Friday, January 11, 2013

Is Shinzo Abe the Great Keynesian Hope?



A lot of people were very excited about Shinzo Abe's talk of revoking the Bank of Japan's independence and forcing the Bank to adopt a far more expansionary/easy/inflationary monetary policy. I was not among them. I said that Abe was just "talking down the yen". This now seems to have become the conventional wisdom in the press, though as Paul Krugman points out, talking down the yen is a good (if not revolutionary) idea in its own right.

Now, here comes Abe with some Keynesian magic: an "emergency stimulus" package worth over $100 billion.

Is this for real? Well, sure, it's for real. And it will probably continue. So Keynesians should be happy. But they should also realize that the reason for Japan's new "stimulus" has nothing to do with Keynesian ideas. Instead, it has to do with re-establishing traditional back-scratching relationships between the LDP and its grassroots supporter base.

Shinzo Abe's party, the "Liberal Democratic Party" (the name of which always reminded me of "Holy Roman Empire"), held onto power for 55 years. It was supported by the bureaucracy and big business - the other legs of the so-called "iron triangle". But Japan is a democracy, so the LDP needed to get votes...and with Japan's extremely restrictive campaign financing and advertising laws, this was difficult to do the way Americans did it. 

So instead, as political scientist Ethan Scheiner explains in his classic book Democracy Without Competition in Japan: Opposition Failure in a One-Party Dominant State (see a summary here) the LDP resorted to a system called "clientelism". Basically, Japan's central government gave pork directly to groups who would go and campaign for them. Chief among these were construction companies. These companies employed a bunch of blue-collar dudes, usually in the rural areas (which, like in the U.S., wield disproportionate electoral power). Some of these dudes worked as part-time farmers; some of them belonged to right-wing Tea Party type groups. Most of the companies themselves were mafia-owned. The LDP would dish out pork, and the construction companies would basically become campaign staff for LDP politicians - knocking on doors, putting up posters, making calls, etc. It was a tit-for-tat relationship, and it worked for decades. In the 1990s, Japan's massive (and famously wasteful) construction spending binge, billed as fiscal stimulus, went mostly to these groups.

In the early 2000s, things changed, with the ascent to power of Junichiro Koizumi, the LDP's famous maverick reformer. He tweaked Japan's electoral system to make it much harder to win office by using private armies of door-knockers (Update: A commenter helpfully reminds me that reform of this system actually began in the early 90s, when an opposition coalition briefly took power due to an LDP split). He also cracked down hard on construction spending. This austerity was offset by much looser monetary policy; the Bank of Japan embarked on a program of quantitative easing (actually the world's first). 

Anyway, the tweaked electoral system, lower "clientelist" pork spending, and the disastrous unpopularity of Abe's first tenure as prime minister helped ushed the DPJ into power, breaking the LDP's 55-year run. But now the LDP is back, and they need to re-establish their base of support. This means re-establishing the back-scratching relationship with those construction firms (and, by extension, rural Japan, right-wing Tea Party type groups, and the mafia). The LDP needs to say "Hey, guys, things are back to the way they were." This, I suspect, is the main reason for the "emergency stimulus".

All of which doesn't mean that fiscal stimulus isn't a good idea for Japan. After all, money is still getting spent! But it does mean that we can expect construction pork spending to continue if and when Japan's economy recovers. That knowledge should affect businesses' expectations in the present, making the stimulus somewhat less effective in the present.

(Also there's the side question of whether Japan needs stimulus right now. On one hand, I think there's evidence that pork-barrel spending in the 1990s, while not necessarily worth the ultimate costs, did make Japan's post-bubble slump a lot less painful than it otherwise would have been. And of course interest rates are at the Zero Lower Bound, and Japan could use a little inflation. On the other hand, Japan's unemployment rate is only 4.2%, meaning there might not be that much actual slack in Japan's economy. And a lot of the stimulus spending is likely to be wasteful (much more so than, say, infrastructure spending in the U.S.), both because Japan's infrastructure (unlike ours!) is overbuilt, and because of the political nature of the spending. That will lower the multiplier.)

To sum up: Once again, I think that Abe's appearance as a bold Keynesian experimenter is a cover for a program of traditional mercantilism and corporatism. I guess we'll see how well that program works.


Update: A Japanese translation of this post is available here.

