enterprise," even though the direct gov- ernment participation in ownership seems to be of minor im- portance.
Such data but barely scratch the surface, for they fail clearly to indicate the wide ramifications of a network of enterprises of a trust-like character which the Japanese have been swiftly elaborat- ing throughout the entirety of their newly acquired "autonomous circle of common prosperity" in "Greater East Asia. " Within Japan proper, reorganization schemes are being announced almost daily which combine entire industries into single or closely coordinated trusts. Since the beginning of 1941, reorganization schemes have been announced for such widely varying trades and industries as electric light bulbs (for export), oil, silk, spinning (ten manage- ment enterprises coordinated by a single policy administering body), deep-sea fisheries, and automobiles. ^* These are paralleled by a mushroom growth of similar Japanese dominated private trusts in Korea, Manchukuo, North China, and the South Sea areas. Many of these are deliberately organized as central and all-inclusive trusts for the whole of Japanese dominated territories. Thus the East Asia Shipping Company has been recently "entrusted" with "the task" of organizing shipping with the mainland, and Dai- Nippon Airways with the spinning of a centrally directed Far Eastern air traffic system. ^^
pany and the International Telephone Company under the terms of a special law. " It is to handle all wireless telegraphic and a part of the cable telegraphic traffic of Japan and the Japanese empire, and is aimed at "uniform control, completion and development of the international communication network of Japan. " Oriental Econ- omist, July, 1940.
64 In 1941, the following reorganizations were completed: 77 cotton spinning com- panies were merged into blocs, leaving only 14 companies; 37 woolen companies were reduced to 8. Similar steps were taken for other textile companies like silk and rayon. See the annual report of Mr. S. Tsuda, president of the Cotton Spinners' Association, Oriental Economist (August, 1941), p. 423. As for the other industries, nine leading packing firms were merged into one; 27 machine tool firms formed the Nisshin Ma- chine Industry Co. ; six canning companies formed the Toyo Can Manufacturing Co. , 960 glass firms reduced to 50. Those industries in the process of reorganization in the fall of 1941 and probably completed now are: Portland cement, 23 firms reduced to 5 or 6, imitation leather, 16 firms into 4, marine leather, 19 into 1, oil, 14 into 6, municipal transportation, unification of companies in each city, woolen yarn whole- saling, 200 dealers into 24 blocs with one firm in each, tanning, 800 into 30 or 40 blocs, soap manufacturing, 500 into 50 blocs. Cf. Osaka Mainichi and Tokyo Nichi Nichi from August to October, 1941, inclusive.
65 Toshio Narasaki, "Oriental Great Economic Circle and Transportation Policy," East Asia Economic News, Jan. , 1941.
? 110 KOKUTAI AND CO-PROSPERITY
The "co-prosperity sphere" has been variously described. One Japanese writer outlines this oriental equivalent of the Nazi "new order in Europe" in the following terms: ^^
The Oriental Great Economic Circle signifies the economic circle com- prising Manchoukuo, China, the Netherlands Indies, French Indo- China, Thailand and British Malaya under the leadership of Japan. The areas belonging to this circle should strive to bring about a com- plementary existence with free exchange of commodities, performing at the same time their shares in the productive activities. In such an economic circle, it is natural that the country the most advanced in the fields of culture, economy, industry and technical arts should take the lead of other nations, and in the Orient this duty of leadership devolves without question upon Japan. ^'^
Parallel with these developments, the government has taken an increasingly active hand in the process of forced cartellization, es- tablishment of compulsory price and marketing control, and vari- ous other forms of regulation which serves to promote the cen- tralization of economic policy-forming power. Under the Bureau for Industrial Regulation, established in 1930, for example, the Ministry of Trade and Industry may declare any "consolidation" to be a regular cartel organized by itself "with the definite purpose of promoting industrial economy," if approved by more than half of the potential membership. And, "if more than two-thirds of the members of the cartel agree to the provisions agreed upon, they may petition for a contract and the Ministry can make such a con-
tract with them. " ^^ The Bureau's powers in theory, even under the original enabling act, range over the entire field of industrial or- ganization and policy:
66 Idem.
67 A frank version of the above general aims is expressed by Mr. Masatsune Ogura, Finance Minister in Konoye's third cabinet, in a series of articles, "How to Fight Economic War" in the Osaka Mainichi and Tokyo Nichi Nichi (English), Aug. 2-3, 1941: "Nippon can specialize in heavy industries and China in light industries to advantage. The products of these two countries can supply not only the co-prosperity sphere but all the world as well. The Greater East Asia Co-prosperity Sphere af- fords an ideal market for our manufactured goods. Hundreds of millions of East Asiatics are our potential customers. . . . If we should succeed in settling the emergency and in bringing about expansion, whatever financial burden we may have shouldered will bring returns many times over. "
68 Professor Masamachi Royama, "Die wirtschaftsrechtliche Struktur als Grundlage des japanischen Wirtschaftsaufschwungs," Weltwirtschaftliches Archiv, XLVI (July, >>937)' 79-92.
? KOKUTAI AND CO-PROSPERITY ill
The first department (or division) handles supervision and checking of industrial transactions, carries out scientific research and administers any financial reform required to achieve special improvements. The second division supervises the standardization of industrial products, the uniformity of manufacturing processes, and the propaganda adver- tising of home products. Thus all different forms of industrial produc- tion are checked, supervised, and virtually controlled by these two de- partments. (R)^
Other governmental coordinating activities extend and deepen the web of official control. The Bureau of Economic Resources, established in 1928, "has jurisdiction over all plans that deal with regulation and disposition of raw materials and both human and material economic resources. " ^? The Bureau of Supervision or General Board of Control, organized in 1935, is a sort of central "Kontrollamt" of the entire national economic system, subject to the direct authority of the Cabinet. ^^ How far such control may go can be seen in the field of agriculture, where a wide-ranging net- work of regulation covers practically the entirety of the Japanese agricultural system, including its economic interests at all levels of production and marketing. The model here is the Rice Law, passed in 1921 and subsequently altered and greatly reinforced by a num- ber of amendments. In its current form it is probably the most rigid, all-inclusive, and totalitarian law relating to any major agri-
cultural industry anywhere in the world. ^^
The final step taken in this direction is reflected in the establish-
ment of the Supreme Economic Council, charged with the task of coordinating "total agricultural associations, total vocational and industrial associations and 'free enterprise units' which will con- tinue to exist outside the corporate bodies. " Under leadership of the government, "plans for an empire industrial federation" made
69 Ibid. 70 Ibid. 71 Ibid.
72 Dr. Shiroshi Nasu, "Ziele und Ausrichtung der japanischen Agrarpolitik in der Gegenwart," Weltwirtschaftliches Archiv, XLVI, 157-84. According to this authority "the total agricultural debt rose from 750 million yen in 1911 to 4600 million yen in 1929" and by this latter date approximately 30 percent of all Japanese farmers were insolvent and unable to pay their debts. The effect of the various price and market- ing and agricultural control laws seem not to have been the liquidation of this growing mass of agricultural indebtedness, but rather to have cumulatively pressed the poverty-stricken peasant layers into a straightjacket reminiscent of the Pro- crustean pattern of the German Reichsbauerngesetz--or law of compulsory entail- ment. See also the sketch of "the agricultural reorganization movement in the Monthly Circular of the Mitsubishi Economic Research Bureau, March, 1941, p. 11.
