Change the LDP, change Japan — now more than ever

David Pilling, the FT's Japan correspondent, indirectly responds to a point I made earlier this week when discussing Matsuoka's suicide in an op-ed entitled "No way back to old Japan" (subscription required).

As the title suggests, he argues that Matsuoka's suicide actually marks the death throes of the old political system:

The postwar system that is now morphing into something new depended on fast growth to survive: the LDP shovelled tax money from the cities to the countryside via huge public works programmes. It reaped dividends in the form of votes from over-represented rural constituencies and "political donations" through grateful interest groups. That system is no longer viable, for the simple reason that the money has run out. The public works budget has been savaged in the past decade. The system of paying for roads and dams with post office savings is being wound down. Indeed, the post office itself, the world's jangliest piggy bank, is being privatised.

Gerald Curtis, a Japan expert at Columbia university, says that Japan is undergoing the third great change in its modern history. The first was the Meiji Restoration, when leaders ditched feudalism. The second was the postwar construction of a machine to deliver rapid economic growth. Professor Curtis calls the third phase a "20-year decade", a glacial but valley-carving response to domestic economic crisis and globalisation. That adjustment has meant the slow breakdown of convoy capitalism, reflected in the unwinding of cross shareholdings. It also heralds the abandonment of egalitarian income distribution. In politics, it means the end of elections by money-stuffed envelopes and the rise of prime ministerial power and accountability.

Interestingly, he also argues that Abe's emphasis on education and constitution revision are signs of change, rather than examples of how Abe is interested in anything but midwifing the creation of a new political system.

I wish it were so. I wish the old system were transforming before our eyes, the Abe Cabinet being the swansong of the old era. But I think the evidence to support Pilling's argument is thin.

Undoubtedly the money is running out. There's no way around that. Politicians like the late Mr. Matsuoka have a smaller pot to fight over — but how will that affect the system? Will pork-barrel politicians decide to become reformers when faced with difficulties in earmarking funds for their constituencies? Will the incumbency advantage actually fail them as the amount of money they send home shrinks? On the contrary, won't politicians simply compete that much more fiercely to earn their share of the shrinking pie?

As for the rise of the prime minister in the policy making system, the new power of the Kantei can and has been overstated; as Mulgan argues, what's happened is that the prime minister is now the third leg of a triangular policy making system, forced to contend with the LDP's policy making organs and the bureaucracy (who still collude with one another).

The implication in Pilling's argument is that the new political system is going to emerge organically, without any individual or party actively shaping its creation. But I disagree. I don't see how Japan's political system will transform into a system in which policy is made in service of public and national interests without an LDP president willing to impose discipline on party ranks, cut PARC down to size, sharply limit interaction between bureaucrats and Diet backbenchers, and centralize campaign funding in the party. Each of these steps would require the willingness to overcome fierce opposition from the LDP. Is there anything Abe has done that would lead someone to think that he will be the man to create a new political system?

What is likely to happen that even as the old system loses its potency, it will limp along in the absence of someone stepping forward to propose a replacement. The problem is that Japan cannot wait forever to reform. Its demographic sword of Damocles (hat tip: GLOCOM), together with the inexorable rise of China and India, mean that failure to act now to "rationalize" its political system will doom Japan to irrelevancy.