47 comments:

  1. I was under the impression that ~2% of GDP was not a test of Keynesian ideas.

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  2. Anonymous3:20 PM

    Noah:

    Great post above-learned a lot about the LDP.

    Couldn't Japan actually use infrastructure spending, but just in a different way, rather than building under-utilized roadways in ruarl areas?

    For example, if Abe promised to build more buses and trains for walkable urbanism, along with investing in non-nuclear, non-carbon energy producing eletric infrastructure, wouldn't that be beneficial, both as investments and for the environmental spill-over effects?

    I am surprised Japan never did this over the last 15 years, since this would have huge benefits not just green-wise, but also for Japan reducing its carbon imports.

    Or is there no green and converse "energy independence lobby" in Japan?

    If you can illuminate the last question that would be great!

    Frank

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    1. Anonymous2:18 AM

      Saying Japan could use more walkable urbanism is like saying their restaurant scene could use some more ramen.

      Delete
    2. Anonymous3:54 AM

      To Frank,
      I'm Japanese, and I believe I'm in the middle of the road. I have just read this blog. As for the LDP, this seems to be a one-sided view. Not a few Japanese expect Prime Minister Abe's cabinet to do better things than the former cabinet. (Believe it or not, the former Cabinet was indirectly controlled by our mass media, whose management-level officials are mostly people from South and North Korea that use aliases.
      Anonymous A

      Anonymous A

      Delete
    3. Anonymous6:45 AM

      I agree, walkable would be a godsend. I don't live in a rural area really, but the city is absolutely not pedestrian or even cycle friendly. You'd think with more than 400,000 people in the city limits, there would be more than one train station. Cars are absolutely necessary here, but at the same time just aren't worth the cost or hassle.

      Delete
    4. Anon A:

      Believe it or not, the former Cabinet was indirectly controlled by our mass media, whose management-level officials are mostly people from South and North Korea that use aliases.

      That's interesting! I didn't know that. I have also heard that Korean-Japanese people also are prominent in the 右翼団体 and in the technology industry. Are ethnic Koreans an "elite minority" in Japan, like Scots in the UK, Chinese people in Indonesia, or Jews in Russia?

      Delete
    5. Anonymous8:37 PM

      Noah:

      You're likely being sarcastic, but you should know at the very least that the mainstream Japanese media no longer represents the Japanese people (if it ever did). The strong LDP victory despite the irrational LDP bashing by the media "on behalf of the people" should be a clear indicator of this.

      Delete
    6. You're likely being sarcastic

      No! I know that Korean-Japanese people are very common in the tech industry, and many of them are entrepreneurs (e.g. Son Masayoshi). So I really am starting to think that ethnic Koreans are an "elite minority" in Japan.

      you should know at the very least that the mainstream Japanese media no longer represents the Japanese people (if it ever did)

      Probably not, but does any country's media represent its people? I doubt it. America's certainly doesn't.

      Don't get me wrong, I have LOTS of problems with the Japanese media. I definitely think new media sources are needed.

      Delete
    7. Anonymous1:23 AM

      It is notable that Masayoshi Son is ethnically Korean simply because people from his background do not often break into the upper ranks of "respectable society". They've got a lot of chips stacked against them. As an example, I would refer you to the Japanese person above in the thread who is convinced that the DPJ was being run from behind the scenes by a dark cabal of ethnic Koreans "using aliases" AKA Japanese names~

      Delete
    8. Yeah, that commenter is full of "derp".

      But it's worth noting that this is often the case with oppressed but highly skilled minorities. Shut out of traditional routes to success, they become entrepreneurs.

      Delete
  3. Anonymous3:51 PM

    If it's a signal to the key domestic constituencies that will hold him accountable, why would Abe and the LDP want to mask what they're doing, billing it as Keynesian fiscal and monetary stimulus? The summary of Scheiner's book that you link to says that clientelism is an ingrained norm in the Japanese political system, so where does the need for subterfuge come from?

    Also shouldn't you also look at this in international context too? If Japan weakens its currency than, on the margin, that encourages other big economies -- the US, the EU, etc. -- to attempt to weaken their currencies too. It's a virtuous self-reinforcing process, given that most of these countries still have overly tight monetary policy.

