AMPONTAN

Japan from the inside out

“The DPJ doesn’t have a growth strategy”

Posted by ampontan on Thursday, September 24, 2009

THE YOMIURI SHIMBUN recently interviewed Hosei University Prof. Komine Takao, an economist who once headed the Research Bureau of the Economic Planning Agency and was an official in the Ministry of Land, Infrastructure, and Transport. In particular, they asked him about the economic policies of the Hatoyama Administration. Here’s how it went:

*****

The growth strategy of the Hatoyama Administration is based on expanding domestic consumption by providing financial assistance to households. What do you think of that?

That sort of thinking has no value as a growth strategy. They’re not talking about something beneficial, such as reducing taxes or implementing other fiscal measures, which would result in economic growth as incomes continue to rise. They’re just discussing how to divide up the pie among corporations, the government, and the citizens. But the pie itself won’t get any larger.

A growth strategy is how to make the pie larger. Even if some benefits accrue this year, they’ll be short-lived.

To put it in extreme terms, the DPJ doesn’t have a growth strategy.

How should growth be depicted?

Utilize the blessings of globalization, increase imports and exports, primarily to Asia, and then expand domestic demand as the benefits are returned to the people. The only growth strategy is to take the royal road (i.e., the proper path).

Improving productivity demands aggressive investment in R&D for technology. Operating resources will have to be diverted to growth sectors, such as long-term care and medical treatment. Demand is rising for high-quality medical treatment and long-term care, but working conditions are poor, including low wages, and there is a labor shortage.

Services should be diversified, and there should be a conversion to a mechanism in which high quality services are available on an out-of-pocket basis. That’s how the latent demand for medical treatment and long-term care will be actualized.

What is the biggest problem for the management of the economy?

There is absolutely no discussion of current economic conditions, or what sort of growth rate is envisioned over the medium- to long term. The DPJ way for macroeconomic management seems to be “the daily life of the people” itself.

Economic growth raises incomes, and price stability means stability in daily life.

The Minister of Economic and Fiscal Policy should have the extremely important role of analyzing daily economic trends, formulating the government’s perception of the economy, and delivering that message. There seems to be a lack of interest in that.

There are discussions of reevaluating public works projects.

There have always been vested interests, whether for roads or for dams. One problem in the past has been that there was no change in the proportion of the budget allocated to public works projects.

The biggest advantage in the change of government is that (the new government) has no pre-existing ties, so that presents an excellent opportunity to determine a new sequence of priorities.

I wonder if their rollout of policies hasn’t been reckless, however, such as their announcement of the suspension of dam construction projects so soon after they took office. It takes time, but they should gather the people involved and discuss the issues. That would smooth out the rough edges.

There have been strong objections from business and financial circles of the new Government’s targets for reducing greenhouse gases.

There are some advantages to setting strict targets. The strategic utilization of regulations could change the course of the economy and society. For example, when the price of oil quadrupled during the first oil crisis, people were alarmed that the Japanese economy would collapse.

But Japan developed the technology to cut back on oil consumption, which transformed the industrial structure. The economy evolved in such a way that growth could be achieved with very little increase in oil consumption.

It might have been the case that we were able to achieve something unanticipated.

Financial Services Minister Kamei Shizuka is calling for the introduction of a moralistic system with a moratorium on the repayment of debt by small businesses and others.

That’s out of the question. It’s absurd.

In a system based on contractual agreements, it is not legally possible to change the terms of the loan relationship at the time the contract was made before the loan is repaid. Several problems would ensue, including the flight of foreign capital if the situation in Japan were perceived to be that severe. It would also put small and medium-sized lending institutions in a serious bind.

The contempt for moneylenders making a profit without working for it seems to stem from a reading of The Merchant of Venice.

He doesn’t seem to have asked the opinions of specialists or the people involved. I can only say that he is treating the authorities responsible as his personal property.

*****

MEANWHILE…

Those nefarious oil barons are at it again. Now they’ve gone and bought out another one of the good guys.

Which one?

(Prof. Mojib Latif of Germany’s Leibniz Institute) is one of the leading climate modellers in the world. He is the recipient of several international climate-study prizes and a lead author for the United Nations Intergovernmental Panel on Climate Change (IPCC). He has contributed significantly to the IPCC’s last two five-year reports that have stated unequivocally that man-made greenhouse emissions are causing the planet to warm dangerously.

Oh, no! What did he do?

(L)ast week in Geneva, at the UN’s World Climate Conference–an annual gathering of the so-called “scientific consensus” on man-made climate change –Latif conceded the Earth has not warmed for nearly a decade and that we are likely entering “one or even two decades during which temperatures cool.”

The Eco-Church worshipers have been reduced to sputtering that Dr. Latif also said he thinks global warming will resume again. Except he isn’t sure when or why, and he was wrong the last time, and he agrees with people who say climate change is cyclical, and, and, and…

But this week in New York, Prime Minister Hatoyama addressed the world’s largest congregation of thugs and despots at their jamboree on the left bank of New York’s East River and promised that Japan will cut its greenhouse gas emissions by 25 percent by 2020 from 1990 levels.

