Archive for April, 2010

Schooled by Scandinavia? Not Quite.

Friday, April 23rd, 2010

The bandwagon for lauding the Scandinavian countries (Denmark, Norway, Sweden) is here and just about every Japanese professor has hopped aboard.

They’re right about one thing: The Scandinavian welfare model is certainly an object of adolation all across the world.

It offers universal health-care, subsidized higher education, and comprehensive social security. The Scandinavian welfare model undoubtedly provides the best social safety net to its citizens compared with any other system in the world. A strong social safety net paves the road towards the egalitarian welfare states of Northern Europe, which Japanese professors have been viewing lately with increasing admiration.

Take Norway for instance. Norway has consistently ranked #1 on the UN’s HDI (Human Development Index) from 2001~2007, and again in 2009. Norway also has one of the smallest wage-differentials in the world, evident in its low Gini coefficient (the Gini coefficient measures inequality within a country; the lower the score, the more equal the nation is considered to be.)

In contrast, Japan’s Gini coefficient has been steadily rising. Wage-differentials are growing, with the middle-class being eroded from both sides: a greater number of people are slipping into the quagmire of poverty, and people who were originally average-Joe’s have started to earn incomes that go well up into the stratosphere as well.

To add insult to injury, Japan’s social safety is weak, unsustainable, and inefficient. For example, Japan does offer universal health care to its citizens, but just recently the amount the state covers has been reduced to 70% of the bill, from the original 80%. This makes it increasingly difficult for old people with chronic diseases to receive treatment.

So thus there is little wonder that Japan looks to the Scandinavian states for guidance.

But there are two critical difference between Japan and Scandinavia:

Japan is bereft of resources; Scandinavian countries have a surfeit of them.

Take Norway’s state-owned Statoil for instance. Whenever Norway needs a sizeable GDP boost, Statoil steps in by ramping up oil exports, providing Norway with a renewed inflow of foreign currency. Norway, like Sweden and Denmark, also enjoys a geography rich in natural gas, forests, and minerals: all primary goods that can be used for export should the need arise.

Of course, exporting natural resources is only a fall-back plan. The Scandinavian countries encourage their citizens to pursue higher education so that processed goods with higher market value can be exported. In other words, while the Scandinavian countries usually employ knowledge-intensive goods for export, they also have the ability to fall back on their natural resources to ride the rough waters should the need arise.

Japan, while having strong human capital, has very little natural resources available for export. Thus one reason that the Scandinavian model won’t work in Japan is Japan’s lack of natural resources available for export.

The other crucial difference between Japan and the Scandinavian countries is that Japan has a significantly larger population. In order to provide a strong social safety net to all of its citizens, Japan would need to earn much more through its exports. In contrast, since the Scandinavian countries have smaller populations, they can concentrate more of the nation’s wealth per capita than Japan can.

The need for a better social safety net in Japan is clear. But Scandinavian countries, while providing a good case study, is not the ideal model for Japan, atleast not without refinement.

The only path towards growth (which is a prerequisite for knitting a better social safety net) that Japan can take is by improving its education and strengthening its comparative advantage in knowledge-intensive goods. Japan had rationalized its educational institutions in the Post-war years and took the semi-conductor industry by storm in the 1970′s. But lately, the current Prime Minister Yukio Hatoyama has been consistently cutting the Ministry of Education’s budget.

With limited time and limited national savings, Japan must concentrate on providing quality education to its next generation of footsoldiers: before its too late.


“Eco-Points”: Not so eco-friendly

Thursday, April 15th, 2010

Have you ever wondered just how eco-friendly “Eco-Points” are? After all, the Japanese government has specifically articulated that only eco-friendly products will merit “Eco-Points,” a new form of government subsidy.

If one really thinks about it, the “Eco-Points” system isn’t environmental friendly at all. It’s not in the least bit green; it’s a total farce.

