" ^^ 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, .
Brady - Business as a System of Power
, p.
275.
18 W. H. Chamberlin, Japan over Asia (Boston, 1937), p. 228.
19 Data from Resume statistique de I'empire du Japon (Tokyo, 1912). P- 108; ibid.
(1924), p. 72; ibid. (1930), p. 46; ibid. (1934), p. 44; ibid. (1936), pp. 46-47. According to an investigation by the Industrial Bank of Japan, quoted in the Osaka Mainichi and Tokyo Nichi Nichi (English), July 26, 1941:
1st half of 1940 2nd" " "
No. of Am't of capital mergers involved (in yen)
69 1,802,353,000 143 2,093,143,000
1st " " 1941 172 The Bank gives the following reasons for the increase:
3,024,770,000
1,983 4. 707 10,194 12,634
14-547
755 2,523 6,227 8,113 9,264
38. 1 53. 6 61. 1 64. 2 63. 7
? KOKUTAI AND CO-PROSPERITY
Built up around and led by the Zaihatsu, the large aggregations of capital represent a degree of actual concentration far greater than the superficial data of corporate holdings of the giant concerns would seem to indicate. No important policy of state, it is safe to say, is likely to be realized unless it has the active or tacit approval of the great houses that stand at the gravitational center of this swiftly growing concentration movement.
The Zaibatsu, in turn, are closely held family systems, controlled through the device of family owned holding companies. Again the case of Mitsui, largest and oldest of the Zaibatsu, may be taken as typical. The House of Mitsui consists of eleven affiliated Mitsui families,^^ all offshoots of the founder, Sokubei Mitsui. The head of each family is a member of the Family Council, and only family heads may vote at Council meetings. The head of the main Mitsui family is ipso facto head of the Council. The other ten families have a strict and traditional family rank and status. The Council is governed through a Family Constitution, first drawn up in 1722 by the third Mitsui, and revised and brought up to date in 1900. The full text of the 1900 Constitution has never been published, for many passages are held as strict family secrets. It is known that there are 10 chapters and over 100 articles. Of the Constitution, Russell 2^ remarks, "In no other large business institution in the
"1. The Government has advised companies in financial difficulties to carry out merger.
2. With the kaleidoscopic change in the world situation many companies were obliged to effect amalgamation due to the difficulty in obtaining raw materials. 3. From the viewpoint of enterprise rationalization financial organs have advised
industrial companies to effect mergers. "
20 Oland D. Russell, The House of Mitsui (Boston, 1939), p- 4, quotes a Japanese
authority, Shumpei Kanda, who in 1937 estimated the fortunes of the eleven family heads as follows:
Baron Takakimi Takahisa
Geneyemon Baron Takakiyo Baron Toshitaro
Takanaga Takamoto Morinosuke Takaakira Benzo Takateru
Total wealth *i Ibid. , p. 23.
450,000,000 Yen 170,000,000 200,000,000 230,000,000 150,000,000 140,000,000
60,000,000 80,000,000 60,000,000 60,000,000 35,000,000
1,635,000,000
93
? KOKUTAI AND CO-PROSPERITY
world is the power and unity of family so firmly entrenched and safe-guarded as in the House of Mitsui through this rare docu- ment. "
So fundamental is the pattern of Mitsui in the family systems of the gigantic Japanese combines that it is worth quoting Russell's summary of this remarkable document somewhat at length: ^2
Chapter One specifies the six main families and five branch families by name, and prescribes that branch families may not be elevated to the status of main families, nor may any future branch families be ad- mitted to the Council.
It is characteristic of the spirit of the document that Chapter Two expressly defines the duties of the family members before there is any mention of the rights and prerogatives of these members. In this chap- ter are laid down these principal points:
94
1.
2.
3.
4.
5. 6.
Members of the family shall respect the rules prescribed by the founder, associate with each other as brothers, cooperate in all things, work together to enhance the prosperity of the House and to consolidate the foundations of each family.
Dispense with excessive luxury and practice simplicity and econ- omy in living.
When of proper age, sons and daughters of the eleven families shall study in good institutions of learning.
No debts shall be incurred by members of the Family nor shall any one member guarantee the loans of others.
