ECONOMIC MOBILIZATION RYU SHINTARO
In March 1938, the Diet passed the National Mobilization Law, which gave the government extensive new powers over the county's manpower, resources, trade, and other economic activities. Big business leaders and their political allies in the Diet objected to many of these changes. In 1940, Ryu Shintaro, a journalist close to Prime Minister Konoe Fumimaro, wrote a best-selling book explaining the economic reorganization. The following excerpt deals with government controls over the profits of business firms.
JAPAN'S ECONOMIC REORGANIZATION {NIHON KEIZAI SAIHENSEl)

Investment and Controls on the Profit Rate
    Investors of capital argue that if profits are placed under government control, productive activities will stagnate. . . . Others object [to government controls on company profits] on the fundamental economic ground that according to the tenets of liberalism the source of all productive activity lies in the human impulse toward "gain." This view dominates the conventional wisdom of today's businessmen (jitsugyoka).
    With respect to the first point. . . [the fear that production will stagnate] is an illusion that results from the concentration of capital in the high-profit sector. The high-profit sector invigorates and stimulates productive activity, but it does so only relatively compared with other sectors. If the present dividend rate were to continue fluctuating at around 30 percent, would investment slow down if dividends were held under 30 percent ? . . . What would the owners of capital gain by hesitating to invest? If the international movement of capital were free and if capital could be exported, controls on the profit rate clearly would lead to a decline in productive activity. At present, however, these assumptions do not hold, so there is no problem.
The Pursuit of Gain
    Let us turn to the second point. This is the problem of Homo economicus (economic man) familiar to every first-year economics student wrestling with Adam Smith. In these final days of liberalism, it is probably inevitable that we must mention Smith, the founding father of liberalism.
The essence of liberalism lies in the proposition that when individuals pur­sue their own gain as they compete with one other to express their distinctive characteristics, they are acting in complete accord with the public good (koeki}. Basically, this proposition rests on the assumptions that an individual's "creativ­ity" or "originality" derives from his "pursuit of gain" and that without pursuing one's gains, it is not possible to display one's creativity or originality.
    This way of thinking lies at the core of economic liberalism. Transcending this way of thinking must be the point of departure for building a new economic system. That is clear if we point out the following two misconceptions.
    First of all, some people labor under a foolish illusion, cloaked in the guise of economic liberalism, that the "pursuit of gain" is nothing more than a human desire for improvement. The urge to survive, the human drive toward ever higher betterment, is present during any period of history. But it always takes a characteristic form appropriate to the society of the time. For example, trades­men are said to think only of their own interests. If society does not tolerate their money grubbing, then it cannot maintain itself. But their money grubbing is not the consequence of their inborn character. It is simply a consequence of the fact that in a liberal [economic] structure, you will fail if you don't work with your abacus as cleverly as you can. Money grubbing is simply the form of survival within that structure. ... In a liberal economy "pursuit of gain" must be tolerated, but in itself it is nothing more than the economic psychology of those who find themselves in an economy organized on liberal principles. . . .
The Motive for Action in Modern Business Firms
    Second, in the most highly developed business firms today, the "pursuit of gain" is not always the direct motive behind economic activity. The pursuit of gain is the sole motive for activity in business enterprises in which one person—for example, a small shopkeeper, a small factory owner, or an old-style big mer­chant—not only owns capital but also uses it. In a large modern joint stock company, however, individual economic motives differ depending on an indi­vidual's actual function. Stockholders are interested mainly in the dividends paid on the capital they have invested, but many of them are completely di­vorced from the enterprise's management. Top executives who are also big stockholders in their firms are certainly interested in dividends, but as executives they play a technical role in the management of the firm as well. Employees working under them perform functional or technical roles in their various work­places. To be sure, their activities are organized within a management structure designed to produce a rise in the profit rate and an increase in dividends, but the motives of an individual engineer, white-collar worker, or blue-collar worker, varied though they might be, are not so different from those of a public official working to fulfill his duties. At the very least, the "pursuit of gain" is not the direct motive behind their activities as individuals.
    Since the collective result of their activity is the improvement of company profits, the main issue is whether the "organization" is configured to deliver continual improvements in the rate of profit. It is no longer the case that the pursuit of gain permeates large business firms from top to bottom or that it serves as the driving force behind the economy. Gain accrues to the entire business organization as a whole, but within that organization the activities of individuals. . . are based for the most part on their "function." Core employees in large concerns probably work with a consciousness that they are serving a social or national function. This consciousness, however, often contradicts or collides with the firm's "pursuit of gain."
    Since the modern business firm is organized for the continual pursuit of profit, what is at issue here is clearly not a question of human nature but a question of economic organization. It is safe to say that even systems based on liberal [economic] principles are, for the most part, moving in the direction of "functionality." Looked at in this way, the idea that controls on profits will slow down pro­ductive activity or bring the economy to a halt is behind the times. It reflects the mentality of a small shopkeeper who thinks the commercial spirit of the green­grocer or the fishmonger is what drives the modern business firm. The problem clearly is to free the development of productive power by stripping the old shell from modern business firms that have developed on the basis of functional spe­cialization, by emphasizing their "functional" position and by transforming them from "organizations based on profit" to "organizations based on function."
 The Control of Profits and the Freedom of Creativity
    However, since an organization based on function constitutes a unified whole, we must decisively regulate profits, which are at the core of a liberal economic system.
    The control of profits involves both a reduction and a fixing of the dividend rate. What the system must determine is not how high the dividend rate should be but, rather, how upper limits on the dividend rate can be fixed at a level appropriate to current conditions. Since we can imagine that at some point there will be an economic turndown, it ought to be set at a low level . . . the point of departure for the new system lies in whether or not dividends should be considered equivalent to interest payments. More specifically, since profits over and above the fixed dividend are either retained as company reserves or used directly in the expansion of the business firm, not only must profits be considered as interest payments but the meaning of invested capital also must change to some degree. Since the owners of capital simply collect fixed divi­dends similar to a kind of interest payment, the function of the businessman (kigyoka) and the position of the capitalist differ. There is no reason why a capitalist cannot also be a businessman at the same time, of course, but his function [in each role] is quite distinct. The businessman assumes the role of a purely managerial technician charged with running the business firm. He sees to it that the company pays fixed dividends on capital, but beyond that he has no responsibility toward the capitalist. On the other hand, as a business manager, he has an enormous responsibility toward the state and society. His function is to manage the enterprise in its state and social roles with the highest degree of efficiency, and it is for that that he is rewarded.
Just as the engineer carries out his state and social functions through his technical contributions , ... so too the businessman [in his role as manager] acts like an "engineer" for a particular business firm. In that sense he stands as a true leader of production. Since he is completely liberated from the super­vision of the capitalist, he acquires freedom of "creativity" in running the busi­ness firm. His "creativity" is not driven by moneymaking, as it once was. As he becomes conscious of his role in society, he achieves a new and purer freedom. Today both the businessman and the capitalist must put aside the notion that profit is everything, or to put it another way, a framework based on individu­alistic economic activity. By carrying out their own particular "function" in state or society, they finally will be able to express an influential "public voice" in state and society. If they act individualistically by putting profit ahead of everything else, businessmen will gradually lose their "public voice." . . . Only by putting aside their individualism and their profit seeking will their public views acquire political weight. In the view of the current political situation facing Japan, it is extraordinarily important that they do so.
[Ryu, Nihon keizai no saihensei, pp. 147-48, 149-54; PD]
From DeBarry 1002