2002.01.15

Politically Dominated Policy Making: - 4

Learning from the Successful Handling of the Financial Crisis

IV. The Proper Shape of Policy Making and the Role of Politicians

1. Evaluating policy making under the bureaucracy-dominated system

As I have noted above, the LDP, which held on to the reins of government for decades under the 1955 setup, used the bureaucracy as its think tank, and in this way successive LDP administrations succeeded in developing Japan into the world's number-two economic power. Though the bureaucrats drafted the policies, it was a politics-dominated system inasmuch as the politicians of the LDP directed the bureaucrats and used the party's political strength to get the policies implemented.

Bureaucrats have superior skills and know-how with respect to policy drafting. As long as the politicians had the proper sense of their own responsibilities as the main policy-implementation actors and there was an appropriate degree of orderliness and tension in their relationship with the bureaucrats on whom they relied for policy-making assistance, this partnership functioned smoothly.

The mandarins of the Ministry of Finance, who reigned at the peak of the bureaucratic structure, were deeply involved in the process of forming important policies and always provided input based on their own expertise. Sometimes they clearly went too far, as in the case of the proposal for a national welfare tax, which the MOF bureaucrats pushed the Hosokawa coalition government into accepting. However, the bureaucracy did have a feeling that it was supporting the country, and it included many highly capable individuals with a strong sense of mission.

On the LDP side, meanwhile, there were strong figures who could meet the bureaucrats' expectations and make firm decisions when necessary.

During the 1990s, however, with the unfolding of such unexpected developments as the bursting of the bubble economy and the end of the 1955 setup, the relationship between the political leadership and the bureaucracy became distorted by an extreme degree of moral hazard.

The most prominent example of this was the bad-loan problem. Even after the situation deteriorated to the point where the mandarins of MOF were incapable of dealing with it by themselves, they continued to put off action, justifying their neglect by relying on overly optimistic forecasts for the economy, based on which they asserted that the bad loans could be handled once business took a turn for the better and land prices resumed their rise. Meanwhile the politicians left the matter in the bureaucrats' hands, declaring financial affairs to be MOF's field of specialized responsibility. The combination of bureaucratic procrastination and political sloth resulted in a major delay in taking fundamental action to address this problem.

The bad-debt problem also highlighted the limits of sectionalized bureaucratic administration. Since bureaucrats are bound by their ties to their own organization, they cannot take the lead in dealing with policy issues that cut across organizational lines among different ministries and agencies. This is where the need for a politics-dominated system of policy making becomes obvious.

As I have repeatedly noted above, our 1998 Comprehensive Plan for Financial Rehabilitation offered an example of young LDP legislators taking the initiative and successfully coming up with policy through a politics-dominated approach.

2. Why Japan needs a politics-dominated system

Japan is now at the point of its third great national opening, following the nineteenth-century Meiji Restoration, which brought the country into the modern world, and the aftermath of World War II, which produced tremendous change in the country's political, social, and economic systems. More than half a century has passed since the end of the war, and many of the arrangements that worked for decades are now suffering from systemic fatigue. We now urgently require the rebuilding of these systems-in other words, structural reform.

Properly speaking it is the role of politicians to come up with prescriptions for curing the country's ills and to offer direction for the country's future course in the form of concrete policies. Japan's bureaucrats are certainly talented, but it is simply impossible for them, however hard they might try, to match politicians when it comes to sensitivity to the voices of the public. The same can be said with respect to footwork-the ability to touch a multitude of bases in rapid succession. This is only natural, because it is part of politicians' job to keep their constituents' interests always in mind and to regularly make the rounds to listen to the voices of those on the front lines.

What is important for politicians in the age of a politics-dominated system is to develop the ability to formulate policies using their own minds. In order to seize the policy reins from the bureaucrats with respect to crucial policy matters that cannot be left up to them, politicians need to study intensively in a way totally unlike anything the old-style bureaucracy-dependent politicians did. And at the same time, politicians must have conceptual power, a sense of balance, and the power of persuasion.

These are essential conditions in order to overcome the old pattern of bureaucratic dominance and to replace it with one in which elected politicians exercise leadership over the bureaucracy.

3. The proper shape of a politics-dominated system

Under a system of parliamentary government like Japan's, the proper shape of a politics-dominated system is a cabinet-dominated system. It is particularly important for there to be a clear command center in putting together national strategy and other key policies, and for this purpose the functioning of the Kantei, the Prime Minister's Official Residence, must be strengthened.

