Introduction

Japan's fiscal program has undergone significant change in the late 1990s and the first years of the new century. The fiscal program consists of the general budget for the central and local governments based on the familiar revenue-spending framework and the FILP based on a flow-of-funds framework. The general budget stipulates government revenues from various taxes, fees, and bonds and how the revenues are allocated to various components of government spending. The FILP is referred to as Japan's “second” budget, because of its size and importance. Both the general budget and the FILP budget are drafted by the government and approved by the Diet. The FILP funds came primarily from postal savings deposits, postal life insurance, and national pension contributions. The FILP budget allocated funds to a system of government banks, enterprises, corporations, and local governments, which were referred to collectively as FILP agencies. Starting in 2001, FILP funding sources changed and a major redesign of FILP and the PSS occurred.

There were many catalysts for the change in Japan's fiscal program, but one of the more important was the growing recognition that Japan's conventional fiscal program was the source of economic inefficiencies and prevented Japan from adjusting to the new reality of the globalized international economy, which put competitive and efficiency pressures on most industrial nations. The general budget often was used as an instrument of stabilization policy in the context of Keynesian demand management.

An anonymous reviewer of this book accurately suspected that more was involved with the topological decision issues introduced in Section 2.1.3. To indicate other concepts (with the same assumptions), in this appendix I outline key ideas that Jason Kronewetter and I developed for [24]. As one must expect, this discussion emphasizes the connecting themes of the book – the structure of the domain and the dimensionality curse.

In introducing alternative ways to think about group decisions on domains with holes, I hope to interest others in exploring these new, fairly simple non topological arguments. My comments start, as in Section 2.1.3, with choice problems on a circle. The motivating story was to select a beach location on an island: However, applications arise in any number of disciplines. After all, a point on a circle defines a direction, so this discussion applies to any topic where a selected direction is based on information from two or more other directions.

Consider this illustration: A current psychology project with Louis Narens involves a colored disk placed in the center of a surrounding colored background. It is well known that the perceived color of the disk in this “center-surround” framework depends on the colors of the disk and the surrounding background.

Rarely does a proposal enjoy a complete consensus; however, the proposition that the field of social choice owes an enormous debt to Kenneth Arrow would pass unanimously. Even though we can debate who should receive credit for siring this academic discipline – Borda, Condorcet, or both – Arrow's insights clearly inspired the modern rebirth of the field. The startling, counterintuitive conclusions of his Ph.D. thesis [2] served as a powerful magnet to attract talented researchers to this area.

Arrow's profound result is negative; it states that it is impossible to do what seems to be obviously possible to do. The astounding nature of his assertion unleashed an avalanche of negative conclusions that seemed to bury us with exasperation: “Is everything that we want to do impossible to do?” The persistence of this theme created a frustrated sense that positive conclusions in this area probably do not exist. This was the prevailing attitude when I moved into this field: The researchers, resembling a gaggle of partying morticians, cheerfully greeted me with this pessimistic commentary. In this chapter, I will provide some hope by showing how and why the situation is nowhere near as dire as these results suggest.

I found it surprising that many of the major negative conclusions have amazingly similar explanations. The value of knowing why these negative results occur is that, often, this information can be used to replace the frustrating negativity with positive assertions.

Introduction

The evolution and transition of Japan's economic and political institutions during the entire post–World War II period is remarkable for two reasons. First, Japan completed reindustrialization and reestablished prewar economic growth trends in record time. By the 1970s, Japan emerged as the second largest economy in the world. Japan remains a major component of the world economy with one of the world's higher standards of living for its population. Second, following the completion of reindustrialization, Japan's economic and political development exhibited wide fluctuations in performance. After a short but turbulent period of economic distress in the early 1970s, Japan achieved impressive economic, financial, and political stability from 1975 to 1989. The perception of Japan's economic invincibility became widespread during this period. Starting in 1990, however, Japan experienced intense economic, financial, and political distress. The economy and financial system continued to decline or stagnate until 2005. Despite economic recovery by the mid-2000s, Japan continues to face lingering economic and political problems.

The record of Japan's economic performance since the early 1970s and how Japan has adapted to internal and external forces of change have offered a number of important insights into the development process in general. Japan has become a major case study and has influenced economic and political institutions in many countries as they either tried to emulate Japan's economic success or learn from Japan's failures.

The general outline of Japan's postwar development can best be understood by dividing the postwar period into four distinct periods.

To connect theory with reality, this concluding chapter addresses certain realistic, pragmatic dangers associated with actual elections. I also critique, but only briefly, some contemporary, so-called reform efforts.

After exhibiting my tendency toward reckless behavior by sticking a toe into the dangerous waters populated by advocates of various voting rules, I will hastily retreat to the safety zone ensured by theory and academics. Once back in this ivy-covered haven, I will tie together certain points made in this book by using a different approach.

Our Standard Voting Rule

The material developed in the past few chapters probably spawned worries about the accuracy of standard elections. I hope so; a strong, take-home message is that standard voting rules create real and grave problems.

These fears realistically arise whenever elections are based on, or involve, the plurality vote. As described in the past two chapters, this typically used voting rule suffers severe weaknesses causing its outcomes to compromise the wishes of the voters. To escalate the rhetoric, it is realistic to fret about the legitimacy of any reasonably close election where the outcomes involve the plurality vote.

The 2000 U.S. Presidential Election

In Section 1.1, doubt was expressed whether the 2000 U.S. presidential election outcome involving George W. Bush, Albert Gore, and Ralph Nader accurately reflected the views of the voters.

