Skeptical by nature, I am always cautious about accepting arguments that a major change is taking place, especially with respect to Japan.
But I am hearing some things from newly installed Prime Minister Junichiro Koizumi that leave me wondering.
Actually, it was Koizumi's new finance minister, Masajuro Shio-kawa, who on Wednesday grabbed my attention when he said he wanted to "restrain" the amount of public works spending in the government's budget. In a companion statement, Shiokawa said "there is no need to mull an extra budget now," presumably meaning that no supplemental spending budget is under consideration.
Past Japanese governments have adopted so-called "supplemental budgets" to pursue large spending programs justified as necessary to promote economic growth. This is the No. 1 prescription of Keynesian economics, though that body of work also advocates lowering taxes, something Japan has been reluctant to do. But when it came to spending public money, Japan was taken in, hook, line, and sinker.
Milton Friedman, famed University of Chicago economist and Nobel economics laureate, has more than anyone else helped debunk naive applications of John Maynard Keynes' economics to public policy. Friedman once gave a succinct explanation for the popularity of Keynesian economics: "Here was one of the most famous and respected economists in the world [Keynes] informing governments that the way to full employment was paved with higher spending and lower taxes. What more attractive advice could politicians wish for? Long regarded public vices turned into public virtues. Marvelously simple, yes. But also simply marvelous."
Thanks to Keynesian logic, Japan's government has managed to go deeply in debt. Japan's government received encouragement, if not outright pressure, from the Clinton Administration to spend more money. The mantra of the previous administration was Japan is not doing enough to stimulate its economy.
What did they get for it? A big pile of debts, that's all.
Japan has little to show in the way of economic growth despite the six stimulus packages between 1992 and 1998 that totaled ?76.3 trillion (US$623 billion) of spending.
Now it is well known that the governing Liberal Democratic Party stands accused of ulterior motives in promoting these spending projects. The political support for the LDP comes from the construction industry, among other places.
At the rankest level, the projects financed by the supplemental budgets were what I refer to as reverse bribes. In a normal bribe a person or company pays bribe money to a politician for political favors. In a reverse bribe, a politician uses government money to award pork barrel contracts to his constituents to ensure their support.
Given this backdrop, you have to wonder whether Koizumi and his band of reformers can make reform happen even in a small way.
Still there is an ironic twist to the story concerning the new George W. Bush administration. The Bush State Department seems to have a new spending project of its own in the making for Japan.
Though in office less than 16 weeks, the new administration has turned its focus on some of the larger issues and Asia is a huge preoccupation. President Bush and his Secretary of State Colin Powell, have a grand strategy to elevate the bond between the US and Japan.
US Deputy Secretary of State Richard Armitage was quoted in the New York Times on Thursday saying, "As a lot more US thinking turns toward Asia, I'd like to see a relationship with Japan that is like that of the relationship with Great Britain, in that it is taken for granted that of course we will consult on all matters, and of course we have a very in-depth, warm and personal relationship regardless of which party comes to power."
Well, it better be a very special relationship. Consider that the US is urging Japan to amend its constitution so that it can build a full-fledged standing army to share in regional defense responsibilities.
That thought ought to infuriate the Chinese. But in addition, to get back on the topic, re-arming Japan has got to cost a ton of public money!
So try as he can, Koizumi, who is not opposed to building an army, may not be able to slip the ghost of John Maynard Keynes.
EXPRESSING GRATITUDE: Without its Taiwanese partners which are ‘working around the clock,’ Nvidia could not meet AI demand, CEO Jensen Huang said Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and US-based artificial intelligence (AI) chip designer Nvidia Corp have partnered with each other on silicon photonics development, Nvidia founder and CEO Jensen Huang (黃仁勳) said. Speaking with reporters after he met with TSMC chairman C.C. Wei (魏哲家) in Taipei on Friday, Huang said his company was working with the world’s largest contract chipmaker on silicon photonics, but admitted it was unlikely for the cooperation to yield results any time soon, and both sides would need several years to achieve concrete outcomes. To have a stake in the silicon photonics supply chain, TSMC and
IDENTITY: Compared with other platforms, TikTok’s algorithm pushes a ‘disproportionately high ratio’ of pro-China content, a study has found Young Taiwanese are increasingly consuming Chinese content on TikTok, which is changing their views on identity and making them less resistant toward China, researchers and politicians were cited as saying by foreign media. Asked to suggest the best survival strategy for a small country facing a powerful neighbor, students at National Chia-Yi Girls’ Senior High School said “Taiwan must do everything to avoid provoking China into attacking it,” the Financial Times wrote on Friday. Young Taiwanese between the ages of 20 and 24 in the past were the group who most strongly espoused a Taiwanese identity, but that is no longer
A magnitude 6.4 earthquake and several aftershocks battered southern Taiwan early this morning, causing houses and roads to collapse and leaving dozens injured and 50 people isolated in their village. A total of 26 people were reported injured and sent to hospitals due to the earthquake as of late this morning, according to the latest Ministry of Health and Welfare figures. In Sising Village (西興) of Chiayi County's Dapu Township (大埔), the location of the quake's epicenter, severe damage was seen and roads entering the village were blocked, isolating about 50 villagers. Another eight people who were originally trapped inside buildings in Tainan
‘ARMED GROUP’: Two defendants used Chinese funds to form the ‘Republic of China Taiwan Military Government,’ posing a threat to national security, prosecutors said A retired lieutenant general has been charged after using funds from China to recruit military personnel for an “armed” group that would assist invading Chinese forces, prosecutors said yesterday. The retired officer, Kao An-kuo (高安國), was among six people indicted for contravening the National Security Act (國家安全法), the High Prosecutors’ Office said in a statement. The group visited China multiple times, separately and together, from 2018 to last year, where they met Chinese military intelligence personnel for instructions and funding “to initiate and develop organizations for China,” prosecutors said. Their actions posed a “serious threat” to “national security and social stability,” the statement
RSS