HIKONE, SHIGA PREF. – In my book “Shijo-shugi no Shuen” (“The End of Market Fundamentalism”), which was published about 15 years ago, I wrote: “Those who believe it desirable for salaries to be as equal as possible to all workers regardless of their accomplishments, namely, those who believe in equality of outcome, have now fallen into a sheer minority. Socialists of the years gone by aimed at attaining equality of outcome. While accepting the maxim that ‘He who does not work, neither shall he eat,’ socialists think that those who work should be remunerated equally.”
October 2000, when the book was published, was just before a new administration under Prime Minister Junichiro Koizumi came into being. “Structural reform” was the principal slogan of his economic policies. It meant that the postulation of neoclassical economists that a free and competitive market will bring about efficient distribution of resources would serve as the fundamental premise of his policies.
The actual situation of the market economy in those days was characterized by various regulations that hindered free competition, and the publicly controlled post office’s three services — postal services, postal savings and post office life insurance — were suppressing the banking, insurance and transport sectors. In the mid-1980s, the administration of Prime Minister Yasuhiro Nakasone had privatized Japanese National Railways and Nippon Telegraph and Telephone Public Corp., revitalizing the land transportation and information and telecommunications markets.
Privatization of the last remaining bastions, that is the post office’s three services, and easing and abolition of various regulations in the financial and other sectors would lead to the development of a completely free and competitive market economy, which is a prerequisite to neoclassical economists’ postulation, and the Japanese economy was certain to be revitalized. This is what Koizumi thought. The consistency of the Koizumi administration’s economic policies is worthy of high praise as it faithfully followed market fundamentalism.
Market fundamentalists assert that in free competition there naturally are winners and losers, and, therefore, it is equally natural for income disparities to result. A progressive taxation system on income is harmful and of no use because it hampers high income people’s incentive to work. Levying tax on income, which is compensation for labor, is wrong in the first place. It is desirable to reduce income tax rates for both individuals and businesses and to raise the consumption tax rate. Moreover, since excessive social welfare will impede the motivation to work, social welfare programs should be limited to a bare minimum.
Around the time my book was published, most economists were captivated by market fundamentalism and the passage quoted from my book at the start of this article referred to a “common sense” among Japanese economists from the late 20th century to the early 21st century. But the Lehman Brothers shock of 2008 brought about a dramatic change, with the resurgence of Keynesian economics, which argued that the government’s market intervention with all available fiscal and monetary measures was indispensable to avoid a global depression. Indeed, it is said that 4 trillion yuan (¥60 trillion) that China invested in public works projects filled a worldwide gap between supply and demand and prevented a global depression.
Ironically, however, this huge public spending, once regarded as a savior for the global economy, has resulted in an excessive expansion of China’s production capacity. This led to a slowdown of the Chinese economy, which in turn has become one of the causes of Japan’s economic stagnation.
Partly thanks to the re-emergence of Keynesianism, which was once thought to have died, Keynesian economists like Joseph Stiglitz and Paul Krugman, whose principle is stimulation of domestic demand through fiscal policies and opposition to fiscal austerity, have gained strength. They assert that the fundamental cause of today’s worldwide economic slump is demand deficiency throughout the world, and they call for stimulating demand on a global scale.
These economists also bitterly criticize economic disparities prevailing in the United States, where the top 1 percent of the population grabs more than 20 percent of the total income. French economist Thomas Piketty and British economist Anthony Atkinson also fall in line with Stiglitz in condemning income and asset disparities.
Jeremy Corbyn, an extreme leftist and new leader of the British Labour Party, has appointed Stiglitz and Piketty to the party’s Economic Advisory Committee. U.S. Sen. Bernie Sanders, who calls himself a democratic socialist and is staging a good fight in the presidential primaries, has also won support from Stiglitz.
In both Europe and the U.S., there has been a shift since the Lehman Brothers shock from conservatism to liberalism, which indeed may more appropriately be called leaning toward the left, both in the political arena and among economists.
Japan, meanwhile, has been moving in a direction opposite the global current ever since Prime Minister Shinzo Abe took the reins of government in December 2012.
I for one think highly of the three principles of individualism, liberalism and democracy, all of which have been nurtured in modern Western Europe. As slightly more than three years have passed since Abe came back to power, it has become clear that his politics are not in line with these three principles and, therefore, not in line with the Keynesian goal of rectifying inequalities and helping the socially weak, let alone with market fundamentalism.
Abe’s ideology and creed is nothing other than state capitalism. He has made one move after another incompatible with market fundamentalism — such as personally asking Keidanren to raise wages, insisting on implementing the “equal pay for equal work” concept as though he was a socialist and trying to reorganize the electric industry through the Innovation Network Corp. of Japan, a government-financed fund.
Once the prospect of ending deflation and resuscitating the economy has become bright, he will no doubt rush toward his long-cherished goal of amending the Constitution. While it is taken for granted that he will seek to rewrite the war-renouncing Article 9, his Liberal Democratic Party came up in 2012 with a draft constitution under which “public interest and order” would take precedence over the basic human rights of freedom of expression and individualism.
Such a revision is totally unacceptable and should be rejected resolutely because it would undermine the very basis of a liberalistic and democratic state. If citizens opt to remain idle onlookers, the political system of this country could fall into a trap of totalitarianism, to say nothing of state capitalism.
Takamitsu Sawa is a distinguished professor at Shiga University.
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