Introduction

The economic problems of the 1990s and 2000s had an impact not only on the Japanese government's economic policy, politics, and political outcomes but also on broader aspects of Japanese society and life. Although many factors were attributed to Japan's economic problems, policy makers, politicians, and observers argued that the structural features of the Japanese economy were an important cause of the problems. Japan's corporate governance, financial system, labor market practices, and the clientelistic relationships between government and industry were considered sources of economic inefficiency, impairing the performance of the Japanese economy.

Japanese corporations themselves also felt the need to restructure their business and management and regain competitiveness and efficiency to improve their performance, as many of them suffered poor performance, debt, excessive investment and capacity, low rates of returns, redundancy, and high production costs. Private corporations, particularly those in the export sector, were the first ones to acknowledge the need for change and to initiate reform, because they were exposed to international competition and had no other choice but to change if they wanted to survive in the market economy. They were thus much more forthcoming in executing their own changes than politicians, bureaucrats, and their constituent industries and sectors that had been accustomed to favorable government policy and protection provided by politicians and bureaucrats. These traditional constituents' first inclination was to hang on to their entitlements and ride out the economic recessions with help from the government.

In contrast with South Africa and Mauritius, Ghana's economic history has been marked by an unhealthily close relationship between the fraternal worlds of money and power. In what later became south and central Ghana, an ongoing entanglement of political and economic elites was epitomized in the institutions of the pre-colonial Asante empire and colonialism did not necessarily disarticulate these linkages. Following independence, Kwame Nkrumah and the ruling Congress People's Party (CPP) institutionalized the dominance of the political sphere over the economic, consolidating a neo-patrimonial fusion of economic and political elites.

This was not inevitable. Given certain similarities, it is not unthinkable that Ghana's development might have more closely resembled South Africa's: like South Africa, Ghana had a leading sector (cocoa in Ghana's case) which might have provided the basis for the development of an assertive, indigenous economic class. Ultimately, however, successive Ghanaian governments over-exploited that sector before it was yet strong enough to defend its interests. Instead of growing out of a profitable and market-driven cocoa sub-sector, much of Ghana's business class would emerge instead from a profoundly state-driven economy. And given that the state in question rapidly became neo-patrimonial, this pattern of development severely compromised the nature of the local capitalist class.

In the late summer of 1981, in a hot and sticky Washington DC, staff members of the World Bank were strategizing how best to release a report entitled Accelerated Development in Sub-Saharan Africa. Some were nervous about how the report might be received – and rightly so. The content of those 200-odd pages proved highly controversial. They would also be enormously consequential, reshaping the role of the state in economies across the developing world for decades to come. In sub-Saharan Africa, the impact of the report would be directly felt through policies of structural adjustment that linked access to development finance to a neo-liberal set of economic policies. Africa's growth prospects, the report argued, had been curtailed by the overreach of the state; what was needed instead was a greater role for unfettered market forces and for the private sector. The report represented nothing less than an agenda to revolutionize the respective roles of the public and private sectors in African economies. The attempt to implement that agenda, however, produced uneven results.

In 1994, what had been “inconceivable” in South African economic policy-making came to pass. At a gathering of the world's political and economic leaders in Davos, Switzerland, Nelson Mandela committed his country to wide-ranging economic reform that, far from moving in the direction of nationalization, pledged to advance privatization.

This is a striking outcome in a country where the new black majority government, described as “quite far left of centre,” had every reason to be hostile to a predominantly white business community. Business was tainted by its association with apartheid. In addition, the ANC was considered to be under pressure from the majority black population to end years of white economic privilege and increase state spending on welfare and poverty alleviation. Reinforcing these pressures was the ruling Congress' formal political alliance with the South African Communist Party (SACP) and the Congress of South African Trade Unions (COSATU), both of which explicitly advocated leftist economic policies. Yet, by the end of the 1990s, the ANC government had consolidated a moderate – even conservative – set of economic policies.

Thomas Koelble argues that South Africa's “nationless state has produced two competing versions of modernity, one based on the precepts of the liberal ethos of universal human and individual rights, individual entitlement and autonomous citizenship. The other version of modernity is based on the assertion of group rights and ethnic solidarity.” Neither one of these two versions has been exclusively associated with any one ethnic or racial group – or indeed any one class – in South Africa. Rather, these competing versions have waxed and waned, been taken up and discarded, by a number of groups in response to broader political developments. While the policy needs of mining magnates dominated policy-making in the early twentieth century, political and economic power were divided on an explicitly ethnicized basis from the 1930s with the rise of a brand of Afrikaner nationalism that was hostile to the English-speaking mining magnates. The coincidence of ethnic identifications and economic strata has, however, been enormously consequential.

Throughout the modern history of South Africa, English-speakers were advantaged by their association with British capital; they were the most skilled, educated, and urbanized group from the outset and this gave them a head start, economically speaking.

By 1990, the Ghanaian government was considered by some a model World Bank pupil. The first generation of neo-liberal reforms to restructure the Ghanaian economy had been completed successfully and the government was poised to introduce a second generation of reforms. The common wisdom among reform technocrats is that this second reform phase is difficult and, in contrast with the first phase of reform, that it requires high levels of cooperation from broader society and from the private sector in particular. There were thus strong incentives for the Ghanaian government to step up its consultations with business, and the World Bank urged it to do so. In addition, the business community in Ghana was slightly larger and more independent minded than its Zambian counterpart, or at least, much of it was. Despite all of these factors, business in Ghana had little influence on the course of economic policy in the 1990s. Why was this?

The answer, I will argue, lies in both the natures of the Ghanaian state and business sectors, and the character of their interactions. The Ghanaian private sector comprised elements that could be described as neo-patrimonial, as well as elements that were distinctively autonomous.