All special actions require the consent of the Family Council. The Family Heads shall observe the various contracts and inden- tures in transacting their various businesses, shall take turns in inspectihg the business conditions of each of the firms and estab- lishments of the House of Mitsui, shall submit reports to the Coun- cil, shall call the Council whenever it is found that any officer of any firm of the House of Mitsui is undertaking or attempting to undertake dangerous plans, or if he is found committing some wrong so as promptly to adopt means of dealing with the offender and set about rectification or prevention of similar acts.
Chapter Three outlines the prerogatives and duties of the Family Council, voting rights, and general agenda of Council meetings. The second article of the chapter gives to the Council the right of "distribu- tion of profits, earmarking of reserves, budgeting of expenses and pay- ments of the various firms of the House, and distribution of property in case any of the companies of the House should be dissolved. " Ac- tually these details are handled in general by the Mitsui Gomei Kaisha, but the Family Council acts as sanctioning body.
22 ihid. , pp. 20-23.
? KOKUTAI AND CO-PROSPERITY
95
The Fourth Article of the chapter specifies that the Council shall determine the household budgets of each of the eleven members of the family; and this is religiously followed, even to the extent of "entertain- ment allowance. "
Chapter Four concerns marriage, adoption, and regulations about collateral branches. It has never been published in detail.
Strict rules are provided in Chapter Five for clamping a heavy hand on "those members of the House who misconduct themselves or who squander money or property. " It is a matter of record that these regu- lations rarely have been invoked.
Chapter Six is the original Sixth Precept of the Founder's Constitu- tion, and is characteristic not only of the spirit of the entire document but a three-hundred-year-old Mitsui Principle. It specifies that "Retire- ment shall never be permitted unless it is unavoidable," and includes a maxim of Hachirobei: "The lifework of a man lasts as long as he lives; therefore do not, without reason, seek the luxury and ease of retire- ment. " The rest of the chapter deals with inheritances in the event of compulsory retirement.
Chapter Seven details the duties of the directors of the Mitsui firms and lays down a code, mostly secret, "to assure perfect contact among them so as to obviate friction. "
Chapter Eight is held in extreme secrecy. Only family members and the higher directors of the business organization know its provisions. In general, it sets strict limits to various capitalizations, specifies com- mon property and the property of each family. It details the handling of reserve funds, classified as "common reserves, preparatory reserves, extra reserves, outlay reserves and descendant reserves. " The descendant reserves are set aside whenever a son or daughter is bom into any of the families.
Contractual safeguards among family members are dealt with in Chapter Nine, which asserts that "Violation of rules or contracts by any member of the main and branch families is punished by reprimand, disciplining, and more severe methods under the Civil Code, if neces- sary. It is evidence enough of the strength of the Constitution as a force of law on the family members to observe that the Mitsuis have never gone into civil court against each other.
The final chapter provides for necessary supplementary rules and amendments with the provision that "Should there be changes in the law of the land which makes the foregoing Constitution of the House of Mitsui infringe them, changes shall be made in the Constitution, but in such a way as not to lose the spirit of the original Constitution. "
No better illustration could be given of the completely patri- archal character of the system of the Zaibatsu than this. Only the mechanism of control, the holding company, is modern. All the
? KOKUTAI AND CO-PROSPERITY
Zaihatsu "have a pyramidal structure, with a holding company at the top controlling the main operating companies and the 'side- line' concerns. Each of these two classes of company has numerous subsidiaries, which frequently, in turn, have small companies largely dependent upon them. " However, actual day-by-day ad- ministration is, G. C. Allen tells us, "largely in the hands of one or more distinguished 'Banto' (literally 'head watchman') such as Nanjo of Mitsui, Ishikawa of Sumitomo, Kozo Mori of Yasuda and, until recently, Toyotaro Yuki of Sumitomo. " ^^ The Banto may be, in fact typically are, "adopted" into the familial structure and come to be completely identified--not infrequently through mar- riage alliances--with the family hierarchy of the House.
