url?sa=t&source=web&cd=1&ved=0CCYQFjAA&url=http://mercatus.org/sites/default/files/Holcombe_Cronyism_web
url?sa=t&source=web&cd=1&ved=0CCYQFjAA&url=http://mercatus.org/sites/default/files/Holcombe_Cronyism_web
url?sa=t&source=web&cd=1&ved=0CCYQFjAA&url=http://mercatus.org/sites/default/files/Holcombe_Cronyism_web
Create successful ePaper yourself
Turn your PDF publications into a flip-book with our unique Google optimized e-Paper software.
labor, land, and antitrust reforms in addition to entrusting<br />
bureaucrats with expanded powers to intervene in economic<br />
affairs. 1 Political leaders in Japan were concerned<br />
that free trade and financial liberalization would prevent<br />
cartelized industries from growing and competing in<br />
the global market. In 1949, the government created the<br />
Ministry of International Trade and Industry (MITI).<br />
This agency had vast authority to regulate exports,<br />
raise tariffs, and direct public investment. This political<br />
restructuring destroyed many of the institutional norms<br />
that had traditionally tempered the collusion between<br />
business and government in Japan and set the stage for<br />
the state-driven industrialization policies that would<br />
characterize Japanese economic policy in the following<br />
decades. Japan expanded MITI’s power after becoming<br />
sovereign in 1952 and used it as an important instrument<br />
with which to conduct the nation’s ambitious industrialization<br />
policies.<br />
Today, top government officials plucked from the<br />
most prestigious universities in the country still conduct<br />
industrial policy planning in Japan and discuss it<br />
with the most powerful businessmen in their respective<br />
industries. The lax enforcement mechanisms available<br />
to economic planning agencies prompt government officials<br />
to maintain informal ties with business leaders. 2<br />
Officials utilize the “soft” powers of their offices to form<br />
relationships with the leaders of the critical industries in<br />
the national plan. Special interest groups in Japan tend<br />
to form in response to government industrialization initiatives<br />
rather than forming out of a desire to lobby for a<br />
policy in the first place. 3 State-driven industrialization<br />
in Japan has thus led to the development of rent-seeking<br />
94 LIBERALISM AND CRONYISM