ECONOMY

No Pain, No Gain 

Short-sighted management in politics and business remains commonplace in Japan despite outward appearances, writes Kojima Akira.

Populism is widespread around the world. It has given rise to short-term politics. Private-sector companies are supposed to run their businesses with a long-term strategy in pursuit of sustainable growth and prosperity in the future. In reality, however, they share the common thread of short-sightedness in terms of their management style. 

In the wake of the global financial crisis that was triggered in 2008 by the collapse of Lehman Brothers, experts across the United States engaged in discussions and shared the view that the investment bank’s bankruptcy could be attributed to the uncontrolled rise of financial capitalism and short-term thinking that was commonly seen among leaders of corporations, including financial institutions.

The term “short-termism” was commonly used at the time by those seeking measures to address the problem. Even today, however, many politicians and business leaders are often seen to continue holding on to a short-term approach in the expectation of immediate results at the price of long-term growth for success and profit.

The word “populism” is a vague term with multiple meanings. According to Sasaki Takeshi, the former president of the University of Tokyo who received Japan’s Order of Culture for remarkable achievements in the field of political science, populism consists of two essential elements: anti-elitism and an approach driven solely by electoral success.

President Donald Trump is maintaining his America First policy in his re-election campaign. It seems, however, that his campaign agenda fails to tell us how he will rebuild America’s economy and society in the long term without presenting a concept as to what sort of society he is aiming to create.

As a matter of fact, the Democratic Party has also been unsuccessful in presenting a clear, long-term vision. This gives me the impression that the America First policy has been transformed into an “election first” policy in the political arena of the United States.

For those who consider electoral success to be of absolute importance, it appears that educated elites and high-ranking bureaucrats had no justification for their positions in government because they were not elected by the people. This type of extreme view may lead to anti-elitism. We can assume that people who are anti-elitism find it acceptable for many executive posts of the US government to remain unfilled as they have been to date.

Populism in Japan

Let us examine the situation in Japan. The Abe administration has now entered its eighth year in power since its inauguration at the end of December 2012, and it continues to renew its record tenure in Japan’s constitutional history. While the administration has political stability, its political agenda has remained trapped by a short-term view seeking immediate results. This is attributable to the elections. There have been as many as six national elections since the Abe administration was inaugurated. The ruling party has won all of these elections, meaning that the Abe administration has won six elections in a row. 

Abe Shinzo (second right) campaigns alongside other candidates during the 2012 LDP presidential election. PUBLIC DOMAIN

It is regrettable, however, that a government tends to offer populist pledges to woo voters with immediate results at elections, spending an enormous amount of the national budget in their favor to win the election. Politicians tend to push back the implementation of policies with painful side effects, and they tend to prioritize policies that may produce quick results for the general public. This results in pork barrel politics.

In the past in this column, I have introduced economist Robert Feldman and his theory on the CRIC (crisis, response, improve, complacent) Cycle. He says that following a major financial crisis, authorities typically react by creating a stopgap response. This response will help the situation to improve to some extent. With few of the structural problems fixed for now and important policies being left unimplemented, the same sources of the original crisis will set the stage for the next crisis. He argues that a series of temporary patchwork repairs like this has resulted in the protracted economic setback in Japan since the 1990s. I share the same view regarding this issue.

The government has implemented more than ten policies since 1991, when the bubble economy burst, which were named using adjectives such as “integrated” or “comprehensive” policy. Meanwhile, Japan has seen as many as seventeen prime ministers heading up political administrations in the past thirty years.

Each administration has served for a short period of time, and none of them has introduced policies with immediate painful results, although they expected successful results in the long term. Consequently, the potential growth rate, which is considered the fundamental strength of the Japanese economy, remains below 1%. 

The Abe administration has been in power for many years. Meanwhile, Abe’s policies appear to have been largely influenced by the election-first approach in his political style. It may appear that his administration has been in power consistently for many years, but it is possible to conclude that it was only a history of election-driven policies adopted by the same administration.

It is also possible to argue that Abe has just happened to serve as Prime Minister of six short-lived administrations. I feel sad about that personally. I wish that Abe had aimed to achieve fundamental results in the long term, rather than seeking to achieve immediate effects under his administration, which has proved to be in power for many years.

Corporate leaders likewise tend to be short-term oriented for immediate results and are overly risk averse. Corporate management style in Japan was once characterized as being based on long-term views. However, it seems that no other country is more short-term oriented than Japan in terms of corporate management.

KOJIMA Akira is a member of the Board of Trustees and professor of the National Graduate Institute for Policy Studies.

This article first appeared in the March/April 2018 issue of the Japan Journal.

 

 

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