Archive for the ‘politics’ Category

Why did the DPJ win? What can we expect from them?

December 9, 2009

In the most recent cycle of Japanese national elections, The Democratic Party of Japan (DPJ), which has only been in existence since 1996, utterly dominated (as in totally trounced) the Liberal Democratic Party (LDP), which had been in power more or less continuously since the 1950’s. How could this happen? There are certainly larger questions in life, but more mystifying ones? I wouldn’t go so far as to make that suggestion.

Unfortunately I find myself needing to come up with a satisfactory essay-length answer to these two related questions as soon as possible. Before I get mired in the nitty gritty of the writing process, what with its necessity for “consulting reputable sources,” and, “thinking things through,” I feel like using this forum to brainstorm for a while.

First question’s first. There are several possible reasons for DPJ victory: Electoral reform — which was passed in 1993, during the brief moment when a coalition of LDP defectors gained power — helped give more voice to urban voters by re-portioning the number of seats per district to reflect Japan’s demography more accurately. This may have put the LDP at a disadvantage since it finds a big chunk of its constituency in rural districts. The electoral reforms also increased the number of single member (first past the post) voting districts vs. multi-member (proportional representation) districts, which may have helped take the steam out of the LDP political machine, accustomed as it was to flooding each district with candidates so as to dilute the spread of the proportional votes and keep as many as possible within the party.

Conversely, it *could* be that voters, despite the fact that they appear to be even more disengaged with politics than US voters, just got fed up. After all, the incumbents had been making next to no headway on trade liberalization, welfare reform, or the borderline absurd level of government subsidy to failing firms. It is no exaggeration to suggest that reading about the waste endemic to this system is exactly like reading some of the more ridiculous passages from Catch-22. It also bears mentioning that the LDP had been riled with scandal since the 80’s and (oh yeah!) placed in a fairly vulnerable position when it comes to apportioning blame for more than a decade of economic stagnation! In this light, it may be even more difficult to understand how they lasted as long as they did.

There is also a broader debate that I am expected to talk about: the question of how people make decisions. In this class we read a lot of commentary that traced political happenings inevitably back to particular actors playing out their own best strategies. Politicians act to maximize their interests, in this school of thought, and voters naturally do the same. But there’s also folks that privilege institutional shift or adaptation, whereby the rules change over time reflecting a kind of cumulative wave of choices — people are still rational, but they make choices in terms of what they perceive social rules to be. To understand their choices you have to look at the pattern of exchanges going on around them. (My take on this and other fun social science debates is that the truth lies in an impenetrable fog between the two lemmas, an insight which is not really very insightful albeit maybe pithy enough to qualify as good fodder for an opening paragraph.)

In any case, it was certainly rational for voters to seek change and for DPJ leaders to organize an effective campaign to promote it — but why now? and how did they do it? and in what areas did the LDP lapse sufficiently to allow them to do it? These are all legitimate questions to elaborate on in the essay, and all require aforementioned nitty gritty work.

Moving on to the second question, which may be the harder of the two since it’s concerned with predicting the future, what can we expect? Well, the biggest DPJ plank is to revamp social welfare programs and make them more broad and equitable (which will hopefully have the ancillary effect of encouraging cash strapped consumers to spend more of their money and to increase the dwindling labor force by having more babies). They’ve also been going through the budget with one of those jeweler’s eyepiece thingies to cut wasteful spending. Plus they’ve engaged in “comprehensive” administrative reform so that, for example, bureaucrats can no longer sit in the Diet or hold press conferences. (In the first weeks of the Hatoyama administration, this apparently led to the Foreign Minister not being allowed to call press conferences, which was very silly from a diplomatic perspective.) Anyway, the DPJ also placed a big emphasis on decentralization, the giving of more decision making power to local governments. Apparently they want to gain people’s trust, to bring folks into the fold of actually participating in politics. While there’s plenty of cause for cynicism, it’s also the case that a more active local government would help ameliorate the pork barrel problem, which is way worse in Japan than it is in the US.