It is, perhaps, superfluous to add that the governing relation- ships in these hierarchies of command and subordination bear throughout the patriarchal-feudal stamp. Frequent dissatisfaction has been expressed with such paternalism by executive staffs ^^ and, of course, by labor whenever and wherever it has had any oppor- tunity to organize. But in those places which have been kept anti- septic to all forms of disaffection, staffs may still properly
be designated as vassals of the entrepreneur, and are ready even to make sacrifices for his honor. Another aspect of this feudal attitude is the tendency to lay great stress on the esteem and standing of the enterprise. The Japanese is not content merely to draw his salary; he wants to be active in the correct way, in the correct place, and wherever possible in an outstanding, universally respected undertaking. ^^
This is in keeping with Bushido, and may, naturally, have at times its better side. ^(R) Yet, challenged at any point by the growth of
23 "The Concentration of Economic Control in Japan. " Allen's point is well taken here, except that Mori is connected with Sumitomo and Yuki, with Yasuda.
24 Particularly with the deepening of the depression. Criticism by the younger army officers, becoming keen during the early 1930s, seems to have accelerated such dissatisfaction amongst the younger staff members of the "Big 4," who felt especially resentful over their low chances of promotion. The resultant change in policy, called "slewing-around"--donation of funds to national social organization, some "slowing up of the tendency of big business to monopolize all branches of trade," etc. --does not seem seriously nor at any point to have altered the picture.
25Emil Lederer and Emy Lederer-Seidler, Japan in Transition (New Haven, Conn. , 1938), p. 187.
26 "The great entrepreneurs take it for granted that through bad times as well as good they will carry at least their clerks, and if at all possible their workers; in case of dismissal there is a moral claim to a six months' bonus. Everywhere, in both public and private service, the bonus plays a great role--further evidencing the per- sistence of feudal, patriarchal habits of thought. Service is to be rewarded not only
96
? KOKUTAI AND CO-PROSPERITY
97 antagonistic liberal-left mass movements, it has led to coordinated and comprehensive measures not only for suppressing independent political parties, labor unions,^^ and other such popular organiza- tions, but also to systematic methods for the totalitarian extirpation of "dangerous thoughts"; this is accomplished by "thought con- trol" 2^ in restraint of "ideational offenders," and is effectuated through such programs as the "National Spirit Mobilization" of the "National Harmonizing Society. " ^^ The Supreme Cultural Coun-
cil represents the final step in this direction. ^^
SUPPLEMENTARY AND PERIPHERAL WEBS OF CONTROL
The influence of the Zaihatsu reaches far beyond the fingertips of corporate control. Mention has already been made of the power they are enabled to wield over other large concerns through their control over credit, and their ability to manipulate markets, prices, and the framework of law so as to bring small concerns into a posi- tion of economic dependence upon them. Most small industrial establishments, Allen remarks in another connection,^^ are domi- nated by merchant employers, who finance the producers, co-
with the expected payment but also with a voluntary gift (of course as determined by customary law, but still with overtones of the gift) and wherever possible gen- erously. The employer has a number of other obligations, as, for example, gifts to the clerks in case of a wedding or the birth of a child, and long excursions, paid for and participated in by the employer. " Ibid, p. 188.
27 Not including, of course, many types of superpatriotic and vigilante or semi- vigilante Fascist-type organizations. For a description of these, see O. Tanin and E. Yohan, Militarism and Fascism in Japan (London, 1934).
28 An interesting summary of these efforts is given in an article by Hugh Byas in the Magazine section of the New York Times, April 18, 1937, called "Japan's Cen-
"
sors Aspire to 'Thought Control. '
29 Bibliography Section, Public Opinion Quarterly, July, 1938, p. 528 (based on an
article in Contemporary Japan, Sept. , 1937, written by Moriyama Takeichiro and en- titled, "Rescuing Radicals by Law"): "By a high administrator of the 'Law for the Protection and Observation of Ideational Offenders effective since November 20, 1936, which is intended to rehabilitate both the mental and the material life of such offenders in order that they may be converted from radical doctrine and restored as loyal and useful members of society. ' 'The zeal, paternal feeling, and devotion with which those who apply the law are thus serving the nation, have an important bear- ing upon the reform of the existing order which is a watchword of the nation today. ' Twenty-two such Homes for Protection and Observation are said to exist in Japan, to afford 'ideational offenders' an opportunity to 'resume their studies. ' " See also the discussion, "Organ for Spiritual Drive Favored," in the Japan Times and Mail Aug. 3, 1938.
