28 – A Tale of Two Countries (26 Nov 09)
A Tale of Two Countries – Obama’s Failure and Minshuto’s Success
(I gave this talk yesterday before the Ozaki Foundation in Tokyo)
You perhaps think the subtitle of this talk – Obama’s Failure, Minshuto’s Success – to be a mischievous and overly hasty conclusion. But I think it is already a reality staring us in the face. Summing it up right away: Obama has missed the one rare opportunity for initiating the momentous reform policies he was expected to deliver, and such opportunity will not come again. The Minshuto, on the other hand, has moved fast to change Japan’s political reality beyond a point where it can revert to where things were until September, and where they had been for decades of indecision.
Both the United States and Japan are in the middle of developments that are bound to have a great effect on the wider world, quite aside from them changing their domestic circumstances. I can imagine that you have greater trouble believing that about Japan than about the United States, but that may be because of an ingrained habit, widespread in the world, of identifying the United States with leadership and vigor and Japan as a place where the politics never change.
What the two countries have had in common are serious problems connected with a lack of effective political control. This out-of-control situation has in the United States led to regression; to things moving in very much the wrong way, especially with regards to its financial system and its waging unprovoked and unnecessary wars. And in Japan the out-of-control situation has led to stagnation, to things not moving at all, except, very gradually downhill, socially and economically. No wonder therefore that expectations before the American and Japanese elections were considerably greater than they tend to be with run-of-the-mill elections among the world’s democracies.
It is no exaggeration to say that the election of Barack Obama was hailed almost everywhere with a sense of great relief, and with the general assumption that after the eight internationally bumpy years of George W. Bush, the world could go back to doing normal business with Washington. Millions of people in Europe, including my wife and myself, stayed up until five in the morning to watch the first moments of Obama as president-elect. We felt ourselves part of a huge community sharing a very uncommon political emotion. I can still see, in my mind, the tears of Jesse Jackson as the TV cameras picked out his face in the cheering crowd.
Expectations in pre-election Japan were also very high, higher than I have witnessed since the mid-1990s. They were less well-defined than in the United States. It was simply felt that the sense that Japan was not going anywhere had become overwhelming, that something fundamental had to happen.
This national mood was influenced by the party political upheaval of 1993, without which we would not have the Minshuto of today. 1993 was an important year for Japan, because it revealed that the Japanese political status quo of a one-and-a-half party system, a system addicted to keeping things as they are, was not something decreed by the facts of nature. Japanese began to understand that fundamental change was not only desirable but also possible. But the promise of those days never became reality, and it was misdirected throughout the long period of Koizumi’s fake reforms.
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There was never any doubt that Obama faced a task of superhuman proportions. He had inherited about the worst imaginable political and economic conditions from his predecessor. Not only the most severe credit crisis since World War II, which prompted expert commentary about a possible end to capitalism as we have known it, but also a machinery of government that had purposely been wrecked by Republican officials still obsessed with the romantic notion that the less government you have, the better it is for everyone. This while the American military-industrial complex seemed to have gone berserk. It was of course understood from the very beginning that the new American president could not possibly fulfill the hopes of all who had worked hard to get him elected. But at a minimum he was elected to try to stop the casino type speculation of the large investment banks, and get them to allocate credit again, and to rein in American warmaking.
“Please give him more time!” This is, still today, a common reaction when you bring up Obama’s failure in conversations with Europeans or Japanese, or – less so now – Americans. That sounds like a reasonable request. It fits in with the enthusiasm for Obama here and in Europe. What I am telling you instead, is not immediately obvious because it has been hidden in a dense fog of wishful thinking. There is strong resistance to accepting bad news after the celebrations following the Obama election. This is exemplified by the five Norwegians of the Nobel committee who gave him the Peace Prize solely on the basis of Obama’s fantastically effective oratory. But the give-him-more-time conclusion has helped create the wrong atmosphere for his presidency. Generosity bordering on indulgence in this connection has not helped him at all. Because this seemingly rational retort is based on a misunderstanding. Obama never had more than a very little bit of time, to do the things he was expected to do, and now the time is up. I will explain in a minute.