According to JapanTimes, the Japanese government has installed the “Eco-Points” system to:
1) stimulate consumption
2) to promote [the] use of energy-efficient goods

This should be revised to say:
1) to stimulate consumption, especially household consumption
2) to promote the idea that Japanese citizens are buying themselves into being environmentally conscious citizens

More on #2 later. For now, lets concentrate on #1.

So, just how green are “Eco-Points?”
Let’s take a look at TV’s for example (one of the 4 products where “Eco-Points” can be redeemed- the others are refrigerators, air conditioners, and cars).

“Eco-Points” can be redeemed for TV’s that have high energy efficiency. So far, so good.
You get more “Eco-Points” for bigger TV’s. In other words, the bigger the TV, the more “Eco-Points” you get.

Ah, now we begin to see some contradictions. Obviously, if the TV is bigger, there will be greater energy consumption. A household that originally intended to buy a 32-inch TV may decide to swap their old TV for a 40-inch instead, an increase in energy use caused by the warping of consumer preference by none other than “Eco-Points!”

 To give you an idea of what this implies, here’s a little graph to help you visualize just how eco-friendly “Eco-Points” really are:

This graph makes the whole “Eco-Points” sham glaringly obvious in all it’s notorious glory. The government isn’t really trying to make Japan greener (though just like any other country, it certainly loves proclaiming to be eco-responsible.)

It’s basically just trying to get consumers to spend their hard-earned cash on not just a new TV, but a bigger TV. Not just a new refrigerator, but a sleeker, air-brushed steel door refrigerator. Not just a new air conditioner, but an air conditioner that dispenses negatively-charged ions that refreshes the room’s air.
In other words, “Eco-Points” is an attempt to jump-start the economy. It is, in fact, nothing short of and nothing more than a government-sponsored defibrillation of an increasingly floundering economy.

In the JapanTimes article List of goods qualified for Eco-points now out, there’s a Q&A which reads:
Why are the points being awarded only for air conditioner, refrigerator and TV purchases?

The government is focusing on those appliances because half of total carbon dioxide emissions from households are produced by these three products alone, according to the Environment Ministry.”

Notice how the answer state “carbon dioxide emissions from households.” If there’s any room for opposition left, here’s the knock-out kick statistics:

Japanese households consistently make up less than 20% of total CO2 emissions.

If the Japanese government really wanted to get serious about cutting down on CO2 emissions, then they would enact regulations on the industrial sector, by far the biggest pollutor. But that would hamper GDP growth, the government’s primary objective.

Why aren’t “eco-points” being applied to say, greener production lines or greener smelting equiptment? The answer is simple: the government wants to put an end to consumer frugality and stimulate domestic demand.

Let’s review.
Publically, the government has stated it has launched the “Eco-Points” system to:
1) stimulate consumption
2) to promote [the] use of energy-efficient goods

And I argued,
This should be revised to say:
1) to stimulate consumption, especially household consumption
2) to promote the idea that Japanese citizens are buying themselves into being environmentally conscious citizens

From everything I’ve written thus far, #1 is quite obvious: The government wants to jump-start the economy by having consumers literally buy themselves out of a decade-long recession.

Now on to #2. The evidence for #2 has already been mentioned, but what good is there in coupling a system that rewards more expenditures with something like eco-friendliness?

In a previous article, I wrote about how we’ve entered an era of “symbolic consumerism.”

The fact is, we now live in an advanced capitalist paradigm in which we can buy ourselves into a new image of ourselves, including the view that we’re environmentally conscious, no matter how preposterous and paradoxical that may be in reality.

But I’ll give it to the DPJ. Their a wily lot, and while “Eco-Points” hasn’t made the world a greener place, it has certainly dethawed many people’s wallets.

So, all in all, I’ll give it to the DPJ: a party doing a splendid job spurring GDP growth under the banner of being green- since 2009.


The Dilemma of the Liberals

Monday, April 12th, 2010

Just recently, under his contagious clarion call “Yes we can,” President Barack Obama successfully managed to pass his Health Care Reform Bill.

