Japan from the inside out

Putting peoples’ lives first

Posted by ampontan on Thursday, May 5, 2011

…(I)ncestuous relations between corporations and governments are fascistic. The problem comes when you claim that such arrangements are inherently right-wing.
– Jonah Goldberg

The type of businessmen who seek special advantages by government action (are the) actual war profiteers of all mixed economies.
– Ayn Rand

PEOPLE have been complaining since the 19th century about a type of government/corporate collusion that has come to be known as the socialization of risk and the privatization of profit.

Risk is inherent in any commercial enterprise, and profits are an enterprise’s reward for successfully avoiding or negating those risks. Too often, however, Big Business colludes with Big Government (of either party) to create ways to keep the profits for themselves while making the public pay for risks gone sour. “Too big to fail” is one of the most common, as well as the one of the most stupid, justifications.

Now here comes the Japanese version, proposed as a way to keep Tokyo Electric Power Co. afloat while it deals with what are likely to be enormous compensation payments resulting from the problems with the Fukushima power plant. We already know who’s going to get stuck with the tab.

Both the Yomiuri Shimbun and the Asahi Shimbun are reporting that either the Democratic Party of Japan, or the DPJ-led government — keeping track of the more than 20 bodies Prime Minister Kan created to deal with the earthquake/tsunami makes it difficult to pin down — is discussing a new mechanism that will allow Tokyo Electric Power to raise rates to defray the compensation costs for Fukushima. No one knows the final bill for that compensation, but one initial estimate suggests it could be JPY one trillion a year for four years.

If the nation’s other power companies are asked to contribute to the compensation, the mechanism will allow them to raise their rates, too. Of course, say the proponents, the government will monitor the rates to make sure the increase is not excessive — doesn’t that allay your concerns? — but the average household will be on the hook for several hundred yen more a month in utility bills.

Their excuse reasoning is that it will be difficult for Tokyo Electric to maintain its operations absent a raise in rates. Therefore, investors will dump their bonds, which therefore will roil the commercial bond market, which therefore could cause problems for Japanese government bonds.

In short: TEPCO and its shareholders, primarily the big financial institutions, have been the ones to make the profits. By rights, they should also be liable for the risk. But when a natural disaster, exacerbated by power company and government mismanagement, requires the people who made the profits to assume the risk — you know, the free market mechanism — they want to socialize that risk by having those with no responsibility for the problem pay for it.

Access the website of the Democratic Party of Japan and the first thing you see is their slogan: “Putting Peoples’ Lives First”.

More than a half-century ago, Alfred Jay Nock wrote: “Professional politicians…are known of all men to be pliant mountebanks when they are not time-serving scoundrels, and are usually both.” Still true after all these years.

It’s encouraging that several people unleashed a barrage at that trial balloon as soon as it hove into view. Kono Taro of the LDP, who claims (sometimes believably) to champion small government, asks why everyone else should pay to clean up the TEPCO mess just to keep stock prices stable for the banks.

Mr. Kono notes that the power companies already have a reserve fund of JPY 2.4 trillion for reprocessing, which is derived from user fees. He suggests dipping into that fund before anyone talks about rate increases. He further suggests that TEPCO should sell its assets (some of which are ownership stakes in affiliated companies) and apply the proceeds to the compensation.

He puts his finger on the problem that the DPJ promised to solve, but perpetuated instead:

“Bureaucrats from the Ministry of Economy, Trade, and Industry, and representatives of Tokyo Electric and the Federation of Electric Power Companies circulate through the Diet office building every day, buttonholing individual MPs and promoting their different agendas, (including) ‘Forcing Tokyo Electric to pay their claims could result in a financial crisis’.”

Are those quotes at the top of the post beginning to make sense?

Mr. Kono is one of those who offers another alternative: Spin off TEPCO’s atomic power division and split the parts of the company responsible for power generation and power transmission into separate entities. His version is a bit dodgy because he calls for the utility to be nationalized first, and then selling the individual units after it’s been split up. (His small government rhetoric does have some holes.) But he’s well aware that the LDP Diet members aligned with power company interests will also need to be squelched.