Very much in contrast to Obama’s unflappable and disastrous patience were Minshuto’s moves immediately after taking over from the LDP. They were crucial, they placed many potential detractors and natural enemies off-balance, and showed them that what is happening in Japan is not simply a normal change of government of the kind that other democracies go through regularly. By being fast and showing strong determination the Minshuto has, as I said, already changed Japan’s political reality quite far beyond the point where things can return to what they were until mid-September.
There is great irony in these contrasting approaches. Japan, as we have often been told, is a ‘consensus democracy’. I would not ever call it that, but it is true that political figures here are normally quite circumspect in what they undertake, making sure that there is sufficient tacit agreement for them to succeed. But it has been Obama who has practiced consensus formation, in fact he has stretched it to an almost absurd limit. As soon as he was inaugurated, he was trying to shake hands with Republicans who fervently wish for his administration to fail. He was trying to reach bipartisan agreements with politicians who have no other desire than to end his political career. And, of course, he did not get anything from them that is even remotely comparable to consensus. In the meantime, he refused to listen to the American electorate, of which a majority had made clear in countless opinion polls that it wanted a stop to the occupation of other countries, and wanted an economy that could no longer be held hostage by businessmen who are still called bankers, but are essentially gamblers stuffing their own pockets.
The Minshuto moved as if consensus was an alien concept in Japanese political life. Or, rather, that over the years the Japanese electorate had shown more than enough consensus about the fundamental political changes that Japan needed to undergo.
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What might explain the difference in approach, and with that the degree of success? I think that the inner core of the Minshuto was ready for what it had to do. In 1993, when its members belonged to different splinter parties, these original reformist politicians did not get very far with their reforms because they were not properly prepared; they did not have the knowledge and the bureaucratic assistance to assert their political authority, and they did not know how to manage and control the policy-making levers. But the important thing at that time was that they found each other and subsequently could form the first true postwar Japanese opposition party. They stuck together and they never let go of the cardinal idea that to turn Japan into what Ozawa has called a ‘normal country’, they had to create a political steering wheel, a genuine government establishing national priorities and capable of altering a course for the nation. In other words, to create what I call a center of political accountability. Hence, the Minshuto has been emphasizing the importance of a policy making apparatus centered on the cabinet, and the necessity of taking the ultimate budget decisions away from the budget bureau of the MOF, and to make these subject to cabinet deliberations. The core members of this new government party have also realized that there was a causal connection between the notorious ‘hole in the middle’ of the Japanese political system and the odd and pathological U.S.-Japan relationship, in which the important things by which a state is externally recognized as a separate decision-making entity are taken care of by American proxy. That relationship, by the way, has already changed by the mere fact that it has been made a subject for fundamental discussion, and by the sending of messages to Washington that Japan should no longer be taken for granted.
* * *
Back to Obama, and the window of opportunity he was given to take very drastic and dramatic steps for repairing what by common American opinion had become broken. America, expecting a possible collapse of the capitalist economy, was ready for the kind of radical action that normally would not have overcome domestic political barriers. But Obama chose Clinton-era economic policymakers who were in bed with precisely those banking interests that had caused the credit crisis to begin with, or who had played a crucial role in making the crisis possible. These officials designed policies that created the impression of economic recovery, but that at the same time enlarged and consolidated the power of the very large investment banks and created new advantageous conditions for them to continue gambling.
It is important to take the time here for a moment to consider the almost unbelievable developments under Obama. Instead of breaking up the bankrupt banks, firing their top managements responsible for the crisis, and bringing them back to the purpose for which they had been established to begin with, namely allocating funds to businesses in a judicious and efficient manner, the power of these banks was increased through greater concentration caused by mergers, and their survival became guaranteed by government – that is taxpayers – money. No surprise therefore that these financial institutions went back to their casino activities and to paying again obscenely high bonuses to their top people. Nothing was done to alleviate the indescribable misery of the hundreds of thousands who lost their homes and their jobs as a result of the crisis (in recent estimates that are more honest than the official statistics, one out of five Americans willing to work cannot do so).
