Time for a change, in Japan

15.07.09 Publication:

A time for change. That is the basic feeling that surrounds elections in parliamentary democracies all over the world, especially when one party has been in government for quite a number of years. Japan has long been the exception, right up until the 2007 Upper House elections. Now, the coming Lower House election looks like being different, with a change of government being a real prospect. To this foreign observer and lover of Japan, that prospect of change is extremely welcome.

                My hope for change is not based on any special affection or admiration for the Democratic Party of Japan. It is based on a very simple point about democracy. This is that democracy is not really a way to produce good government. Rather, it is a method of producing accountability, or of punishing bad government. Japan has had bad government for a long time now. That bad government deserves to be punished.

                There is a second basic reason to favour change. It is that power, both in politics and in the bureaucracy, inevitably leads to corruption, complacency and abuses of public trust if it is left unchecked, if it is left without any sense of accountability. A wise British historian, Lord Acton, once said that “all power tends to corrupt”. He was right. So the holders of power need to be shaken up, and preferably changed, every few years.

                Stability is a good thing in government. But a stability that has lasted for 54 years, barring the brief Hosokawa government in 1993, is far too much for the good of Japan, even if the LDP has had to govern through coalitions since the Hosokawa episode.

In my country, Britain, we probably had too rapid an alternation of parties in government in the 1960s and 1970s, with five different governments during that period. Such excessive alternation leads to too many sharp reversals of policy, and makes it hard for businesses or households to make investments and other plans. Since Margaret Thatcher won the 1979 general election, however, Britain has had a better and more stable sort of party alternation, with 18 years of Thatcher’s Conservative Party followed (until now) by 12 years of Tony Blair’s Labour Party.

Probably 10 years at a time would be an ideal sequence of alternation, but neither elections nor politics ever produce ideal outcomes. Nevertheless, alternation of the sort that Britain has seen since 1979 has allowed governments to introduce coherent, consistent policy-reform programmes before, eventually, the voters punish them for becoming corrupt or incompetent. When our general election is held, some time before June 2010, we fully expect Labour to be kicked out of office and to be replaced by the Conservatives.

Everyone asks whether the DPJ is ready to form a government. But this is the wrong question to ask. No opposition party is ever ready to take over the government in any country, as the practice of opposition in Parliament never provides any training or experience for government. Being an opposition Diet member and being a cabinet minister are completely different jobs. The DPJ, like Britain’s Conservative Party, will simply have to learn once they are in office.

The next accusation that is usually made is that the DPJ has no policies. Yet this is not true. The DPJ has huge numbers of policies, covering everything from social welfare to health to road tolls and to defence. The real problem is that some of these policies contradict one another, or are supported by different factions inside the party which disagree with each other. Moreover, given the state of Japan’s public finances, with gross public debt overtaking 200% of GDP, the DPJ plainly could not afford to implement all of its policies, or not for many years.

This too is typical of opposition parties all over the world. In opposition, a party can afford to be irresponsible. In government, the party has to make choices, to set priorities, to work out how best to spend the government’s limited resources. Neither the voters, nor the media nor the DPJ itself can really know what sort of choices and priorities the party would make and set until and unless it has to form a government. Exactly the same is true of Britain’s Conservatives.

Despite that eternal truth about democracies in which two main parties alternate in government, there are some positive things that can be said about the DPJ’s policy platform. I am a free-market economist, one who is often accused of being a “neo-liberal” or a “market fundamentalist”. Nevertheless, I believe that some of the policy positions taken by the DPJ do correspond with the needs of Japan’s economy and society in 2009.

In economic terms, Japan’s basic problems are weak consumption and very low productivity growth. In social terms, the country’s basic problem is rising inequality and, even worse, growing poverty. These problems are linked. Wages have long been declining in response to the weak economy, with the lowest wages being paid to part-time and irregular workers, who lack the pension, job security and unemployment insurance enjoyed by full-time, regular workers.

This guarantees that household consumption will stay weak or even decline, while companies also have had little incentive to invest in ways to use higher productivity to boost profits. The inequality and poverty that has resulted is morally disturbing and dangerous for social order, as well as being damaging to future economic growth.

Traditionally, the Japanese state has been highly interventionist through regulations, guidance and in some cases public ownership, but extremely inactive in terms of social welfare, by comparison with European governments. The essence of the DPJ’s policy platform consists of an ambition to change this balance, by devoting most of its two-year Y21 trillion stimulus package to social welfare spending, designed to put money into families’ pockets. As long as this can be financed by transferring money from other uses, such an ambition makes good sense.

So does the DPJ’s pledge to raise the workers’ minimum wage over a three-year period, as this would directly reduce poverty and inequality. This, along with the promise to make unemployment insurance available to irregular workers, would help boost consumption, though both could impose big burdens on the public finances.

In the end, a DPJ government would not be able to carry out all of its policy promises. As I said earlier, choices have to be made, priorities have to be set. Nevertheless, both the sign of change and the fact of having a new government would be beneficial to Japan, both in its domestic economy and society, and in its foreign-policy stance.

Asia is changing every year, thanks to the rise of China and the emergence of India as a new regional power. In that situation, a Japan that has had a discredited, scandal-hit government which has lacked a majority in the Upper House of the Diet since 2007 is a Japan whose status and influence have suffered.

The weak Japanese economy is of course a main reason for that decline in status and influence, and a change of government will not be able to transform the economy overnight or even quickly. But Japan has also suffered by having had an ineffective government, one unable to pass its legislation easily and one whose continuation in power has looked doubtful ever since the retirement of Prime Minister Koizumi.

A new party in government would simply, a cynic can say, mean that new mistakes can now be made by a new cabinet of scandal-prone ministers. That is certainly true. But it would also send a clear signal to other countries that Japan is changing, that its democracy is truly functioning in the way democracies are supposed to function.

The immediate consequence of that change might well be confusion and incoherence. But it would shake things up, would bring in new faces and new ideas, and would force Japan’s neighbours as well as its allies and other friends around the world to think about and watch Japan in a new, more attentive way. As a long-time foreign observer of Japan, and as I said earlier certainly a lover of Japan too, the chance now for change is terrifically exciting.