In the 19th century, it was accepted that the role of the state should be tiny. The role was based on a state’s monopoly on violence. Internal policing and external defence were its great functions. Everything else (schooling, health, social security, business activity) could be left to the private sector. Taxation was light, because spending was light.
After World War II, it was recognised by the victorious Allies that their people deserved more. The UK and the US rolled out fantastically generous programmes, in particular free schooling and free medical services for life in the UK. Not surprisingly, the role and size of government mushroomed.
But not in Japan. The remarkable thing about this country is the tiny size of its state. The Japanese state achieves one of the best outcomes in the world in health, education and personal security, while being one of, if not the, smallest in terms of spending and personnel.
While the UK and the US puff themselves up as lean and mean proponents of neo-liberal governments, Japan is frequently castigated by foreign visitors as “socialist”. Yet socialism, with its vast government programmes and central control mentality, implies a huge government apparatus. This is manifestly absent in Japan, as the statistics show.
Apart from the US, Japan has the lowest total tax burden in the developed world, yet achieves superb results in life expectancy, child mortality, crime and education. In other words, the Japanese state is giving unbelievably good value for money. With one of the lowest levels of resources in the world, this country produces gold or silver medal podium-spots in all the key areas which developed nations are supposed to provide their citizens.
That combination of low inputs and high outputs is unique. Some countries boast lower tax rates (the US), and a very small group of countries boast better health and education (mainly in northern Europe); but no country manages such a great combination.
There are many ways to slice the data, but the most dramatic way is to count the total number of civil servants per 1,000 of the population. France, unsurprisingly, leads the way with 90. The UK, despite its fierce capitalist rhetoric, is close behind with 75; the US 65; decentralised and, hence, relatively efficient Germany has 60; and Japan has — wait for it! — 35. (These figures include central and local staff, as well as the military.) It is thus most amusing when visitors complain that Japan is socialist, when it has half the number of government bureaucrats as the US.
In addition, Japanese levels now are almost half what they were in 2000 — in other words, the Japanese bureaucracy has been ruthlessly downsized in less than 20 years.
Here is another stunning figure. The UK (population 60 million, GDP $2.7 trillion) in 2014 featured a government spending budget of ¥117 trillion (at 2015 FX rates, where the weak yen admittedly inflates the UK figure … but still). Japan’s budget (population 127 million, GDP $5 trillion) spent less than ¥100 trillion. Now that is what one might term true austerity and belt-tightening.
Japanese politicians, supposedly weak and emasculated, have achieved Thatcherite and Reaganesque goals of small government and tight budgets long abandoned in other countries as being too extreme.
All this confirms that Japan’s national debt has nothing to do with government inefficiency and everything to do with a demographic problem, which is the unavoidable consequence of the post-war baby boom. Baby booms, like all booms, end in a bust. The government is now trying to finance the retirement and health needs of a huge elderly population with a much smaller younger population and an economy which is inevitably not as risk-taking or as fast-growing as a few decades ago.
Put it another way: Looking at Japan’s government debt of 230% of GDP should not fill you with contempt and horror. Rather, you should be amazed and impressed that it is not much higher. No other country has managed to maintain its key human and physical infrastructure at such a high level, while simultaneously financing such a catastrophic demographic transformation. Germany, for example, has collapsed from boasting one of the most over-engineered and richly equipped infrastructures in the world to something approaching the UK. Cities are grimy and dirty, and the trains are chaotic. And Germany is supposedly richer and better managed than most.
Countries — and there are many — looking at how to maintain a civilised framework when money is tight know where to look.© Japan Today