There is a bigger story to tell behind the story you can follow in the newspapers. We have known for a long time that some business entities, or entire business sectors, can make all the difference in American policy making, because of their armies of lobbyists and the fact that they pay for the re-election of politicians. We have just seen a grand demonstration of it, with new health care legislation that gives the American public preciously little of what they had been promised, and provides the pharmaceutical and insurance industries with new means to add to their already astronomical profits. The more profound story is that the financial institutions that created the crisis have now managed to capture the American state to a degree and with the prospect of permanency, that has not quite happened before. Obama has done nothing to stop this, and even now with regulatory plans that are in the hands of the same entities that are to be regulated, appears to be doing everything to help consolidate their situation.
In the case of that other huge policy matter that Obama was supposed to repair, American militarism, he has expanded the fighting in Afghanistan to Pakistan, and appears incapable of standing up to the Pentagon and its generals. Even if Obama were to give in to the formidable pressure to narrow American presence in Afghanistan, rather than giving in to General McCrystal’s request for more troops, his weakness in this area is helping along an ever more dangerous ‘security state’ that obeys fantasies about non-existent threats to the nation, and military-industrial interests devouring the billions that Washington borrows from other countries, at great future expense to the well-being of American citizens.
Those people who say that his hands were tied, and that he would run into venomous opposition, have forgotten how immensely popular Obama was when he took over, and how the media were in the mood to support a counter-revolutionary policy program – we may call the undesirable trends that brought us the economic crisis and excessive belligerency as drawn-out revolutionary developments. As for the venomous opposition, he is getting that anyway, and would get no matter what he did.
The result of Obama’s government so far is that those policies that under George W. Bush were considered not acceptable have now been given a stamp of good house-keeping. If he were to try at this late stage to reverse that, and do the things he was supposed to accomplish, he would risk much bigger opposition, potentially catastrophic for his presidency. He would have to start by dismissing his economic staff and his generals.
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An old historian’s dilemma revolves around the question what makes more history – in the sense of determining what happens – personalities or their circumstances? The two obviously interact. If Obama had been less reliant on his economic advisers and the generals, and less inclined to believe that his own famous oratory constitutes valuable ‘first steps’ for whatever must be done – if he, in other words, had been more like either of the two Roosevelts or even like the Kennedy after the Cuban Missile Crisis – we would probably have a very different situation today. And if the central characters of the Minshuto personally had not learned to iron out their differences, and and not realized that continuing to stick together would be crucial for eventual Japanese political reform, we would not now witness their exciting attempt at creating true government.
But let us focus on institutions for a while. One could argue that in some ways the Minshuto had it easier than Obama. Aside from being better prepared, the basic institutions for having a real government, like a cabinet, were there. The cabinet had not been used for doing the things for which democratic cabinets exist. Under the LDP it met twice a week for something like 15 to 20 minutes for the sole purpose of its members putting their hanko on documents prepared the day before at the meeting of the actual policy makers, the jimu jikan, the vice ministers of the various administrative agencies. It was not used; but it was there, ready and waiting as an institution for the Minshuto to put real life into it.
The United States does have the institutions necessary for democratic governance, of course. And they have been used a lot. But also misused. The great problem with America’s governing institutions is their corruption; not in the sense of money in exchange for favors – that happens too – but in the original meaning of the term: rot and decay.
We need to take a closer look at this, as it is a big part of the story. In the background of Obama’s failure loom the dire developments in the United States these past couple of decades, which to my mind amount to nothing less than a formidable tragedy. The American nation was not as great as it was made out to be by its educators and politicians flattering their public, and was not the great example of the good life for all other peoples in the world to aspire to, as numerous Americans take for granted, but it was in many respects a success. It had great qualities, and at an earlier stage the American nation conveyed a strong sense of freedom and possibility. There still is the bracing friendliness and spontaneous generosity of most of the people you meet when travelling in that country. Americans of course do not deserve what powerful interests have made of their country. Something terrible happened to their political institutions. President Eisenhower anticipated this when, in his televised farewell address to the nation he coined the phrase military-industrial complex. In the original draft of the speech, he had also added Congress to that complex, but that sounded clumsy. He warned that the survival of democracy in the United States was at stake.
