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Monday, Sept. 1, 2003

Merger of opposition parties may bring grand reform era

On July 24, lawmakers of the Democratic Party of Japan and the Liberal Party approved an agreement for the two opposition parties to merge before the end of September. Some pundits criticized the scheduled merger as "unprincipled," but I disagree. I believe it has major significance for the nation.

In my opinion, it is essential for Japan to implement market principle-based reforms to change its highly regulated, opaque and unfair economy into a free, transparent and fair one, but that is not sufficient. These reforms must be accompanied by simultaneous "third way" reform.

Market principle-based reforms, pure and simple, will improve economic efficiency, but they are also likely to widen income gaps, lower the quality of public medical care and education, increase the unemployment rate, arouse public anxieties, contribute to higher crime and suicide rates and, for many people, make society less livable.

Margaret Thatcher, after taking office as British prime minister in 1979, implemented a series of market principle-based reforms, successfully reactivating the British economy. However, Britain suffered serious side effects from Thatcherism, and as a result, her Conservative Party was dealt a devastating loss by the Labour Party.

Tony Blair succeeded Thatcher in May 1997. Asked at his first news conference as prime minister to list his three major policy priorities, he said, "education, education, education."

Thatcher had promoted privatization in all sectors of society, cut the budget for public schools and effectively encouraged education at private schools. As a result, the quality of education at public schools suffered. Children from rich families benefited, but those from poor families were excluded from a good education at a private school.

The Third Way refers to the policy platform of Blair's New Labour government. The "third way" I propose for Japan should be aimed at creating an "equal-welfare" society. Lest my critics should scoff at the proposal, let me redefine "equal" and "welfare."

In my opinion, an "equal society" is one in which no person is excluded from benefits to which he or she is entitled. For example, an unemployed person is typically excluded -- although willing to work, he or she is excluded from a job. In Britain, under Thatcher's rule, children of poor families were excluded from a good education. Another example of inequality is the lack of health insurance coverage for 17 percent of the population in the United States; thus they are excluded from decent health care.

Welfare traditionally has meant public assistance to the aged, unemployed, sick, disabled and other people in need. Welfare in the future should offer financial aid to help people develop their abilities. What is needed is a shift from negative assistance to positive assistance.

If third-way reform is implemented in parallel with market principle-based reforms to create a mechanism for positive welfare, the latter reforms can be successfully realized without pain.

Liberal Party leader Ichiro Ozawa is a strong advocate of market principle-based reforms. The LP, which espouses a new conservatism, is capable of promoting reforms I believe are essential to my reform proposal. On the other hand, the Democratic Party of Japan has many members, including former members of the Social Democratic Party, who would be willing to endorse third-way reform.

The coming merger may look like an "unprincipled union," but it will lead to the birth of a new political party that includes both new conservatives and leftwing liberals. Let me welcome the founding of a new party capable of implementing market principle-based and third-way reform at the same time.

I strongly hope that the new party will do everything possible for the simultaneous implementation of the two reforms. It will be no easy task, but without such efforts, removing the dark clouds hanging over Japan's future will be impossible.

The DPJ-LP merger heralds a grand Heisei Era social experiment of major reforms.

Takamitsu Sawa, professor of economics at Kyoto University, is also the director of the university's Institute of Economic Research.

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