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Tuesday, May 18, 1999
Tracing a profile of the new Japan
REGIME SHIFT: Comparative Dynamics of the Japanese Political Economy, by T.J. Pempel. Ithaca and London: Cornell University Press, 1998, 263 pp.
I'm confused. On the one hand, we're told Japan has undergone tumultuous change since the beginning of the '90s. The Liberal Democratic Party lost its 38-year-long hold on power, a world-beating economy continues to grind through a seemingly endless recession, unemployment has reached postwar highs, and the once-peerless bureaucracy has lost its shine. Its confidence shattered, the entire country seems to have lost its way.
But before I get comfortable with that idea, other observers peel away another layer of reality. They point out that the LDP is back in power, and the stage is set for economic recovery. Yes, unemployment is at record levels, but the much-hailed restructuring is no more than the usual cyclical retrenchment. And with the bureaucracy and other remnants of the old order fighting systemic reform, recovery will allow them to fend off any real threat to their grip on "the system."
T.J. Pempel, Boeing Professor of International Studies at the University of Washington, aims to set the record straight in "Regime Shift," his new study of the changes in Japan. As the title suggests, he belongs to the first school.
For Pempel, "despite continued LDP rule, consistently high economic growth and close ties to the United States, Japan's political economy underwent a series of sometimes dramatic alterations, particularly from the mid-1970s into the late 1980s, that fundamentally transformed key elements of the political economy and laid the groundwork for the dramatic transformations of the 1990s."
That sounds reasonable enough, but Pempel also hedges a tad. Rightly, he argues that "standards for a 'truly changed' Japan are implausibly out of touch with Japanese reality. . . . Change in Japan has typically been a matter of two steps forward and one step back."
Pempel uses a straightforward methodology to reach this reassuring conclusion. First, he paints his portrait of the old order in Japan -- "the regime" in the language of the academic, "the system" to unrepentant radicals of the '60s. It consists of three elements: the political alliances that have power, the institutions through which they exercise it and the ideology that drives their behavior. (Four other countries -- Sweden, Britain, the United States and Italy -- provide a framework for comparison.)
The key feature of Pempel's picture is the virtual unanimity in Japanese society about the goals the country would pursue and the priority they are to be given.
According to Pempel, Japan, at least through the mid-'60s, "pursued an economic policy mixture of embedded mercantilism, a policy dependent on a closed market at home and on extensive barriers to the import of both manufactured and consumer products as well as to most foreign direct investment. It also depended greatly on a strong governmental bureaucracy actively attempting to catalyze growth in the private sector through a host of oligopolistic and export-oriented policies."
Japan was able to stick to that policy because of socioeconomic alliances between labor and business and the political and bureaucratic worlds. Their broad agreement about social goals and the way to achieve them was facilitated, in turn, by an institutional structure that gave enormous power to the bureaucrats who drove the economy, and the politicians who accommodated, co-opted or ran off the opposition.
Many people would like to believe that Japan's postwar course was assured. They assert that the country could not but succeed; its institutions were determined by culture, and they had to take the form they did. But Pempel believes that history was contingent, that the structure of society and the events that took place were shaped by what preceded them. The Japanese experience and the "Japanese miracle" were by no means inevitable.
The implications of that argument are far-reaching. It means that Japan can change course. And Pempel is convinced that in the late '60s and '70s, it did.
External shocks figured prominently. The oil crises of 1973 and 1979 forced wrenching adjustments on the country. But they were superseded by "the Nixon shocks" of the same decade. Those are the decisions to pull the U.S. off the gold standard and the old Cold Warrior's move to re-establish relations with China. Both hit at pillars of the Japanese policy establishment; just as important was the psychic blow delivered by the U.S. willingness to act without informing Japan in advance.
The reverberations were intensified by the cracks that had developed in what was, till the mid-'60s at least, a monolithic society. In the business community, internationally competitive companies were discovering that their priorities and interests diverged sharply from those of the country's inefficient, coddled domestic producers.
Multinational corporations benefited from the capital liberalization forced on Japan when it joined the Organization for Economic Cooperation and Development. Access to foreign capital freed them from the bureaucracy's tightfisted control over foreign exchange. Less dependent on the Japanese market, these companies saw protectionism as a threat to their interests, especially when it encouraged foreign governments to retaliate. The split in the ruling class widened as the two groups cultivated their own patrons in the political and bureaucratic worlds.
The "conservative core" further fragmented as the LDP continued to buy support from its traditional constituents (particularly farmers) at the expense of newly rising groups, such as urban workers and consumers. All the while, and especially during the go-go years of the bubble, income disparities were widening. The crash at the beginning of the '90s only made the choices and the conflicts more real. As Pempel explains, "in the 1990s, the conservative regime's once solid socioeconomic base, previously held together through positive-sum politics and economics, had become zero sum: Benefits to one socioeconomic sector increasingly meant the probable loss of benefits by another sector."
That offers some explanation for the policy zigzags of the '80s and '90s, when, for example, economic stimulus measures were followed by consumption tax increases. Those maneuvers dented the bureaucracy's image as certain and steady -- as has the recent raft of scandals.
And yet . . . Pempel points out that important features of the old order have survived. Japan remains a deeply conservative country, and the end of LDP dominance did not mean the end of its mind-set. The bureaucracy still enjoys incredible power and the market remains closed by most standards.
So where does this leave us? Pempel believes that change is certain, but cautions that the shape of the political-economic system that will emerge is anything but.
In his Japan, one-party rule is out. There will never again be the "unbridled hegemony" that the LDP exercised over the last four decades. Moreover, "the Japanese economy will not return soon to any unparalleled string of successes."
Zero-sum politics means that Japan will seesaw between forces that favor openness, modernization and internationalization and those that prefer regulation, protection and a domestic focus. The problem is that the internationalists don't have an institutional base. The balance of power within the bureaucracy favors the domestic-based ministries (such as construction and agriculture, forestry and fisheries), and even the more internationally oriented ministries have factions that favor inward-looking interests. (Need it be said that rarely does a bureaucracy wholeheartedly embrace deregulation?)
Similarly, within the political parties, the internationalists are outgunned, and there is little sign that electoral reform, despite its many promises, is going to change the political calculus in ways that encourage economic reform. As Pempel notes, "the new single-member districts, considerably smaller and more compact than those they replaced, are almost certain to provide an even greater spur to electoral and economic parochialism."
By all accounts, then, the picture will get more muddied, and the confusion is sure to increase. Fortunately, "Regime Shift" provides some convincing benchmarks as we try to make sense of the fog.