    ReplyDelete
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    1. If it's a signal to the key domestic constituencies that will hold him accountable, why would Abe and the LDP want to mask what they're doing, billing it as Keynesian fiscal and monetary stimulus? The summary of Scheiner's book that you link to says that clientelism is an ingrained norm in the Japanese political system, so where does the need for subterfuge come from?

      Ask Scheiner, not me...the exchange was never explicit and public.

      Also shouldn't you also look at this in international context too? If Japan weakens its currency than, on the margin, that encourages other big economies -- the US, the EU, etc. -- to attempt to weaken their currencies too. It's a virtuous self-reinforcing process, given that most of these countries still have overly tight monetary policy.

      Yep.

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  4. Obviously you’re correct that Abe is pushing expansionary monetary policy for the mercantilist yen-depreciation effect and expanding spending to pay off LDP supporters left in the cold by the DPJ’s tenure. But I don’t see why that undermines the reflationary impact. We learn just by getting to see how the variation affects economic performance. It doesn’t matter what Abe’s motives are.

    Also, just a few points:

    1. The LDP’s electoral strategy required restrictive campaigning regulations to undermine opposition efforts to appeal to voters (and favor LDP incumbents), not the other way around. The LDP could have changed the rules if it wanted to.

    2. Koizumi did not “tweak” the electoral system, that came seven years earlier and was pushed through by a coalition government while the LDP spent a year out of power from 1993-94. That system eliminated direct intra-party competition and shifted lower house competition heavily toward SMD competition in which candidates must knit together broader coalitions of voters than under Japan’s former electoral system. This reduced the value of clientelistic campaign strategies, increased the volatility of vote to seat dynamics, and thereby contributed to the LDP’s loss in 2009.

    3. I believe the decline in construction spending began well before Koizumi with PM Hashimoto in 1996 or so. Hashimoto is underappreciated; Koizumi is excessively so.

    4. The problem with LDP style pork is that, as you note, it’s often tied to relatively small, local construction firms. These are not always technically capable of the sorts of infrastructure projects Japan still needs. But they can lay down roads etc, not so necessary. We’ll have to watch how the pork is spent this time around.

    5. Yes, Japan’s unemployment rate is low, but my understanding is that it reflects a great deal of government support, especially through tax expenditures, for keeping people on payrolls. That needs to end. Protect the people not the jobs. And I suspect the employment to population ratio is not so good (retirement at 60, poor opportunities for women, few/poor opportunities for the young). There is likely more slack in the labor force than meets the eye.

    Anyway, given the lost DPJ years of neither structural reform nor reflation, at least Abe is offering reflation. And if it works, higher real interest rates could result in some structural change, even if the LDP isn’t going to legislate on that front. After all, Japan is a much more open economy than it was in 1990 and people are much more price sensitive now. A bit of inflation could get self-interest to work on a bit of useful creative destruction.

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    1. The LDP’s electoral strategy required restrictive campaigning regulations to undermine opposition efforts to appeal to voters (and favor LDP incumbents), not the other way around. The LDP could have changed the rules if it wanted to.

      Of course.

      Koizumi did not “tweak” the electoral system, that came seven years earlier and was pushed through by a coalition government while the LDP spent a year out of power from 1993-94.

      This is correct, thanks. I'd forgotten that. I guess I should have realized it from the fact that the change is in Scheiner's book.

      I believe the decline in construction spending began well before Koizumi with PM Hashimoto in 1996 or so. Hashimoto is underappreciated; Koizumi is excessively so.

      I'd like to see some data on this. Got any?

      Yes, Japan’s unemployment rate is low, but my understanding is that it reflects a great deal of government support, especially through tax expenditures, for keeping people on payrolls. That needs to end. Protect the people not the jobs.

      Agreed, of course.

      And I suspect the employment to population ratio is not so good (retirement at 60, poor opportunities for women, few/poor opportunities for the young). There is likely more slack in the labor force than meets the eye.

      No, that's not "slack", because increasing aggregate demand won't change those things. That's about total labor supply.

      Actually, making those reforms and increasing total labor supply would be mildly deflationary, not inflationary! Not that that matters much, IMHO. But interesting.

