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Monday, Sept. 7, 2009

Duel of market ideologies past due in Japan's polls

The world has undergone drastic change in the first decade of the 21st century. There appears to be no end to terrorist activities and international disputes in the wake of the Sept. 11, 2001, suicide attacks on the United States.

In retaliation for the terrorist acts, the U.S. led the "Coalition of the Willing" to invade Afghanistan in an effort to quell the Islamic fundamentalist Taliban organization. In March 2003, the same coalition did not bother to wait for a U.N. Security Council resolution before starting the war in Iraq on the presumption that Baghdad possessed weapons of mass destruction. Washington justified the war as a means of liberating Iraqi citizens from the dictatorship of Saddam Hussein.

With the wars in Afghanistan and Iraq, the administration of U.S. President George W. Bush spent eight futile years pursuing American unilateralism.

In Japan, the coalition government of the Liberal Democratic Party and Komeito supported the policy of the U.S. by taking part in both wars. At least Tokyo did stop short of withdrawing from the Kyoto Protocol.

In my view, the resounding victory scored by Barack Obama and his Democratic Party in the U.S. elections last November exerted no small influence on last week's Lower House election, which brought about a change of government in Japan.

Other factors contributing to the collapse of the LDP-Komeito coalition included the international financial crisis of 2008 and subsequent economic downturn triggered by the fall of Lehman Brothers in September of that year.

Many lawmakers within the governing parties began to revolt against the "structural reform" policies of former Prime Minister Junichiro Koizumi, who was at the helm of the government from 2001 to 2006 and whose influence gave his LDP and its junior coalition partner Komeito a huge majority in the 2006 general election. The revolt even led Prime Minister Taro Aso to make mention of "excessive market fundamentalism."

Today, only a minority of politicians follow the ideology that equates a free, transparent and fair market with automatic economic growth, and assumes that the benefits of such growth will trickle down to those of the lowest income bracket.

The revised workers dispatch law, which went into effect on March 1, 2004, eased the rules governing dispatch of workers by employment agencies, resulting in a sharp increase in the number of nonregular workers. Firing of such workers has become a routine since the nation was hit by the global recession.

After dissolving the Lower House for a general election in 2005, Koizumi asked the nation to say yes or no to the central theme of his structural reform program: privatization of postal services. The overwhelming LDP victory demonstrated that two-thirds of the electorate supported the privatization scheme and Koizumi's brand of market fundamentalism.

I have long criticized Koizumi's structural reform as "Thatcherism coming 20 years too late." After becoming British prime minister in 1979, Margaret Thatcher wasted no time leading the privatization of national enterprises and the drive to ease or abolish regulations. What cost her her political life was the introduction of a poll tax requiring every citizen to pay a local tax equivalent to ¥100,000 per year regardless of income. It was dubbed by many as the ultimate example of Thatcherism.

Opposition to this tax far exceeded what she anticipated, and she had to abandon her candidacy to be re-elected head of the Conservative Party in November 1990. John Major replaced her on the pledge to abolish the poll tax, and it was abolished in September 1991.

The Labour Party roundly defeated the Conservatives in the general election in May 1997, bringing about the first change of government in Britain in 18 years. Newly elected Prime Minister Tony Blair distanced himself from the old Labourite policy of nationalizing major enterprises and instead sought to create a "New Labour Party" pursuing a third way.

I recall Shoichi Watanabe, an English-language scholar and leading rightwing critic, expressing his opposition to changes of government at a symposium. He attributed the "British disease" to frequent changes of government, which he said were responsible for changes in fundamental policies.

I do not wish to delve into the cause of the "British disease," but the fact remains that Britain's per capita gross domestic product ranked 10th in the world in 2007 in terms of the U.S. dollar, while the per capita GDP of Japan — which had not experienced a "change of government" — had fallen to 19th.

With the exception of socialist states, Japan is unique in that the political party governing Japan had not changed, with many lawmakers inheriting their positions from their parents. This has weakened Japan's position in the international community, politically and economically. As a result, I cannot help feeling that Watanabe's observations are unfounded.

Today, we are faced with an unprecedented global crisis that threatens the very existence of humans, what with climate change, spiraling fuel and food prices, the international financial and economic downturn, and a new type of influenza. I wonder if the Democratic Party of Japan, which is to take the reins of government, is capable of systematically implementing policies to overcome these crises. For example, if the party is serious about reducing carbon dioxide emissions to combat global warming, it will have to face off against the Japan Business Federation (Nippon Keidanren).

The only way for the DPJ to win voter support is to draw up ambitious medium- and long-term targets for reducing greenhouse gas emissions and to aggressively introduce renewable energy sources, creating in effect a Japanese version of the "Green Deal," which must be pushed to pull the nation out of recession.

Because of this recession and its rising unemployment, Koizumi's structural reform programs are under fire. It must be recognized, however, that he implemented his policies with an unswerving faith in market fundamentalism. It must be assumed that, from the outset, he foresaw that the logical consequences of his policies would be social disparities, a sharp rise in the number of nonregular workers, and more "losers" in competition. Not caring about these consequences is the true nature of market fundamentalism.

It would have been more desirable if the most recent general election in Japan had represented a head-on confrontation between those who favored market fundamentalism and the Keynesians who regard the market as less than perfect — as in the confrontation between Republicans and the Democrats in the U.S. elections last fall.

Takamitsu Sawa is a professor of Ritsumeikan University's Graduate School of Policy Science and an appointed professor at Kyoto University's Institute of Economic Research.

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