What Eisenhower referred to has in fact been a perfect example of political-economic institutions that start living powerful lives of their own, to such an extent that they escape from the political control over them that is believed to exist. We can see the same with the financial institutions that have caused the credit crisis. They have captured the state; or at least those facilities of the state that can prevent their power from doing great damage to society in general and to national well-being. This kind of thing has happened before in other places. If it is not stopped it tends to lead to fascist-like developments, in which an unhappy and insecure population is seduced by highly unscrupulous and unprincipled opportunistic political movements to act out dangerous power fantasies. The ingredients of that can be seen in the United States of today, with the utterly superficial and entertainment addicted media creating a political reality in which idiotic notions of Obama not being a true American, and a secret moslim, or an actual communist or nazi, as well as persons like Sarah Palin become politically relevant. The Republican Party in particular cynically exploits working class insecurity, fear, misfortune and ignorance.
Obama has done little if anything to reduce the strong sense of economic and political insecurity among the population that drives that development, or the sheer paranoia that was encouraged by the George W. Bush administration with propaganda about the American nation being threatened from outside by implacable evil forces. While preaching the necessity of civil rights and human rights to formerly communist and other autocratically governed countries, both Bush and Obama administrations have allowed an ongoing crumbling away of American civil liberties, and allowed the loss of traditional checks on the judiciary, with more and more rogue prosecutors doing what they want to fill American prisons. Many local police forces have become militarized and are imbued with hostile attitudes toward the public. And that is before we speak of the kidnapping of supposed terrorists, and the torture that the administration continues to condone in situations where it does have control.
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I have already touched on the extraordinary relationship between the two countries. There really is nothing in history that compares to it, which also means that people have had a hard time placing it intellectually. Huge conceptual obstacles block a generally accepted proper assessment. To begin with, Japan is routinely described as an ally of the United States. But an alliance ties sovereign states together. Washington has never treated Japan as a sovereign state. There exists no generally accepted term to describe Japan’s actual position, but protectorate comes closest to it. The Minshuto wants to change that, it wants Japan to be seen as a sovereign state; which is what I understand Hatoyama means when he speaks of “a more equal relationship”.
Washington appears to have no inkling of this. In fact, the runup to Obama’s recent visit revealed the self-deception of the American political class, and the absence of analysts and policy makers in Washington capable of rethinking the reality of the world and to be realistic about it. For decades other governments have tried to get Japan engaged politically. Japan was famously described as an economic giant but political dwarf. Many foreign politicians have complained that if you knocked on Japan’s door no one seemed to be home. A strange condition for such an economically powerful country, but the world became used to it. Now, at a point when, for the first time after World War II, a group of politicians says we are going to steer this place, the American president does not seem to hear that. I would have thought that these circumstances provide a superb opportunity for the heads of government of the two countries to sit down together and figure out a basis for a truly cooperative relationship. Instead we only hear nagging warnings, and nagging worries in the American media, about a recalcitrant Tokyo on the subject of military bases. That disagreement is surely not unimportant, but compared to the future of strategic relations with China and Russia? An obvious fact has not yet been acknowledged on either side; which is that the United States needs Japan more than Japan needs the United States, since a year ago the latter stopped being the buyer of last resort for Japan’s industrial overproduction.
There is a lot of misdirected speculation in the American media, which gets copied in Europe and, surprisingly, in Japan as well. That media chatter would have you believe that Minshuto does not know what it wants. Even sympathetic American coverage speaks of an inexperienced party trying to find its way and confused about where it wants to go. Of course it is inexperienced. That is what you are by definition, if you are doing something you have never done before. And of course its cabinet members are still trying to find their way. Very much of what should be in place for proper government – lines of communication, delegation of authority – must still be constructed, and a great challenge is to work out positive and productive relationships with Japan’s talented and experienced bureaucracy. But a confused Minshuto government? Only with respect to unexpected obstacles that still need to be properly defined. With respect to what it wants to accomplish, it is not at all confused. This media chatter provides a prime example of people so used to looking at reality through their conventional frames of reference that they cannot see what is staring them in the face. American reporters and commentators appear not to have a clue. What they think they see is described in terms of clumsiness and immaturity of a new party in power, if not as resulting from Japanese nationalism, or even the ready-made and stupid, intellectually dead-end, category of anti-Americanism.
