On the Road to Ruin
Reuters has published an extremely interesting article on Shinzo Abe, the father of so-called 'Abenomics'. His economic policy is in essence little more than a warmed-up hoary inflationism, the quack cure that governments have employed throughout history in attempts to 'fix' their economies. It always 'feels good' in the beginning, as asset prices rise and numerous economic activities are set into motion that would never be considered absent the inflationary policy. What happens in the end is best summarized in the conclusion to a speech Fritz Machlup once delivered on the consumption of capital in Austria during the interwar period:
“Austria was successful in pushing through policies which are popular all over the world. Austria has most impressive records in five lines: she increased public expenditures, she increased wages, she increased social benefits, she increased bank credits, she increased consumption. After all these achievements, she was on the verge of ruin.”
The main difference is perhaps that Japan is on the verge of ruin already, at least its government is. On the other hand, Japan also still has a lot of wealth that can be consumed and destroyed by Abe's policies. The de facto insolvency of the government is not an obstacle to additional wealth destruction, quite the contrary in fact.
Japan's current economic policy also has strong mercantilist overtones, as the devaluation of the currency is held to help its export sector. That this is to the detriment of everyone else in Japanese society as a rule remains unmentioned in the press, as it remains unmentioned that the export sector can at best hope to increase its profits temporarily, namely until prices and wages in Japan have adjusted to the devaluation. On the whole, Japan will end up poorer than it was prior to devaluation – and that is without considering the growing potential for a crisis that utterly destroys its currency and makes its outstanding stock of debt worthless.
Japan-Style National Socialism
However, as the Reuters article points out, 'Abenomics' is really not much more than an afterthought to Abe's true agenda, an add-on he thought of because a number of polls indicated that it would be politically more opportune to pursue the 'reflation' of the economy first.
His real goal however is to alter Japan's constitution in order to make it more similar to that of pre-war Japan. He and his clique of closest supporters call themselves 'true conservatives', but it would be more fitting to call them 'nationalists'. In fact, the overall political agenda is best described as national socialist.
Abe is following in the footsteps of his grandfather Nobusuke Kishi, a wartime cabinet minister and later prime minister. Below are a few pertinent excerpts from the Reuters article; note how Abe's comeback is shrouded in mysticism – he visited a 'shrine deep in the mountains' to be 'reborn'. In short, he is a true Führer personality, blessed from on high.
“Conservatives see the 1947 pacifist charter, never once altered, as embodying a liberal social order imposed by the U.S. Occupation after Japan's defeat in World War Two.
Abe's unlikely comeback was engineered by a corps of politicians who called themselves the "True Conservatives," many of whom share his commitment to loosening constitutional constraints on the military and restoring traditional values such as group harmony and pride in Japanese culture and history.
While the cultural-political agenda is what drove them, Abe and his backers also came to realize that voters cared most about the economy, so this time, they made it the top priority.
Months after resigning in September 2007, Abe visited Kumano Shrine deep in the mountains of western Japan, known since ancient times as a place of healing and resurrection. Few thought then he would be politically reborn as one of the country's most popular leaders. "It is said that if you make a pilgrimage there, you will be restored to life," said one government source close to Abe. "I said, ‘Let's go there and you will surely come back.'"
Soon after his resignation, Abe and other LDP conservatives set up the True Conservatives Association. Its goals were to protect tradition and culture, revise the "post-war regime", protect national interests and earn international respect.
Central to the group's world view is a belief that the constitution, drafted by U.S. Occupation officials in February 1946, not only restricted Japan's right to defend itself but also eroded traditional mores by emphasizing individualism and citizens' rights over social harmony and duty to the state.
"The constitution puts individual rights too far out in front," said Komori, who with Kasai later became core members of a more recent corporate-executive support group for Abe, the Cherry Blossom Association. "Mr. Abe is extremely sensitive to the merits of restoring that sort of Japanese spirit. I was in great agreement with that," he told Reuters.
