Wednesday, Sept 22, 2011

Economic morality play (revised)

World attention focuses on the problems of the Greek economy — no doubt with a large helping of schadenfreude added: There, but for the grace of God, go the rest of us is the thought.

But Japan has already been there. Debt relative to GNP in Japan is 30 percent higher even than in Greece. The annual share of budget devoted to debt service has been higher. Japan's currency and bonds may be seen as a safe haven for funds fleeing Europe. But it too has become a slave to that mistaken economic dogma called "austerity," and could be headed for the same slippery slope as a result.

Like the original concept of European Union (which many now realize was another mistake — combining prolifigate Greeks, happy-go-lucky Italians and puritanical Germans in the same economic union?) — austerity had respectable origins. Just as the EU was a reaction Europe's past excessive nationalism, austerity policies were an understandable reaction to the indulgent (mainly welfare) spending in the advanced economies that began in the 1960s and '70s and has been with us — Japan included — ever since.

Today many of these indulgent economies are in trouble and deserve to be punished for past sins. But economies in trouble usually suffer weak domestic demand. Kill that demand with austerity policies and you kill the economy. To paraphrase U.S. economist Paul Krugman, an economy is not a morality play.

So what happens next?

Commonsense would say that any shortfall in private demand, whether caused by slumps or deeper factors, should be met by in an increase in government demand — the Keynesian solution. But Keynesianism today has been turned on its head by rightwing critics and portrayed as an excuse for governments to spend more at all times.

As someone who has worked in government, I can understand where those critics are coming from even if I do not agree with their anti-Keynesian biases. The political urge in democracies to spend for vote-buying and power-grabbing has always been there. As well, we have the never-ending, bleeding-heart demands for more welfare spending. The Nanny State is out of control. People should be made responsible for much more of their own welfare, perhaps not as much as in China today but certainly more than in most advanced democracies.

But, as in China today, government should also keep tight control of economic policy — spend in slumps and cut back during booms. The austerity believers who argue that cutting back spending in slumps will somehow save economies by boosting investor confidence go beyond even old-time communists in slavish obedience to an unrealistic ideology.

With communism there was always the hope that despite current failures you would eventually reach the pot of gold at the end of the rainbow. Austerity lacks even that saving grace.

Looming right in front of you is a reality so obvious you cannot ignore it. This is the fact that cutting government spending forces recessions that immediately begin to cut government tax revenue faster than the spending cuts reduce the official debt. So the debt you were committed to reducing increases the more you cut spending. You are cutting off the very legs you are trying to stand on.

We saw this only too clearly in Japan during its two decades of austerity policies. The Koizumi "no pain, no gain" austerity period managed to increase the debt by an enormous ¥300 trillion. That Japan's many austerity advocates still manage to ignore this appalling fact is a tribute to the power of all ideologies, and not just communism, to distort human thinking. Stay-the-course, keep with that pain-inflicting hair shirt called austerity and you will find eventual salvation – that is the mantra.

True, and as in Japan, we see occasional ideology-denying compromises that allow bursts of spending when the pain gets unbearable — rather like the fat man on a diet who cannot resist the occasional binge on chocolate and cream. But that solution will not solve much.

By all means keep the fat man on his diet; do everything to keep government spending under control. But change the menus. Cut excessive welfare spending — old age and medical entitlements especially. Control the military. Sell off unneeded government assets. Hit tax evasion hard. Restrict imports that cut legitimate domestic production.

But do not cut the government spending needed to revive the economy. Instead, insist that this spending concentrate on items with the strong multiplier effects need to boost tax revenues — infrastructure spending especially. Welfare spending rarely has this merit. And finance this spending much more by indirect taxes on specific products, luxury goods especially, and services, while cutting the income taxes, corporate-profit taxes and flat-rate consumption taxes which discourage work incentive and encourage tax evasion.

Meanwhile deregulate almost anything that restricts private investment and consumer spending, even if that means allowing casinos in Odaiba or all-night dancing in Roppongi. Our puritans have yet to realize that even wasteful social indulgencies that encourage people to spend are better that the harm caused by consumers who refuse to spend and who park their surplus funds in banks which refuse to lend because consumers refuse to spend. Here Japan with its cautious consumers is even more guilty than most in its ability to create this dog-tail-chasing, downward, deflationary spiral.

But even better, listen to the voices of reason saying that if there is no inflation risk and official debt is a problem, then governments have the right to create the money, or to force central banks to create the money, needed to overcome recessions and pay back debt. But here we find the dead hand of yet another out-of-date ideology — the one born in those postwar years when excessive government spending led to out-of-control inflation. Those days have gone, possibly forever.

