Letter bombs (13): Atlanticism
Posted by ampontan on Wednesday, December 29, 2010
READER TOADOLD sends in a link to a blog post in The Atlantic by Megan McArdle called Japan and the Limits of Keynesianism. While the author’s primary concerns about the problems of the Japanese economy are on the mark, her post demonstrates why there is so little to be learned from people who spend so little time paying attention to Japan as it actually is.
Reading about the government’s behavior reminds me of the worst accounts of compulsive spenders on the verge of personal bankruptcy–a sort of “What the hell, we’re screwed anyway, so let’s not think about it and maybe go to Cabo for the weekend.”
Reading more extensively might have suggested to her that the problem is the behavior of Japan’s first serious left-of-center government since the creation of the Liberal Democratic Party in 1955 and the parameters of modern Japanese politics. The DPJ government is dominated by former campus radicals, unionistas of the public and private sector, other undifferentiated leftists, and European-style social democrats who are determined to implement their worldview in the face of the facts and justify everything they’ve believed all their adult lives now that their chance is here at last. Indeed, the primary actors in many ways resemble those of the Obama administration and the Pelosi-Reid Congress in the United States for the past two years. Reducing central government expenditures is not their objective.
This is not to say that the LDP did not follow the same model of Big Government/Big Business collusion and the widespread distribution of pork, but as Hayek pointed out many years ago, social conservatives are not loath to cooperate with statists.
(T)he Japanese are extremely patriotic about their nation’s financial needs.
Ms. McArdle writes this in the context of explaining that the Japanese debt is primarily financed at home. I have no idea what it is supposed to mean.
She quotes, without a link or attribution–or even identification–Felix Salmon. Mr. Salmon is a financial journalist and blogger for Reuters, a fact that on the face of it does not bode well for insight into current conditions in Japan. We don’t have to wait long; here’s his first quoted sentence:
The situation in Japan is particularly depressing because the country has no major ethnic or political rifts.
Anyone who thinks Japan has no major political rifts has no business offering his opinions on Japan. I could entertain a small group of bien pensants at a Manhattan cocktail party for the better part of an evening with stories of the country’s political rifts. He continues:
But still the technocrats can’t make any headway.
Perhaps that’s because the technocrats are part of the problem rather than part of the solution. Still more from Mr. Salmon:
(The Japanese government) is even getting rid of highway tolls. Oh, and it’s cutting the corporate tax rate.
As anyone who can read a Japanese newspaper knows, the government just announced a new toll schedule this week, which will include a maximum rate of JPY 2,000 on weekdays. The 2009 campaign promise to eliminate highway tolls was the first one jettisoned by the new government when it came to power–within a month after taking office.
Japanese newspaper readers are also aware that (1) the nominal corporate tax rate is being cut a mere five percentage points from an oppressive 40%, (2) many companies pay a lower rate than that already, and (3) the government will try to compensate for the reduction through a de facto increase in the income tax (particularly for those with higher incomes), elimination and/or reduction of deductions, and an increase in the inheritance tax. Oh yes, and an increase in the consumption tax from 5% to at least 10%. One senior party member says they plan to discuss that in the Diet starting in June, to avoid the tax becoming an issue in the sub-national elections in the spring.
The problem is, there hasn’t been a good time for retrenchment in 20 years.
How quickly people forget the Koizumi Administration, which successfully navigated the perilous straits of a financial sector on the verge of collapse due to non-performing debt, expended an enormous amount of political capital on privatizing the postal savings system (demonstrating that politicians who show real courage will be rewarded by the Japanese electorate), and brought the nation’s finances within sight of a balanced budget as recently as 2007. And which also put the expressway system on the road to a form of privatization.
Indeed, Mr. Salmon is quoted as saying:
But as we saw with George W Bush, the fiscal rectitude of one administration can be more than wiped out during the course of the next.
We’ve also seen that in Japan post-Koizumi/Abe, though Mr. Salmon seems to have missed it.
She also quotes blogger Matt Yglesias. For those of you who aren’t familiar with this sparkler, Glenn Reynolds of Instapundit notes that he advocates lying on Twitter, calls people Nazis and writes, “F*ck you.” This is a source who deserves to be quoted?
I can’t blame the politicians for trying to restore some semblance of normal growth in the run-up to elections. But at some point, they’re going to have to cut back, whether or not it’s a good time.
One can’t blame the Anglosphere commentariat for trying to make sense of Japan, but at some point they’re going to have to get serious about doing research instead of pontificating after observing the zebra through a picket fence.