      Delete
  5. Anonymous6:55 PM

    Noah,

    Concerning pork-to-the-precincts, the NYT had a piece earlier this week about the way the Fukushima clean-up funds are being wasted. It would seem that Mr. Abe's predecessors in the DPJ were also fond of the practice. Here's the link:

    http://www.nytimes.com/2013/01/08/business/japans-cleanup-after-a-nuclear-accident-is-denounced.html?ref=hirokotabuchi&_r=0

    (You have to read this just for the ridiculous quote by the Dep Director of the Environment near the end.)

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    1. At first I thought you wrote "Derp Director of the Environment", and I thought, "How appropriate..."

      Delete
  6. Nice historical overview of the LDP's previous attempts at fiscal stimulus. I, like you, remain unconvinced that Abe will follow through with significant fiscal and monetary reforms beyond short-term efforts to gain support for his other policies (http://bubblesandbusts.blogspot.com/2013/01/shinzo-abe-monetarist-or-keynesian-hero.html).

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  7. Anonymous8:46 PM

    @Frank

    Just to answer a few of your questions.

    - Yes, Japan could earmark money away from under utilized rural roads, but then it wouldn't really be pork-barreling, which would be so un-LDP. LDP loves pork, KNOW THAT.

    - Abe is in bed with the nuclear power boys and doesn't seem to even list environment on his main agenda, so why would he want to do what you said?

    - Sure, there is an Green Lobby in Japan, and lots of people care about the environment. Abe's group just calls them the enemies.

    The ideas you have proposed makes sense, but just not for the current backward thinking PM.

    How about instead of your ideas Frank, try my ideas.
    - Lots of infrastructure projects in rural areas, where the population is declining and infrastructure is already maxed out. When necessary due to lack of space, destroy old pork projects and create new ones in the same space.
    - Restart nuclear power because it is clean and safe. In fact, a long time LDP crony who once saw a nuclear power plant on TV can now become the head of TEPCO (owner of the Fukushima nuke plants). If people complain, just give them pork.
    - Ensure that long time loyal big construction companies, like Kajima, get nice contracts of all new infrastructure projects. Make the bidding non-competitive and do not consider the capabilities of Kajima, or any other construction company.


    I would like to find anyone in the world who believe's your ideas (no offense on this) are more palatable to the current LDP govt, than my ideas. If that person exists, surely they have never been to Japan. Despite all of what is mentioned above, Japan does lead the world in some green areas, such as Hybrid cars (privates firms created on govt incentive) and solar powered houses (privates firms created product with govt incentives - actually the govt is pulling the incentives, but this is partially because costs have come down so much for solar panels, the industry can run efficient enough without incentives). In essence, the Japanese govt doesn't drive environmental initiatives, rather corporation.

    TimE


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    1. Anonymous11:37 AM

      Thanks for the info above TimE!

      Frank

      Delete
  8. Anonymous9:56 PM

    Noah---months ago you mentioned are economy broke in the 1970s

    You forgot to mention that this correlated to Jimmy Hoffa being jailed and the Mafia being broken

    Can the Goodfellas bring us back?

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    Replies
    1. There's only one way to find out!

      Delete
    2. Anonymous12:09 PM

      Putting aside the Mafia, but only for a moment, Serious question Noah--please delete the trolls, etc. Am trying to get your thoughts.

      I have not been to Japan, will never go.

      Forget "economics" and the GDP gap. Think like a general like Patton who walks on an Army base and looks around and sees everyone idle, not in uniform, etc. and who says, in 6/8 weeks I can do this with this "outfit."

      Based on walking around, seeing and observing (like Sherlock), how much more productive do you estimate the country of Japan could be?

      My take of the US, for example, is that we could be 3 times as productive, right now (having nothing to do with right wing and libertarian BS that would have negative consequences if we listened) with modest investments in infrastructure but a lot of work rules, social, cultural, and attitudinal change.

      An example of the later: The consequences of failure in this country are enormous. Worst case example: too many people in jail. Best case, all the people who cannot take a risk. Best example of that--the madness of having young people borrow money to go to school.

      Again, how much better could Japan perform?

      Delete
    3. Nathanael10:10 PM

      Small correction: the consquences of failure in the US are enormous -- unless you are one of the rich and powerful elite. In that case, there are no consequences for failure. Be wrong about everything, bankrupt multiple companies, and you, too, can be President like George W. Bush!

      This is a particularly pernicious situation. Our entrenched aristrocracy is positively anti-meritocratic at this point. I don't know what to call "rule by already proven incompetents" -- there must be a Greek word for it.