118 KOKUTAI AND CO-PROSPERITY
up of "leaders representing the steel, coal, electricity, shipping, and cotton industries" was approved as the agency to work with the government in order to implement these plans. The new federation seems to be practically coextensive with the existing Japan Eco- nomic Federation (it may actually be that body! ). The dominating principles were said to be "public service first," abandonment of "liberalistic profitseeking" and "spontaneous and autonomous formulation of economic policy. " The suspicion that "the govern- ment wishes business men to have the management of the nation's economic affairs" ^^ (authoritative self-government in business) seems to have been fully justified with the announcement that Mr. Ogura, head of Sumitomo (third largest of the Zaihatsu), was to be made the Imperial "Japanese Knudsen. " ^*
In addition to the expansion of this meticulously exacting reg- ulatory network, the government has not hesitated under the emergency of war to wipe practically out of existence large sections of the business system. Most noteworthy here is the policy which has come to be known in the Japanese patois as Butsudo (a contrac- tion of the Japanese words meaning "mobilization of commodi- ties"), which was gradually inaugurated after the middle thirties. On the surface Butsudo is a system of war rationing which places special emphasis upon the power of the government to prohibit the manufacture or sale of any commodity in any fashion it may see fit and to canalize productive capacity as the exigencies of a wartime economy may determine.
Actually, it vests in the government power to build up or undo entire branches of industry in either war or peace. Under Butsudo for example, the domestic sale of cottons has been almost entirely eliminated. ^^ Various strictly nonessential foodstuffs can be sold only in limited amounts. Its net effect has been not only to bring
73 Byas, "J'lpan's Censors. " "Under intensifying wartime conditions, the situation has changed quite perceptibly. Government authority has steadily increased and the Government and a special group of officials connected with the big moneyed interests have come to have much say in the economic scheme of the nation. With the progress of the planned economy, these officials are likely to play greater and greater parts in concert with the various industrial and business 'gauleiters' or district leaders, who are moving up to become fuehrers. These rising men are also leaders of their respective cartels. " Hirose Higuchi, Japan Times Weekly and Trans-Pacific, March 27, 1941, p. 458.
74 "Mr. Ikeda, the former executive head of the great Mitsui corporation, . . . is now attached to the Emperor as one of his personal consultants. " Hugh Byas, The Japanese Enemy, His Power and His Vulnerability (New York, 1942), p. 33.
75 Manchester Guardian, July 20, 1938.
^
? ? KOKUTAI AND CO-PROSPERITY 113
about a considerable dislocation of industry and a great deal of occupational unemployment, but also to force many concerns either to suspend operations or to go out of business entirely. By the early part of 1939 some 9,793 establishments employing 68,273 persons were suspended, and some 1,709 establishments employing 6,223 were openly liquidated. ^^ Most of these businesses were small scale; many of them w^ere simply handicraft shops.
Yet even Butsudo does not run counter to the general picture outlined above. Quite the contrary. It merely represents the logical fulfillment of the partnership between business and government which has characterized the evolution of capitalistic institutions in Japan from the very beginning. In it is revealed the determination to coordinate in a national fashion the entirety of economic activity on behalf of the volatile will and vaulting ambitions of the new social-economic hierarchy.
The elements here are not greatly dissimilar to those noted for other totalitarian systems of the general Fascist type.
1. The ZaihatsUj the monopolistically-oriented enterprises cen- tered around them, and the extensive network of trade associations, chambers of commerce, cartels, and similar bodies of which they are the acknowledged leaders, constitute an elaborate, semilegal hierarchy of graduated economic power. The smaller businesses, handicraft establishments, and the various other layers of the "pro- fessional" middle classes thus exist within a sort of all-inclusive "corporate" regime; their organization by occupational categories guarantees them something of the order of a stable living according to customary standards, providing they do not conflict with such policies as Butsudo.
2. This hierarchy works very closely with the civil and admin- istrative bureaucracy of the state. In fact it is probably not too far from the truth to refer to the gradually consolidating economic bureaucracy as the economic aspect of the state bureaucracy. This constitutes the Japanese version of "National Socialism, which is inclined to regard anti-capitalism as separate from socialism and thus associate state-absolutism with socialism. " " Capitalism, in
76 Isoshi Asahi, The Economic Strength of Japan (Tokyo, 1939). Principally af- fected were the textiles, leather, rubber, and iron and steel industries.
77 "National Socialism is a combination of state-absolutism, which has always been a sheet-anchor to Japanese political thought, and Socialism. . . . Japanese National Socialism opposes two important theories of Marxism: (1) it rejects the theory of
? 114 KOKUTAI AND CO-PROSPERITY
this context, is interpreted to be "competitive" and "unregulated" in terms of the "well-being of the state. "
3. The military is becoming increasingly part and parcel of the same control pyramid. At times, as in the beginning of the Man- churian and Chinese "affairs," the army has been able to take inde- pendent action. But under the regime dominated by the cliques centered around Matsuoka, internal conflicts seemed to be largely smoothed out, and that close community of interests which has al- ways held the military and imperial-nationalistic interests together in Japan once again asserted itself. ^^
Japan has really remained a military nation in spite of all the constitu- tional contributions of western democracy. . . . The Key to the de- velopment and expansion of Japanese industry until Japan became established as a major industrial power was increasing militarism. . . . The Administrators and commissioners, the large-scale corpor- ations of the Railroad Company of South Manchuria, and Mitsui and Mitsubishi, the Yasuda and Sumitomo, and other organizations down to the small rice growers and industrial workers and minor crafts- men . . . are all well aware of the numerous factors that control Ja- pan's economic status. In spite of all internal conflicting interests and social differences, all classes of Japan's population are concerned in but one important matter: Japan must progress and she must be suc- cessfulJ^
the decline of state-conlrol; and (2) it rejects the theory of the rise of internationalism. . . . National Socialism appealed to the mass of the Japanese because state-absolutism still exercises its original and traditional influence in Japan. " Kawai, "Neue politische Krafte des wirtschaftlichen Aufbaues. "
78 The Tojo-Terauchi-Sugiyama clique in control of the army at the present time is close to the Zaibatsu. The Terauchi family has been close to the Mitsuis since the first World War days when the elder Terauchi was Prime Minister, while Tojo is intimate with the Mitsubishi. One paper calls Tojo the "most conservative of the army clique. "
Commenting on the New Economic Structure Law of 1941, Joseph Newman, New York Herald-Tribune correspondent in Tokyo and one of the ablest journalists on Japan, declares in a recent book. Goodbye Japan (New York, 1942), p. 199: "The power, however, was left largely in the hands of big business, whose representatives in the offices of Finance Ministry and Commerce and Industry Ministry applied the law in such a way that the big-business clans grew stronger, a larger part of the middle class was liquidated, and workers and peasants were able to buy less goods with their money than ever before. The business clans were permitted to continue their 'voluntary regimentation,' through their independent industrial cartels. They not only were given bigger orders than before by the militarists but also a guar- antee of seven percent profit on their iron and steel output as well as subsidies to encourage production. The government announcement of subsidies for big business was made by the president of the Iron and Steel Control Association, who was pri- vately connected with Mitsui, Mitsubishi and other leading business clans. "
79 Johannes B. Kraus, "Wirtschaftsgesinnung und volkisch-politische Grundbedin-
? KOKUTAI AND CO-PROSPERITY 115
4. And finally, the psychopathic, ideological, propaganda ce- ment which holds the Kokutai amalgam together is the fused power of Shinto and Bushido. In a very interesting doctrinal glorification of the Japanese way, Ginjiro Fujihara, quotes with warm approval the words of Lothrop Stoddard: ^^
Present-day Japan is thus stung to action by the sharpest of life's in- stincts--that of self-preservation. Now add to this primeval urge a burning faith in 'Great Japan' and the peculiar excellence of the Ya- mato Race; add to that again the Bushido code glorifying self-sacrifice and welcoming heroic death, and we can realize the fierce longing in Japanese hearts to cut the Gordian knot of their difficulties and hew out a great destiny with the Samurai sword.