The House vote was far, however, from a landslide victory for Obama, with the final tally coming out to 219-212. What’s worthy of mentioning here is the complete absence of Republican approval votes, underscoring the bipartisan politics of modern-day America.

Today, politics has become so polarized that it’s hard for political parties to find common ground. Aside from the smearing and trash-talking emanating from both parties, political polarization has deep economic repercussions.

In short, an increase in political polarization causes a rise in economic inequality.


For one thing, without basic agreement on fundamental values-in other words-without a common vision that transcends bipartisanship, economic commonality is infeasible.

In his book The Conscience of a Liberal, Paul Krugman notes:

history suggests that there is a kind of ‘dance’ in which economic inequality and political polarization move as one [...] an erosion of the social norms and institutions that used to promote equality, ultimately driven by the rightward shift of American politics, has played a crucial role in surging inequality.

He then observes the social ramifications of political polarization:

the increase in U.S. inequality has no counterpart anywhere else in the advanced world. During the Thatcher years Britain experienced a sharp rise in income disparities, but not nearly as large as the rise in inequality here, and inequality has risen modestly if at all in continental Europe and Japan.

This political polarization is fueled in no small part by an ideological schism between modern-day neoliberals and liberals. The neoliberals advocate the right of self-ownership (and thus denounce taxes), while the liberals promote socioeconomic equality (and thus are in favor of taxes.)

The clash between liberals and conservatives is ultimately the clash between freedom and equality. While both freedom and equality are fundamental human rights that should and are rightly fought over, one is essentially garnered at the expense of the other.

It is thus of little surprise that there has been much academic debate arguing for freedom on one hand and equality on the other.

The neoliberals have two erudite titans on their side, namely Milton Friedman and Robert Nozick.

The late Milton Friedman, a Chicago-based economist, argued in his book Capitalism and Freedom (1962) that an economy unfettered by government intervention is the fairest, most efficient way of managing an economy. Despite Friedman’s conservative stance, he continues to be viewed with deference by economists on both sides of the political spectrum for his contributions to economic academia.

Friedman’s book Capitalism and Freedom offers conservatives the basis for an economic policy which advocates a lessening of taxes. In particular, Friedman’s work can provide the logical backbone to weaken the progressive tax system. Thus  quite naturally, the demographic of most conservatives are generally in the upper-income strata, people who would benefit directly from less taxes.

Robert Nozick furthered the neoliberal/conservative/libertarian philosophy in his book Anarchy, State, and Utopia (1974). Like Friedman, Nozick arrives at the conclusion that society is at its best when the government is at its smallest.

Nozick provides the rightist camp with the political philosophy that would support their political persuasion. He argues that in a hypothetical situation of an “initial state,” a state in which society has yet to be created, no one would agree to have their right of self-ownership infringed upon.

In other words, no one would agree to let others (such as the government) take hold of their liberty, their fundamental right as a human being. If one were to let the government tax their income, then they would technically be enslaved by the government. For instance, if one’s income was taxed at 30%, then 30% of the total time he works in a day would be time worked for the government, which, Nozick argues, is no different from slavery.

To put it succinctly, rightists believe that the sweat of a man’s brow belongs to himself.

Interestingly, John Rawls, the political philosopher who leftists (liberals/egalitarians) seek to validate their claims, also hypothesizes an “initial state” to analyze whether people would advance freedom or equality.

John Rawls envisions a hypothetical situation in which on one hand there is society in its “initial state,” and people must choose amongst themselves what kind of laws they would agree upon behind a “veil of ignorance.” In other words, people will be assigned their sex and post arbitrarily and will not know in advance what kind of social status they will occupy.

Rawls argues that as a form of safety/insurance, people would undoubtedly choose a society with some kind of social safety net. The risk of anyone being assigned to a low-paying job, Rawls argues, would make people agree in an “initial state” for a society in which the government provides some kind of income redistribution.

We now see that while both Nozick and Rawls create similar hypothetical arguments, they arrive at conclusions which are polar opposites of each other.

In the sphere of academics, the battle of ideologies is fought over with logos, ethos, and pathos.

