Analysis: Hatoyama Speech to 173rd Session of the Diet: Part 3

Written By: guyjin on October 30, 2009 No Comment

While the first two parts of Prime Minister Hatoyama’s speech (see Part 1 & Part 2) were mostly uplifting and aspirational, I found much of the more meaty areas of economics and foreign policy in his speech to be full of plattitudes and naive rhetoric. This article will focus on economics, and while Hatoyama named a variety of the policies here that were already included in his manifesto, there were still no details, and no indication of how these policies are going to be paid for.

The Prime Minister began his discussion of economic policy by creating a strawman. He says that:

“…some ideas are no longer valid – such as that we should leave everything to market forces so that only the strong survive…”

This is a false charge. None but the very, very, very radical have ever suggested that governments should leave everything up to market forces, with no regulation to protect the weak or disadvantaged. After the earlier parts of his speech, I would have expected Hatoyama to be more intellectually honest than this, but by building this strawman he can then launch into an emotive description of how his government’s economic policies will create “an economy for the people”. Again, this is a meaningless statement. If an economy is not ‘for the people’, then what is it for….? There is no question that the weak and disadvantaged require protection and assistance. The question is, and has always been, how best to go about that, and what level of government interference is most constructive for the economy as a whole, and for those that need a bit of a hand.

Hatoyama then goes on to speak of small and medium-sized enterprises (SMEs), which he rightly calls “the real strength of the Japanese economy”. But he then mentions a range of policies such as the regulation of loans, child allowance, and other measures such as his promises to eliminate motorway tolls, and implement ’green industry’ policies etc, which are sure to require increased spending and likely increases in taxes – sure to hit SMEs first. It is hard to see how any of the policy measures that he has outlined do anything whatsoever to help (and may end up hurting) SMEs, ‘the real strength of the economy’.

The Prime Minister also calls for an economic recovery ‘driven by autonomous private-sector’ and ‘domestic demand’, but then speaks about how he wants to develop industries in the environment and other fields that can ‘provide a powerful boost to Asia’. Some of this seems just a little confused. And later he talks of the restoration of “regional sovereignty”, whereby regional areas can determine their own futures. But then he speaks of significant increase in national government involvement in local agriculture, forestry and fisheries industries and the restoration of the massive public postal service that Koizumi tried to privatize (seems like so long ago now…..).

What it all boils down to, according to Hatoyama, is “an economy for the people”, which apparently amounts to a focus on shifting the focus of government spending “from concrete to people”. But there is a major flaw in this thinking, in my opinion. Japan is already one of the most heavily taxed countries in the world, and already has established significant safety nets for its citizens. One of the major problems, as I see it, is that over the last two decades, Japan have failed to grow industry sufficient to sop up the excess workers that had been supported for many years by the booming Japan Inc. When the bubble burst, many jobs went with it, and since then many of these jobs have not been replaced. Instead, temporary jobs have sprouted up everywhere, and this has led to insufficient incomes for many citizens. If this problem could be fixed, by stimulating investment and economic growth in real, internationally competive businesses, the government wouldn’t need to provide many of the safety nets that it is discussing.

Unfortunately I don’t see anything in Hatoyama’s plans that suggest a firm grasp or even a recognition of the fact that the government needs to clear the way for more innovation and investment in growing businesses. Rather, by focusing on his ‘economy for the people’ concept, he is shifting the focus away from business, and toward placing more restrictions on the ability of SMEs in particular to grow. I hope that I’m wrong about that, but I don’t see much evidence yet that would suggest that I am…

The 4th and final part will come later today….