The DPJ are no doubt up against “vested interests,” like powerful bureaucrats and bloated domestic industries that stand to loose their access government credit. But they also appear to be working in tandem with vested interests, since they declared Japanese farming, fishing and forestry to be globally competitive and thus worthy of government help. from their reform programs. Also the reform of the postal system (see a couple posts below) has mysteriously disappeared from the agenda. So are they in danger of being co-opted by said interests? There’s also the fiscal challenge in that they can’t take the risk of raising taxes and hence they will have to sell a huge number of government bonds to pay for all this reform. Can you just keep going in to debt forever?

So that’s a quick and dirty outline of some of the issues at hand, and I think my brain is sufficiently stormed for now.


Japanese Postal System Reform — Significant?

November 11, 2009

Once again I’m using this blog as a quasi-academic tool…not a whole lot of other (blog-able) material on my mind these days!

So I’ve spent the last day or so trying to cobble together a passable, brief paper on the following question: Does the highly publicized (and politicized) issue of Postal system privatization in Japan have anything to tell us about the evolution of Japan’s political institutions?

First, the Postal system in Japan is way more important than you’d think — about half of the Japanese population put all of their savings in it, which is a lot. That supposedly makes it one of the biggest financial institutions in the world. The cabinet then uses all this money as a sort of ‘second budget’ not subject to legislative review, which they generally pump into infrastructure projects. This is how you get Japan spending way more than the US on construction without having a comparable land mass or population — clearly inefficient. More generally, huge infrastructure spending and industrial policy are great for developing countries, you could argue, and they propelled Japan’s “take off” post WWII — but they are really no longer a benefit to Japanese society.

Calls for postal reform came in the 90’s after the bursting of the bubble (see below) when the word ‘reform’, the cutting of government waste, and especially the deregulation of the banking sector, entered the vogue. But actually the public was quite happy with the postal system, since it was convenient and offered cushy government subsidized interest rates, and no political actors really wanted to change it either — besides which the Ministry of Finance needed control over the postal system more than ever, since commercial banks were already saddled with bad debt in the financial turmoil…

So what’s the deal? First a word about “institutions,” since they are the contemporary buzz word, apparently. There is certainly a lot of theory floating around there about them. According to Doug North, every society has certain formal or informal rules that shape the behaviors of individual actors. If you view behavior in terms of exchange relationships (which economics tends to) then institutions are like the ossified patterns of exchange that accumulated over time because, essentially, they were (thought to be) beneficial for the actors involved.

North uses the metaphor of a football game: actors or organizations are the players, and institutions are the rules of the game. Note that a lot of these rules are not codified or formalized, but remain unspoken or informal — as in, “No Dogs” or “No Nudity.”

Now there are plenty of cases where ossified patterns of exchange encourage behavior that turns out not to be beneficial over all anymore — don’t get me started about pollution, for example, and/or don’t get economists started on trade protectionism. This is where you get into the nebulous territory of institutional change. How do rules of the game get changed over time? In the world of Japanese politics this is a particularly salient question — in 50 years of one party dominance we’ve seen that under the table money-for-votes exchanges exist in very rigid “iron triangle” structures (politician to bureaucrat to industry). How do you change them?

My argument is that Postal reform became an extraordinarily polarizing ideological issue with very little actual political merit one way or the other — like abortion in the US. The ethics of abortion are hard to parse out — and the economics of postal privatization are also quite nebulous (particularly because the private banking sector would really have no way to compete with a privatized postal system). So it became the case that you were either ‘for it’ or ‘against it.’ This certainly benefited the political career of former Prime Minister Koizumi, who made it his signature issue and managed to pass a privatization bill past a befuddled Diet.

This enlivened politics in a certain way. It sounds crazy for me to advocate for more debate about polarizing issues, but in the case of Japan, where the real decisions are usually made behind closed doors, and the voting public is increasingly disinterested, it might be just the thing to push “institutional change.” Koizumi, like mavericks everywhere, pissed a lot of people off and bought factional rifts among rulers out into the open. Maybe this ultimately helped bring the Democratic Party of Japan (which was only founded in 1996!) into its current position of power — and maybe it nudged the whole system along towards the two party state. Of course its all very ambivalent…but such is the study of institutional change.

The Japanese Bubble — some causes and effects?

