The conservative liberal democratic party have finally lost power in Japan. They have controlled Japanese politics for more than 50 years. Yesterday, the opposition social ‘democratic’ party of Japan won 286 seats. The LDP won 96. This is the first left-right divide to emerge in Japans Parliament since WW2. So, it is certainly historic. However, what is ironic about Japan is that despite 50 years of center right politics it has maintained the highest level of income equality in the OECD.
It has a residual welfare state (akin to liberal market economies such as Ireland, UK and the USA) but more equality.To put it bluntly, Japan has less income inequality than any European state. It is a more equal society than Sweden, Finland or Denmark, countries with historical social democratic governments. This raises interesting questions, and challenges many assumptions about the automatic equation of social democracy with higher levels of equality. Explaining Japans equality points to the importance of public policy and institutional development outside politics.
Japan maintains its high levels of income equality through its wage policy, whereas the social democracies of Scandinavia achieve it through redistributive taxation. In Japan, income is more evenly spread and therefore redistribution occurs at the immediate point of exchange between labour and capital (i.e. the workplace). They have a different organisational form of governance that create min-welfare states within companies. Workers rely more on their employers than the state for benefits. Japan’s senior executives do not earn the extremely high levels of pay associated with liberal market economies, and income disparity within firms is much less pronounced than US or UK based multinationals.
In Japan the richest 20 per cent of the population are only 2.5 times richer than the poorest 20 per cent. In Ireland, the richest 20 per cent are 6 times richer than the poorest 20 per cent. In the USA, they are 8.5 times richer. The authors of ‘The Spirit Level; Why More Equal Societies Almost Always Do Better’ argue that the low levels of inequality in Japan explains (i.e. the causal factor) why they have:
- Higher life expectancy
- Lower infant mortality
- Less homicides (and violence in general)
- Lower levels of imprisonment
- Lower levels of teenage pregnancy
- Higher levels of trust
- Lower levels of obesity
- Lower levels of mental illness
- Higher levels of social mobility
The outcome of their different variety of capitalism is that they generate more income equality than all of their European neighbours, and score better on all the health and social indicators above. Thus, regardless of the fact that Spain, Netherlands, Germany, France and all Scandinavia countries have had social democratic (and socialist leaning) governments none achieve the levels of equality generated in Japan, who have had 50 years of conservative government. The different institutional configurations in each national economy determines levels of equality not the political preference of political parties in government. But, either way, increased equality is desirable for all the above reasons.
The new governing Democratic Party of Japan have promised to allocate 10 per cent of its annual budget (€152 billion) to building a social safety net for those outside the labour market (old, sick and unemployed). Japan now has historic levels of unemployment (5.2 %) and therefore require state not corporate interventions. It will be interesting to see the type of policies the new social democratic government generate, and the impact these have upon their socio-economic system. But, what is more interesting is the shift in political preference amongst the Japanese electorate, and the emergence of a left-center opposition. Food for thought for those who would like to see a left-right divide emerge in Dáil Eireann.