In this public seminar political scientists Prof Nobuhiro Hiwatari and Prof Junko Kato from the University of Tokyo join us to discuss their latest research into social policy reforms during financial crises, and tax politics and the welfare state.
Are Neo-Liberal Reforms Undemocratic? Evidence from the OECD and cases from the UK and Japan
Prof Nobuhiro Hiwatari, University of Tokyo
In this paper I provide a new way of addressing whether spending cuts and social policy reforms are undemocratic. Although measures that weaken market protection and social safety nets are opposed by organized interests and are unpopular with the voters, what if they reflect the position of the democratically elected legislature and not just the incumbent government? To show this is a possibility, I hypothesize that, when faced with global recessions, party leaders competing for power must show that they have viable plans to revive the economy, and as such, they have strong incentives to persuade the median voter that such reforms are unavoidable in order to stabilize the economy and assure international investors. Evidence from 20 OECD countries shows that the major left and right parties tend to move rightward during global recessions, but not so much leftward during economic recoveries with the rise of economic inequality. In addition, I show that spending cuts do represent the policy position of the legislative centre rather than the government centre. The validity of the argument is further demonstrated by examining the cases of Japan and the UK.
Taxation and the Welfare State: Japan in a Comparative Perspective
Prof Junko Kato, University of Tokyo
Since the 1980s, the institutionalization of regressive taxes for effective revenue-raising during a period of high growth has helped industrial democracies resist welfare state backlash. Building on this observation, I argue that the funding capacity of a welfare state is path-dependent on a revenue shift from progressive to regressive taxation. Tax politics is a critical intervening factor. Japan has been regarded as a proto-typical example in which the government failed to introduce a strong revenue-raising machine during a period of high economic growth. Today, Japan has again accumulated a massive government debt that is greater than twice its GDP and recently managed to increase consumption tax rates (from 5 to 8 %) for the first time in seventeen years. Strong opposition to tax increases in Japan appears puzzling considering its relatively low tax level and extremely high debt compared with other industrial democracies. Yet, it is consistent with a comparative analysis of tax politics in mature welfare states. I will explain the current situation in Japanese tax politics in comparison with other industrial democracies, focusing especially on European countries.
17 September 2014
The Japan Foundation, London
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Image: ©Asher Isbrucker