Importing the construction state?

Amity Shlaes, a fellow at the Council on Foreign Relations and author of a recent attempt to discredit the New Deal, has an op-ed in the Washington Post in which she looks at President-elect Barack Obama's newly announced public works plan.

Seeing the phrase "public works," she naturally thought Japan, and wrote a piece about Japan's construction state.

During the 1990s, in the midst of the lost decade (which appears to be turning into lost decades), Ms. Shlaes maintains that "Japan traded its export complex for an edifice complex." She argues that Japan became a construction state while trying to revive its faltering economy during the 1990s. The economy didn't recover, so naturally the construction state is the direct cause.

Her story of Japan's transformation to a construction state in the 1990s is a complete fairytale.

The following is from Jacob Schlesinger's Shadow Shoguns, in a chapter entitled "The Public Works State:"

In the headlong rush to rebuild after the war, construction became the main pillar of the economy. Beginning in the early 1960s, construction spending equaled about one fifth of Japan's gross national product, and by the 1980s, it created nearly one tenth of the country's jobs. So much of the business — from 30 percent to 40 percent a year — was underwritten by the government that many Japanese referred to their country as the "public works state." Indeed, Japan's public works spending as a percentage of GNP was by far the largest in the industrialized world, exceeding America's by a magnitude of four.

But of course, it doesn't help Ms. Shlaes argue against a Keynesian stimulus package focused on public works projects if she writes that the glory days of the construction state were well before the bubble burst. Indeed, Shadow Shoguns is largely the story of Tanaka Kakuei (see MTC's post on Tanakaism), who without question was the father of the construction state — whose glory days largely mirrored his time at the apex of Japanese politics, first as prime minister (1972-1974) and then as the LDP's kingmaker until the mid-1980s when he suffered a stroke. Japan had both an export complex and an edifice complex.

In short, Ms. Shlaes is egregiously dishonest in this piece. Even during the 1990s the construction state had less to do with Keynesianism pump priming — although it was a convenient front, and so much the better if it actually stimulated the economy — than with out-of-control clientelism and corruption.

So in the end Ms. Shlaes is comparing apples and oranges. Simply pointing to Japan's post-bubble construction projects is insufficient to prove that both Japan's 1990s public works and Mr. Obama's emerging public works program are both rotten apples.

The U.S. might even benefit from a sustained effort to improve its infrastructure.