30 Byas, "Japan's Censors. "
31 G. C. Allen, Japan; the Hungry Guest (London, 1938), p. 103.
? gS KOKUTAI AND CO-PROSPERITY
ordinate their activities, and market the finished goods. " "Gen- erally speaking," writes a Japanese authority,^^
small industries have no economic independence in regard to the sale of their manufactures. They do not constitute perfect independent units in the market of competitive transactions as contrasted with large- scale capitalistic enterprise. . . . Most small industries are so circum- stanced as to be obliged to enter into business relations with large busi- ness interests in order to secure the sale of their manufactures. Partly because of the financial necessity of entering into such business relations and partly because of the fact that the purchasers of their manufactures are limited in number, small industries have little free choice in the marketing of their goods. That is to say, most small industries exist in subordination to influential capitalists, who perform the role of cus- tomers in the sale of their manufactures. It is no exaggeration to s^y that in the present-day market organizations, they are entirely depend- ent on powerful capitalistic concerns for their existence.
Recent war manoeuvers seem to have further heightened this condition of dependence. An article in the Mitsubishi Monthly Cir- cular (November, 1938), appraising the significance of the Sino- Japanese war for small enterprises, found that two tendencies stood out: (1) an even greater dependence of these small establishments upon their functions as subcontractors to large enterprises; (2) en- forced and compulsory enrollment of small establishments into Industrial Associations, of which 1,200 new associations, or more than 54 percent of the total number now in existence were organ- ized in the first year of hostilities, 1937-38. These associations have served as a sort of "national grid" for the distribution and alloca- tion of raw materials, and have been instrumental in establishing the type of rules and regulations for self-organization and group discipline which accord with the Kokutai principle. While many of these associations appear to have been initially motivated by hostility to the Zaibatsu/^ there can be no question but that in the main they are subservient to the larger course of events subject to the manipulation of, and the definitive controls mapped out by, the giants.
32 1. Otsuka, "Characteristic Features of Japanese Small Industries and Policies for Their Development," Kyoto University Economic Revieiu, Oct. , 1939, pp. 22-23.
33 This seems to be the case with many of the more recently established handicraft and merchant guilds, and the Zaibatsu appear to have been for a time pretty much disturbed by criticisms emanating from such sources. But the emergencies and
? KOKUTAI AND CO-PROSPERITY
Centered around the Zaibatsu is a far-flung system of closely interlocking cartel and syndicate controls. The coal cartel, estab- lished in 1921, attempts to regulate prices, set production quotas, and the like, for the entire Japanese industry. A sales syndicate for the raw-iron industry, established in the same year, includes all is- land and Japanese-controlled Korean and Manchurian producers. The cement industry is organized into three overlapping cartel groupings, the Japanese Portland Cement Producers, founded in 1900, the Japanese Portland Association, founded in 1910, and the Japanese Cement Consortium, organized in 1924. Amongst the three, controls cover technical innovations, advertising, conditions and terms of delivery, establishment of production quotas, and so on. A community of interest binds together the leading paper pro- ducers (85 percent of the paper, and 90 percent of the pulp in 1929). A series of cartel-like associations governs the cotton, silk, and other textile industries of Japan. ^*
The strength of the Zaibatsu in the cartel system is indicated by their percentages of production volume, or of total capacity, in various of the more powerful cartel groupings (1936): ^^
Industry and Leading Zaibatsu
Steel materials--^Japan Steel (owned by the government plus important Zaibatsu)
Pig iron--^Japan Steel Coal--Mitsubishi Copper--Mitsubishi Shipbuilding--Mitsubishi Alloys--Mitsubishi, Japan Steel Cement--Mitsubishi, Mitsui Paper--Mitsui
Flour--Mitsui, Mitsubishi
Sugar--Mitsui, Mitsubishi
Shipping Tonnage--Mitsubishi, Sumitomo
Percentage of Output or Capacity
65
74 31 31 16 41 44 84 99 43 55
exigencies of wartime seem, for the time being at least, to have stilled such opposi- tion.
34 Most of the above was taken from Karl Hahn, Die Industrielisierung Japans (Giessen, 1932), pp. 126-27.
35 Fortune, Special Japan Issue, Sept. , 1936, p. 136. See also Japanese Trade and Industry, published by the Mitsubishi Economic Research Bureau, Tokyo (New York, 1936), pp. 114-29.