Or, as Dr. Kraus, a very sympathetic observer, puts the matter somewhat more dryly, "Japan's secret is that she knows how to con- trol her economic system through the ethics of Samurai or 'Samurai Geist. ' " <<^
The final step here has been already taken with the de facto dis- solution of all the old parties and the emergence of a fully totali- tarian "single-party state. " The new Fascist party, deliberately modeled after those of Italy and Germany, is still somewhat vague in outline. It is known as the "Association for Assisting the Throne" (AAT), which is in charge of the "National Movement for Assist- ing the Throne" (NMAT), and was at its inception, ex officio, di- rected by the former premier. Prince Fumimaro Konoye. Launched officially on October 12, 1940, it appears to be conceived as an of- ficial government body. ^^ A "Parliamentary Bureau . . . has for
gungen als Voraussetzungen des japanischen Industrielisierungsprozessen," Welt- wirtschaftliches Archiv, XLVI Quly, 1937). PP- 45-61?
80 Ginjiro Fujihara (also written Fujiwara) The Spirit of Japanese Industry (Tokyo, 1936, pp. 118-19. For over a quarter of a century ex-Minister of Commerce Fujihara was chief executive of the Oiji Paper Company, a gigantic paper monopoly con- trolled by Mitsui interests, and formerly associated directly with Mitsui in a number of important positions. Fujihara was also a member of the House of Peers.
81 Kraus, op. cit.
82 "The Cooperation Council [of the A. A. T. ] is an organ through which the will of the people is conveyed to the Administration and vice versa, and is, thus vastly more than an advisory organ of the Government.
In addition to the cartel structure, there exists a series of central *'peak associations," so clearly dominated by the Zaibatsu and the large concerns grouped around and dependent upon them as to resemble more closely clubs or fraternities than actual trade asso- ciations. While there is, for foreign observers, no way whatsoever of now gauging their relative importance, they show tendencies quite similar to those underlying the growth and expansion of com- parable organizations abroad:
Almost all economic organizations in Japan have developed after the World War. Excepting chambers of commerce and industry, they have no legal basis, but as Governmental control of the national economy becomes stricter, the part played by these organizations is necessarily of greater importance. The most representative organizations, the mem- bers of which include all branches of the national economy are the Japan Chamber of Commerce and Industry, Nippon Kogyo Club, Nip- pon Keizai Renmeikwai, and Zensanren. ^^
The first of these, the Chamber of Commerce and Industry of Japan,^^ originated in 1928 under legislative sanction as the legally competent and officially recognized central federation of all the chambers of commerce and industry in Japan Proper, "organized according to the Law and the judicial persons and organizations in Chosen (Korea), Taiwan (Formosa), Karafuto (Japanese Sagha- lien), Kwantung Province and abroad, authorized by the Minister of Commerce and Industry. " ^^ It was successor to the Associated
Chamber of Commerce of Japan, organized in October, 1892, un- der authority of a "Chamber of Commerce Ordinance" promul- gated in 1890 when "chambers of commerce became official organ- izations of merchants and industrialists. " ^^
The nature of this quasi-governmental body has been described by an official representative as follows: *^
^^ Monthly Circular, issued by Mitsubishi Economic Research Bureau, Dec, 1937, written in response to query by the author.
37 These appear to have been modeled after the pattern of the German Chamber of Ck)mmerce and Industry, rather than after the type dominant in the United States and England, and thus to carry much greater weight with their constituencies than is the case in these latter countries.
38 From a typed summary prepared by the Assistant Secretary of the Japan Cham- ber of Commerce and Industry, Tokyo, Japan, in reply to direct questions by the author.
39 Mitsubishi Economic Research Bureau, Monthly Circular, Dec, 1937. 40 Summary, cited in footnote 38 above.
? KOKUTAI AND CO-PROSPERITY loi
The work of the chamber is conducted by a president and two vice- presidents elected every four years in the general meeting of the mem- ber chambers ^^ held once a year. The standing committee, consisting of representatives of 16 chambers of commerce and industry represent- ing industrial centers in Japan, meets monthly in place of convoking the general meeting. Of course, an extraordinary general meeting can be called when urgency is required. Twelve councils are commissioned from the leading businessmen and the crudities [sic] as the consultative organ.
The functions of the Chamber are, among others, to make representa- tion to the proper authorities in relation to commercial and industrial questions, to consider and execute the matters presented by the cham- bers and other business organizations, to issue reports and statistical information on commercial and industrial conditions, to organize and supervise commercial or industrial bodies, and to attend to business pertaining to the International Chamber of Commerce and the Inter- national Labor Conference. Assistance can also be rendered by per- forming the settlement by arbitration of disputes arising out of trade, commerce and manufacture, and by issuing certificates on this and other matters connected with trade, commerce and manufactures, such as the origin of goods, market price, and so on. Naturally the object of the Chamber is to promote and protect the trade, commerce and in- dustry of Japan and it is specially interested to act as the intermediary between foreign merchants and the commercial and industrial com- munities in Japan.
