Masaru Kaneko, an economics professor at Hosei University, is harshly critical of the way the Liberal Democratic Party has been spending taxpayers’ money on public works projects and to bail out big banks.
The state of the economy will be at the forefront of people’s minds as they cast votes in the June 25 general election, and the LDP-led government has pledged that it will do whatever it can to revive the economy.
But Kaneko believes such public spending, generously allocated in the name of salvaging the economy, has only created an “unproductive” link between government spending, the budget deficit and the bailout of large construction firms and banks.
Construction firms and banks have traditionally been major sources of funds and organized votes for the LDP, although banks have refrained from donating to the LDP since the late-1990s, when problems in Japan’s financial industry became a serious policy issue.
Since late 1997 — when the nation was hit by financial crisis — the government has carried out 106 trillion yen worth of public works projects, only to boost the gross domestic product by a marginal 10 trillion yen, while effectively rescuing construction firms with the remainder, he said.
“It seems almost impossible for (the ruling coalition) to cut the cycle,” he said.
Instead of large-scale public works that mainly benefit general contractors, he wants small, local-oriented projects to improve the environment and social welfare. Such a policy shift would require a substantial transfer of power to local governments and stricter monitoring of projects they carry out, he said.
The bank bailout program, with 7.5 trillion yen in public funds injected into 15 major banks last year alone, is also flawed because it fails to hold the banks’ top management responsible for the trouble they got into, he argued.
Huge spending on public works has also helped the banks greatly in that it saved the construction firms, which had borrowed heavily from them.
This generosity toward banks and major construction firms contrasts with the government’s merciless — and ineffective — deregulation policy for politically weak sectors, he said.
For example, the government has eased regulations on the taxi business, but in times of economic slump, increased competition cuts into drivers’ earnings and lowers the level of services they provide, he pointed out.
“I am not against” deregulation itself, he said. “I am against the idea of deregulation (based on the concept) that leaving everything to the market can work well.”
The author of many books critical of mainstream economists, such as “Anti-Globalism,” Kaneko stressed the danger of what he calls market fundamentalism — the belief that the market mechanism is omnipotent.
“The market can function only when there is justice and morals. The market can’t create justice or morals,” he said.
Like many other economists, he believes people’s concerns about job security and pensions have been hurting personal consumption, which accounts for 60 percent of GDP.
Therefore, he said, the social safety net is urgently in need of an overhaul to revitalize the economy before regulations can be relaxed.
The government must stop its “drastic” deregulation of job markets and at the same time unify pension systems so that benefits will not decrease if a worker switches jobs, he suggested, among other reform proposals.
But no major political party embraces a vision of decentralization and a safety net similar to his.
“Political parties are not functioning,” he said, adding that he hopes citizens will exert more power on politics through such measures as releasing black lists of “unwanted” candidates for the election.