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Monday, June 30, 2003
Devolution trinity needs more than a moniker to succeed
By NORIKO HAMA
Fewer subsidies, less transfers, more taxing power. Thus goes Prime Minister Junichiro Koizumi's "trinity" of local government reforms.
According to Mr. Koizumi's proposals, subsidies paid out of the central government's coffers to fund local community projects will be slashed by around 4 trillion yen by fiscal 2006. Transfer payments from the central government in the form of "tax grant" allocations to local authorities will also be pared down. To compensate for the loss of revenue, local governments will be allowed to collect their own taxes -- up to 80 percent of the amount lost through the subsidy and transfer cuts. A 100 percent recovery through local taxation will be permissible for subsidy cuts that occur in the area of compulsory public services, such as education and welfare.
One in three, three in one. A trinity is a trinity because the three parts are inseparable. Indeed there are no separate parts in a trinity. It is all part and parcel of the whole thing. The image is a clever one. One doubts if Mr. Koizumi's knowledge of theology extends to the understanding of the Holy Trinity and its mysteries, but lack of scholarly precision has never prevented politicians from lifting words from scholarly or even holy texts to their advantage.
Mr. Koizumi seems especially gifted in this department. His knack of coming up with the "mot juste" to suit the occasion is quite uncanny, if somewhat unscrupulous.
Mr. Koizumi is right in saying that the three parts of his local finance reforms can only work effectively if they happen all at once. It does not make sense to simply starve local authorities of subsidies and transfers when they have for so long been conditioned to rely on central government support for more or less everything.
It is also true that local governments have to be jolted out of the culture of dependency that has shaped their basic mind-set up to now. But for that to happen, it stands to reason that they should be granted the funding powers that allow them to act independently.
Without the wherewithal, local autonomy is ultimately a joke. Yet local autonomy is no joking matter if Japan means to break out of the institutional paralysis that is so inhibiting its ability to cope with the challenges of the 21st century.
It could well be said that Mr. Koizumi's trinity actually does not go far enough. If the government is really serious about devolving power to the regions, it ought to give the local authorities extra taxation powers over and above those intended to offset the loss of existing subsidies and transfers. Then, and only then, will the regions be able to conduct their affairs in a truly autonomous and creative fashion. Thus the operation devolution trinity deserves to be given a fair try.
But that will not be easy. Devolution strikes at the very heart of the existing Japanese system. Centralized management has been the dominant mode of operation in Japan's economic, social, political and bureaucratic history, dating all the way back to the Meiji Restoration. Breaking with this tradition will involve the demolition of many fiefdoms and spheres of influence in the many corridors of power in and around the central government. Formidable opponents to the scheme will fight tooth and nail to keep the status quo intact.
This is no time for Mr. Koizumi to be delegating responsibility, as he has been so apt to do at wrong moments regarding other important aspects of his reform program. What the devolution trinity requires of Mr. Koizumi is a trinity of audacity, subtlety and tenacity. A mere flair for the mot juste will not be enough to win this fight.
Noriko Hama is an economist and a professor at Doshisha University School of Management.