Power here would seem (1) to relate primarily to the general supply of information, general guidance, and general supervision, of member policies on problems of broad economic interest; (2) to possess some degree of officially granted authority in the exercise of its legally defined prerogatives; (3) to be centered in the hands of representatives of the chambers of commerce and industry resident in the great industrial cities; and (4) through relatively small mem- bership in these latter, to be readily subject to the control of the giant concerns clustered around the Zaihatsu.
The Nippon Kogyo Club (Industrial Club of Japan) is another World War baby. Having been established in 1917, it "exclusively represents the interests of large industries which developed during the World War, and thus constitutes a private organization of large
41 "When the Chamber of Commerce and Industry of Japan was organized, the number of the member chambers of commerce and industry was only 80. The num- ber has gradually increased, numbering at present 149, including 108 in Japan Proper, 4 in Karafuto, 13 in Chosen, 1 in Kwantung Province, 11 in Manchukuo, 5 in China, 4 in the United States, 2 in India and 1 in South America. " Idem.
? 102 KOKUTAI AND CO-PROSPERITY
industrialists. " ^^ In other words, it is a sort of "Union League Club" of the Zaihatsu circles, having for its objects, "to facilitate intimate intercourse among its members, . . . to investigate economic poli- cies from the standpoint of large industries . . . [to promote] the harmonization of the interests of capital and labor, and . . . [to serve as] the representative organization for Japanese industry in intercourse with foreign businessmen. "
Stimulated by problems of the great postwar depression to ex- pand its functions further, the Nippon Kogyo Club took the lead in forming two other organizations, Nippon Keizei Renmeikwai (The Japan Economic Federation) in 1922 and Zenkoku Sangyo Dantai Rengokai (Zensanren--National Federation of Industrial- ists) in 1931. The former was established ostensibly as a "branch of the International Chamber of Commerce. " In reality it appears to serve as a compact coordinating body of a limited number of na- tional business organizations, dominated in turn by a few of the giant concerns, and devoted primarily to the formulation of eco- nomic policies for the Japanese business community as a whole: *^
Members of this economic organization include 30 organizations, 216 judicial persons, and 427 individual businessmen. The managing or- gans are the General Meeting, councilors meeting, directions (sic), resi- dent directors, resident committee and councillors. The resident com- mittee is an organ to the chairman (sic), and is elected by the chairman among resident directors, directors and councillors. The work carried on by this organization is as follows: (1) Facilitating intercourse among businessmen, (2) Formation of an economic policy representative of businessmen, by investigation on the part of its own board and by out- side experts, (3) Representing Japanese business in relations with for- eign economic organizations. **
"Besides being the headquarters of the Japanese National Com- mittee for the International Chamber of Commerce, since its in- ception, the Federation now possesses within its organization, the Japanese American Trade Council, the Japan-British Trade Com- mittee, and, quite recently, the Japan-Italian Trade Committee . . . The Federation is rendering manifold services to the Govern- ment in the formulation and execution of important national eco-
42 Monthly Circular. 4S Idem.
44 See also the "constitution" of the Japan Economic Federation, dated April, 1937 (obtainable in English).
? KOKUTAI AND CO-PROSPERITY 103
nomic policies. Its position may well be compared with that of the Federation of British Industries in London and of the United States Chamber of Commerce in Washington, D. C. " *^ Presided over by the eminent Baron Seinosuke Goh,*^ the Federation is at least a blueprint for full and complete coordination of the economic, fi- nancial, and commercial policies of the island empire.
Zenkoku Sangyo Dantai Rengokai performs a like function in
the labor field for a parallel cross-section of the upper reaches of
Japanese big business. "The main objective of this association is
similar to that of employers association [sic], protecting the em-
ployers' interests against attack from the labor movement. It is
composed of five local associations--Kwanto, Kwansai, Middle,
West, and North--and these local bodies entertain relations with
chambers of commerce and industry, and manufacturers* associa-
^'
tions. "
In 1937 a supreme effort was made to bring together all cen-
tralized employers' and business confederations "which would con- centrate all the interests of businessmen" vis-a-vis the government. Thus was called into being on September 27, 1937, the Nippon Keizai Dantai Renmei (The Japanese League of Economic Or- ganizations) under the joint auspices of the Japan Economic Fed- erations, the National Federation of Industrialists, and the Japan Chamber of Commerce and Industry. Representatives were sent by individual organizations as follows:
Japan Chamber of Commerce and Industry Japan Economic Federation 8
*5 East Asia Economic News, published by the Japan Economic Federation, Aug. , 1939-
46 "His career as a businessman began in 1898 when he became the president of the Nippon Transportation Company. He became successively or concurrently the head of innumerable corporations, such as the Imperial Commercial Bank, the Tokyo Stock Exchange, the Nippon Iron Manufacturing Company and the Tokyo Electric Light Company. He has been the president of the Chamber of Commerce and Industry of Japan, and is the vice-president of the Society for International Cul- tural Relations. " Since becoming President of the Federation, "Baron Goh became the head of the Organizing Committee of the two big national corporations, the North China Exploitation Company and the Central China Development Company, which have been established in accordance with the fixed policy of the Japanese Government. " East Asia Economic News, July, 1939.
47 Monthly Circular. "In view of the history . . . it is clear that the Federation was organized to present a united front of capitalists against the labor class. " Trans- Pacific (weekly). May, 1940, p. 11.
9
? KOKUTAI AND CO-PROSPERITY
National Federation of Industrialists 6
Tokyo and Osaka Clearing Houses
Trust Company Association 2 Life Insurance Company Association 2 National Association of Local Bankers 2
Nine commissions were established, "six of which were to spe- cialize on control over commodities such as textile raw materials, fuels, metals including iron and steel, rubber and hides, lumber, and paper respectively. One commission will investigate price prob- lem [sic] while another will supervise the supply of labor and tech- nicians. The last commission will supervise industrial finance. " ^^
Apparently the new organization has worked very closely with the government, constituting as it does, a sort of private "National Defense Council" for business enterprise. With the possible excep- tion of the National Association of Local Bankers, every one of the member peak or central associations is directly or indirectly dom- inated by the Zaibatsu.
Schematically, it would be hard to imagine a much higher degree of policy-determining power than is indicated by the combination of the Zaibatsu and its concentric cartel and federational machin- ery. The hierarchy of business control seems well-nigh complete. Even further importance is lent by the closeness of the tie binding the system, almost from the start and from center to circumference, with the government.
ZAIBATSU AND KOKKA NO TAME
As with the great eighteenth-century European mercantilistic states in their times, Japan's entrance onto the world stage wit- nessed a deliberate and systematic dovetailing of the power require- ments of army and navy, the Realpolitik of imperial expansion, and the swiftly unfolding needs of monopoly-oriented industrial, commercial, and financial capitalism. That the state should take the lead was both natural and inevitable.