The plan for reorganization of the central government ministries and agencies that was originally undertaken by the Hashimoto administration was partly in response to this need. As a result, the new organizational setup that went into effect in January 2001 provides a more powerful Kantei, and it also has sent numerous elected politicians into the ministries and agencies to hold the newly created posts of senior vice-minister and parliamentary secretary. In this sense it represents a move in the direction of a cabinet-dominated system.

The new institutional framework is now in place, but the cabinet in power at the time of the shift was one whose approach was quite opposite that of a cabinet-led setup. Prime Minister Mori and his administration depended wholly on the LDP for the formulation of policy, and so contrary to the proclaimed strengthening leadership by the cabinet, what we actually witnessed was an increased concentration of power in the hands of the chairman of the LDP's Policy Research Council.

Unlike Mori, Prime Minister Koizumi seeks to wield leadership of a presidential nature, and his administration has taken full advantage of the strengthening of the Kantei's functions that is one of the major fruits of the bureaucratic overhaul; the prime minister himself has taken the helm in directing such initiatives as reform of the fiscal structure, dealing with the bad-debt problem, and reforming the special-status corporations of the public sector.

Koizumi has all the qualities required of a political leader: zeal, spirit, and courage. But in order for him to be able to exercise his leadership even more powerfully, additional institutional support is required.

What I would like to propose is the creation of a formal national strategy team to strengthen the operations of the Kantei. This would be made up of a small group of politicians well versed in policy making and good at following through; they would report directly to the prime minister, and they would be assisted by a group of specially selected bureaucrats from different ministries and agencies.

The existing support system provided by the chief cabinet secretary and deputy chief cabinet secretary is not adequate. We need to create a setup that will provide direct support for the prime minister from a group of politicians familiar with the ins and outs of policy and that will make proper use of the bureaucracy.

If a setup is created that allows politicians to make full use of talented bureaucrats, the politicians will be able to accomplish many times more than what they could otherwise do.

Prime Minister Koizumi has actively recruited talented people from the private sector to support him in his work. That is certainly one approach; however, such private-sector individuals do not have expertise at translating ideas into policy action. When it comes to making policies reality, they are no match for politicians.

In this respect the situation is clearly different from that in the United States, where the people from the private sector brought into the White House to serve as presidential advisors are already familiar with the policy-making mechanisms and have personal connections with politicians.

The job of fleshing out the structural reform drive that the Koizumi administration aims to achieve should be handled by politicians with responsibility for implementation. Only if this sort of political setup is established will we have created a comprehensive mechanism for a politics-dominated system.

4. The role of the LDP and of politicians

Under the 1955 setup the policy-making mechanism of the ruling party, the LDP, was structured logically. Within the party there were separate divisions corresponding to the various ministries and agencies that considered policy issues; the decisions that they reached were then reviewed by the party's Policy Research Council, and if they passed muster there, they were sent to the party's supreme decision-making organ, the General Council, for approval as formal party decisions. And special committees were set up as required to deal with issues that cut across the organizational lines dividing ministries and agencies.

During the financial crisis of 1997-98, the party set up a Headquarters on Urgent Countermeasures to Stabilize the Financial System, consisting of former prime ministers, along with a Special Research Commission on the Implementation of the Total Plan for Financial Revitalization, which was a specially created panel whose members were picked without reference to the usual rules of seniority. Through these groups, the party worked in close coordination with the prime minister's staff in the Kantei, and these efforts made possible a politics-dominated approach that allowed Japan to ride out the crisis.

Currently a similar approach is being applied to the issue of reform of the special-status corporations of the public sector, responsibility for which Prime Minister Koizumi has assigned to Ishihara Nobuteru as minister of state for administrative reform and regulatory reform. The LDP's Administrative Reform Promotion Headquarters is providing solid support for this effort, which is one of the Koizumi cabinet's top priorities.

However, the fact that the LDP is governing in a coalition with two other parties means that the policy-making process involves adjustments among the coalition members, and this has inevitably brought changes to the traditional policy-making mechanism. Authority has become concentrated in the hands of the top policy-making officials of the three parties in the ruling coalition, who get together to coordinate policy for the coalition as a whole, and it has been pointed out that open debate within the party is liable to be stifled on certain matters.

Room for further study remains with respect to the proper shape of the policy-making process in a coalition government. But the trial-and-error experience of the past eight years show the great importance of careful discussion during the policy-formation stage, transparent procedures, and efforts at deepening mutual understanding. A major remaining issue is how to achieve an appropriate balance between party autonomy and agreement within the coalition.

