Wednesday, January 14, 2009


Watanabe Yoshimi is on his own.

As Jun Okumura makes exceedingly clear, there is little chance that Mr. Watanabe will be joined by other LDP defectors in his effort to build a national movement to take down the old guard. (Although, surprisingly, Mr. Watanabe was joined by an LDP abstainer — Matsunami Kenta — in Tuesday's vote on the second stimulus, an act of rebellion for which Mr. Matsunami has already been punished by being stripped of his title as parliamentary secretary for the Cabinet Office.) Mr. Watanabe has indicated that he wants to build a "popular movement," not a new party.

The basis for this popular movement is anger at the bureaucratic conservatism that Mr. Watanabe believes lies at the heart of the "old, old LDP." For Mr. Watanabe, bureaucratic rule — to which the LDP is wedded — lies at the heart of the country's inability to cope with the once-in-a-century crisis facing Japan.

In a recent issue of Voice he wrote of the shift to a "postmodern" moment, arguing that Japan is in the midst of one of several great transformations, in the mold of the transitions to the Heian, Kamakura, and Edo periods. Arguing that a "once-a-century storm" requires a "once-a-century response," Mr. Watanabe advocates the wholesale transformation of the Japanese state, starting with administrative reform and the eradiction of amakudari. He further advocates decentralization and the consolidation of prefectures into states as a means of depriving Kasumigaseki of power — and with the reorganization of local governance, he suggests that the capital should be moved, as in earlier great transformations. (This is hardly a new idea.)

He offered an expedited version of this article in both his statement of secession and his Tuesday press conference.

The LDP may yet offer further confirmation of Mr. Watanabe's argument that the LDP is incapable of implementing the reforms Mr. Watanabe believes necessary to save Japan from ruin. As Uesugi Takashi argues in the February issue of Voice, the LDP may once again fight over the future of the road construction fund during the ordinary Diet session. For Mr. Uesugi, the road construction debate lies at the heart of the LDP's downfall. The road construction tribe has persistently blocked efforts not only to shift funds from road construction to other, less particularistic ends, it has blocked reform more generally. Surely behind obstruction to Mr. Watanabe's efforts to promote administrative reform lies the hand of the road tribe, for any serious attempt to uproot amakudari would be a blow to the construction companies, the bureaucrats responsible for the contracts, and road tribe members themselves. Aso Taro may become only the latest in a series of LDP prime ministers forced to back down in the face of resistance from the road tribe. Naturally while the media and the public busy themselves with the possibility of rebellion by reformists when the 2009 budget comes to a vote, the road tribe will be quietly looking for ways to water down Mr. Aso's promise to suspend the special fund and redirect the newly created "fund for the creation of a foundation of rural vitality" towards road construction funding.

Of course, it does not do to simply demonize the LDP's longtime reliance on public works spending (which some Americans have begun to do in anticipation of the Obama administration's stimulus plan). The LDP came to rely on public works as what Margarita Estévez-Abe has called a "functional equivalent" of welfare and unemployment assistance, a method of public support that also produced public goods for rural areas while conveniently solidifying the LDP's political position in rural electoral districts. As Estévez-Abe argues, the LDP essentially farmed out welfare provision to small companies, enabling Japan to create a welfare state without a large public sector or an unsustainable public debt for much of the postwar period:
Instead of aiding firms to shed their redundant workforce, the Japanese welfare state subsidized employment of excess labor — in both large and small firms. Rather than creating a large public sector — which would have benefited the opposition parties — or an extensive active labor market to pool and train redundant workers, Japan subsidized private sector employment instead. Japan's 'socialization' of capital was a crucial piece that made the system work. It allowed the state to invest in public works beyond its tax revenue. It also permitted private firms to function as primary welfare providers by shielding them from financial pressures. In short, Japan's small social welfare spending and its weak organized labor did not yield a form of laissez-faire capitalism. On the contrary, postwar Japan pursued a brand of capitalism, where economic units — that is, firms — were very much treated as units of welfare provision as if under a socialist regime. Furthermore, state intervention to protect businesses in Japan perpetuated the presence of a large number of inefficient firms. (Welfare and Capitalism in Postwar Japan, 198.)
The problem therefore is not that the road tribe is the mastermind behind a sinister conspiracy to wreck Japan. It's that this form of social protection — targeted at both firms and individuals located in rural Japan — is antiquated, and that continued efforts to perpetuate this system delay the construction of a more conventional welfare state and make life worse for the Japanese people.