      Honestly the Mafia would be more competent.

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    4. Dumbocracy?

      ;)

      Delete
  9. Ha! The instant I saw that "public works" were listed in that article by Abe, I just knew we were in for some more pointless rural road and bridge spending. Maybe they could build another suspension bridge in Hamada.

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  10. Anonymous10:03 AM

    Some time ago I heard about a stimulus proposal to move the Central Government to another city outside of the Kanto area. I thought this was a great idea; especially the bulldozers and wrecking balls in Kasumigaseki part.

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  11. Anonymous10:04 AM

    As an immigrant dependent on public funding of scientific research in rural Japan, I'm quite happy about Abe's stimulus promise (as opposed to austerity that's been underway since the quake). Perhaps it's for show, but folks spending public money here are VERY concerned about any appearance of patronage/conflict-of-interest. Scandals that I've been made aware of as case studies in what-not-to-do wouldn't have raised much concerned in the States. Perhaps this resulted from DPJ not wanting to start down the path of the LDP and now we'll return to business-as-usual, but we'll see.

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  12. "On the other hand, Japan's unemployment rate is only 4.2%, meaning there might not be that much actual slack in Japan's economy. "

    Unemployment is a pretty poor measure of slack. A better one is employment-to-working age population ratio.
    http://research.stlouisfed.org/fred2/graph/?g=eup

    the combination of a declining employment-population ratio, deflating implicit gdp deflator, all suggest a large degree of slack. Or, maybe when the US gets to 5.5% unemployment because everyone has dropped out of the labor force, you'll say we have no slack in the US economy?

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    1. This is what I'm wondering. If there's little slack in economy why isn't there wage inflation with workers bidding up wages? Deferential Japanese consider it rude to ask for a raise?

      Delete
  13. Anonymous10:26 AM

    Informative post about LDP. One quibble/question. I suspect that the low nominal unemployment rate is misleading. Japan being a country of strictly enforced unwritten rules, women over 35, men over 60, and residents of rural areas know that once they lose their job, it is very unlikely that any company will offer them a new job, so they stop looking for work and stop being counted as unemployed. Plus, many of the young who are among the 96% officially employed are working part-time dead end jobs ("arubaito"), and are severely underemployed. So I would guess that there is a lot more slack in the Japanese labor force than the statistics would indicate. My suggestion to Abe and the LDP (although it would probably be anathema to them) is to pass comprehensive maternity leave rights legislation. Now, any woman who takes time off for maternity leave fears she will lose her job, never to get a replacement (see unwritten rules, above). Couple that with financial support to municipalities to open more childcare centers, which are in woefully short supply. These two measures will boost the birth-rate, and therefore the economy, much more than another Bridge to Nowhere.

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  14. The Japanese were the first Keynesians - in fact they were Keynesian before Keynes published his General Theory (See Chalmers Johnson's "Miti and the Japanese Miracle").

    The original practitioners of Keynesianism were dark actors: first the Japanese (and at first, not specifically dark), second the Germans. Both spending programs concentrated in armaments (thus, dark spending).

    In 1932 the Minister of Finance (MoF) implemented stimulus spending in response to the Great Depression (as well as lowering the currency value to gain international competitiveness in textile exports in 3rd country markets, a hammer to the British textile industry). He figured the deficit spending could and would be paid for by tax receipts when prosperity was restored. This was not a specifically dark program yet - it had right intentions of alleviating the Depression, however, the bulk of spending did go to munitions.

    The program worked. Japan was out of the Depression by the end of 1933.

    In 1934 the MoF then moved to end the stimulus program in an attempt to head off inflation. This antagonized military/nationalist who wanted to continue to spend on munitions for the military. The MoF was assassinated. This was part of a series of prominent cabinet level assassinations. The effect was the abrogation of high offices in the government to the military, until, eventually, even the Prime Minister post was held by a member of the military in 1941.

    As a result the stimulus program continued, and the Japanese government struggled with attempting to contain inflation.

    By 1939/40 Japan's industrial productivity was 100% above the 1929 level. (by the way German re-armament began only after mid 1934, but by 1940 was 139% above 1929's level). Not only that, but it had been transformed from light industry (textiles) domination of the economy in 1929, to heavy industry domination in 1939. (This is when Japan was building uber battleships and all those aircraft carriers).

