Osaka's 'win-win' merger may leave the people lost

In a historic first, Osaka municipal voters go to the polls today to vote on a referendum that, if approved, will divide the city into five semi-autonomous wards.

For years, Osaka Mayor Toru Hashimoto and his Osaka Ishin no Kai (One Osaka) local party have hammered home the message that, without the merger, bureaucratic redundancy with Osaka Prefecture cannot be eliminated, economic growth cannot occur, social welfare services cannot be improved and true local, grass-roots democracy in Osaka cannot flourish.

Sounds very nice, doesn’t it? Especially the last bit about grass-roots democracy. But some tough questions remain: How much will the merger really cost? What happens to the existing municipal debt (partially due to white elephant projects built two decades ago)? And what happens to local services?

Answers are contradictory, elusive or confusing. Thus, local media polls last week showed more people opposed the merger than supported it.

Whatever the final result, it’s important to remember that, traditionally, those yelling loudest for an Osaka merger were not local politicians, bureaucrats or even Osaka residents, but a few major corporations in the Kansai Economic Federation and the Osaka Chamber of Commerce and Industry.

These (mostly) old men have decades of experience running the city of Osaka behind the scenes. Their motivation for a merger is simple: more influence over the local tax base and, hopefully, cheaper costs for their businesses (by eliminating redundancy with the prefecture).

An Osaka merger poses many questions. But one of the less-discussed issues is likely intensified competition among the five new autonomous wards to lure more corporate taxpayers or keep them from bolting to a neighboring ward to get a better deal.

The business mandarins hope to find themselves courted by five local heads and elected assemblies, all of whom would inquire how their ward might use their newfound powers of the purse to provide ever-more tax breaks and deregulation to make, or keep, the mandarins happy.

If that means cuts in citizen services have to be made, well, no worries. Ward leaders can tell residents that whatever tax money gets cut for their services today to provide business incentives will come back tomorrow in the form of new jobs and increased corporate tax revenue.

That may be true and they may sincerely believe it. But it should not be forgotten that many Osaka business leaders do not live in the city of Osaka but in the nicer parts of the prefecture and neighboring Hyogo or Kyoto. They’re interested in seeing tax money used in ways that benefit their bottom line, not get spent (too much) on schools, day care centers and social welfare services they or their families will never use.

In other words, many senior corporate leaders view the city of Osaka less as a democratic entity and more as a strategic “location” that now needs to show its “international competitive advantage” in terms of cost of operations.

From an economic point of view, it’s common sense. But what’s being asked today is whether voters believe a merger will not only improve local democracy and public services but also convince nonresident shareholders and directors of some of Japan’s largest and most politically connected firms that their tax needs will be met and they will invest in the new Osaka.

Maybe. Efforts by the city and prefecture to keep Osaka firms in the city back in the 1990s with various incentives failed miserably. “Win-win” is a nice phrase bantered about in business school, in corporate training seminars and by Osaka merger proponents. It may even be true. However, history suggests voters need to remember their Latin today as well as their English: caveat emptor, or “let the buyer beware.”

View from Osaka is a monthly column that examines the latest news from a Kansai perspective.