99
? 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.
18 W. H. Chamberlin, Japan over Asia (Boston, 1937), p. 228.
19 Data from Resume statistique de I'empire du Japon (Tokyo, 1912). P- 108; ibid.
(1924), p. 72; ibid. (1930), p. 46; ibid. (1934), p. 44; ibid. (1936), pp. 46-47. According to an investigation by the Industrial Bank of Japan, quoted in the Osaka Mainichi and Tokyo Nichi Nichi (English), July 26, 1941:
1st half of 1940 2nd" " "
No. of Am't of capital mergers involved (in yen)
69 1,802,353,000 143 2,093,143,000
1st " " 1941 172 The Bank gives the following reasons for the increase:
3,024,770,000
1,983 4. 707 10,194 12,634
14-547
755 2,523 6,227 8,113 9,264
38. 1 53. 6 61. 1 64. 2 63. 7
? KOKUTAI AND CO-PROSPERITY
Built up around and led by the Zaihatsu, the large aggregations of capital represent a degree of actual concentration far greater than the superficial data of corporate holdings of the giant concerns would seem to indicate. No important policy of state, it is safe to say, is likely to be realized unless it has the active or tacit approval of the great houses that stand at the gravitational center of this swiftly growing concentration movement.
The Zaibatsu, in turn, are closely held family systems, controlled through the device of family owned holding companies. Again the case of Mitsui, largest and oldest of the Zaibatsu, may be taken as typical. The House of Mitsui consists of eleven affiliated Mitsui families,^^ all offshoots of the founder, Sokubei Mitsui. The head of each family is a member of the Family Council, and only family heads may vote at Council meetings. The head of the main Mitsui family is ipso facto head of the Council. The other ten families have a strict and traditional family rank and status. The Council is governed through a Family Constitution, first drawn up in 1722 by the third Mitsui, and revised and brought up to date in 1900. The full text of the 1900 Constitution has never been published, for many passages are held as strict family secrets. It is known that there are 10 chapters and over 100 articles. Of the Constitution, Russell 2^ remarks, "In no other large business institution in the
"1. The Government has advised companies in financial difficulties to carry out merger.
2. With the kaleidoscopic change in the world situation many companies were obliged to effect amalgamation due to the difficulty in obtaining raw materials. 3. From the viewpoint of enterprise rationalization financial organs have advised
industrial companies to effect mergers. "
20 Oland D. Russell, The House of Mitsui (Boston, 1939), p- 4, quotes a Japanese
authority, Shumpei Kanda, who in 1937 estimated the fortunes of the eleven family heads as follows:
Baron Takakimi Takahisa
Geneyemon Baron Takakiyo Baron Toshitaro
Takanaga Takamoto Morinosuke Takaakira Benzo Takateru
Total wealth *i Ibid. , p. 23.
450,000,000 Yen 170,000,000 200,000,000 230,000,000 150,000,000 140,000,000
60,000,000 80,000,000 60,000,000 60,000,000 35,000,000
1,635,000,000
93
? KOKUTAI AND CO-PROSPERITY
world is the power and unity of family so firmly entrenched and safe-guarded as in the House of Mitsui through this rare docu- ment. "
So fundamental is the pattern of Mitsui in the family systems of the gigantic Japanese combines that it is worth quoting Russell's summary of this remarkable document somewhat at length: ^2
Chapter One specifies the six main families and five branch families by name, and prescribes that branch families may not be elevated to the status of main families, nor may any future branch families be ad- mitted to the Council.
It is characteristic of the spirit of the document that Chapter Two expressly defines the duties of the family members before there is any mention of the rights and prerogatives of these members. In this chap- ter are laid down these principal points:
94
1.
2.
3.
4.
5. 6.
Members of the family shall respect the rules prescribed by the founder, associate with each other as brothers, cooperate in all things, work together to enhance the prosperity of the House and to consolidate the foundations of each family.
Dispense with excessive luxury and practice simplicity and econ- omy in living.
When of proper age, sons and daughters of the eleven families shall study in good institutions of learning.
No debts shall be incurred by members of the Family nor shall any one member guarantee the loans of others.
