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Modern Japan - land of small government

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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

©2019 GPlusMedia Inc.

14 Comments
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Looking at Japan’s government debt of 230% of GDP should not fill you with contempt and horror.

Uh, no, contempt and horror is appropriate. It is a sign of the demographic crises, yes, but this crises is looking more and more like a national suicide pact.

4 ( +5 / -1 )

If debt to GDP is 240%++ that is not a sign of a small state. It's the hall mark sign of a massively bloated state that spends more then it takes in. The same apples everywhere else.

2 ( +3 / -1 )

Great article. The debt hawks keep telling us that "Keynesian" Japan is addicted to govt spending. That ain't true. Austerity and "free market" policies are what bloat budgets.

After Thatcher's policies came into force, a huge portion of people started living off state benefits when they lost their jobs, most of which never came back.

Reagan, the pioneer of deficit spending, gave about a trillion bucks to the bloated Pentagon, and George Junior Bush signed every spending bill that came across his desk...while the economy was growing!

"contempt and horror is appropriate"

How you got any evidence that Japan's national debt is harming the economy?

-4 ( +2 / -6 )

Ghe Author uses stereotypes rather than fact... total crimes Jspan is in the top 10 of nations with the highest total crimes.

Child Mortality? considering the serious low rate and dcrease in child birth in Japan the child mortality level is still high.

Life expectancy is on par with switzerland, Italy and Australia to name a few.

The above ate not criticisms of Japan but the typical lack of research by many reporters who choose to write based on heresay rather than dig into the facts.

Also Japan does not need the same numbers in government because it uses a hierarchical approach where its top down, from government to corporation to employee in terms of enforcing rules and revulstions, then you also have an extensive system of cameras and video surveillance at everu shop, street corner, train station, inside terminals and an ic train pass connected with full id thst tracks every station you use and the time.

You pretty much have the bulk automated. And a population that is fairly much controlled and trackable, reducing manpower needs at government level.

Still you have contracted workers and agencies also filling extra roles for the government that the article does not touch upon.

-2 ( +2 / -4 )

I suspect the writer is ignoring local government, which it significantly bigger in Japan (both in terms of staff and budget) than in some of the countries he discusses. Interesting article, nonetheless.

1 ( +1 / -0 )

"I suspect the writer is ignoring local government,"

-- "These figures include central and local staff, as well as the military."

"Still you have contracted workers and agencies also filling extra roles for the government that the article does not touch upon."

About half my friends in Canada who work for the govt, technically or officially arent public servants: they're private contractors/independent consultants. That situation may be more prevalent overseas than in Japan.

Anyway, so what? That situation wouldn't alter the budget spending figures comparison. They all need to be paid out of public coffers.

0 ( +1 / -1 )

The article paints a nice picture, but not an accurate one. The government in Japan is not like the governments in other places. In Japan the lines between the public and private sectors are blurry. There may be not so many bureuacrats working actively in the government, but Japanese banks and corporations have quite a few former bureaucrats in their boardrooms. It seems a rather obvious conflict of interest to have former legislators and regulators earning high salaries at the very places they were supposedly regulating, but that is how things are done in Japan. This system is why Japan has had a mainly one-party government since the end of the war. The domestic banks finance the governmement by buying bonds whenever the government issues them. The government builds infrastructure or funds other projects with the money raised, and the contracts for these projects are awarded to companies which own the banks. With rackets like this, is it any surprise that Japan has racked up so much debt?

The effect of this practice adds costs to the economy which are not considered taxes, yet which still must be paid for by regular Japanese. This collusion between government and business has allowed corporations to keep out foreign competition via tariffs, closing certain products out of the domestic market, and price fixing. These are not looked upon as badly as they would be in other countries, as they cultural ways of doing business in Japan.

If one looks at disposable income, that is, the amount of money people have left after paying taxes and normal living expenses, despite supposedly much lower taxes, Japan's disposable income falls behind all of the countries mentioned in the article. This is mainly due to higher costs for food and other goods, both imported and domestic, caused by corporate/government collusion. The article also makes too light the devaluation of the yen. In relative terms, it is far weaker against the dollar and British pound than many realize.

2 ( +4 / -2 )

"The government in Japan is not like the governments in other places."

Because it spends less and gets more? Indeed, that's the writer's point.

The domestic banks finance the governmement by buying bonds whenever the government issues them.

Hello, that's true in the other economies as well, Although now in Japan the BOJ is buying all the new bonds, so you got that one about as wrong as you could be. Next!

"the contracts for these projects are awarded to companies which own the banks"

Mitsubishi UFJ Financial Group and the like are owned by construction companies? Which ones?

-3 ( +1 / -4 )

Strange article.

"In the 19th century"

One of the biggest changes in japan's history took place during this century. Is the "tiny government" idea meant to relate to the pre-Meiji or post-Meiji governments?

As for the "civil servant" numbers, do they include health service workers? The drama of the numbers might be helped if we had a source.

0 ( +0 / -0 )

Mitsubishi UFJ Financial Group and the like are owned by construction companies? Which ones?

The banks are part of the larger conglomerates, which also contain the largest land developing companies. Mitsubishi UFJ Bank, Motors, Heavy Industries, Chemicals, Insurance, Glass, Metals, Real Estate, Aircraft, etc. etc. And then there is their counterpart is the Mitsui Group, which has many similar subsidiaries. When the government funds a project, these companies are generally involved.

The projects are developed by these companies, the construction companies who do the work are independent in name only, much like the suppliers to the motor companies.

2 ( +4 / -2 )

"The banks are part of the larger conglomerates, which also contain the largest land developing companies."

You said "owned" in your original post. So you were wrong, But your subsequent goal-shifting damage control attempt is also wrong:

Mitsu UFJ major shareholders:

Japan Trustee Services Bank 7.47% The Master Trust Bank of Japan 4.44% Nippon Life Insurance Company 2.01% ADR Holders (held by the Bank of New York Mellon) 1.94% State Street Bank 1.53% State Street Bank (China clients) 1.27% Meiji Yasuda Life Insurance Company 1.23% The Chase Manhattan Bank, N.A. London Secs Lending Omnibus Account 1.14% Toyota Motor Corporation 1.05%

-3 ( +0 / -3 )

I'm also curious about the comparison with the UK. The vast majority of health sector workers in Britain are public servants, and a very significant portion of taxes collected goes towards health care. I wonder if the writer has failed to include Japan's national health premiums in his "tax" count; technically they may not be a tax, but for practical purposes they are. Japanese health care workers may not be directly employed by the government, but if the bulk of their salaries are coming via a compulsory, income-based charge then they might as well be.

0 ( +0 / -0 )

I had to check my calendar, reading this I SWORE it must be April 1st!!!

Sadly there isn't any info or links to back up what was printed, but my impression is MAN this dude has got it seriously wrong!! Govt has been choking the life outta Japan now for over 20yrs, prior to that it just wasn't in the way as much & you could ignore it.

I think this should be in a FICTION section

1 ( +1 / -0 )

The borrowing figures give the lie to this. as does any experience trying to get something done thru government. that might possibly be because there are not enough bureaucrats (??!!). What is true is that bureaucracy in the EU, US and UK is just as bad.

0 ( +0 / -0 )

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