But in politics, it’s fought over with campaign money. After all, raising or lowering taxes has a direct impact on people’s lives.

The year 2009 was marked by a democratic victory in both America and Japan. The inauguration of President Obama of the United States and Prime Minister Hatoyama of Japan into office has brought the Bush-Koizumi neoliberal reform policies to a grinding halt.

What caused such an abrupt change? The answer, perhaps, can be found in Robert Reich’s Supercapitalism, which shows that American-style capitalism has gone too far in advanced neoliberal capitalist economies. When the top CEO’s of American companies were beginning to earn over 300 times the income of the average worker, when investment bankers were reeling in millions in bonuses, and when Walmart’s atrociously low wages and health insurance skimping became rampant, people had finally decided that enough was enough.

But how had the conservatives advanced their agenda for so long? How had the Thacherites of Britain, the Post-Reagan administrations of the US, and the Tanaka cabinet onwards of Japan plow through their reform without resistance from the left?

The truth is that there was resistance from the left. But liberals, unlike conservatives, are an eclectic demographic, and the liberal intelligentsia are small in number. And here’s the real kicker: unlike conservatives, liberals don’t have the kind of lavish funding for their political campaign runners.

2009 marked a time when people who were usually disillusioned with politics rallied behind the liberal cause in an effort to halt the encroaching inequalities brought about by conservative reform.

But already, both President Obama and Prime Minister Hatoyama face renewed resistance from an increasingly audacious and well-funded right. The enigmatic and lucrative wildlands of Wall Street remain unscathed by legal reform too: death bonds and catastrophe bonds have replaced the once-savvy subprime mortgage bonds.

Is the liberal wind going to push us forward to a more equal society? Or will we slowly digress back towards a path of inequality?

Only time will tell.


Capitalism: A Not-so-Lovely Story

Wednesday, April 7th, 2010

She’s undecisive, a shopaholic, and takes forever to make up her mind.

This isn’t a harrowing roller-coaster story about a former ex.
This is a story about capitalism.

For the the better or for the worse, capitalism has become the de facto socioeconomic paradigm of the modern world and it looks like it’s here to stay. While we now see different forms of capitalism throughout the world, like “American capitalism” marked by meritocratic wage differentials, an infinitesimal social safety net, and poor public services in essential areas such as education and medical care to alternative forms like the “welfare-state capitalism” of the Northern Europe nation-states marked by more government intervention in the market, the key foundation of the capitalist paradigm remains universal.

Lately we tend to forget that capitalism used to have a antithetical counterpart: communism.
The interesting thing to mention here is that Karl Marx, undoubtedly a man who studied capitalism in earnest, viewed communism as the next rational evolutionary step as a means of production. In other words, communism would, Marx argued, suceed capitalism as a better socioeconomic paradigm.

However, history indicates that when communism is put to use, it has several fatal flaws. First, the government interferes far too much in the market which leads to the establishment of inefficient industries. Second, the government itself tends to become repressive, particularly when social capital begins to erode. Third, the lack of incentives for diligence and the lack of the profit-motive slows or even halts innovation.

Obviously, communism thus far has proven to be far from a utopian mode of production. It did not, contrary to what Marx had envisioned, become a sort of utopian “association of free men.”

This does not mean that we can write communism off, declare capitalism victor, and indulge ourselves in a capitalist society. Capitalism too has its flaws, which I believe are equally unsavory.

Modern-day capitalism has advanced to such a degree that we engage in what I would like to tentatively call “symbolic consumerism.” 

Take cigarettes for instance. Why do people smoke? Do they smoke for the nicotine high? In The Tipping Point, pop-sociology author Malcolm Gladwell tells us no. People smoke, he argues, because smoking “overwhelmingly [is] associated with the same thing to nearly everyone: [...] the ultimate expression of adolescent rebellion, risk-taking, impulsivity, indifference to others, and precocity.”

