The budget is the key to regime change

In their final appeals to Japanese voters, Kan Naoto and other DPJ leaders laid particular stress on the budget.

Speaking in Tokyo on Saturday, Kan said, “True regime change is politicians who have received the trust of the people restoring the right to formulate budgets to the people.” Okada Katsuya, the DPJ’s secretary-general, delivered the same message in Gifu Saturday. “We will completely review and remake the budget,” he said. “We will review from a zero base that severs existing obligations.”

Perhaps it seems strange that on the eve of the general election that may deliver the DPJ into power for the first time, its leaders are speaking of the “right of formulating budgets” and “zero-based budgeting.”

It shouldn’t. After all, the power to determine how a nation’s wealth is spent and distributed — inherent in the national budget — has been at the center of political conflicts for centuries since the rise of the modern state. Appropriately considering that Kan and other DPJ politicians are looking to create a proper Westminster system on Japan’s shores, the battle over the budget was particularly central to Britain’s political development, from the struggles of the seventeenth century, Britain’s “century of revolution,” to the battle over the “People’s Budget” roughly a century ago, when the Asquith government fought over the House of Lords over a budget that included redistributory measures, especially pensions, and would be financed by tax increases on the wealthy.

When Kan speaks of the right to formulate budgets, he is speaking of something fundamental to democracy: that the people’s representatives should have the power to decide how the public’s money is spent and that their decisions should be transparent so that the people can decide whether they approve of how their representatives are using the public’s wealth. The problem is not that politicians have been uninvolved in budgeting under LDP rule, but that their involvement was the product of collusion between elected representatives and bureaucrats who saw cooperation with certain politicians — the LDP’s zoku giin (policy tribesmen) — making deals behind closed doors to benefit particular groups and constituents at the expense of the whole. The opacity of the budgeting process was compounded by the existence of special accounts in addition to the general budget, funds that were used with little or no public oversight. It was for this reason that when I spoke with one of the DPJ’s rising stars, a retired finance ministry official, in January he stressed that the DPJ cannot be sure of how it will pay for all of its promises because it cannot be sure of how much money is sitting in special accounts the contents of which have not been made available to the DPJ, let alone the public at large.

Accordingly, while some doubt that anything will change with a DPJ victory, if the DPJ succeeds at making the budgeting process even more top-down and subject to political control than it became as a result of the Hashimoto reforms of the late 1990s (the extent to which these reforms transformed the budgeting process are open for debate), it will have truly changed Japan. Restoring the cabinet’s constitutional prerogative to formulate the budget is, after all, the goal of the party’s plans for a national strategy office. Administrative reform has arguably been one of the DPJ’s core principles since the first DPJ was created in 1996 — the above statements and others reveal that for the DPJ administrative reform that does not include reform of the budgeting process is incomplete.

Changing the budgeting process, often construed as entailing a fight with the ministry of finance, may in fact entail more significant battles with the ministries responsible for spending the money rather than the ministry allocating it. Under LDP rule, spending ministries like the agriculture ministry, the former construction ministry, and the health, labor, and welfare ministry have been the primary administrative beneficiaries of opaque budgeting — it was not accidental that the most powerful policy tribes were connected to these policy areas. All of these ministries have suffered from budget cuts over the past decade, which will presumably make them even more resistant to changes proposed by the DPJ: it is their budgets that the DPJ would like to redirect in order to pay for programs directed at the public’s main concerns.

Cutting these budgets will take a certain ruthlessness on the part of a DPJ government. Naturally the LDP will find ways to put a human face on budget cuts. Presumably manga artist Satonaka Machiko’s appeal on behalf of the 11.7 billion yen “national media arts center” lampooned as Aso Taro’s “Manga cafe” by the DPJ will not be the last such appeal if the DPJ wins Sunday. Masuzoe Yoichi, Aso’s minister of health, labor, and welfare and potentially Aso’s successor as LDP leader, warned that the DPJ’s policy of rearranging the budget could jeopardize important programs in his ministry to combat swine flu and unemployment, which strikes me as fearmongering on Masuzoe’s part, but it does suggest that after an electoral defeat the LDP will still find ways to challenge the DPJ on this question of remaking the budget.

But ultimately giving politicians in the cabinet more power over the budget is but a first step to moving Japan in a new direction. Having claimed budgetary authority, the government will then have to find a way to balance among the DPJ’s three goals of fixing Japan’s finances, building a proper social safety net, and finding a way to get Japanese households and companies channeling their cash holdings into profitable investment and consumption.

In most areas the DPJ may not signal a radical departure from the LDP — most areas except for the question of who should make Japan’s budgets. And it is that difference which makes all the difference. If the DPJ implements its plans for a strengthened cabinet, it will make a radical departure from LDP rule, and clear the way for further policy changes.

One thought on “The budget is the key to regime change

  1. This is an excellent point. Having been involved first hand in these sorts of processes it would be hard to imagine a layer of interference from \”stakeholders\” and non-ministerial politicians. We already have a pretty transparent system here, but our Treasury managed to find enough money through a \”value for money\” exercise. With an empowered MOF with the mandate to oversee this reform might yield some incredible (from a cost-benefit point of view) savings being offered up from those ministries smart enough to play ball before being \”made\” to (which happened here). In this sense, an all out \”war\” could well be avoided. And most definitely if the DPJ does nothing more than accomplish this it will indeed be a reform that upholds the essence of democracy more than most realise.Our stakeholders are always whinging what a bad job that we do for getting them more money through the budgetary process. We are not advocates, we are entrusted with giving free and frank and neutral advice to the democratically elected minister who will then reject or accept and then issue orders for which we are to carry out. Its fantastically democratic even if frustrating personally, as a bureaucrat. With a full review/zero-base approach, I think the potential for some new ideas to come from the bureaucracies itself might find their way through from middle ranks upwards – this is our experience, and might be mightily helpful for the DPJ to shore up the places where they are a bit weak/vague.


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