(^482) THE WEALTH AND POVERTY OF NATIONS
But could they? A decade later, when private enterprise had not yet
shown interest, some officials began to worry. In 1929, the Ministry
of Commerce and Industry (predecessor of the Ministry of
International Trade and Industry [MITI]) published a study, "Policy
for Establishing the Motor Vehicle Industry," and this was followed
by renewed overtures to the biggest business groups.
By way of example and encouragement, the government designed
and started making in 1931 a small 45-hp car that would do 40
kilometers an hour. This slowpoke did not catch on, however, and in
1936 the two American giants still accounted for some three
quarters of national output. Now the Japanese army proposed that
these foreign firms be purely and simply expelled. After all, war is
war, and trade is war.* The pusillanimous politicians found this a
litde indelicate, though, so the Diet passed a law, drafted by the
army, offering big subsidies to Japanese makers and requiring that
auto companies be owned and directed in their majority by Japanese
citizens. At the same time, the government laid heavy duties on
import of complete vehicles and knockdown sets for assembly.
These tariffs did the job: by 1938 the production share of Nissan,
Toyota, and Isuzu was up to 57 percent. The Americans tried to
stick it out, seeking to merge with Japanese makers. No way: all
plans to merge, dissolve, or get around these discriminations were
subject to government approval. In 1939, the American firms gave
up and cleared out. For the Japanese, this turned out to be a good
exercise in mercantilism and a preparation for the trade wars of the
future.
Where all this would have led, we can guess. But war changes
everything, including the best-laid plans. In 1945, plants and
equipment lay in ruins, and the American occupation authorities saw
no reason why Japan should bother itself with an auto industry.
Some officials at the Bank of Japan and the Ministry of Transport
agreed. But MITI saw automobiles as the focus of a whole range of
related branches and worked out a stimulus package: low-cost loans,
tax privileges, protection against foreign competition. For tax
purposes, export sales were deductible from income; imports of tools
- This is an old theme in the Japanese nationalist refrain. Haruhiro Fukui, "The
Japanese State," p. 206, offers an eloquent exposition in a prefectural governor's
speech of 1904: "... war in peace time goes on constantly. In this kind of war, that
is, struggle for survival, those who exploit scientific instruments to expand industry,
produce goods at low costs, and thus absorb financial resources will nurture the
strength of their own nation, enrich its resources, and thus emerge as winners. ..."