The problem today for the advanced economies is to encourage private demand for domestically produced goods and services. The fiscal conservatives, and they are many in Japan, should not be allowed to keep us fighting the battles of past economic wars when demand tended to outstrip supply. Today that problem has been thoroughly reversed –something that our austerity-addicted, hair-shirt ideologues have yet to realize.

ギリシャ経済の問題に世界の注目が集まっている まちがいなく自己満足もたっぷりと添えて。そこで起こったことは、神の加護がないかぎり、われわれにも起こること、という思いだ。


 EU(ヨーロッパ連合)(金遣いの荒いギリシャ人、ノー天気なイタリア人、ピューリタン精神のドイツ人を同じ経済連合に一括りにするとは これはもう一つのまちがいだったと、今では多くの人が気付いている)のそもそものコンセプトと同じように、「緊縮」もりっぱなルーツを持っていた。ちょうどEUがヨーロッパの過去における行過ぎたナショナリズムに対する反動だったように、緊縮政策も、1960年代70年代に先進国経済で始まり、今日まで続いている支出の大盤振る舞い(主に福祉)に対する一つの反動だったことは理解できる。



 常識からすれば、スランプが原因かあるいはより深い要因によるのかに関係なく、個人消費が落ち込んだときは、政府からの需要を拡大して対応すべきところだろう これがケインズ流の解決だ。ところがケインズ主義は今日、右派の批判者連中によって歪められ、常時政府支出を拡大するための口実、というレッテルを貼られてしまった。


 また現在の中国のように、政府は経済政策をしっかりとコントロールすべきである スランプ時には支出を増やしブーム時には切り詰める。「緊縮」信奉者は、スランプ時に支出を切り詰めれば何らかの形で、投資家の自信を高揚させ経済を救えるというが、これは昔の共産主義者が非現実的イデオロギーに盲従したさらにその上を行くイデオロギー従属だ。



 これは、日本の緊縮政策の20年間にあまりにもはっきり示された。小泉の構造改革なくして成長なしの緊縮時代に、債務は300兆円というべらぼうな増え方をした。日本の「緊縮」提唱者の多くが、この驚くべき事実にいまだに目をつぶりおおせているということは、人間の思考を歪めるという、共産主義のみならずすべてのイデオロギーがもつ力の特性だ。軌道にのっとり、緊縮という名の苦しいヘアーシャツ(昔修道士が懺悔のために着た毛髪で作ったシャツ)を着続けよ、そうすればついに救いが訪れる という呪文である。

 たしかに、日本がそうだが、苦痛が耐えがたくなったとき、時にはイデオロギーを否定するような妥協をし、爆発的に支出するということをわれわれは見てきた ダイエット中の肥満者が、時には我慢しきれず、チョコレートやクリームの饗宴に身を任せるのに似ている。だがその解決は問題解決にはならない。

 どうあってもその肥満者にはダイエットを続けさせねばならない。政府支出コントロールは是が非でも続けなければならない。けれどもメニューを変えることだ。過大な福祉支出を切る とくに高齢者と医療の資格関連で。軍事費をコントロールする。不必要な政府資産を手放す。脱税に厳しく対応する。適正な国内生産を援護する。

 しかし経済を更生させるための必要な政府支出は削らない。代わりに、この支出は、税収活性化に必要な相乗効果の大きいアイテム とくにインフラ に集中した支出だということを強くPRする(福祉支出にはまれにしかこの相乗効果のメリットはない)。そして支出をまかなうために、さらに一段と多くの特定商品への間接課税、とくに贅沢品とサービスに対する間接税を採用する一方、労働意欲を弱め脱税を強めるような所得税、法人税、一律の消費税を減らす。


 しかしさらによいのは、インフレのリスクがなく債務が問題の場合、景気後退を克服し債務返済に必要な金を、自分が作り出すあるいは中央銀行に作らせる権利が政府にはある、という理性の声に耳傾けることだ。だがここでも時代遅れのイデオロギーの死んだ手にぶつかる。 政府の過剰支出が手におえないインフレをもたらした戦後期の産物のイデオロギーだ。あの日々はもう過ぎた、もしかして永遠に。

 全ての先進国経済に共通する今日的問題は、国内で生産する商品とサービスへ個人消費を活発にすること。財政保守派は日本に多いが、彼等が、需要が供給を追い越した過去の経済戦争と同じ戦いを、われわれに強いることを許すべきでない。われらが「緊縮」中毒の、ヘアーシャツ・イデオローグたちは未だわかっていないが 今日、問題は完全に逆になったのだ。