All special actions require the consent of the Family Council. The Family Heads shall observe the various contracts and inden- tures in transacting their various businesses, shall take turns in inspectihg the business conditions of each of the firms and estab- lishments of the House of Mitsui, shall submit reports to the Coun- cil, shall call the Council whenever it is found that any officer of any firm of the House of Mitsui is undertaking or attempting to undertake dangerous plans, or if he is found committing some wrong so as promptly to adopt means of dealing with the offender and set about rectification or prevention of similar acts.
Chapter Three outlines the prerogatives and duties of the Family Council, voting rights, and general agenda of Council meetings. The second article of the chapter gives to the Council the right of "distribu- tion of profits, earmarking of reserves, budgeting of expenses and pay- ments of the various firms of the House, and distribution of property in case any of the companies of the House should be dissolved. " Ac- tually these details are handled in general by the Mitsui Gomei Kaisha, but the Family Council acts as sanctioning body.
22 ihid. , pp. 20-23.
? KOKUTAI AND CO-PROSPERITY
95
The Fourth Article of the chapter specifies that the Council shall determine the household budgets of each of the eleven members of the family; and this is religiously followed, even to the extent of "entertain- ment allowance. "
Chapter Four concerns marriage, adoption, and regulations about collateral branches. It has never been published in detail.
Strict rules are provided in Chapter Five for clamping a heavy hand on "those members of the House who misconduct themselves or who squander money or property. " It is a matter of record that these regu- lations rarely have been invoked.
Chapter Six is the original Sixth Precept of the Founder's Constitu- tion, and is characteristic not only of the spirit of the entire document but a three-hundred-year-old Mitsui Principle. It specifies that "Retire- ment shall never be permitted unless it is unavoidable," and includes a maxim of Hachirobei: "The lifework of a man lasts as long as he lives; therefore do not, without reason, seek the luxury and ease of retire- ment. " The rest of the chapter deals with inheritances in the event of compulsory retirement.
Chapter Seven details the duties of the directors of the Mitsui firms and lays down a code, mostly secret, "to assure perfect contact among them so as to obviate friction. "
Chapter Eight is held in extreme secrecy. Only family members and the higher directors of the business organization know its provisions. In general, it sets strict limits to various capitalizations, specifies com- mon property and the property of each family. It details the handling of reserve funds, classified as "common reserves, preparatory reserves, extra reserves, outlay reserves and descendant reserves. " The descendant reserves are set aside whenever a son or daughter is bom into any of the families.
Contractual safeguards among family members are dealt with in Chapter Nine, which asserts that "Violation of rules or contracts by any member of the main and branch families is punished by reprimand, disciplining, and more severe methods under the Civil Code, if neces- sary. It is evidence enough of the strength of the Constitution as a force of law on the family members to observe that the Mitsuis have never gone into civil court against each other.
The final chapter provides for necessary supplementary rules and amendments with the provision that "Should there be changes in the law of the land which makes the foregoing Constitution of the House of Mitsui infringe them, changes shall be made in the Constitution, but in such a way as not to lose the spirit of the original Constitution. "
No better illustration could be given of the completely patri- archal character of the system of the Zaibatsu than this. Only the mechanism of control, the holding company, is modern. All the
? KOKUTAI AND CO-PROSPERITY
Zaihatsu "have a pyramidal structure, with a holding company at the top controlling the main operating companies and the 'side- line' concerns. Each of these two classes of company has numerous subsidiaries, which frequently, in turn, have small companies largely dependent upon them. " However, actual day-by-day ad- ministration is, G. C. Allen tells us, "largely in the hands of one or more distinguished 'Banto' (literally 'head watchman') such as Nanjo of Mitsui, Ishikawa of Sumitomo, Kozo Mori of Yasuda and, until recently, Toyotaro Yuki of Sumitomo. " ^^ The Banto may be, in fact typically are, "adopted" into the familial structure and come to be completely identified--not infrequently through mar- riage alliances--with the family hierarchy of the House.