I am afraid that the Japanese media are not enough of a help. Japanese political reporters and editors have for generations been trained by following the minutiae of jiminto habatsu (LDP cliques) infighting, and they were very good at this. When I used to cover political upheavals in Thailand, I always looked up my Japanese colleagues in Bangkok because they usually were great experts with respect to factionalism in the Thai military. You do what you are good at doing, and so many Japanese newspapers project a pattern of infighting and factionalism onto the actual situation. With as one result that they tend to miss moves by Minshuto leaders actually aimed at important Japanese policy adjustments.
This newspaper-produced political reality does of course have influence over actual reality, and it can misdirect attention. Once it does that, you may get self-fulfilling expectations about inner discord in the party. Could that wreck what Minshuto has on its agenda? Perhaps. Much can go wrong.
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Before going further with what can go wrong, let us recapitulate what the points on the Minshuto agenda entail when you add them up. Nothing less than the formation of a true government, something that the jiminto (LDP) never accomplished effectively, never tried to do after postwar reconstruction, and the creation of an economic powerhouse, were completed. A government that could ask and answer the question “what is next”? And act upon that. And nothing less than the establishment of a genuine sovereign state capable of diplomacy that goes further than that necessary for the safeguarding of raw material sources, and markets for Japanese products; that goes further than simply keeping Washington happy. Something that will be recognized outside Japan as standing on its own legs
This program will cause considerable upheaval. Now, the Japanese political system in which laws do not in practice determine what is allowable in relationships and transactions, and in which much informal power is exercised, has long known informal means to keep things within certain bounds: Shaming and scandals.
The Japanese system that has existed until now may be compared to a biological organism in the sense that it has a kind of immune system defending it against elements that disturb its inner balance. For politicians or adventurous businessmen who do things that may overturn established practices, there are scandals to cut them down. These require the cooperation between the public prosecutor and the media. I have followed several of them closely, and written quite a lot about the phenomenon. Such scandals are very predictable. Last spring we saw one in the effort to lessen the power of Ozawa. What the Minshuto is doing is hugely upsettting to the established order, and it is inevitable that scandals will develop around Minshuto’s leaders, because it requires very, very little to start one. Here, the arbitrary power of the public prosecutor is a problem for Japan’s political future, and we can only hope that factionalism inside their office will stop what usually starts automatically as a result of self-styled dedication to the supposedly higher cause of Japanese socio-political stability.
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I want to take this tale of two countries a step further with a side-by-side comparison. It is time to learn from that, even though this will require some conceptual agility that is not encouraged by established academic and journalistic ways of looking at things.
Ok, side by side: In Japan we see a new government dedicated to overcoming political and economic stagnation and prepared to become a pro–active force to cooperate with neighbors for the betterment of everyone’s conditions. In the United States we see a degradation of democracy and a new government that has not been able to control forces that by common opinion are considered negative and even disastrous for the country and the world. More war. And prospects of more financial crises and thus more economic misery.
Things were supposed to develop differently. The United States was long the model of modern industrial, economic and political development, with Western Europe as a variant; the capitalism that others ought to aspire to, while building their democracies. But now it is sadly rotting away while Asian economies are praised for their vigor, enthusiasm and a degree of success in lifting living standards to a higher level.
Here our tale of two countries should become instructive.
In modern times, Japan and the United States always found themselves at opposite ends with respect to the organization of their political economies. I have described this in terms of relatively undifferentiated private and public sectors in Japan. The gradual separation of those two sectors had constituted the most important political development in a Europe emerging from its feudal systems and creating the conditions for democratic political participation as well as the underpinnings of a market economy.
