CHAPTER 1

INTRODUCTION

 

            Why do politicians sometimes make unpopular or contested policies that could damage their electoral prospects?  This is the question this book seeks to answer.  Self-interest permeates current academic and journalistic depictions of politicians’ behavior.  But politicians still sometimes make decisions and policies that do not sit comfortably with such depictions of politicians as self-interested rational goal seekers.  One cannot deny the strong forces of self-interest in politics.  But there is the possibility that explanations solely from the standpoint of self-interest do not accurately reconstruct political behavior and may even hinder the realization of the potential for efficacious democratic policy making.  This is a study of loss-imposing policy making.  It probes the above question by examining the case of Japan, but is meant to be a first step toward understanding loss-imposing policy making in liberal democracies as well as in other polities. 

 

The Puzzle

Many political scientists have long described or assumed politicians as reelection-seekers (e.g., Mayhew, 1974; Fiorina, 1989; Arnold, 1990) and political parties as seeking control of government (Downs, 1957).  This electoral incentives assumption makes sense much of the time, and its use as a theoretical assumption may be justified to the extent that politicians will not be able to pursue whatever other goals they may have if they fail to get reelected. 

Consistent with the expectations of electoral incentives theory, Japanese politicians spend significant time and energy cultivating votes.  They create personal vote-mobilizing machines (koenkai) in their constituencies and spend ¥100 million (=US$1 million, $1= ¥100) a year per politician on salaries for their secretaries who maintain the machines (Hirose, 1989; Iseri, 1988; Ishikawa and Hirose, 1989).  In election years, they double the spending.  In exchange for votes, politicians engage in the provision to koenkai members of services such as assistance in marriage arrangements, school admissions, job placement, issuance of official permits, license applications, and dispute settlements (Fukui and Fukai, 1990).  The importance of reelection can also be inferred from the fact that many politicians have engaged in fund-raising activities of a legally dubious nature that, at worst, would risk the possibility of prosecution, as attested to by many money scandals in postwar Japan (see, e.g., Murobushi, 1981). 

When applied to the study of policy making, electoral incentives theory expects that politicians make policies that serve geographically concentrated or group-specific interests as they are elected from small districts, and therefore that their efforts to make policies serving broad and general interests (e.g., national interests) are likely to be frustrated more often than not (Mayhew, 1974).  In Japan, too, election-driven, particularistic politics is evidenced by a large number and volume of government programs and subsidies targeted at such constituent groups as farmers, small- and medium-sized businesses, industries, and local governments, as well as various tax breaks for them (e.g., Calder, 1988; Hirose, 1981; Kishiro, 1985; Nihon Keizai Shimbun-sha, 1983).

            However, although politicians attend to narrow interests much of the time, they sometimes manage to legislate policies that serve broad interests at the expense of particularistic interests (for such U.S. cases, see Kelman, 1988; Quirk, 1990) or electorally unpopular policies that can potentially damage their electoral prospects.  Politics in advanced as well as newly emerging democracies is replete with cases of politicians seeking electorally unpopular policies during economic hardships, including those designed to reduce budget deficits such as expenditure cuts, the termination of government programs, and tax increases, or combinations of all (for stabilization programs in new democracies, see Bresser Pereira, Maravall, Przeworski, 1993).  The downsizing of the welfare state currently underway in many advanced democracies typically requires politicians to make electorally difficult policy decisions.  Market deregulation and liberalization also sometimes entail transitional costs to the public and vested interests in the short run and may impair incumbent governments’ and politicians’ abilities to collect votes.

Politicians also resolve various conflicts of interest幼onflicts between electoral and political goals, short- and long-term objectives, party leaders and backbenchers, and constituent and geographical groups謡hich appear irresolvable in light of their self-interested cost/benefit calculations.  They sometimes do so without fundamentally satisfying the competing interests.

            We here have a puzzle: If legislators are rational reelection-seekers, how do they manage to legislate policies that are opposed by constituent groups and the public or that may adversely affect their reelections?  The following cases of tax and electoral reforms in Japan exemplify such puzzling phenomena.

Consumption tax

            In the past two decades, the Japanese government and ruling parties have undertaken three attempts to introduce a consumption tax (Prime Ministers Masayoshi Ohira, Yasuhiro Nakasone, Noboru Takeshita) and two other attempts to increase its tax rate (Prime Ministers Morihiro Hosokawa, Tomiichi Murayama).  In 1979, the Ohira administration (Liberal Democratic Party [LDP]) attempted to introduce a new five-percent consumption tax to reduce deficits in the national budget and stabilize government revenues.  He announced the intention to introduce the tax in the same year he planned to dissolve the lower house and hold a general election.  But he was forced to withdraw the tax proposal during the election campaign due to opposition both within and outside the governing LDP.  Despite the withdrawal of the proposal, the LDP suffered a setback in the election.

            Eight years later, the Nakasone administration (LDP) sought again to introduce a five-percent new consumption tax to accomplish the fiscal goals unattained during Ohira痴 tenure.  But this attempt also failed.  Nakasone reluctantly scrapped his tax bills in the face of obstructionism by the opposition parties in the Diet and by the public that had caused the LDP a historic defeat in the 1987 nationwide local elections. 