With a view to the speediest possible modernization of her in- dustrial apparatus, the state established up-to-date factories and workshops, and promoted by every means at its disposal the ex- pansion of national industries. Many of the thriving industries of
48 Idem.
104
4
? KOKUTAI AND CO-PROSPERITY 105
present-day Japan--arsenals, chemical works, iron and steel plants, cotton spinning, power-loom weaving, silk filatures, shipbuilding, railways, paper mills, glass works, type-casting, the manufacture of safety matches, coke, gas, bricks--may be traced back to the initia- tive, encouragement, and guidance of the Meiji Government. The state also established trade and industrial schools, seamen's training institutes, and imported foreign technicians and advisors--as early as 1875 more than 500 foreign experts were so employed. On the financial side the state loaned mechanical equipment or capital to private entrepreneurs at low rates of interest, or granted outright large subsidies for the creation of mills and factories, foundries and dockyards. Kokka no tame, ''for the state," was the term used to encourage industrialism. A competent foreign investigator, com- menting on these practices, writes: *^
The part played by the government cannot be overemphasized. Japa- nese industry of the present day owes its state of development primarily to the efforts of a highly paternalistic central government.
In the period 1867-83, the state assumed direct responsibility for the industrial and financial development of Japan. Increasingly thereafter it endeavored to withdraw from direct participation in the industries aided as soon as possible, and turned its holdings over to private companies. ^?
In some cases (railroads, communications, iron and steel, dock- yards) this policy has not been entirely feasible, and the state has continued as an active agent in manufacturing. ^^ Private capitalis- tic enterprise, however, developed apace, and the close association of state and private capitalism has continued in unbroken sequence to the present day. The granting of subsidies, for example, has be- come so firmly entrenched as an integral part of governmental
49 John Orchard and Dorothy Orchard, Japan's Economic Position (New York, 1930), p. 90. See also, Moulton, Japan, in particular Chapter XVII, "The Government in Relation to Economic Enterprise. "
60 The extent to which this disposal of government properties stimulated private enterprise may be shown by the case of the Miike coal mines in Kyushu. In 1886 the government sold these mines to the Mitsui family for 4,550,000 yen. "Within a year the Mitsuis not only had recovered the 4,550,000 yen but made a handsome profit. One conservative estimate is that the mine has averaged 3,000,000 tons a year at ten yen a ton for fifty years. On the basis of thirty percent clear net profits, the Mitsuis in a half-century have realized 450,000,000 yen on a 4,550,000-yen investment. " Rus- sell, The House of Mitsui, pp. 223-24.
51 See Hahn, Die Industrielisierung Japans, pp. 104-7.
? io6 KOKUTAI AND CO-PROSPERITY
policy that it not only persists but has been expanded and gen- eralized until its influence spreads throughout the major industries of the country. The government not only extends such aid to infant industries, but also to practically all the older industries whether experiencing tangible difficulties or not. ^^ Throughout the twen- tieth century an expanding system of autarchic aids, direct and indirect, has been elaborated on the subsidies model; accordingly, tariffs, import quotas, export bounties, currency depreciation and manipulation, foreign-exchange controls, not to speak of an in- creasing monopolization of colonial trade resulted in the creation
of the Yen-bloc.
While the state has not only encouraged industrial growth but
also directed it along particular channels, it has not seriously inter- fered with the conduct nor the private profits of the dominating business concerns. "Japanese large-scale industry," the Lederers write,^^
has taken on the character of modern enterprise without having gone through a period of transition from feudalism. In its origins the patron- age of the State was of decisive importance. . . . Frequently the State intervened to assist families in danger of bankruptcy, supporting them by credit grants, perhaps even through many years. The greater the name and the closer its connection with politically influential parties the more securely could the firm count on being tided over periods of heavy losses. Small people, however, families without connections, were lost if they could not make their own way. ^*
It would be a mistake, however, to conclude that such intimate relationships between government and business enterprise are merely of the order of ''growing pains" involved in "catching up" by forced draft methods. To be sure, "Mercantilism was introduced at the beginning of the Meiji Era and it is still the ruling force at
52 Cf. Herbert M. Bratter, "The Role of Subsidies in Japan's Economic Develop-
ment," IV (May, 1931), 377-93.
5^ Japan in Transition, pp. 238-39.
6* Even the emergence of a war economy in Japan since 1937 and the institution
of some severe restrictive measures has not interfered with profit-making opportuni- ties. The Oriental Economist index for the profit rate of joint stock companies shows a sustained average of about 20% per annum for 1937 and 1938, and it is noted that the war influences on the profit rate are "so negligible that the general condition may be regarded as stationary. " Oriental Economist, Supplement, "Japan Prepares for Ck)ntinental Construction," Oct. , 1939; see also ibid. . Supplement for 1939-40, p. 30, and the issue of Oct. , 1941, pp. 509-10.
? KOKUTAI AND CO-PROSPERITY
the present time. " ^^ Yet so to summarize present trends is to greatly oversimplify the story. What is being accomplished is the gradual rounding out of a highly coordinated Fascist-type of totalitarian economy dominated by an ideology which a Japanese authority declares to be increasingly that of the army bureaucracy: "nation- alistic, expansionist, anti-capitalistic, anti-individualistic, anti- factional, anti-communistic, and socialistic. " ^*
Even the phraseology here is almost identical with the customary Nazi and Fascist propaganda offerings. The Oriental Economist terms the system
State Capitalism. . . . Japan married socialism to capitalism and its offspring was state capitalism. The term is an arbitrary one for want of a better. It means the people, through the state, put up part of the money for some important national enterprise, and private capital the rest, usually about half and half. The state restrains capital, and capi- tal spurs the state. The one gives the national interest with a check on profit, and a sharing by the people as a whole. The other restrains such weaknesses as bureaucracy and nepotism. State capitalism is the nexus. ^'^
It is significant that the writer of these lines is thinking directly and specifically of great "mixed" enterprises (owned partly by government and partly by private interests). There are a number of these, and the pattern of control seems to be gaining steadily in both official and business favor. Mention has already been made of the great Japan Iron and Steel Company, which produces about half of the total Japanese output, and which under most recent plans is owned about half and half by governmental and by private interests. But on a similar plane a whole series of new colonial, transportation, and communication works are being developed.
c5 Professor Eijiro Kawai, "Neue politische Kriifte des wirtschaftlichen Aufbaues," Weltwirtschaftliches Archiv, XLVI (July, 1937), 62-78.
56 Chitoshi Yanaga, "Recent Trends in Japanese Political Thought," Pacific Af- fairs, June, 1940. The author adds, somewhat quaintly, "Japanese ideas are at once radical and conservative. " "Anti-capitalistic," of course, means, "anti-liberal," anti- free-competition, and anti-laissez faire. But in no other sense. Other Japanese writers refer to the new order more simply as "Japanese National Socialism. "
57 George Gorman, "Japan's Three Principles," Oriental Economist, March, 1940. The expression "state capitalism" is unfortunate, since it suggests (a) ownership by the state and (b) pursuit of nonproperty ends. Neither is borne out by the facts. State ownership is supplementary and additional to private capital; there is no sign of desire to expropriate private interests, and the results of government activity re- dound to the advantage of ruling-class circles and private business enterprise. See pp.