Earlier this week, Koga Shigeaki took that idea one step further on the Asahi TV program Morning Bird. Mr. Koga is a rara avis in Japan — a METI bureaucrat with an impressive resume in government service who favors radical civil service reforms to restrict the power of Kasumigaseki. Before raising rates, he argues, the utility should first make provisional compensation payments and limit cash outflow. Then, there should be a national debate about Tokyo Electric’s restructuring and the liability of stock and bond holders. (They are the company’s owners and creditors, after all.) He calls for the separation of the generation and transmission units as a way to shift to the use of smart grids.

The Japanese edition of the Wall Street Journal reports that Tokyo Electric earned JPY 1.34 trillion in consolidated net profit in FY 2010. Total consolidated assets stood at JPY 13.2039 trillion.

Takahashi Yoichi, formerly of the Finance Ministry and a reform bird of Mr. Koga’s feather, also argues that this is an excellent opportunity to separate the units and incorporate smart grids, with the proviso that the supply network be completely open. That would allow individual households and companies to generate and sell electricity, though large companies would still have to operate the grids. Mr. Takahashi uses the analogy of telephone company deregulation; the Internet might work as an analogy as well.

The LDP’s leading Koizumian, Nakagawa Hidenao, says that any trouble in the bond market could be forestalled by having the Bank of Japan buy either TEPCO or Japanese government bonds. He admits that solution is “non-traditional”, but he also says these are exceptional circumstances.

Finally, Yamaguchi Iwao at the Agora website points out that businesses account for 70% of Japanese power consumption and individual households 30%. Raising the rates will cause some companies to shift manufacturing overseas, or to incline them in that direction. Those who stay will be more likely to investigate ways to generate power on their own. That might be a good idea, but it also means that households will be forced to bear a large part of the liability.

So to sum up, the people with the most reactionary and hidebound approach to this problem, the ones who would use the power of government to protect the vested interests at the expense of the public, are the Democratic Party of Japan.

But then classical fascism has always been a phenomenon of the progressive left.

I’ve mentioned before the rumors that Mr. Kan pressured the executives of Tokyo Electric Power into cutting a deal: They start making substantial financial contributions to the DPJ, and he’ll make sure they don’t get in any serious trouble because of Fukushima.

Wouldn’t it be nice to see some behavior that would reveal those rumors to be groundless?

Also on the DPJ English-language website is a section that presents their political philosophy. One paragraph is titled Our Political Standpoint and includes the following:

“We stand for those who have been excluded by the structure of vested interests, those who work hard and pay taxes, and for people who strive for independence despite difficult circumstances. In other words, we represent citizens, taxpayers, and consumers.”

There’s yet another reason why the Japanese public no longer takes the DPJ seriously.

Those with long memories might remember that Koga Shigeaki was on the receiving end of the gangsterish threats of then-Chief Cabinet Secretary Sengoku Yoshito last fall when the former testified in the Diet against the DPJ civil service reform proposals. Mr. Koga didn’t think they were real reforms at all. He’s due to publish a book on 20 May called 日本中枢の崩壊. I’m already standing in line at the bookstore.

For those interested in more detail about smart grids, here’s an explanation from the Center for Progress, which favors “progressive ideas for a strong, just, and free America”.

That’s my only problem with smart grids at this point. The people most excited by the idea are the people least likely to favor anything progressive with a lower-case P that would foster strength, justice, and freedom anywhere.

Les Routledge at this site understands the objections and insists that smart grids must be completely open, transparent, and competitive. Unfortunately, the first words out of his mouth about the advantages of smart grids are that they would be a more efficient way to ration supply.

With friends like these, the idea of free market competition for smart grids doesn’t need any enemies.

I never cared for hip-hop music until I saw this video of Neba Solo.

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One Response to “Putting peoples’ lives first”

  1. […] has a delightful skewering of all the rent-seeking, hand-clasping ugliness going on in Tokyo in the aftermath of the Fukushima Dai-Ichi accident. Both the Yomiuri Shimbun and […]

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