The Values of Japan’s Postwar Political Economy

Abstract

Abstract Japan’s politics enshrines certain core values, such as equality, opportunity, security, and social cohesion. How these values are translated into policies determines whether they promote or undermine growth. In the high-growth era, growth and those values reinforced each other. Nor was there much need for a government-funded social safety net to protect those falling on hard times. An adverse shift began in the late 1970s in response to the abrupt halving of economic growth following two oil price shocks. The country’s leaders slowed down creative destruction in the name of social stability. The country now needed a government-funded social safety net for working-age people, but it refused to fund it on the pretext that the budget was in crisis. Instead, it made a worker’s current job at his current company the prime backup. That led to voter pressure to prop up zombie firms even at the cost of abandoning equality and security, while turning 40% of the workforce into low-wage laborers.