The "redundant" worker who might at one point have worked in small construction company somewhere far from Tokyo is now a temporary worker struggling to find work in urban Japan and living without benefits. The Japanese state, having broken the bank in the 1990s, is no longer able to protect the small firms and their host communities with public works. Little wonder that Japanese firms, deprived of government support, are failing in the face of the global financial crisis. Bit by bit the old system is crumbling, but efforts to prolong its life have unfortunately made it difficult for the government to build a new system in its place.

But the road tribe, their local politician allies, the construction companies, the bureaucrats: they have all been doing what they can to preserve a system that played an important social role for decades. They might be acting out of self-interest, but it is hard to expect them to do otherwise. The time has come, however, for a new system that ensures that public funds are directed to those most in need of it, that public funds are used to create a new safety net that ensures that failing to secure a permanent position in a major corporation is not a sentence to a lifetime of penury and economic insecurity. Japan is in urban country — it needs to a universalistic system that reflects its demographics. Creating a universalistic system should not mean tossing rural areas on the rubbish heap, but Japan must discard a welfare system that now provides support to an increasingly narrow segment of the population.

The LDP, torn between advocates of a new system and defenders of the old, has been singularly incapable of doing what must be done to develop both new sources of wealth and new means of protecting the public. It is for this reason that Mr. Watanabe left, and why Mr. Watanabe is right to argue that questions of public welfare are inseparable from the question of administrative reform. Defenders of the old system, unwilling to surrender voluntarily, must be defeated if a new system is to be created. Of course, it is for this reason why the LDP must be defeated in the 2009 general election.


Noah said...

Wow, this is possibly my favorite post ever.

I was planning to write a post about corporate welfare, but Tobias did it better than I could have. I especially like this part: "Japan must discard a welfare system that now provides support to an increasingly narrow segment of the population."

One thing I'd add is that the current system f corporate welfare is heavily, heavily biased toward men. Construction companies naturally employ mostly men. Also, companies that receive government protection an support are more able to engage in tradition-based gender discrimination than companies that must raise efficiency to face competition (this is the Becker theory of discrimination). So a great deal of Japan's gender problems can also be chalked up to the corporate welfare state.

As a side note, ironically, the best way to revitalize rural areas would be to first construct roads and then make them toll-free; this is the main result of Economic Geography theory, which Paul Krugman won the Nobel prize for (and which Masahisa Fujita of Kyoto University really should have shared). Of course, making roads toll-free is the one thing the road tribe will never do. So the road tribe is actually crippling rural areas.

Anonymous said...

It is remarkable for me to perceive the changes you describe in the Japanese economy under the hammering of the global crisis to be simultaneously appearing in the US. Or perhaps more correctly I should say they are beginning to appear in the US. Once again as in the nineties, Japan is anticipating the changes that show up with a short lag in the US.

Anonymous said...


Interesting you touch upon toll-free roads. I was in the UK last Nov with my wife. After arriving at heathrow i drove a hired car around the south coast of England seeing friends and family.

After about 1hour of driving on the motorway my wife said where is the toll gate, i said there isn't any. Motorways are toll-free in the UK....she was amazed!

The corollary is that if motorways are expensive to use, it encourages those needing to drive long distances to use small, minor roads. Longer journey but passing small local shops etc, which would not otherwise be able to benefit from the passing traffic.

Anonymous said...

"... It also permitted private firms to function as primary welfare providers by shielding them from financial pressures..."

This is the failing US system of "welfare". viz a vie medicare.

It is interesting your views on this, from an American perspective. Since welfare and support in the EU is seen by many in the US as socialism/liberalism all rolled into one and is evil. Why should I work hard to pay for someone else's medical bills etc etc.

Yet the welfare system that Japan needs, which i think you are eluding to, is an EU style. The current health system in Japan and the way it works is an excellent example. It is extremely good efficient and inexpensive.

However i would go on to say that it is not just the Road Tribe. It is everywhere in Japan. Just look at the housing industry. The current quality of houses is shocking....a very limited shelf life. the rules and regulations favour continuously having to buy new after a set period of time. Nothing is built to makers wouldn't want this anymore than the road tribe would being "broken up".

There is a lot of tenacity that needs breaking up in Japan. But I don't see any politician with the balls to do is exactly what Margret Thatcher did in the UK in the early 1980s. The Unions, cut and paste road tribe/house makers here for japan, in the UK had a very tight strangle hold on the whole economy and industry in the UK. MT broke them caused major social unrest, such as the miners strike. Scars still left today. BUT, it was essential to the future of the UK that the Govt were not held hostage to by the Unions. Japan is no different..