This book explains how postwar Japan managed to achieve a highly egalitarian form of capitalism despite meager social spending. Estévez-Abe develops an institutional, rational-choice model to solve this puzzle. She shows how Japan’s electoral system generated incentives that led political actors to protect, if only for their own self-interested reasons, various groups that lost out in market competition. She explains how Japan’s postwar welfare state relied upon various alternatives to orthodox social spending programs. The initial postwar success of Japan’s political economy has given way to periods of crisis and reform. This book follows this story up to the present day. Estévez-Abe shows how the current electoral system renders obsolete the old form of social protection. She argues that institutionally Japan now resembles Britain and predicts that Japan’s welfare system will also come to resemble Britain’s. Japan thus faces a more market-oriented society and less equality.
Japanese political leaders have become "extrovert" in two ways. First, they have become extrovert in terms of seeking media exposure. They have become much enamored of cameras and sound bites. Although the former Prime Minister Junichiro Koizumi (in office from April 26, 2001 to September 26, 2006) did not create this trend, he definitely turned the new trend into a routine by making twice-daily appearances in front of the TV camera—a practice his successors Prime Ministers Shinzo Abe (from September 26, 2006 to September 26, 2007) and Yasuo Fukuda (from September 26, 2007 to present) have inherited. Second, Japanese political leaders have become more assertive and vocal on security and foreign policy issues. Recent developments in Japanese defense policy, including sending Self Defense Forces to Iraq, would not have happened if it were not for the leadership of Prime Minister Koizumi. More politicians actively debate foreign policy in the media, and try to draw appeal with their foreign policy expertise. Why is this change occurring? What is the source of the increasingly "extrovert" behavior among Japanese political leaders?
A paper originally prepared for "Japan and the World: The Domestic Politics of How the World Looks to Japan" Conference at Yale University, March 9-10, 2007. The authors are indebted to comments by the fellow conference participants. Special thanks to Michael Thies for his detailed comments.
Another victory for Japan's governing Liberal Democratic Party. What's new? This time a lot. Japanese politics has changed forever.
This month's election was not just another victory for the LDP over the Democratic Party, its major contender. More important, it was also a victory for incumbent Prime Minister Junichiro Koizumi in his attempt to centralize power within his own party and unite the forces in favor of change. Call it the UK-ization of Japan.
Whether voters intended it or not, Koizumi's landslide victory means that the dice have been cast in favor of a British-style parliamentary system that centralizes power in the hands of the prime minister. The election results promise to transform Japan and its relations with the rest of the world.
Four years ago, Koizumi bid for the presidency of the governing Liberal Democrats by vowing to "destroy the LDP." In his post-election interview, Koizumi boasted that "the old LDP was destroyed and a new party emerged." He is right. He effectively rendered the old protectionist wing of the LDP powerless, by simply refusing to let it to run for office under the LDP banner. Instead, he nominated a whole crop of first-time candidates to run.
More than a quarter of the LDP candidates elected this month are new faces. Nothing like this has ever happened before. In the past, LDP prime ministers never controlled the party nomination. From now on, the LDP will be more like the British political parties. The Democratic Party will have to follow the suit.
The days of weak leaders are over in Japan. With or without Koizumi, the change in leadership style is here to stay. Japan introduced a number of important institutional reforms in the 1990s, including a change in the electoral rules in 1994, and the strengthening of the cabinet and the prime ministerial office in the late 1990s.
All these changes were designed to turn Japan in-to a British-style parliamentary democracy. Koizumi is a product of this new political structure. He was the first to understand how the new political rules of the game worked. Under them, individual politicians cannot survive by bucking party leaders. Koizumi's victory has taught ambitious politicians the need to rally behind a strong leader. There is no going back.
What will happen now? In the short run, there will be bolder policy shifts. Postal privatization is just the first step. We can expect Japan to address its multiple challenges.
Japan is experiencing an unprecedented degree of demographic aging. By 2025, nearly a third of the population will be above 65. In the United States, in contrast, less than one-fifth of the population will be older than 65. Japan also has one of the worst fiscal deficits among the industrialized countries. Major reforms to address these issues are finally on the agenda. The most likely scenario is a reduction in benefits for the elderly as resources shift toward the active working population.
Tax increases will most likely take two forms. One is a moderate hike in the consumption tax rate coupled with a social security reform that increases the government's commitment to a basic social minimum. The other is elimination of existing tax loopholes.
Internationally, Japan has to redefine its role in the world. Japan's so-called Peace Constitution has prevented the country from deploying its troops abroad for military purposes. Koizumi wants to change Article 9 of the Constitution in order to legitimate the Self Defense Forces as a "military" and to facilitate future deployments outside Japanese territories.
With only one year of his term remaining, Koizumi may not deliver all these reforms himself. But the "new party" that he brought to power is likely to carry forward this agenda.
The end result is likely to be a Japan that looks very much like Britain both domestically and internationally. Japan will develop a more pro-market face and be ready to take on a more active role in the U.S. global security strategy.
American business and policy makers will certainly find the new Japan easier to understand and to deal with. Whether a country like China will welcome the change is another issue.
In Sven Steinmo and Bo Rothstein eds. Institutionalism and Welfare Reforms (Palgrave 2002)
During the 1990s, Japan simultaneously expanded and cut benefits in different programs. In doing so, the Japanese case casts doubts upon facile assumption that the welfare state goes through separate phases of expansion and retrenchment. What seems to be happening in Japan is an overall reshuffling of costs and benefits within the welfare state.
Welfare reforms are difficult, because, as Esping–Andersen (1996) and Pierson (1994) have pointed out, welfare states produce groups with stakes in the status quo. Some institutions, however, make it easier to reform the welfare state (cf. Bonoli 2000: Bonoli and Palier 2000; Pierson ed. 2001). Visser and Hemerijick (1997), for instance, show how the Dutch transformed their welfare state by drawing upon a corporatist social partnership. I look at the noncorporatist country, Japan, to examine why some reforms were possible and some not.
In Bernhard Ebbinghaus and Philip Manow eds., Comparing Welfare Capitalism: Social Policy and Political Economy in Europe, Japan and the USA (London/New York: Routledge, 2001)
To the extent that the literature on the varieties of capitalism has taken notice of welfare state arrangements, it has done so by focusing upon the impact of such arrangements on employment relations (Esping–Andersen 1990; Estevez–Abe et al. 1999; Manow 1997a,b; Mares 1997; Huber and Stephens 1997; Wood 1997). In the literature, however, employment relations constitute just one of the features that define a specific model of capitalism (Aoki and Dore 1994; Berger and Dore 1996; Crouch and Streeck 1997; Hall 1986; Hal and Soskice, forthcoming; Boyer 1989; Hollingsworth and Boyer 1997; Kitschelt et al. 1999). The nature of financial markets and the relations between firms and suppliers of capital are every bit as important. The ability of corporations to form long–term commitments, such as lifetime employment, depends on the availability of patient, far–sighted capital. The longer the time horizon of capital suppliers, the greater the autonomy of corporate managers. The time horizon of capital is, in short, one of the most significant determinants of variation between different types of capitalism.
Social protection does not always mean "politics against markets." In this chapter we argue, as did Polanyi (1994), that social protection rescues the market from itself by preventing market failures. More specifically, we contend that social protection aids the market by helping economic actors overcome market failures in skill formation. We show, in this chapter, that different types of social protection are complementary to different skill equilibria.