    I have an historical atlas that shows Japan's per capita GNP at 1/3rd that of the U.S. in 1929. That means, Japan's per capita GNP in 1939/1940 was 2/3s of that of the U.S. in 1929 - however in 1940, employment was still below that of 1929, and would remain so until the 4th quarter of 1941, just before Pearl Harbor. This means that Japan was roughly at per capita industrial parity with the U.S. in 1940, but with only half the population of the U.S.. Meanwhile the U.S. was strategically obsessed with Geopolitics of the Atlantic ocean in 1940/1941. This combination of events was sufficient, I think, to allow the Japanese to think that they could fight the U.S. to a stand still in the Pacific, given the U.S.'s Atlantic orientation. (Hitler, lacking a navy, so feared the U.S. that he promised the Japanese that he would declare war against the U.S. IF Japan attacked them - hoping it would tie the U.S. naval capacity down - which explains his declaration of war after Pearl Harbor - see "Wages of Destruction").

    In the offing, once war commenced, so did full scale Keynesianism in the U.S. Like everyone else that tried it, our industrial capacity doubled in only 3 years time - spelling doom for both Japan and Germany (Hitler was right to fear us).

    I'm not sure if $100 billion is sufficient Keynesianism to have a sufficient effect. Nearby South Korea had implemented a stimulus of 1/4th GNP over 4 years (about $250 billion) and it was a BIG success. No doubt, proximity to this success effects Japan's thinking. However, Japan's economy is about 3 times larger, so similar stimulus would be $750 billion: however with unemployment under 5%, I doubt the efficacy of a BIG stimulus in Japan. So it will be interesting to see how this works out.

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  15. Noah -
    You can't write a post about Japan without getting in a couple digs at the Tea Party? Really? Are the Tea Party groups in the U.S. really major recipients of pork spending or corrupt payoffs? And are the Japanese analogs (I have no idea what you are actually referring to) really shrill reformists and constitutional nit-pickers? If so, they seem a poor fit for the LDP.

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    1. The American Tea Party are neither reformists nor constitutionalists, they are simply ethnic nativists. The Japanese "uyoku dantai" are the same thing.

      Delete
    2. And you know this... how?

      Pretty bold assertion, categorical, unqualified.

      Would come as a surprise to the Tea Partiers I know.

      Good thing for you you're immune from confirmation bias, being one of those "smart dudes".

      But I'm sure you can believe all the white people on MSNBC. They wouldn't lie to you.

      By all means, stay awesome.

      Delete
  16. Anonymous12:17 AM

    "...Japan could use a little inflation. On the other hand, Japan's unemployment rate is only 4.2%, meaning there might not be that much actual slack in Japan's economy. "

    If Japan "could use a little inflation" (which it sure can) than the fact unemployment is currently low is not "on the other hand" at all. The low unemployment rate should help the stimulus spending bring about the desired inflation.

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  17. "But they should also realize that the reason for Japan's new "stimulus" has nothing to do with Keynesian ideas. Instead, it has to do with re-establishing traditional back-scratching relationships between the LDP and its grassroots supporter base"

    America does Keynesian stimulus Keynes style. Japan does Keynesian stimulus Buchanan style. Yeah, ok.

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  18. Anonymous7:45 AM

    Is there any specific evidence out there at the moment in terms of what sorts of companies etc are/will/are likely to receive money from this package?

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  19. Eric Titus11:36 AM

    Is this really accurate? For example, one could, from a certain perspective, argue that Obama's excessive spending on infrastructure and construction was a form of "clientalism" that went to groups dissatisfied with the lean Bush years. In fact, it is popular among some conservative groups to see the democratic party as "buying" votes through government programs. Why should Japan's approach to infrastructure be seen as more clientalist than the US's (also, in some states US construction companies also have unsavory connections).

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  20. Is there any specific evidence out there at the moment in terms of what sorts of companies etc are/will/are likely to receive money from this package?

    I'm not sure what different "types of companies" there are...there's no current dataset that I know of that correlates LDP grassroots organizing with government contracts (Scheiner's data is from decades ago), but Scheiner may have one. You should email him. He works at UC Davis.

    Is this really accurate? For example, one could, from a certain perspective, argue that Obama's excessive spending on infrastructure and construction was a form of "clientalism" that went to groups dissatisfied with the lean Bush years.