113-19, following.
107
? io8 KOKUTAI AND CO-PROSPERITY
The model here has been the semigovernmental South Manchurian Railway. ^^ Others are the new China Federal Reserve Bank,^^ the North China Development Company,^^ and the Central China Development Company. ^^ Industrial enterprises taken over or newly established in the conquered territories are being handled in a similar fashion, when they are not included directly in the interest radii of the "development companies. " ^^ Thus the army has brought in Y. Aikawa, now allied to the Zaihatsu, to take over the Showa Steel Company. Recent schemes for a national electric power grid comparable to the British Central Electricity Board are being laid out on a similar basis. The newly formed International Electric Communication Company ^^ is being governed much as
58 Capital 800,000,000 Y (yen); assets valued (1936) at 2,000,000,000 ? . "Controls nearly all the railways in Manchuria, North China and part of Korea, and is com- parable, in many ways, with the Canadian Pacific, the Trans-Siberian and other great lines . . . it has developed most of Manchuria's coal, iron and gold mining, gas, electricity, and water supplies, docks, engineering works, modern hotels and news- papers. " Smith, "Japan's Business Families. " Since December, 1937, a great propor- tion of South Manchurian Railway's property in the heavy industries has been transferred to the Manchurian Industrial Development Corporation, headed by Y. Aikawa. The M. I. D. C. 's capital of 450,000,000 yen is contributed equally by the Manchukuo Government and the Japan Industry Company, one of the smaller Zaibatsu. See Japan-Manchoukuo Year Book, 1940, pp. 860-66, for a description of the M. I. D. C.
59 Capital 50,000,000 ? ; half provided by the Yokohama Specie Bank, the In- dustrial Bank of Japan, and the Bank of Korea; balance by various Chinese banks.
60 Capital, 350,000,000 Y, one half contributed by the Japanese government,
61 Capital {Oriental Economist, May, 1940) 173,000,000 Y, owned about half and half by government and private business interests. Its operations include salt, min- ing, textiles, fishing, railroad, housing projects and properties.
62 Under these schemes, Japan was divided into nine regional blocs with a mo- nopoly distribution company in each bloc.
These schemes went into operation on April 1, 1942.
There are other "mixed enterprises" which are mainly syndicates. These are the Japan Rice Co. , capital 30,000,000 ? , Japan Fertilizer Co. , capital 50,000,000 ? , and the Japan Coal Co. , capital 50,000,000 Y. In each case, the government contributes half of the capital, besides passing out many forms of subsidies. All three have complete monopoly over the buying and selling of the commodity concerned. An- other group of "mixed companies" is concerned chiefly with the development of mining. These are: Imperial Fuel Development Co. , capital 20,000,000 Y, Japan Gold Production Co. , capital 20,000,000 Y, and the Imperial Mining Development Co. , capital 30,000,000 Y. Half of the capital is contributed by the state. Colonial and transportation development companies not mentioned previously are: South Seas Transportation Co. , Japan Transportation Co. , capital 20,900,000 Y, Korea and Manchoukuo Development Co. , 8,000,000 Y, Formosa Development Co. , 18,000,000 Y, South Seas Development Co. , 15,300,000 ? , and the Manchuria Development Co. , 33,300,000 Y.
63 The new company "is a national policy communication company which came into being through the consolidation of the former Nippon Wireless Telegraph Com-
? KOKUTAI AND CO-PROSPERITY 109
though it were a "mixed enterprise," even though the direct gov- ernment participation in ownership seems to be of minor im- portance.
Such data but barely scratch the surface, for they fail clearly to indicate the wide ramifications of a network of enterprises of a trust-like character which the Japanese have been swiftly elaborat- ing throughout the entirety of their newly acquired "autonomous circle of common prosperity" in "Greater East Asia. " Within Japan proper, reorganization schemes are being announced almost daily which combine entire industries into single or closely coordinated trusts. Since the beginning of 1941, reorganization schemes have been announced for such widely varying trades and industries as electric light bulbs (for export), oil, silk, spinning (ten manage- ment enterprises coordinated by a single policy administering body), deep-sea fisheries, and automobiles. ^* These are paralleled by a mushroom growth of similar Japanese dominated private trusts in Korea, Manchukuo, North China, and the South Sea areas. Many of these are deliberately organized as central and all-inclusive trusts for the whole of Japanese dominated territories. Thus the East Asia Shipping Company has been recently "entrusted" with "the task" of organizing shipping with the mainland, and Dai- Nippon Airways with the spinning of a centrally directed Far Eastern air traffic system. ^^
pany and the International Telephone Company under the terms of a special law. " It is to handle all wireless telegraphic and a part of the cable telegraphic traffic of Japan and the Japanese empire, and is aimed at "uniform control, completion and development of the international communication network of Japan. " Oriental Econ- omist, July, 1940.
64 In 1941, the following reorganizations were completed: 77 cotton spinning com- panies were merged into blocs, leaving only 14 companies; 37 woolen companies were reduced to 8. Similar steps were taken for other textile companies like silk and rayon. See the annual report of Mr. S. Tsuda, president of the Cotton Spinners' Association, Oriental Economist (August, 1941), p. 423. As for the other industries, nine leading packing firms were merged into one; 27 machine tool firms formed the Nisshin Ma- chine Industry Co. ; six canning companies formed the Toyo Can Manufacturing Co. , 960 glass firms reduced to 50. Those industries in the process of reorganization in the fall of 1941 and probably completed now are: Portland cement, 23 firms reduced to 5 or 6, imitation leather, 16 firms into 4, marine leather, 19 into 1, oil, 14 into 6, municipal transportation, unification of companies in each city, woolen yarn whole- saling, 200 dealers into 24 blocs with one firm in each, tanning, 800 into 30 or 40 blocs, soap manufacturing, 500 into 50 blocs. Cf. Osaka Mainichi and Tokyo Nichi Nichi from August to October, 1941, inclusive.