Ah, so people aren’t smoking because they like charring their lungs. I’d bet my dollar that smokers don’t want to be diagnosed with lung cancer either. But when cigarette warning labels became mandatory on cigarette packages, sales actually increased. Why?

The reason is because today, in this form of matured capitalism, people engage in “symbolic consumerism.” In other words, people are buying symbols. Smoking cigarettes makes you badass. Driving around in a Prius makes you an environmentally conscious citizen. Touting a Louis Vuitton bag suggests to people you’re a sophisticated lady. The list goes on and on.

When symbolic consumerism is at its nascency, cigarretes will still be carcinogenic and will still contain nicotine. But as the consumption of symbols is furthered, people will still buy cigarretes even if they become, say, e-cigarettes. E-cigarettes are “cigarettes” which are basically plastic cigarettes with LED tips. No smoke. No nicotine. No carcinogens.

In Japan, “alcohol-free alcohol” is now a hit product, another sign of symbolic consumerism taking hold in advanced capitalist economies.

So what effect does this have on the public sphere and society as a whole? In his book Buyology, Martin Lindstrom examines cigarettes and observes:

“Cigarette warnings […] had in fact stimulated an area of the smokers’ brains called the nucleus accumbens, otherwise known as the ‘craving spot’ [...] those same cigarette warning labels intended to curb smoking, reduce cancer, and save lives had instead become a killer marketing tool for the tobacco industry.”

In other words, we will now begin to crave products not for their actual properties but for what they represent to us as symbols. Our individuality will be expressed more and more by what we buy.

A visceral gut feelings tells me that a society where the pursuit of the accumulation of material wealth and the expression of the individual through symbolic consumerism as the defining characteristics of daily life lacks the kind of strong human bonds so vital to a healthy union of people.

Of course, I don’t think communism provides a sound alternative. But perhaps communitarianism, a resurgent form of communism with communism’s biggest flaws ironed out, may provide a good antithesis to modern-day capitalism. This year’s Nobel Prize in Economics laureate Elinor Ostrom wrote extensively about The Commons, which are tight-knit communities that provide not just essential goods and services to its members but also strong emotional ties as well.

Capitalism’s flaw lies in how the accumulation of material wealth doesn’t necessarily equate to happiness. The anonymous story The Fisherman and the Investment Banker is quite telling of capitalism’s inherent flaws:

The American investment banker was at the pier of a small coastal Mexican village when a small boat with just one fisherman docked. Inside the small boat were several large yellow fin tuna. The American complimented the Mexican on the quality of his fish and asked how long it took to catch them.

The fisherman replied, only a little while.

The American then asked why didn’t he stay out longer and catch more fish?

The Mexican said he had enough to support his family’s immediate needs.

The American then asked, “but what do you do with the rest of your time?”

The Mexican fisherman said, “I sleep late, fish a little, play with my children, take siesta with my wife, Maria, stroll into the village each evening where I sip wine and play guitar with my amigos, I have a full and busy life.”

The American scoffed, “I am a Harvard MBA and could help you. You should spend more time fishing and with the proceeds, buy a bigger boat with the proceeds from the bigger boat you could buy several boats, eventually you would have a fleet of fishing boats. Instead of selling your catch to a middleman you would sell directly to the processor, eventually opening your own cannery. You would control the product, processing and distribution. You would need to leave this small coastal fishing village and move to Mexico City, then LA and eventually NYC where you will run your expanding enterprise.”

The Mexican fisherman asked, “But, how long will this all take?”

To which the American replied, “15-20 years.” “But what then?”

The American laughed and said that’s the best part. “When the time is right you would announce an IPO and sell your company stock to the public and become very rich, you would make millions.”

“Millions.. Then what?”

The American said, “Then you would retire. Move to a small coastal fishing village where you would sleep late, fish a little, play with your kids, take siesta with your wife, stroll to the village in the evenings where you could sip wine and play your guitar with your amigos.”

Perhaps the clash between the ideals of modern-day capitalism and communatianism will sublate to form a new socioeconomic basis: one that allows for more humane social relationships while still retaining the innovative energies of capitalism.