It has long been assumed that all modern industrial powers will evolve in the same direction, and that there will be convergence if we wait long enough, with Japan and Korea and communist countries beginning to resemble the American model more closely. In this view their funny kind of capitalism of today would become a more normal kind. Not enough people realize how much the common analyses of economic and political developments start from unquestioned premises of a world evolving in the direction pioneered by what is commonly referred to as the West. This is true for journalism and media commentary, but also, and very much so, for academics.
But for about fifteen years now, I have been struck by how the American capitalism is getting funnier all the time, with developments that seem to point to convergence in the other direction. The line between private and public over there gets more and more blurred, with business interests capturing America’s regulatory powers; and as we have just seen, the line has essentially been erased altogether with a government guarantee that the big investment banks will not go under, no matter how bankrupt they are. The traditional term for this, derived from mid-twentieth century political discourse, is ‘corporatism’.
There are reasons to avoid that term because of a great deal of confusion about it, and its misapplication after having been borrowed for ahistorical American political science theories about intermediation. But the Japanese political economy has in the past often been pointed at as a super example of corporatism, with politically determined protections and campaigns rather than a market mechanism determining economic outcomes. Think of things like the so-called convoy system of the Japanese banks protected by the MOF.
So, a next logical question is how the American and Japanese corporatisms are different from each other. Clear images of what happened with the ‘bubble economy’ in Japan, and with the recent wild casino speculation in the United States, illustrate what is vitally important. Both could only exist because of the political condoning and encouragement of what has become known as the ‘paper economy’ in which arbitrary value is attached to assets that do not produce anything, and therefore cannot be judged by the value of what they produce.
The Japanese bubble was directed to a large extent from the bureaucratic-financial power centers, and served to create costless capital for Japan’s manufacturers to streamline and expand their production apparatus. They then engaged in the biggest wave of plant and equipment investment in the history of mankind. Why? They hoped that this would deal effectively with new economic disadvantages that resulted from the huge increase of the value of the yen against the dollar. Only about ten percent of the transactions during the bubble years were estimated to benefit private persons. In other words, Japan’s officials and captains of industry used the bubble for a joint effort to make the national economy stronger, or so they thought.
In the United States, by contrast, industry has been run into the ground as financialization proceeded, and the investment bankers began to trade in debt-related derivatives rather than concentrating on lending to industrial sectors most deserving of credit. Members of the American financial elite did not give a hoot about national economic conditions, as they pocketed literally billions of dollars themselves. In my previous talk early last year, right here, for the Ozaki foundation, I called that ‘parasite capitalism’, and predicted that it would lead to ever greater crises. But in spite of all the dislocations caused by the Japanese ‘bubble economy’, I do not think that an effort meant to preserve industrial strength for the nation rather than for the self-enrichment of bankers deserves to be called parasitical.
So, the corporatism in Japan and the United States are most significantly different with respect to who benefits from it.
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Will the momentous changes in the way that Japan is to be governed include a partial restructuring of the Japanese political economy? Probably. If Japan is to move a bit away from what its own domestic critics have labelled as pseudo-feudal structures, this would be inevitable. But that process requires much care and wise judgment. Japan became a first-class industrial power by its own methods, and did wonderfully well by not heeding the advice and admonitions that for many years emanated from Washington. I am reminded of this all the time when I read commentary about China today in major international financial publications, about what the officials in Beijing are doing wrong. And I have to laugh, because much of it sounds familiar; I read almost the same things about Japan twenty years ago.
I am not here to give any advice to the Minshuto. But on the subject of advice, I would like to suggest that American and European economists and economic policy makers have, by and large, lost the right to be taken seriously when they lecture the Chinese or the Japanese about the wonders of market capitalism, and tell them how to do their economic planning. We should certainly become aware of the mostly unexamined Western assumptions concerning desirable economic organization, and then we should promptly drop them.
For the Minshuto, undoing the damage related to these assumptions inherited from the Koizumi years, is yet another one of the huge challenges facing them. As politically interested Japanese citizens, which I assume you are, I wish you every luck in the interesting times ahead.