65 Toshio Narasaki, "Oriental Great Economic Circle and Transportation Policy," East Asia Economic News, Jan. , 1941.
? 110 KOKUTAI AND CO-PROSPERITY
The "co-prosperity sphere" has been variously described. One Japanese writer outlines this oriental equivalent of the Nazi "new order in Europe" in the following terms: ^^
The Oriental Great Economic Circle signifies the economic circle com- prising Manchoukuo, China, the Netherlands Indies, French Indo- China, Thailand and British Malaya under the leadership of Japan. The areas belonging to this circle should strive to bring about a com- plementary existence with free exchange of commodities, performing at the same time their shares in the productive activities. In such an economic circle, it is natural that the country the most advanced in the fields of culture, economy, industry and technical arts should take the lead of other nations, and in the Orient this duty of leadership devolves without question upon Japan. ^'^
Parallel with these developments, the government has taken an increasingly active hand in the process of forced cartellization, es- tablishment of compulsory price and marketing control, and vari- ous other forms of regulation which serves to promote the cen- tralization of economic policy-forming power. Under the Bureau for Industrial Regulation, established in 1930, for example, the Ministry of Trade and Industry may declare any "consolidation" to be a regular cartel organized by itself "with the definite purpose of promoting industrial economy," if approved by more than half of the potential membership. And, "if more than two-thirds of the members of the cartel agree to the provisions agreed upon, they may petition for a contract and the Ministry can make such a con-
tract with them. " ^^ The Bureau's powers in theory, even under the original enabling act, range over the entire field of industrial or- ganization and policy:
66 Idem.
67 A frank version of the above general aims is expressed by Mr. Masatsune Ogura, Finance Minister in Konoye's third cabinet, in a series of articles, "How to Fight Economic War" in the Osaka Mainichi and Tokyo Nichi Nichi (English), Aug. 2-3, 1941: "Nippon can specialize in heavy industries and China in light industries to advantage. The products of these two countries can supply not only the co-prosperity sphere but all the world as well. The Greater East Asia Co-prosperity Sphere af- fords an ideal market for our manufactured goods. Hundreds of millions of East Asiatics are our potential customers. . . . If we should succeed in settling the emergency and in bringing about expansion, whatever financial burden we may have shouldered will bring returns many times over. "
68 Professor Masamachi Royama, "Die wirtschaftsrechtliche Struktur als Grundlage des japanischen Wirtschaftsaufschwungs," Weltwirtschaftliches Archiv, XLVI (July, >>937)' 79-92.
? KOKUTAI AND CO-PROSPERITY ill
The first department (or division) handles supervision and checking of industrial transactions, carries out scientific research and administers any financial reform required to achieve special improvements. The second division supervises the standardization of industrial products, the uniformity of manufacturing processes, and the propaganda adver- tising of home products. Thus all different forms of industrial produc- tion are checked, supervised, and virtually controlled by these two de- partments. (R)^
Other governmental coordinating activities extend and deepen the web of official control. The Bureau of Economic Resources, established in 1928, "has jurisdiction over all plans that deal with regulation and disposition of raw materials and both human and material economic resources. " ^? The Bureau of Supervision or General Board of Control, organized in 1935, is a sort of central "Kontrollamt" of the entire national economic system, subject to the direct authority of the Cabinet. ^^ How far such control may go can be seen in the field of agriculture, where a wide-ranging net- work of regulation covers practically the entirety of the Japanese agricultural system, including its economic interests at all levels of production and marketing. The model here is the Rice Law, passed in 1921 and subsequently altered and greatly reinforced by a num- ber of amendments. In its current form it is probably the most rigid, all-inclusive, and totalitarian law relating to any major agri-
cultural industry anywhere in the world. ^^
The final step taken in this direction is reflected in the establish-
ment of the Supreme Economic Council, charged with the task of coordinating "total agricultural associations, total vocational and industrial associations and 'free enterprise units' which will con- tinue to exist outside the corporate bodies. " Under leadership of the government, "plans for an empire industrial federation" made
69 Ibid. 70 Ibid. 71 Ibid.
72 Dr. Shiroshi Nasu, "Ziele und Ausrichtung der japanischen Agrarpolitik in der Gegenwart," Weltwirtschaftliches Archiv, XLVI, 157-84. According to this authority "the total agricultural debt rose from 750 million yen in 1911 to 4600 million yen in 1929" and by this latter date approximately 30 percent of all Japanese farmers were insolvent and unable to pay their debts. The effect of the various price and market- ing and agricultural control laws seem not to have been the liquidation of this growing mass of agricultural indebtedness, but rather to have cumulatively pressed the poverty-stricken peasant layers into a straightjacket reminiscent of the Pro- crustean pattern of the German Reichsbauerngesetz--or law of compulsory entail- ment. See also the sketch of "the agricultural reorganization movement in the Monthly Circular of the Mitsubishi Economic Research Bureau, March, 1941, p. 11.
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up of "leaders representing the steel, coal, electricity, shipping, and cotton industries" was approved as the agency to work with the government in order to implement these plans. The new federation seems to be practically coextensive with the existing Japan Eco- nomic Federation (it may actually be that body! ). The dominating principles were said to be "public service first," abandonment of "liberalistic profitseeking" and "spontaneous and autonomous formulation of economic policy. " The suspicion that "the govern- ment wishes business men to have the management of the nation's economic affairs" ^^ (authoritative self-government in business) seems to have been fully justified with the announcement that Mr. Ogura, head of Sumitomo (third largest of the Zaihatsu), was to be made the Imperial "Japanese Knudsen. " ^*
In addition to the expansion of this meticulously exacting reg- ulatory network, the government has not hesitated under the emergency of war to wipe practically out of existence large sections of the business system. Most noteworthy here is the policy which has come to be known in the Japanese patois as Butsudo (a contrac- tion of the Japanese words meaning "mobilization of commodi- ties"), which was gradually inaugurated after the middle thirties. On the surface Butsudo is a system of war rationing which places special emphasis upon the power of the government to prohibit the manufacture or sale of any commodity in any fashion it may see fit and to canalize productive capacity as the exigencies of a wartime economy may determine.
Actually, it vests in the government power to build up or undo entire branches of industry in either war or peace. Under Butsudo for example, the domestic sale of cottons has been almost entirely eliminated. ^^ Various strictly nonessential foodstuffs can be sold only in limited amounts. Its net effect has been not only to bring
73 Byas, "J'lpan's Censors. " "Under intensifying wartime conditions, the situation has changed quite perceptibly. Government authority has steadily increased and the Government and a special group of officials connected with the big moneyed interests have come to have much say in the economic scheme of the nation. With the progress of the planned economy, these officials are likely to play greater and greater parts in concert with the various industrial and business 'gauleiters' or district leaders, who are moving up to become fuehrers. These rising men are also leaders of their respective cartels. " Hirose Higuchi, Japan Times Weekly and Trans-Pacific, March 27, 1941, p. 458.
74 "Mr. Ikeda, the former executive head of the great Mitsui corporation, . . . is now attached to the Emperor as one of his personal consultants. " Hugh Byas, The Japanese Enemy, His Power and His Vulnerability (New York, 1942), p. 33.
75 Manchester Guardian, July 20, 1938.
^
? ? KOKUTAI AND CO-PROSPERITY 113
about a considerable dislocation of industry and a great deal of occupational unemployment, but also to force many concerns either to suspend operations or to go out of business entirely. By the early part of 1939 some 9,793 establishments employing 68,273 persons were suspended, and some 1,709 establishments employing 6,223 were openly liquidated. ^^ Most of these businesses were small scale; many of them w^ere simply handicraft shops.