    The distinguishing feature of "clientelism" is that it has much finer resolution. You can actually reward individual supporters, instead of just regions that generally supported you; for example, if Obama spends money to rebuild infrastructure in Michigan, he's handing money to a state in which >40% voted against him!

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    1. Nathanael10:07 PM

      Here's the thing about corporatism: like feudalism, it works if the corporate bosses keep their side of the bargain.

      The reason it's falling apart in the US is the unfettered greed of the CEOs, who have repeatedly cheated their workers. It worked pretty well in the 50s when the CEOs kept their side of the bargain, but once the raids on the pension funds and the offshoring started... then it didn't work.

      So, bluntly, what's wrong with clientelism? It's a modern form of feudalism, except that the serfs have the power to reject the lord if he doesn't keep up his side of the bargain.

      It's one hell of a lot better than the system we have in the US, where whether we vote for Romney or Obama, the response is "fuck you, we're gonna give money to billionaire bank CEOs, and cut Social Security and issue assassination lists". I'm only exaggerating slightly.

      To put it another way: Establishing traditional back-scratching relationships is a lot better than handing wads of money to psychopathic CEOs. Which would YOU prefer?

      Delete
    2. I suspect that at least some direct users of Abe's interventions are obvious: the Japanese state has mostly internal creditors now claiming dibs on monetary policy.

      http://t.co/Grjrb1zO

      Which, I believe, makes the inflationary drive feasible to begin with. The public spending side seems a relatively small accessory to the vast drive to the export sector and associated financial infrastructure, especially if there is a long way from cash to conditional spending as one might expect. Sure enough, needed, as any structural adjustment takes time, so, even if it is done, it my not be seen to be done without some props. Whatever is left of centralism in Japan may not hurt any of this, methinks - a small business country would certainly move in different ways: structural essentials inbuilt in politics and what not, but perhaps never too clear from outside & on short notice.

      Just a thought

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    3. Hm... the American habits you describe I'd also call clientelism ['patronage is my favorite word - 'guess there are many others...], and take it with a grain of salt, as you do. The US version has a certain ring to it, granted - you'd probably start a civil war instead of merely getting out the vote, with that outspoken partisanship alone, if 'grafted' on some relatively conservative country !

      Corporatism means something Austrian to me.

      Delete
  21. If he is, I know what to call him: Honest Abe!

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  22. Well, perhaps the construction part of his 10.3 trillion yen stimulus package is somehow related to the fact that a large part of the country has been devastated by a mega-quake and tsunami in March 2011, and people want construction to rebuild stuff more quickly.

    I'd give the man a chance.

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  23. Anonymous2:47 PM

    You say "Japan's infrastructure (unlike ours!) is overbuilt" but Japan's infrastructure needs new maintenance work to prevent tragedy like the recent collapse of the Sasago tunnel killing many people.
    Japan is also a very small country (only 0.25% of surface area of all the countries in the world,) yet 25% of earthquakes of more than magnitude 6 happened in Japan.

    http://www.nationmaster.com/graph/geo_sur_are_sq_km-geography-surface-area-sq-km
    http://en.wikipedia.org/wiki/List_of_deadly_earthquakes_since_1900

    Mountains cover over 75% of the land's surface, which requires more work to build roads than building one in a country with mostly flat areas. Japan also has devastating typhoons.

    Labeling all these maintenance work and constructions to protect the land from natural disaster as "evil" because it only "re-establishing traditional back-scratching relationships between the LDP and its grassroots supporter base" is a very popular opinion in Japan too (especially from opponent parties.)

    There is a high chance Tokyo is going to be hit by a big earthquake in the near future. I wouldn't call all of these constructions and maintenance work "waste of money."

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  24. Along the lines of the Rules versus discretion debate [lately in "The Taylor Rule and the transformation of monetary policy; Evan F. Koenig, Robert Leeson, George A. Kahn, 2012"], Japan seems deeper in discretion territory indeed. You say as much, of course.

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  25. Along the lines of the Rules versus discretion debate [lately in "The Taylor Rule and the transformation of monetary policy; Evan F. Koenig, Robert Leeson, George A. Kahn, 2012"], Japan seems deeper in discretion territory indeed. You say as much, of course.

    ReplyDelete