November 3, 2009

A couple weeks ago a classmate of mine clarified the whole Japanese bubble thing with a couple simple diagrams. This is my attempt to replicate them before I forget what his reasoning was. OK:

Diagram 1

The classic model of the Japanese economy (Diagram 1) was a tight-knit, government enforced structure with a number of interesting features: first, individuals couldn’t buy corporate stocks, so they had to save their wages in banks. Banks basically had to loan money to corporations regardless of those corporations’ profitability — part of this was policy, part of it was the tradition of corporate groupings or “keiretsu.” Not pictured in the diagram: corporations made money via foreign trade, which was pretty easy to do through much of the “high growth period,” partly because the Yen was pegged to the dollar at an artificially high rate.

Now in 1971 Nixon took the US dollar off the gold standard and floated it on the market, which ended the Occupation-era policy of having the Yen pegged to the dollar. So the exchange rate (which had been 360 yen to the dollar from 1950 – 1971) went down to 290 yen to the dollar by 1972

This meant that export producing industries in Japan started to suffer, since foreign folks paying foreign currency now had to pay more of it per yen.
So the government decided to introduce capital market liberalization, allowing corporations to get the capital they needed from non-traditional sources, like foreign investment and stock markets. They ditched domestic banks, which then found themselves without lenders — they should have shrunk at this point, but they were unable to do so because of strict “too-big-to-fail” type rules. So instead the banks started lending money to whomever would take it, esp. in the real estate sector. Corporations also started pumping their extra cash into real estate (Diagram 2)

Diagram 2

This elevated prices, and wages, across the board — the Bubble — which made everybody happy! Until the Bank of Japan raised interest rates, making loans more expensive, which sent artificially high prices tumbling and triggered a contraction that is still plaguing Japan.

The silver lining is that this chaos may have created the political momentum to clean up Japan’s notoriously corrupt bureaucracy and dominant political party — which make our system look like Scandanavia (or, you know, some other utopian metaphor). In 1993 the dominant party lost power for the first time since the 50’s, which everyone said was significant, but they regained it soon after. BUT this July they lost it again! And tomorrow I’m planning to go to a lecture/panel discussion that will hopefully clarify whether this is significant. We shall see.

An apocryphal story

October 7, 2009

A US Admiral was apparently schmoozing with military folks from various countries and playfully proposed a thought experiment to a high-ranking Russian officer.

“Suppose we got serious about nuclear disarmament,” he says, “and both our countries really went through with it, destroying every last warhead.”
The Russian nods.
“But then a few days later you guys realize that there are three or four that you didn’t destroy — what would happen?” asks the American.
Not one to miss a beat, the Russian responds, “of course we would then call the White House with our ultimatum.”

No player wants to be caught with their proverbial pants down, so you’re never going to see any real effort at nuclear disarmament. Hence the moral outrage over Iran’s nuclear program is silly, and probably a result of political calculations, especially when you’ve got a nuclear Israel that never even bothered to go through the motions of signing the Non-Proliferation treaty.

Executive Pay

September 21, 2009

Do I really want to weigh in on such a contentious issue? No. Or at least, not without another cup of coffee.

I just wanted to point out a correlation between what Paul Krugman said in his NYTimes column this morning…

“What’s wrong with financial-industry compensation? In a nutshell, bank executives are lavishly rewarded if they deliver big short-term profits — but aren’t correspondingly punished if they later suffer even bigger losses. This encourages excessive risk-taking: some of the men most responsible for the current crisis walked away immensely rich from the bonuses they earned in the good years, even though the high-risk strategies that led to those bonuses eventually decimated their companies, taking down a large part of the financial system in the process.”

…and a passage from UCSD Prof. Chalmers Johnson (whose various treatises on Japanese industrial policy have been required reading for more than one class so far):

“Morita Akio, chairman of Sony Corporation [circa 1982], believes that the emphasis on profitability has been a major cause of American industrial decline. He asserts, ‘The annual bonus some American executives receive depends on annual profit, and the executive who knows his firm’s production facilities should be modernized is not likely to make a decision to invest in new equipment if his own income and managerial ability are judged based only on annual profit.’ Morita believes that the incentive structure of postwar Japanese business has been geared to developmental goals, whereas the incentive structure of American business is geared to individual performance as revealed by quick profits.”

