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Sunday, Aug. 23, 2009

Japan has plenty of work to do in transforming how it governs

The world is changing dramatically and political governance is at stake.

The U.S. subprime loan fiasco spawned a global financial crisis and the world economy is assailed by a recession comparable to the Great Depression of the 1930s. At the financial summits of November 2008 and April 2009, and at this year's Group of Eight summit in July in L'Aquila, Italy, the world's leading industrialized nations committed to taking on the economic challenges jointly. They have taken all available fiscal and financial measures to stabilize the global economy, and revive demand.

As a result, the world economy appears to be emerging from the worst phase. But the problem of bad loans hovers over financial markets in the United States and, especially, Europe, and there is no prospect that fiscal stimulus measures will lead to autonomous economic recovery. This is why policymakers in each nation need to impose careful economic management.

The worldwide recession is bringing into question the governance of major nations and the international community. Nobel Prize-winning economist Paul Krugman says the global financial crisis has undermined the belief that if things are left to market mechanisms, everything will run smoothly. Krugman calls for a return to the philosophy favoring a certain degree of regulation (Jan. 3, 2009, Yomiuri Shimbun).

It often has been pointed out that markets are not necessarily perfect and that "market failures" happen. The subprime loan fiasco certainly represents a "market failure." Public adjustments by government rectify market failures.

Economic management should be based on market mechanisms and free-trade principles. Public adjustments by government should be minimal and should utilize indirect means as much as possible. In sum, government must seek an optimum combination of market mechanisms and public adjustments.

To cope with the current crisis, some nations have raised tariffs on imports and given priority to purchasing domestic products. Politics tends to give priority to domestic interests. To attain an optimum mix of market mechanisms and public adjustments, it is desirable for politics, administration and the private sector to pool all their wisdom.

With regard to the international exchange system, discussions are under way on whether the dollar standard system should be maintained or whether a new system should be sought.

As for global warming, the U.N. Climate Change Conference (COP15) in Copenhagen this December is expected to agree on a framework for greenhouse-gas emissions from 2013. But optimism is not warranted.

And what about the international political arena? With the collapse of a U.S.-centric world, we are heading toward a polycentric one. Regional conflicts are intensifying over religion and race. While U.S. President Barack Obama's initiative has given some impetus to moves toward nuclear disarmament, nuclear proliferation is continuing in such nations as North Korea and Iran. We desperately need the formation and management of a new world order.

Japan must tackle many political issues. We have to create a new growth model that will replace financial capitalism. As the population shrinks and gets older, people are losing faith in the social security system, including pensions and medical services. There are fears that economic growth will never escape its downward spiral. Central and local government debt amounts to 170 percent of gross domestic product, the worst among developed nations.

The international competitiveness of Japan's higher education institutions is falling in relative terms, and the education level of elementary and middle schools is declining. Japan desperately needs structural reform in various fields.

The deterioration of Japanese politics must be stemmed at any cost:

First, the capabilities of political parties should be heightened. Conditions must be created that will lure talented people into politics. There is also a need to establish political infrastructure that will produce effective policies. The practice by which lawmakers' children inherit their parents' supporters and election machines should be reviewed, and competition should be introduced in selecting candidates for elections. A system in which political parties take the initiative in picking talented candidates and work to win public confidence is needed.

If a political party wants to come to power in an election, it needs to make clear what policies it will pursue once in power — that is, spell out its aims in its manifesto. It also needs to clarify what kind of a nation it wants to build, what concrete measures it will adopt and what kind of system it will employ to manage the government.

To enhance their policy-related capabilities, parties must have the ability to evaluate the present situation, predict the future, nurture original ideas, persuade people what to do and implement policies. To realize these goals, they must either have specialized internal organizations or actively utilize functions outside. They also need to reorganize the system to upgrade the ethics and abilities of party members.

Second, it is necessary to establish constructive political practices. I believe a two-party system that enables changes of government is desirable. At least it is necessary for political parties to build desirable political practices one by one — by clarifying their principles and stances, publicly discussing policy with other political parties, and arriving at logical conclusions that are not bound by party interests but follow democratic principles.

Third, it is necessary to rouse people's interest in politics. Japan's democracy is often dubbed "theater audience democracy." People look at politics as if watching a game show. It is often said that people who don't identify with any political party are in the majority.

It is important to create an environment in which people are conscious that the nation's sovereignty resides with them and in which they can use their judgment to assess policies. For this to happen, political parties need to have direct communication with people or indirectly through the media. New information and communication systems can become important means for this.

Dynamic discussions on policy matters will enhance people's interest in politics. It is important for branches of the administration, think tanks, economic organizations and nongovernmental bodies to stimulate public discussions, and make policy proposals.

Fourth, it is necessary to re-establish trust between politics and administration. Administration needs to examine itself concerning the many matters criticized by public opinion. But mutual distrust between politicians and administrators is an unhappy development for people.

Government ministries and agencies must carry out what is decided by politicians. They directly deal with people and are the first to realize people's dissatisfaction. If there are contradictions in policies, they are obliged to notice and rectify them.

But if public servants lose morale and talented people refrain from becoming public servants, decisions by politicians will not be implemented properly. This will eventually lead to distrust in politics.

Essentially, administration should respect the principles of simplicity, efficiency and impartiality. Administrative reform must target these principles as it proceeds.

There is a saying that politics is the highest morality. This not only shows that politicians are required to abide by the rules of democracy and work with everlasting humility and an altruist spirit but also cautions against politics deteriorating into populism. It is people and business enterprises that flower and bear fruit in society. The role of politics is to prepare the soil for these plants.

I hope that the Aug. 30 general election will stem the deterioration of politics and become a turning point for politics full of vitality in Japan.

Shinji Fukukawa, formerly vice minister of the Ministry of International Trade and Industry (now the Ministry of Economy, Trade and Industry) and president of Dentsu Research Institute, is currently chairman of the Machine Industry Memorial Foundation.

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