Even if the political system is well designed, however, it will not function as it should unless the individual politicians involved in it enhance their own abilities. In order to keep the system from being "pie in the sky," politicians must of course study and improve themselves. But in addition, in order for politicians to get beyond the limits on their individual abilities, instead of simply relying on the bureaucracy they must develop their own personal staff of aides.

Unfortunately the present set of arrangements makes this very difficult to do. Each legislator is allowed only a single government-paid policy staffer. In the U.S. Congress, by contrast, each legislator has an official staff of about 20 people. The U.S. legislative system is different from Japan's, so it is not appropriate to make a direct comparison; even so, having just a single policy staffer is obviously inadequate.

The problem is especially acute for members of the House of Representatives elected from single-seat constituencies, since they must deal with every sort of issue. Possible measures to provide them with their own "policy brains" include the creation of a joint staff shared by legislators and strengthening of the functions of the LDP Policy Research Council secretariat, which plays the role of a think tank for the party's legislators.

Another issue that needs to be addressed is how to build a structure of coordination between the party and the legislators who have been assigned posts in the various ministries and agencies as senior vice-ministers and parliamentary secretaries. In order to achieve stronger teamwork between the party and the government, it is essential to coordinate the particulars of policy; liaison between the party and the legislators in the ministries and agencies can help accelerate the process of turning policy into action.

In addition I should touch on the system of assigning posts within the party. The LDP's system of making appointments to key posts is based on a process of adjustment among the party's various factions, and the tendency is for posts to be assigned in line with seniority (defined as the number of times a legislator has been elected); as a result, it appears that the most qualified people do not necessarily get selected. In order to achieve a policy-centered system, it is essential that posts be assigned on the basis of qualifications, and for this purpose the party should create arrangements that will allow for individual members' aptitudes and abilities to be objectively judged. In this connection the system used in Britain, which has a parliamentary cabinet setup much like Japan's, can be a useful reference: Legislators there follow one of two separate courses, namely, the path to a ministerial post and the path to posts within their party.

5. The significance of member-sponsored legislation

In closing, I wish to touch on the issue of member-sponsored legislation.

Under Japan's parliamentary system, in contrast to the U.S. political system, the government (cabinet) has the right to submit bills to the legislature. The link between the cabinet and the ruling party (parties) is tight, even though it is not as strong as the bond seen as in Britain's case; under these circumstances, as long as the system of politics-dominated policy making is working properly, it is acceptable for 80% of the bills submitted to the Diet to be sponsored by the cabinet. Even so, I believe that member-sponsored legislation should be used more actively in the future as one way of diversifying the nation's policy-making tools.

Member-sponsored bills may be divided into three major categories:

First is the category of full-fledged, thoroughly debated legislative proposals. Bills in this category deal with issues that the government cannot well handle, a good example being the Organ Transplant Law that was enacted in 1997.

This member-sponsored bill dealt with the truly critical issue of whether "brain death" can be equated with the end of human life. The lively debate cut across party lines and involved the government and the general public as well as the members of the Diet. In the end a law was enacted with provisions considerably stricter than those seen in other countries' legislation on this matter, allowing brain death to be treated as the end of life and respecting the will of those desiring to donate organs for transplant and those wishing to receive them.

The second category consists of bills aimed at accelerating the policy-making process on the basis of political initiative. These are bills submitted by legislators in cases where bureaucratic turf wars are likely to delay the bill-drafting process within the government. In my own experience, one such piece of legislation, the Law on Fixed-Term House Lease Rights, was enacted in two years, even though the expected time frame for drafting and passage as a cabinet-sponsored bill had been five years.

The final category consists of "issue-consciousness-raising" bills. These are bills sponsored by members who wish to point out the need for legislation on a particular issue. Opposition legislators frequently submit bills in this category. In many cases the bills are offered as alternatives to the legislative proposals of the government and ruling parties. The contents vary greatly from bill to bill and the issues addressed are diverse, but basically such bills do not actually get enacted.

In addition to the above three categories, I have noticed some exceptional cases recently. In the ordinary Diet session for 2001, the bill on stock market reform, including the legalization of "treasury stock" (purchases by companies of their own shares), which ordinarily should have been submitted by the cabinet, was handled as member-sponsored legislation. And the current extraordinary Diet session is expected to bring revision of the Child Welfare Law in the form of a member-sponsored bill.

In any case, member-sponsored bills can be expected to become increasingly important in the period ahead in response to demands for greater speediness in the implementation of policy. What will be most important in this connection is for politicians to have the will, talent, and conceptual power to make policies and the powers of persuasion and leadership required to get their bills enacted. Japan's politicians thus need to keep working at self-improvement.

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