Johnson argues that the Japanese developmental state was predicated upon cooperation between the state and private interests — especially the strategic allocation of rewards for management other than short-term profit. The grossly oversimplified result was long-term planning, which, in addition to other factors institutional, geopolitical, and (possibly) cultural, led to the post-war Japanese economic miracle.

Of course the irony is that the industry-government kabal in the Japanese finance sector proved disastrous when their own bubble burst…

That said, what Krugman seems to be looking for is some kind of give and take between the state and the finance sector: government gives you a huge taxpayer bailout, you should respond by giving the government some measure of slack. This kind of arrangement has eluded the U.S. in every sector save the military.

Support Reverend Billy!

March 2, 2009

Youth A: Are you being sarcastic?
Youth B: I don’t even know any more, man…
~The Simpsons

Coiffured street performer Reverend Billy will run for mayor of NYC on the Green Party ticket, according to the NYTimes.

This is the first instance of a burner (read: Burning Man festival attendee) running for major political office that I know of.

What’s his platform? Oppose consumerism, focus on “neighborhoods,” pretend to be an evangelical Christian.

It’s a superb policy agenda as far as I’m concerned, but for the lamentable absence of “lampooning Bobby Jindal” which, sources indicate, will emerge as a central issue in the next election cycle.

Like Bobby J, Rev. Billy has made a recent and ridiculous appearance on CBS:


November 5, 2008

Given that its election night 2008 and I live in the nation’s capitol, I’m not sure that this post really requires content. But here are a few thoughts before I pass out:

1) Those Obama kids really do deserve that puppy.

2) The Obama campaign was the most elaborate and expensive campaign machine in history — and Obama himself displayed an intuitive grasp of how to go about it, kind of like a Federer on the tennis court. Just because McCain made it to the finals didn’t mean he had a chance at the championship.

3) This man makes it really difficult to be cynical!

The Boys in Green

October 24, 2008

So I’ve been furrowing my brow upon this Green revolution stuff, not only because of the strong capitalist bent to it and the glaring lack of political feasibility, but also because I hear about it so much — and as a rule, whenever something crosses that threshold of being in my face all the time, I start to find it annoying.

HOWEVER last night in class I saw a terrific presentation by the incomparable Scott Sklar of the Stella Group which executes renewable energy projects for industrial and commercial interests worldwide. This man gave me a much needed positive vibe about the notion that possibilities exist for our future.

Check it out: the military is always on the cutting edge of new technology, and they’re *great* at getting public funding in this country. So I thought what Mr. Sklar had to say about current military projects particular interesting — since they tend to end up in the public sphere and thus the market for consumer goods (like our fair internet).

Did you know that 80% of combat deaths in Iraq are due to soldiers traveling in convoys, hence making easy targets of themselves? And of course what are they carrying in the vast majority of these convoys? Fuel!

Did you know that the military has been one of the prime movers in the development of PV-nanotechnology that can be used in dyes? You will be able to generate energy for your house by painting it with this stuff — they’ve even been able to print it on paper to make little flexible polaroid-sized solar cells. Absolutely insane.

Did you know that they make portable solar powered water purification systems? (These will come in handy in the battlefield as well as in turmoil following natural disasters, the incidence of which we can expect to go up!)

Did you know that there are also a lot of folks within the DOD who are advocating for the strategic importance of “distributed energy” — finding ways to generate energy in a de-centralized, renewables based way?

There are the same people (though military man McCain is obviously not part of this group) who worry about nuclear power and our insanely inefficient power grid as national security risks! Our energy grid needs to be more flexible, like the cell phone network — which, by the way, depends on cell towers 20% of which operate off of solar energy!

Did you know that they already sell backpacks with little solar panels embedded in them, so you can charge your laptop while you walk around?

And finally: Did you know that the solar and wind industries are the third largest employers in Germany and Spain? You can’t keep military prowess and hence global hegemony while the economy suffers…so I think there’s a faction in the Pentagon pushing for this move towards renewables. And these people tend to have quite a bit of political clout. And hell, if there’s anything that People’s Liberation Army over in China likes to do, its try to get our technology…

Here I am a peacenick quasi-anarchist and its *the military* that get me excited about the move to green energy…absolutely insane!