It is, perhaps, superfluous to add that the governing relation- ships in these hierarchies of command and subordination bear throughout the patriarchal-feudal stamp. Frequent dissatisfaction has been expressed with such paternalism by executive staffs ^^ and, of course, by labor whenever and wherever it has had any oppor- tunity to organize. But in those places which have been kept anti- septic to all forms of disaffection, staffs may still properly
be designated as vassals of the entrepreneur, and are ready even to make sacrifices for his honor. Another aspect of this feudal attitude is the tendency to lay great stress on the esteem and standing of the enterprise. The Japanese is not content merely to draw his salary; he wants to be active in the correct way, in the correct place, and wherever possible in an outstanding, universally respected undertaking. ^^
This is in keeping with Bushido, and may, naturally, have at times its better side. ^(R) Yet, challenged at any point by the growth of
23 "The Concentration of Economic Control in Japan. " Allen's point is well taken here, except that Mori is connected with Sumitomo and Yuki, with Yasuda.
24 Particularly with the deepening of the depression. Criticism by the younger army officers, becoming keen during the early 1930s, seems to have accelerated such dissatisfaction amongst the younger staff members of the "Big 4," who felt especially resentful over their low chances of promotion. The resultant change in policy, called "slewing-around"--donation of funds to national social organization, some "slowing up of the tendency of big business to monopolize all branches of trade," etc. --does not seem seriously nor at any point to have altered the picture.
25Emil Lederer and Emy Lederer-Seidler, Japan in Transition (New Haven, Conn. , 1938), p. 187.
26 "The great entrepreneurs take it for granted that through bad times as well as good they will carry at least their clerks, and if at all possible their workers; in case of dismissal there is a moral claim to a six months' bonus. Everywhere, in both public and private service, the bonus plays a great role--further evidencing the per- sistence of feudal, patriarchal habits of thought. Service is to be rewarded not only
96
? KOKUTAI AND CO-PROSPERITY
97 antagonistic liberal-left mass movements, it has led to coordinated and comprehensive measures not only for suppressing independent political parties, labor unions,^^ and other such popular organiza- tions, but also to systematic methods for the totalitarian extirpation of "dangerous thoughts"; this is accomplished by "thought con- trol" 2^ in restraint of "ideational offenders," and is effectuated through such programs as the "National Spirit Mobilization" of the "National Harmonizing Society. " ^^ The Supreme Cultural Coun-
cil represents the final step in this direction. ^^
SUPPLEMENTARY AND PERIPHERAL WEBS OF CONTROL
The influence of the Zaihatsu reaches far beyond the fingertips of corporate control. Mention has already been made of the power they are enabled to wield over other large concerns through their control over credit, and their ability to manipulate markets, prices, and the framework of law so as to bring small concerns into a posi- tion of economic dependence upon them. Most small industrial establishments, Allen remarks in another connection,^^ are domi- nated by merchant employers, who finance the producers, co-
with the expected payment but also with a voluntary gift (of course as determined by customary law, but still with overtones of the gift) and wherever possible gen- erously. The employer has a number of other obligations, as, for example, gifts to the clerks in case of a wedding or the birth of a child, and long excursions, paid for and participated in by the employer. " Ibid, p. 188.
27 Not including, of course, many types of superpatriotic and vigilante or semi- vigilante Fascist-type organizations. For a description of these, see O. Tanin and E. Yohan, Militarism and Fascism in Japan (London, 1934).
28 An interesting summary of these efforts is given in an article by Hugh Byas in the Magazine section of the New York Times, April 18, 1937, called "Japan's Cen-
"
sors Aspire to 'Thought Control. '
29 Bibliography Section, Public Opinion Quarterly, July, 1938, p. 528 (based on an
article in Contemporary Japan, Sept. , 1937, written by Moriyama Takeichiro and en- titled, "Rescuing Radicals by Law"): "By a high administrator of the 'Law for the Protection and Observation of Ideational Offenders effective since November 20, 1936, which is intended to rehabilitate both the mental and the material life of such offenders in order that they may be converted from radical doctrine and restored as loyal and useful members of society. ' 'The zeal, paternal feeling, and devotion with which those who apply the law are thus serving the nation, have an important bear- ing upon the reform of the existing order which is a watchword of the nation today. ' Twenty-two such Homes for Protection and Observation are said to exist in Japan, to afford 'ideational offenders' an opportunity to 'resume their studies. ' " See also the discussion, "Organ for Spiritual Drive Favored," in the Japan Times and Mail Aug. 3, 1938.
