Tokyo's Little Italy.

• Author: PEMPEL, T.J.

Is Japan's LDP similar to Italy's Christian Democrats of the 1970s and 1980s -- forever plundering the public treasury to stay in power?

Sometime before October of this year and likely by June, Japan's new prime minister, Mori Yoshiro, will dissolve the Lower House of parliament forcing voters to slog through their seventh parliamentary election since the country's asset bubble burst ten years ago. As the election approaches, far too many analysts will fret over the wrong questions: Will Japanese voters elect a government capable of getting the economy back on track? Will Japanese voters continue to tolerate a decade of slow-to-no growth? What policies should a new government adopt for macro-level growth? Answers to these questions are by no means trivial, but they too easily presume that Japan's next election will have more than marginal effects on the deep structural problems of Japan's political economy. It will not.

Japan's next election is unlikely to have a major impact on the economic problems plaguing the country for two major reasons. First, the options presented to voters are almost certain not to involve stark economic alternatives. This should not be surprising. Citizens in most countries, including Japan, rarely confront the sharp choices between personalities and economic policies that arose in Britain in 1979 or in the United States in 1980 when Margaret Thatcher and Ronald Reagan campaigned for and unleashed a wave of new economic policies that broke with decades of prevailing practice. In the next Japanese election, the major political parties will offer voters no such dramatic economic alternatives. Second, a major overhaul in Japan's political economy is already underway, driven largely by forces outside the electoral arena. The next election is not likely to have more than a modest impact on the speed with which structural changes proceed; it is unlikely to affect its direction or its overall outcome.

For most of the 1990s, Japan has been undergoing massive structural changes in its political economy. Its old regime has collapsed, and a new regime is in the process of taking its place. The key changes revolve around the collapse of the old regime's two central pillars: unchallenged conservative political hegemony and high economic growth. Both have by now become elements of a past that is unlikely to return. These two, in turn, rested on several rather unusual structures that are also fast being eroded.

Politically, conservative dominance relied on the ability of the Liberal Democratic Party (LDP) to maintain a very unusual socio-economic coalition. It comprised a wide swath of Japan's enterprises -- its largest and most sophisticated firms, its smaller sub-contractors and distributors, its farm population, as well as a substantial portion of its professionals. Also unique among the industrialized democracies of the world, Japanese organized labor was politically marginalized. By the 1960s, the Marxist socialist and communist parties supported by organized labor had no credible chance of forming or entering any government. Finally, conservative predominance relied heavily on an unusual electoral system that allowed parliamentary seats to be won with as little as 12 to 15 percent of a district's vote and on a bureaucracy that wielded a high degree of regulatory and policymaking autonomy.

Economically, the old regime of high growth was helped by several things: by buffers preventing most foreign direct investment (FDI) or manufactured imports that could compete with Japanese-owned firms; by a capital market insulated from world capital markets and subject to high levels of government and central bank control; by a small number of huge conglomerates (keiretsu) with extensive vertical ties to small scale domestic suppliers and distributors and horizontal ties to one another; and by an almost exclusively domestic labor-market that ensured long term job guarantees to a significant portion of the (male) work force.

Despite the fact that the LDP has regained a preeminent position in electoral politics since it split in 1993, and has been at the core...