            In the following year, despite the two previous failures and electoral punishments, the Takeshita administration (LDP) launched another attempt to introduce a three-percent consumption tax.  This time, the new tax passed the Diet.  But the LDP lost its majority in the 1989 upper house election that followed the introduction of the tax.

            In 1994, Prime Minister Hosokawa of the anti-LDP eight-party coalition government that had replaced the LDP in power attempted to raise the consumption tax rate by replacing the three-percent tax with a seven-percent 渡ational welfare tax” with a view to stabilizing government revenues and financing income and residential tax cuts to stimulate Japan痴 economy in recession.[1]  The attempt was, however, thwarted by opposition from most of the coalition partners.  Then in late 1994, the Murayama coalition government (the LDP, Social Democratic Party [SDPJ], New Party Harbinger [Sakigake]) successfully legislated the tax increase from three to five percent.

What caused these failures and successes?  Why did the five administrations seek tax increases when it must have been evident that the policies would not be electorally popular?

Electoral reform

            A series of political scandals led the LDP government in the late 1980s and early 1990s to consider the alteration of the current multi-member district (MMD) system for lower house elections.  Its rationale was that the system bred money politics and corruption.  In 1991, Prime Minister Toshiki Kaifu proposed the institution of a single-member district (SMD) system combined with proportional representation (PR).  But his reform bills were scrapped due to opposition both within the LDP and from the opposition parties.

            Prime Minister Kiichi Miyazawa (LDP) then submitted reform bills proposing a simple SMD system in 1993.  But opposition by many LDP members deterred his administration from making compromise with the opposition parties that proposed a mixed SMD-PR system, and the bills were shelved.  A non-confidence motion against his cabinet was subsequently submitted by the opposition parties and approved with the help of reform-minded LDP members’ dissent.  Miyazawa dissolved the lower house.  As fifty-four politicians broke away from the LDP to form two new conservative parties, the LDP fell from power when it was unable to secure a majority in the following general election.

            Prime Minister Hosokawa痴 eight-party coalition government, which had replaced the LDP in power, submitted bills proposing a mixed SMD-PR system.  Although approved in the lower house, the bills were rejected in the upper house, when SDPJ politicians of the coalition joined the now opposition LDP in voting against them in early 1994.  The coalition subsequently made drastic concessions to the LDP痴 reform proposal, and the amended bills謡hich were almost identical to the Kaifu administration痴 scrapped bills用assed the Diet.

            These cases raise the following questions: Why should reelection-seeking politicians have had to change the electoral system through which they had been elected?  Why did they accept the reform that they expected would introduce uncertainty and transitional costs to their reelection?  Why did Kaifu痴 and Miyazawa痴 proposals fail and Hosokawa痴 succeed?  Why did the anti-LDP coalition parties accept the same electoral system they had fiercely opposed during Kaifu痴 attempt? 

 

            We examine these cases of Japan痴 tax and electoral reforms in the second part of the book to shed empirical light on the puzzle of the making of loss-imposing or contested policies.  In tandem with its first half devoted to theoretical exploration, this book studies the conditions under which politicians can make loss-imposing or contested policies and the mechanisms of the policy process that determine the legislative success and failure of such policies.

Limits of Electoral Incentives Theory and The Importance of Policy Legitimacy

            Electoral incentives theory explains, with relative ease, why politicians lean toward particularistic policy making.  But the theory does not give us many clues about why they sometimes make unpopular or contested policies, when those policies can compromise their electoral goals.  Some scholars have presented electoral incentives explanations for loss-imposing or contested policy making, but they are not cogent ones. 

For instance, Mayhew (1974, pp. 141-158)謡ho postulates members of U.S. Congress as reelection-seekers and deduces particularistic policy outputs as its consequence耀eeks to solve the puzzle by alluding to the multiplicity of politicians’ goals and the different incentive structures facing them.  He argues that members of Congress are concerned also with the maintenance of the prestige and power of Congress and that it provides elected leaders with selective incentives to engage in institution-protective activities that go beyond individual members’ electoral interests; hence, this serves as a check on particularism (for a similar line of argument, see also Fenno [1973] who stipulates reelection, influence within the House, and good public policy as the three goals of House members).

            These scholars correctly observe the presence of actor motivations and other forces that do not necessarily add up to particularism.  But the question remains as to the mechanisms by which legislative leaders break free of particularism and serve general interests, and the conditions under which they alternate in aiding individual members’ electoral quests and maintaining the prestige and power of Congress.

