Why Tokyo Can’t Get the Economy Going: One-Party Rule
Whatever the final margins in Japan’s June elections, it is highly probable that voters will keep the ruling party in power, thus perpetuating, for all practical purposes, one-party rule since the 1950s. This is not necessarily an Asian phenomenon. Other Asian countries have done away with one-party domination. Thai voters have a choice. Even in post-Suharto Indonesia, recent elections were hotly contested. But Japan’s leadership has continued to play intraparty musical chairs for a full decade while the economy stagnated.
By the beginning of the 1990s, the export-heavy locomotive of Japan Inc. had run out of steam. The country’s protective bureaucracy was no longer able to insulate weak banks and businesses from the harsher realities of globalization. Faced with a need for drastic economic restructuring, Japan’s economic managers either ignored it or watered down reform. Instead, they relied on injections of government funding, mostly in the form of costly construction programs, to keep the economy chugging along.
While such pump priming can produce temporary results, its long-term effects can be harmful. Japan’s current national debt is huge, nearly 130% of gross domestic product and about half the country’s savings. It’s sustainable only because of Japan’s huge personal savings, of which more than $2 trillion is invested in low-interest postal-savings accounts. Nonetheless, the debt continues to mount.
But 10 years of fiscal stimulants haven’t solved the problem. Overprotected domestic industries remain appallingly uncompetitive. Banks that once spear-headed the economic miracle still suffer from deflated assets and loan portfolios. Warehouses are filled with unsold inventories. Record unemployment rates (March’s 4.9% would have been almost twice as large if reckoned by U.S standards) signal the end of the old job-security era. Underlying it all is a nervous and largely passive consumer.
Japan remains trapped in the ruins of its “old economy” successes. For once the winds of globalization began blowing through its financial sector and then its burgeoning information-technology industry, the cozy alliance of bureaucracy and business could no longer protect Japan’s fragile two-tier economy from international competition.
Yet, the country’s problems are by no means insoluble. Political economists, journalists and businessmen believe that Japan must have a “third opening,” as sweeping as the Meiji cultural revolution of 1868 or the MacArthur “democratization” of post-1945, to end intrusive bureaucratic regulation, revitalize the education system and weed out inefficient banks and corporations. The trouble is, to deregulate and restructure the economy, with all the temporary pains that would cause, would strike at the heart of most of the ruling Liberal Democratic Party’s special-interest constituencies.
For almost half a century, this party has dominated Japanese politics. It has justly been credited for the successes of the old economic miracle, and the two generations of voters who have grown up under Liberal Democrats are understandably grateful. But the memory of good times is wearing thin.
Things are happening in Japanese business. It is internationalizing as never before. Information technology is moving ahead. People are putting more money in the stock market, encouraged by heavy foreign investment. Entrepreneurs are starting up new businesses. Yet, the restructuring efforts of companies often founder because of political foot-dragging.
The principal barrier to Japan’s recovery is lack of leadership and political will. As they try to understand diminishing incomes, mass layoffs and a rapidly graying society with insufficient pension funds to support it, the Japanese people look in vain for someone in authority to explain the muddle and offer hope for the future.
Over the past 12 years, Japan has had 10 prime ministers, all but one of them products of the Liberal Democratic Party. (Tomiichi Murayama, professedly a Socialist, was little more than a puppet for a Liberal Democrat-led coalition.) Only one of them, Ryutaro Hashimoto, actually tried to bring about some structural reforms, but his hopes for financial liberalization, the “big bang,” foundered in the murky waters of party politics and bureaucratic errors.
His successor, Keizo Obuchi, faced with the virtual dissolution of Japan’s banking system, began his stewardship with a dramatic call for “economic revitalization.” A few emergency measures succeeded: specifically, $500 billion in public money to stabilize the banking system and insure depositors’ accounts. But thereafter, Obuchi’s policies did little to justify his reassuring hype. Committees and nonpartisan councils aplenty were appointed to consider national problems, and most withered on the vine. In practice, Obuchi’s government either put off or diluted reform whenever it harmed special-interest groups favored by the party and its coalition ally, the ironically named Clean Government Party (Komeito).
Apart from sponsoring ever-increasing steroid injections of public-works projects, Obuchi had no real program. One of his bosses, former Prime Minister Yasuhiro Nakasone, had approvingly, if ironically, labeled him shinku--a vacuum, receptive to other ideas because he had none of his own. As a veteran insider, however, Obuchi’s one strength was his ability to keep control of the party, diminish political opponents and cash in on enough past political favors to win election. Yet, when he was suddenly hospitalized in early April, the victim of a stroke, the country’s vital economic statistics were no better than when he began: consumer spending still falling, banks shaky and GDP growth negative for the last two quarters of 1999.
The Liberal Democrats’ back-room boys selected Yoshiro Mori, party secretary-general and political hack, to replace him. His invisible leadership qualities immediately led wiseacres in the Japanese press to christen him “Vacuum No. 2.” His promise to bring about a “rebirth of Japan” prompted critics, punning on the characters in his name, to call him “Mr. Mirage.” But Mori can be trusted to work hard for the party and its constituencies regardless of what happens to restructuring plans for the Japanese economy. The interests of party and country have become increasingly divergent.
The estrangement of party from country is not unprecedented. You need look no farther than Japan’s neighbor, the People’s Republic of China. The ruling Communist Party, entrenched since 1949, faces a similar conflict between economic progress and perpetuating political rot. With ideology a joke, corruption a way of life among party members and any real reform--cleaning up the banking system and cutting back on the grossly unprofitable state-owned industrial sector--a possibly fatal threat to party control, Jiang Zemin and his communist cronies have made an even worse mess than Mori’s Liberal Democrats.
Japan, for all its problems, is a democracy. But China suffers from far more than an overextended economy. Until some rule of law emerges, a paranoid regime that relies on an army of public-security thugs to keep its people in line will remain an international menace. Nonetheless, the similarities of party governance and popular apathy in both nations should give Japan’s politicians some pause. Much like Chinese, Japan’s voters have kept the majority party in power for so long because they are nervous about untried and ill-defined alternatives.
Closer to home, however, Japan might learn something from South Korea’s political progress. Since taking office, President Kim Dae Jung has had considerable success at some real economic restructuring. He also has to cope with a large and vociferous parliamentary opposition. Politics in South Korea’s two-party democracy are noisy and contentious, but they are also transparent. South Korean voters have a clear set of choices not yet enjoyed by their Japanese cousins. What’s more, a new nonpartisan group, the Citizen’s Alliance, blacklisted 86 candidates from both parties in the recent National Assembly elections because of corruption charges. Fully 70% of those listed lost.
That’s a useful example to voters in Japan’s upcoming Diet elections, if they finally tire of the steroid economy and have the gumption to demand some real reform.
