James Doolittle

February 19, 2006

Privatization or Bust

Filed under: Uncategorized — jdoolittle @ 10:26 pm

Chan Chee Khoon, Z Online Magazine writer, evaluates Japan’s economy in relation to the privatization to come of Japan Post, Japan’s government-run postal system, in his essay “Neo-Liberitarianism vs. Communitarian Capitalism: Japan’s Dilemma.” His argument, after introducing the private banking industry’s demands on breaking apart Japan Post and how it falls in line with Prime Minister Koizumi Junichiro’s political platform, proposes that the plan of a “neo-liberal remedy could very well prove to be worse than the disease that it seeks to cure.”

The threat of privatizing Japanese governmental institution came up in the early 1980’s when the Diet passed a bill to dismantle Japan National Railways. In 1987, Japan’s national railway system was given up as a government institution to governmental subsidiaries and, eventually, to private industries. In the private market, the train system improved in efficiency, efficacy, and accessibility: more people could rely on trains to reach more locations on time in the liberalized transportation market. Train companies were appointed and forced to compete with one another, producing companies cornering certain markets—high speed trains, local service trains, intra-prefectural trains. People who needed to reach far off locations in a short amount of time, for example, could take a more expensive line from a company specializing in that specific train-need. The issue of privatizing government run-institutions in Japan has reemerged into the buzz of Japanese economic discussion for the past few years given Koizumi’s platform and historical promotion of privatizing the post system, but in a more socio-political realm given the nature of the postal system.

Japan Post’s function serves not only as a means of delivering and shipping letters and parcels throughout Japan, but also acts as a national bank complete with financial services ranging from commercial loans to home mortgages. Because of its role as a “financial institution with assets of about ¥386 trillion,” Koizumi’s plan for the government to “gradually divest itself of all stakes in the banking and insurance companies, and retain control over only the delivery and branch operations of the privatized entities,” holds greater socio-economic effect on Japan’s evolving politics than privatizing the rail system ever did. In its 25,000 branch offices, JP holds 30% of the nation’s individual savings deposit and “Kampo, Japan Post’s life insurance scheme, has assets of about ¥121 trillion, some 40% of the national total [for this market].”

Khoon cites from an article in the Economist magazine expanding on the social ramifications and economic results of such a move:

With Japan’s private banks struggling to boost profitability, the last thing they need is a collection of big government lenders — backed by explicit and implicit subsidies — depressing lending rates and competing with them for business, although, unlike the [Government Housing Loan Corporation], Japan’s other eight [Government Financial Institutions] are also serving some borrowers which no private bank would touch…

The point being that the introduction of a neo-liberalist reformation—specifically introducing government subsidiaries that would participate competitively in the financial market—would result in economic disparity for individual citizens relying on government loans as well as private financial companies that would not be able to compete with government-subsidiary-based private businesses.

Khoon presents a persuading argument that the resulting economic destabilization that would occur from breaking up and privatizing Japan Post, would disenfranchise many Japanese citizens and cause bankruptcy in already existing private banking companies; however, Khoon is calling into question Koizumi’s economic plan based primarily on its social consequences and claims that economic disharmony breeds less growth than economic stability. Economic history and trends dictate that, regardless of social exigencies to come out of any given economic structure, a static social economy will not grow with the same force or drive as will the competition-based paradigm of capitalism.

One Response to “Privatization or Bust”

  1. jdoolittle Says:

    I’m realizing now that there are posts in which it is annoying that this theme has no capitalization.

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