30 Byas, "Japan's Censors. "
31 G. C. Allen, Japan; the Hungry Guest (London, 1938), p. 103.
? gS KOKUTAI AND CO-PROSPERITY
ordinate their activities, and market the finished goods. " "Gen- erally speaking," writes a Japanese authority,^^
small industries have no economic independence in regard to the sale of their manufactures. They do not constitute perfect independent units in the market of competitive transactions as contrasted with large- scale capitalistic enterprise. . . . Most small industries are so circum- stanced as to be obliged to enter into business relations with large busi- ness interests in order to secure the sale of their manufactures. Partly because of the financial necessity of entering into such business relations and partly because of the fact that the purchasers of their manufactures are limited in number, small industries have little free choice in the marketing of their goods. That is to say, most small industries exist in subordination to influential capitalists, who perform the role of cus- tomers in the sale of their manufactures. It is no exaggeration to s^y that in the present-day market organizations, they are entirely depend- ent on powerful capitalistic concerns for their existence.
Recent war manoeuvers seem to have further heightened this condition of dependence. An article in the Mitsubishi Monthly Cir- cular (November, 1938), appraising the significance of the Sino- Japanese war for small enterprises, found that two tendencies stood out: (1) an even greater dependence of these small establishments upon their functions as subcontractors to large enterprises; (2) en- forced and compulsory enrollment of small establishments into Industrial Associations, of which 1,200 new associations, or more than 54 percent of the total number now in existence were organ- ized in the first year of hostilities, 1937-38. These associations have served as a sort of "national grid" for the distribution and alloca- tion of raw materials, and have been instrumental in establishing the type of rules and regulations for self-organization and group discipline which accord with the Kokutai principle. While many of these associations appear to have been initially motivated by hostility to the Zaibatsu/^ there can be no question but that in the main they are subservient to the larger course of events subject to the manipulation of, and the definitive controls mapped out by, the giants.
32 1. Otsuka, "Characteristic Features of Japanese Small Industries and Policies for Their Development," Kyoto University Economic Revieiu, Oct. , 1939, pp. 22-23.
33 This seems to be the case with many of the more recently established handicraft and merchant guilds, and the Zaibatsu appear to have been for a time pretty much disturbed by criticisms emanating from such sources. But the emergencies and
? KOKUTAI AND CO-PROSPERITY
Centered around the Zaibatsu is a far-flung system of closely interlocking cartel and syndicate controls. The coal cartel, estab- lished in 1921, attempts to regulate prices, set production quotas, and the like, for the entire Japanese industry. A sales syndicate for the raw-iron industry, established in the same year, includes all is- land and Japanese-controlled Korean and Manchurian producers. The cement industry is organized into three overlapping cartel groupings, the Japanese Portland Cement Producers, founded in 1900, the Japanese Portland Association, founded in 1910, and the Japanese Cement Consortium, organized in 1924. Amongst the three, controls cover technical innovations, advertising, conditions and terms of delivery, establishment of production quotas, and so on. A community of interest binds together the leading paper pro- ducers (85 percent of the paper, and 90 percent of the pulp in 1929). A series of cartel-like associations governs the cotton, silk, and other textile industries of Japan. ^*
The strength of the Zaibatsu in the cartel system is indicated by their percentages of production volume, or of total capacity, in various of the more powerful cartel groupings (1936): ^^
Industry and Leading Zaibatsu
Steel materials--^Japan Steel (owned by the government plus important Zaibatsu)
Pig iron--^Japan Steel Coal--Mitsubishi Copper--Mitsubishi Shipbuilding--Mitsubishi Alloys--Mitsubishi, Japan Steel Cement--Mitsubishi, Mitsui Paper--Mitsui
Flour--Mitsui, Mitsubishi
Sugar--Mitsui, Mitsubishi
Shipping Tonnage--Mitsubishi, Sumitomo
Percentage of Output or Capacity
65
74 31 31 16 41 44 84 99 43 55
exigencies of wartime seem, for the time being at least, to have stilled such opposi- tion.
34 Most of the above was taken from Karl Hahn, Die Industrielisierung Japans (Giessen, 1932), pp. 126-27.
35 Fortune, Special Japan Issue, Sept. , 1936, p. 136. See also Japanese Trade and Industry, published by the Mitsubishi Economic Research Bureau, Tokyo (New York, 1936), pp. 114-29.
99
? 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.