Yet even Butsudo does not run counter to the general picture outlined above. Quite the contrary. It merely represents the logical fulfillment of the partnership between business and government which has characterized the evolution of capitalistic institutions in Japan from the very beginning. In it is revealed the determination to coordinate in a national fashion the entirety of economic activity on behalf of the volatile will and vaulting ambitions of the new social-economic hierarchy.
The elements here are not greatly dissimilar to those noted for other totalitarian systems of the general Fascist type.
1. The ZaihatsUj the monopolistically-oriented enterprises cen- tered around them, and the extensive network of trade associations, chambers of commerce, cartels, and similar bodies of which they are the acknowledged leaders, constitute an elaborate, semilegal hierarchy of graduated economic power. The smaller businesses, handicraft establishments, and the various other layers of the "pro- fessional" middle classes thus exist within a sort of all-inclusive "corporate" regime; their organization by occupational categories guarantees them something of the order of a stable living according to customary standards, providing they do not conflict with such policies as Butsudo.
2. This hierarchy works very closely with the civil and admin- istrative bureaucracy of the state. In fact it is probably not too far from the truth to refer to the gradually consolidating economic bureaucracy as the economic aspect of the state bureaucracy. This constitutes the Japanese version of "National Socialism, which is inclined to regard anti-capitalism as separate from socialism and thus associate state-absolutism with socialism. " " Capitalism, in
76 Isoshi Asahi, The Economic Strength of Japan (Tokyo, 1939). Principally af- fected were the textiles, leather, rubber, and iron and steel industries.
77 "National Socialism is a combination of state-absolutism, which has always been a sheet-anchor to Japanese political thought, and Socialism. . . . Japanese National Socialism opposes two important theories of Marxism: (1) it rejects the theory of
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this context, is interpreted to be "competitive" and "unregulated" in terms of the "well-being of the state. "
3. The military is becoming increasingly part and parcel of the same control pyramid. At times, as in the beginning of the Man- churian and Chinese "affairs," the army has been able to take inde- pendent action. But under the regime dominated by the cliques centered around Matsuoka, internal conflicts seemed to be largely smoothed out, and that close community of interests which has al- ways held the military and imperial-nationalistic interests together in Japan once again asserted itself. ^^
Japan has really remained a military nation in spite of all the constitu- tional contributions of western democracy. . . . The Key to the de- velopment and expansion of Japanese industry until Japan became established as a major industrial power was increasing militarism. . . . The Administrators and commissioners, the large-scale corpor- ations of the Railroad Company of South Manchuria, and Mitsui and Mitsubishi, the Yasuda and Sumitomo, and other organizations down to the small rice growers and industrial workers and minor crafts- men . . . are all well aware of the numerous factors that control Ja- pan's economic status. In spite of all internal conflicting interests and social differences, all classes of Japan's population are concerned in but one important matter: Japan must progress and she must be suc- cessfulJ^
the decline of state-conlrol; and (2) it rejects the theory of the rise of internationalism. . . . National Socialism appealed to the mass of the Japanese because state-absolutism still exercises its original and traditional influence in Japan. " Kawai, "Neue politische Krafte des wirtschaftlichen Aufbaues. "
78 The Tojo-Terauchi-Sugiyama clique in control of the army at the present time is close to the Zaibatsu. The Terauchi family has been close to the Mitsuis since the first World War days when the elder Terauchi was Prime Minister, while Tojo is intimate with the Mitsubishi. One paper calls Tojo the "most conservative of the army clique. "
Commenting on the New Economic Structure Law of 1941, Joseph Newman, New York Herald-Tribune correspondent in Tokyo and one of the ablest journalists on Japan, declares in a recent book. Goodbye Japan (New York, 1942), p. 199: "The power, however, was left largely in the hands of big business, whose representatives in the offices of Finance Ministry and Commerce and Industry Ministry applied the law in such a way that the big-business clans grew stronger, a larger part of the middle class was liquidated, and workers and peasants were able to buy less goods with their money than ever before. The business clans were permitted to continue their 'voluntary regimentation,' through their independent industrial cartels. They not only were given bigger orders than before by the militarists but also a guar- antee of seven percent profit on their iron and steel output as well as subsidies to encourage production. The government announcement of subsidies for big business was made by the president of the Iron and Steel Control Association, who was pri- vately connected with Mitsui, Mitsubishi and other leading business clans. "
79 Johannes B. Kraus, "Wirtschaftsgesinnung und volkisch-politische Grundbedin-
? KOKUTAI AND CO-PROSPERITY 115
4. And finally, the psychopathic, ideological, propaganda ce- ment which holds the Kokutai amalgam together is the fused power of Shinto and Bushido. In a very interesting doctrinal glorification of the Japanese way, Ginjiro Fujihara, quotes with warm approval the words of Lothrop Stoddard: ^^
Present-day Japan is thus stung to action by the sharpest of life's in- stincts--that of self-preservation. Now add to this primeval urge a burning faith in 'Great Japan' and the peculiar excellence of the Ya- mato Race; add to that again the Bushido code glorifying self-sacrifice and welcoming heroic death, and we can realize the fierce longing in Japanese hearts to cut the Gordian knot of their difficulties and hew out a great destiny with the Samurai sword.
Or, as Dr. Kraus, a very sympathetic observer, puts the matter somewhat more dryly, "Japan's secret is that she knows how to con- trol her economic system through the ethics of Samurai or 'Samurai Geist. ' " <<^
The final step here has been already taken with the de facto dis- solution of all the old parties and the emergence of a fully totali- tarian "single-party state. " The new Fascist party, deliberately modeled after those of Italy and Germany, is still somewhat vague in outline. It is known as the "Association for Assisting the Throne" (AAT), which is in charge of the "National Movement for Assist- ing the Throne" (NMAT), and was at its inception, ex officio, di- rected by the former premier. Prince Fumimaro Konoye. Launched officially on October 12, 1940, it appears to be conceived as an of- ficial government body. ^^ A "Parliamentary Bureau . . . has for
gungen als Voraussetzungen des japanischen Industrielisierungsprozessen," Welt- wirtschaftliches Archiv, XLVI Quly, 1937). PP- 45-61?
80 Ginjiro Fujihara (also written Fujiwara) The Spirit of Japanese Industry (Tokyo, 1936, pp. 118-19. For over a quarter of a century ex-Minister of Commerce Fujihara was chief executive of the Oiji Paper Company, a gigantic paper monopoly con- trolled by Mitsui interests, and formerly associated directly with Mitsui in a number of important positions. Fujihara was also a member of the House of Peers.
81 Kraus, op. cit.
82 "The Cooperation Council [of the A. A. T. ] is an organ through which the will of the people is conveyed to the Administration and vice versa, and is, thus vastly more than an advisory organ of the Government.
