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137 8 THE STATE-BANK COMPLEX Although in terms of ideology Japanese society underwent a drastic reorientation after the end of the war, the economic system— particularly the institutional system for financial control—was retained essentially intact. The result was . . . an acute gap between understanding and reality. . . . Extensive regulation applied through the money market controlled the flow of capital, strongly influencing the industrial structure and the pattern of economic growth. Financial control was implemented through the Bank of Japan and other financial institutions , particularly large banks, with support from the bureaucracy in the economic field. The banks and the economic bureaucracy functioned as a general staff behind the battlefield in this total war called high economic growth. —Noguchi Yukio and Sakakibara Eisuke (1977) [The banker] makes possible the carrying out of new combinations, authorizes people, in the name of society as it were, to form them. He is the ephor of the exchange economy. —Joseph Schumpeter (1912) The relationship between the state and the banking system constitutes a defining feature of a national political-economic system, with implications for many other things. The previous chapter described how U.S. authorities reversed political course in Japan and enforced a policy of credit-capital restriction in 1948– 49. This chapter explains how Japanese financial authorities simultaneously preserved and consolidated the core financial circuits of Japan’s capitalist economy. It contextualizes that process within the historical stream of the development of Japan’s state-bank complex. From the early 1940s into the 1980s, the Japanese system of industrial finance relied mainly on direct financing by banks. In Schumpeterian terms, this system of industrial finance itself had the aspect of a “new combination.” In the historical timing of its appearance, it also fits with the cyclical framework developed by 138 CHAPTER 8 Schumpeter in regard to the temporal “clustering” of new combinations (see 9.1). This new financial system began to take shape during the deflation and recessions of the 1920s and 1930s.1 Total war and wartime totalitarianism after 1937 drove forward this transformation and caused the state to assign a quasiadministrative role to the banks. The changes of the occupation era tended to consolidate rather than reverse this transformation, and the system that emerged out of the capital constriction crisis of 1949–50 proved enduring. Viewed in terms of Schumpeter’s cyclical schema, the system of direct bank financing thus emerged out of the crisis of the semiliberal prewar economic order and functioned as an innovatory infrastructural element supporting the long economic upswing that began in the 1950s. The banking system was also at the center of the 1989 bubble. The period of troubles since the bubble’s collapse conforms also to Schumpeter’s schema: what worked as a developmental factor at one stage ceased to do so at the next. More than that, it became a dysfunctional element and obstacle to the tasks of the present. 8.1 Banking as Economic Governance Japan’s modern state-society structure is now widely understood to be characterized by an extensive, diverse, and well-articulated set of institutions “in between ” state and society. This picture has appeared from many vantage points in the English-language scholarship of the last quarter century. In Chalmers Johnson ’s account, large corporations themselves played such an intermediate role. The paternalistic bureaucratic state delegated authority to them, expected them to follow state directives, and protected and nurtured them as its own. Peak business organizations have played similar mediating and self-governance roles, as emerges in the work of Miles Fletcher, Ulrike Schaede, and Lonny Carlile. In Carol Gluck’s study of the construction of the ideology of the modern imperial state, a large part was played not only by state officials but also by ideological entrepreneurs from “among the people” who competed to serve the state, to make the state’s messages their own, and to make their own messages those of the state. Sheldon Garon has anatomized the in-between places of civil-society organizations such as women’s groups, religious bodies, and social reform groups as they sought representation in the state and were co-opted and deputized by it. Often enough, such organizations were themselves first organized at the initiative of state authorities or of people very close to state authorities. Gregory Kasza has explored the character of mass civil organizations in international comparative perspective and delineated a “conscription society” that shares key features [3.129.45.92] Project MUSE (2024...

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