While Abe and his allies remained committed to their conservative agenda, the failure of his first administration had taught them one scarring lesson: Voters care more about pensions and pocketbooks than changing the constitution and reviving patriotic education. The program of drastic monetary easing that became central to "Abenomics" took root in Abe's agenda after the triple disasters of March 11, 2011 – a mammoth earthquake, tsunami and nuclear crisis.
In June of that year, senior LDP member Kozo Yamamoto set up a group calling for a 20 trillion yen ($200 billion) reconstruction program to be funded by debt purchased by the Bank of Japan. Yamamoto invited Abe to head the group. It later morphed into an association urging the central bank to set a 4 percent inflation target – considered an extreme notion to which the BOJ was staunchly opposed. Abe accepted the role, and through his association with the group and its mentors such as Yale University professor Koichi Hamada, became a convert.
Unlike during his first term, cabinet ministers rarely speak out of turn. Abe is kept front and center in the media through interviews, news conferences and Facebook postings. Abe spends considerable effort wooing media executives but shuns the brief daily stand-up Q&A sessions with reporters that tripped him up the first time.
For all the change in style, those close to Abe say his ultimate goal remains unchanged. "He intends to be in office for four or five years and in the end, he wants to revise Article 9 of the constitution," said another government source. The pacifist clause, if taken literally, bans Japan from maintaining a military, but has been stretched to allow armed forces now bigger than Britain's.
This time Abe is pushing first for procedural changes to the constitution's Article 96 to lower the hurdle for revisions. Currently, Article 96 requires that amendments be approved by two-thirds of the members of each house of parliament, followed by a majority of voters in a public referendum. The LDP wants to change that to a simple majority in parliament, followed by the public vote.
Critics say such an amendment would leave the constitution vulnerable to easily shifting political winds.”
In summary, Abe and his allies are militarist nationalists pursuing a socialist economic program. Note the frequent assertions that the current constitution is too focused on individual rights, which are held to be 'too far out in front'. Instead, the Abe group wants the focus to shift to 'duty to the State', which is allegedly more in keeping with the 'Japanese spirit'. Now that they have resurrected the pre-war monetary policy of Korekiyo Takahashi, which helped finance the massive armament of Japan's military in the run-up to Word War II, they want to take the next logical step and enlarge the military – which requires the renunciation of the constitution's pacifist 9th paragraph. As an aside to the inflationary policy, it is noteworthy that Yale University professor Koichi Hamada is apparently responsible for cooking up this part of 'Abenomics'. Readers may recall in this context that the chief of Argentina's central bank, Mercedes Marco del Pont is also Yale-educated and not only has driven the Argentine peso to the verge of a hyper-inflationary collapse, but espouses what can only be called extremely bizarre notions about inflation and its causes. It seems Yale produces a great many monetary cranks.
What is perhaps most disturbing about all of this is that the US are said to be in favor of the changes Abe plans, especially the re-militarization of Japan:
“Japan's security ally, the United States, would likely welcome an easing of the constitution's constraints on Japan's military.”
This is quite possibly the result of fiscal deliberations – if Japan expands its military, it is probably reckoned that it will shoulder more of the cost of defending the Pacific region against imaginary enemies. The fact that Abe also plans to cut down individual rights is likely regarded as a secondary problem. Actually, it is probably not regarded as a problem at all, which is sad testament to the fact that the values that were espoused by the founders of the US have come to be regarded as political obstacles rather than a blessing worth standing up and fighting for.
The Japanese electorate has fallen for a snake oil seller who promised to revive the economy with methods that have failed spectacularly throughout history. Not only that, he successfully concealed his true intentions from voters, which essentially boil down to restricting individual rights in favor of Etatism and rearming and expanding Japan's military. What for would one want to expand one's military, if not war? Abe is bad news in every respect.
Shinzo Abe, nationalist and inflationist: blessed from on high since his pilgrimage to a famous shrine deep in the mountains.
(Photo credit: AFP)
Abe's role model: Nobusuke Kichi, a member of the 'Imperial Rule Assistance Association' and Japan's minster of commerce and industry from 1941 to 1945 and prime minister from 1957 to 1960.
(Photo: Wikimedia Commons)
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