Ask Why

September 29, 2008

If you never saw (or read) “Enron: The Smartest Guys in The Room”, you should check it out.
As of this writing it is posted on youtube — albeit lo-res, parsed into 11 segments and featuring Spanish subtitles (which I kind of enjoy…)

Since you may not have the time to watch the whole thing, I’ll go ahead and embed the last segment:

The energy firm’s spectacular failure, propped up as it had been by elaborate (and borderline hilarious) financial deception and boundless corporate greed, is looking pretty familiar these days. I bet the government reaction to the Enron crisis — essentially to frown but do nothing of consequence — will recur this time around. Why? Why do people invest in the first place?

Well inflation is pretty much always on the rise, so your money is always worth less than it was the last time you looked. So you must invest in something or you’ll be losing money. Since you have to invest, but you don’t necessarily want to be a captain of industry yourself, you might as well put your finger in corporate stocks, bonds, market indexes, funds, etc. This is because corporations, and the financial instruments that exist on their behalf, represent large amounts of capital by way of lots of different stockholders who are not liable to know or care where that money comes from. So you minimize risk *and* responsibility! You get easy money (or at least you beat inflation) and corporations get the equity they need. It’s win-win! Investors in and executives at Enron were just doing what the system was designed for them to do!

But why is inflation always on the rise? Why is the global economy always growing? Why is there no limit to its growth? Why does the drive for profit trump every other value? Why can’t we just industrialize the whole world, produce and sell more and more stuff? Why can’t we make money forever? Why can’t every generation be richer than the last, with an endless bounty of natural resources and happy, faceless laborers?

The Coal Economy

September 19, 2008

I’m probably going to be reading and writing about China, the environment, and energy policy for what remains of the semester…so I thought I might use this forum to offer periodically some speculations on various related things.

So In his latest “We Can Solve It” email, The Man Himself Al Gore sums up current US energy policy with aplomb (a quality notoriously absent from his 2000 presidential bid.) He says: “We’re borrowing money from China to buy oil from the Persian Gulf to burn it in ways that destroy the future of human civilization.” Word. But we don’t want oil stealing the limelight!

Of course US foreign policy has been driven by considerations of oil at least since World War I (before that it was cotton) but oil is not the source of most of the energy that you and I use. Coal is. Furthermore, the trade that we’ve built with China over the past few decades is also coal powered.

Now consider the fact that China now produces more greenhouse gases then any other country, having recently overtaken the US for that dubious distinction. While per-capita energy use in China is very low, this is because the majority of China’s outrageously large population are farmers who don’t use much energy. Most of the energy used in China comes from coal and goes towards the industrial sector. Coal has fueled Chinese development — it’s primarily used to power the extraction of steel and other minerals as well as the manufacture of consumer goods for US and European markets. These activities bring in enough revenue for the PRC to have billions laying around to lend the US. The other source of revenue is the 25% income tax on Foreign Direct Investment, mostly levied upon corporations who also want to produce things for export.

So when China lends us money, it’s because our consumption is the source of their revenue. They need us to stay afloat. American mass consumerism depends on electricity that is also primarily powered by coal. So, what we have is a vast system for extracting and burning coal — they extract it and burn it so as to make and sell stuff to us; we extract it and burn it so as to buy things from them. The very fact that I can type this post (on my Made-in-Taiwan laptop) and you can read it (presumably on yours) is predicated upon this relationship.

In light of this thought, check out this ad from “We Can Solve It”:

Like I said in my previous post, we’re all familiar with what happens when you elect representatives of the oil industry to high political office. It’s bad. So I’d be in favor of “breaking big oil’s lock on the government.” But if you agree with my above statement that the Chinese and US economy are linked inexorably through coal production and consumption, then in order to stop pumping carbon into the atmosphere we would have to stop (and retool) the whole machine. We would have to stop the global economy and change out its rusty old engine.

Besides the fact that this would be catastrophic to our daily lives, both here and in China, it’s also completely impossible for governments to undergo such an action.

I’m currently interning at an outfit whose goal is to use the market and a growing network of business/civil society folk around the world to try to fix the problem not by lobbying government per se but by promoting investment in renewable energy, which is a very dynamic industry right now. It’s exciting stuff. But I don’t believe this tactic will be very effective, simply because it’s grounded in the very market ideology that created the problem.