            Arnold (1990) explains that politicians feel compelled to support a policy serving diffuse or general interests if its general costs or benefits are salient or potentially salient to substantial numbers of citizens, if coalition leaders act to encourage traceability for general effects rather than for group or geographic effects, and if general benefits are highly salient and group and geographic costs appear negligible.  While sound in telling general patterns, his explanation appears unsuitable for explaining some particular cases.  Consider the cases of Japan痴 consumption tax studied in this book.  In Arnold痴 view, legislators should be the least likely to accept a policy such as the creation or increase of a consumption tax that would impose costs upon all economic groups, unless there were means to conceal identifiable governmental actions producing the costs or to make politicians’ individual contributions to the costs invisible.  But the costs to citizens of the new tax introduced by Prime Minister Takeshita in 1989 were large預 three-percent tax would be levied on all goods citizens and firms purchased.  The traceability of the costs back to politicians’ individual actions was also strong, as the tax drew national attention and the political parties’ positions and actions were well covered by the media.  Arnold痴 theory, then, would expect politicians to kill the tax bills.  But the governing LDP managed to pass the bills with the tacit help of two opposition parties (the CGP and DSP).  Similarly, the costs of the Murayama coalition government痴 tax increase (1994) were large, and the traceability chain was strong.  But the coalition successfully legislated the tax hike with no electoral retribution.

            Take also Japan痴 electoral reform.  The public demanded reform.  Its costs to citizens were nil.  The traceability of the costs of no reform back to politicians’ actions would be great, as the issue received extensive media coverage.  In Arnold痴 view, then, we should expect the Japanese politicians to feel compelled to enact reform.  But they openly killed the first two reform attempts (1991, 1993).  Moreover, the legislative failure in 1993 turned out politically costly to governing party politicians; it resulted in the LDP痴 loss of control of government for the first time in 38 years, and Prime Minister Miyazawa was forced to resign as party president.

            Electoral incentives theory also has difficulty explaining situations in which politicians seek unpopular policies and actually lose elections.  Prime Ministers Ohira痴 and Takeshita痴 respective attempts to create a consumption tax are cases in point.  Ohira proposed a new tax in the year of the 1979 general election.  He withdrew the proposal prior to the poll, but his LDP suffered a major electoral setback.  Likewise, the LDP痴 loss of a majority in the upper house election followed Takeshita痴 introduction of a consumption tax in 1989.

            Rational choice scholars might invoke the factors of uncertainty and imperfect information to explain such 妬rrational” policy decisions.  Those factors certainly characterize many decision making situations.  But Prime Ministers Ohira痴 and Nakasone痴 failed tax attempts exemplify cases in which policy decisions resulting in electoral setbacks went beyond what the factors could reasonably account for.  Both attempts cost the LDP major electoral setbacks, and the possibility of such negative consequences was readily perceivable before the elections. 

            These observations illustrate that politicians sometimes show behavior that goes counter to or beyond the expectations of electoral incentives theory.[2]  Certainly, politicians tactically use available strategies to minimize the negative repercussions of an popular policy, and the strategies may sometimes prove helpful (Arnold, 1990; Pierson and Weaver, 1993).  But to the extent that policy conflicts can be too intense or complex for the strategies to be sufficiently potent and that it can be difficult to find a solution that would satisfy the interests of all those involved, politicians need to generate support for a policy not only by coordinating interests but also by resting justification for their policy decision upon something other than self-interest. 

I show in this book that 菟olicy legitimacy” is such a factor that can preempt or override the forces of self-interest and makes possible the implementation of a contested or unpopular policy that runs counter to the interests of particular political actors involved.  I elucidate the dynamics of policy processes that affect legislative success and failure by using the concept of policy legitimacy.[3]  I explain why policy legitimacy is important to a policy痴 obtaining approval and what factors facilitate or impede legitimacy formation by examining the case of policy making in Japan. 

            In the second part of this book, I examine the two issues of the introduction and increase of a consumption tax, and electoral reform to show the empirical relevance of the policy legitimacy argument.  The tax issue includes attempts to introduce a new tax by three administrations and attempts to increase its tax rate by two administrations.  Electoral reform includes attempts by three administrations to change the electoral system for the lower house.  As each issue contains both successful and unsuccessful cases, we can demonstrate the conditions in which similar policies are approved at some times and not approved at other times.[4] 

 

 


[1] The coalition was comprised of the Social Democratic Party (SDPJ), Renewal Party, Clean Government Party (CGP), Japan New Party, Democratic Socialist Party (DSP), New Party Harbinger (Shinto Sakigake), Social Democratic League, Democratic Reform League.

[2] The institutional perspective (e.g., Steinmo, 1993; Weaver and Rockman, 1993) does not help us understand the kind of loss-imposing policy making we are concerned with, either.  A simple institutional explanation would hold that Japan痴 parliamentary system with the strong executive should make loss-imposing policy making easier.  But as will be mentioned (Chapter 2, footnote 28), despite the governing LDP痴 38-year majority status, government bills were often shelved due to opposition by minority opposition parties.  In the present study痴 three failed cases of tax increases, too, the administrations were unable to legislate tax increases although they had a parliamentary majority.  Also, simple institutional explanations do not account for different outcomes of similar policy attempts in the same country.

[3] The concept was originally taken up by George (1980).

[4] These case studies are by no means a test of my policy legitimacy argument.  Nor are they representative of the entire population of policies and legislative bills.  However, they offer interesting cases through which to study the behavior of politicians and parties and the determinants of the fate of a policy attempt in Japan.