Somebody needs to tell Mr. Hatoyama a few things, in addition to the statements of people like Dr. Latif and the long line of scientists to precede him. For one thing, the terms of art in the English language have changed. Now that even the Eco-Church can’t deny that the globe has stopped warming, they’ve been warming up to the phrase “climate change” instead. And that phrase “greenhouse gases”? It’s so yesterday! Please–now it’s “carbon pollution”. Didn’t you listen to President Obama’s speech while you were there?

He might also have profitably listened to Chinese President Hu Jintao, who said during his two-minute greeting that his country would take “determined action”, but who was equally determined not to specify what that action or its targets would be.

Then Mr. Hatoyama could be told that:

“As the International Energy Agency concluded, the major nations in the Organization for Economic Cooperation and Development ‘alone cannot put the world onto the path to 450-ppm trajectory, even if they were to reduce their emissions to zero.'”

Someone also might remind him that the U.S. has pledged to reduce emissions by only 20% from 1990 levels by far-off 2050, and “the 80% target means reducing fossil-fuel greenhouse-gas emissions to a level the nation last experienced in 1910.”

Horse, meet buggy!

Then again, if Prof. Komine thinks the DPJ doesn’t have a growth strategy…

Nah!

While some of the speeches in New York might have been diverting as an exercise in observing public lunacy, particularly those from the Libyan and Iranian leaders, Mr. Hatoyama should have focused on this line from Mr. Obama:

“Nor do alignments of nations rooted in the cleavages of a long gone Cold War (make sense in an interconnected world).”

Translation: If China, Russia, or North Korea start to get really uncool, don’t you Japanese go calling us on the phone and ask for help.

If you don’t care for my interpretation, you could always ask the Czechs, the Poles, the Israelis, the Hondurans, or even the Iranian demonstrators for theirs.

But I admit there could be other ways to render that. Heck, now that everyone knows Mr. Obama isn’t interested in keeping his story straight on anything from one week to the next, there might not be any real interpretation at all.

5 Responses to ““The DPJ doesn’t have a growth strategy””

  1. Guyjin said

    As insightful and colorful as always. The interview was right on the money, and the ‘global warmi… sorry, climate change’ stuff mirrors some comments I made on my blog earlier today also. Keep up the great analysis.

  2. Kevin said

    This Prof. Komine Takao lives in a fantasy land. All of his advice is contradictory.

    First, he criticizes the DPJ for focusing on reallocation of the ‘pie’ of wasteful government spending and gives us the wonderfully intelligent alternative of reducing taxes or, even better, implementing other fiscal measures.

    Then he suggests, “increase imports and exports, primarily to Asia,” without considering the horrible difficulty Japanese companies are having by not being able to lower the prices of their goods to compete against Korean and Chinese manufacturers.

    And best of all he tells us, “improving productivity demands aggressive investment in R&D for technology,” but he proposes we do this by…reducing taxes?

    The nepotism and bloat in government need to be stripped away before Japan can take any steps toward growth. 50 years of LDP and a 860 trillion yen debt prove that the status quo isn’t working.

  3. Mac said

    Erm … in 1910 didn’t they nigh zero pollution controls, an industrial revolution going full swing and coal burning everywhere?

    I sorry but I think you keep missing the point here. Our emissions should be at zero, our environmental accounts should balance, regardless of whether the temperature is rising or falling. It is not a question of “eco-faith or not”.

    You live in a house where you need to pay for water, sewage and waste disposal. Your neighbour makes more money because he does not pay for them. He shits and pisses over your wall, throws his garbage sacks in your garden, has drilled a hole in the water supply just ‘up pipe’ from you and is using up all the supply before you get it. And when you question him about it, he threatens you aggressively, messes with your mind and can afford big dick lawyers because he does not pay for his costs.

    How to you feel about that?

    Basically, that is the way the global economy is making more profit … by reneging on its responsibilities and silencing its critics either with violence or misiniformation. Refusing to pay ITS very real external costs and passing them onto US.

  4. Ken said

    The DPJ does have a debt growth strategy.
    They have accused the issuance of additional bonds by LDP during their opposition party.
    So they cannot take the action though they promised so many welfare policies.
    They may manage to finance them in the 1st year but no more from the 2nd year.
    They cannot take the action of monetarism, which they have criticized, such as tax reduction.
    Surely there is no growth policy but just cut of LDP set-up budget.
    It is like the management of household economy by amateur and so Japanese economy will shrink.
    Besides, Kamei’s socialistic measure will confuse finacial field and Financial Minister Fujii’s knowledge is already obsolete which does not hold good now.
    Yen has already broken through the wall of JPY90/USD by his wrong message and it will hurt major companies in Japan.
    They think light of market and do not know the severity that it sometimes acts against people’s intention.
    I fear Japanese economy is trapped in the 2nd dip by their mis-lead.

  5. You might like this article on Japan:
    http://www.ritholtz.com/blog/2009/09/andy-xie-what-we-can-learn-as-japans-economy-sinks/
    ——————
    Thanks for the link, Matt.

    Just about when I was starting to wonder if he was leaving the Koizumi years out of it to make his point, he says that they abandoned mark-to-market. But Takenaka Heizo says they didn’t (at least during his time), and says the temptation has to be resisted.

    – A.

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