DEVELOPMENT: Three Cheers For Japan, Sneers for IMF, World Bank

By Suvendrini Kakuchi Reprint | | Print |

Suvendrini Kakuchi

TOKYO, Jul 17 1996 (IPS) - Japan’s climb to the top of the pedestal in the economic arena, was largely a result of shrewd government investment — not only in the industrial sector, but even more importantly in human development.

In particular, the emphasis that post-war Japanese governments placed in the education sector proved a guarantee for long-term economic development and a general high standard of living for most of its population.

That is the conclusion of the United Nations Development Programme’s (UNDP) 1996 Human Development Report (HDR), which was officially released in Tokyo Wednesday.

“The theme of the report for 1996 is based on the findings that there is no automatic link between economic growth and human development,” Richard Jolly, chief architect of the report said at the launch. “The link is the sensible policies of governments that stress human development to ensure economic growth.”

And for that, Japan and Sweden got high marks, say UNDP officials, saying this was the main reason why the Japanese capital was selected for this year’s launch of the annual UNDP report.

“The Japanese example incorporates much of the UNDP Human Development Report which stresses the importance of sensible policies in encouraging economic growth towards the overall upliftment of the people,” said Tokyo University’s Professor Tsuneo Ishikawa who was invited to attend the report’s launch.

Another Japanese academic, professor Hiroya Ichikawa of Sophia University, in touting his nation’s own success, took a dig at the Bretton Woods multi-lateral financial institutions, the International Monetary Fund (IMF) and the World Bank.

According to Ichikawa, the structural adjustment policies of the IMF which have been prescribed for a number of developing countries in Africa, Asia, Latin America and the Caribbean were flawed because they were not “people oriented”.

The IMF policies, such as reducing wages, raising interest rates and focusing on industrialisation are at the expense of the people who are in need of greater government investment in the health and education sectors, he said.

Jolly also remarked on the policies of the Washington-based institutions and said he had heard of comments from IMF and World Bank officials describing the 1996 report as “anti-growth”.

Not so, says the report’s author. Instead, among other things, he stressed that what must be avoided is “growth that is jobless” and which does not allow “human beings to develop themselves”.

“Our biggest challenge is the battle against orthodoxity that has placed too much emphasis the market,” he said. “The hardest thing for the world is to accept the fact that in the market economy the compassion is not there. Our message is difficult to accept in practice.”

In many respects, the Japanese model matched growth with economic employment and human development.

Social sector spending, especially after World War II, focused heavily on educational and health reforms which resulted in the high standards of secondary and tertiary level education and drastically lowered infant mortality rates.

And while the Japanese economy is private sector-led, it was the government’s initial investment in the education and health that generated the qualified personnel that now staff the commercial enterprises.

“There is no doubt that Japanese governments have played a key role in bringing Japan into the first course of the economy but not the second,” Ishikawa said. “These polices, which were formed with the goal of catching up with the West, reduced poverty significantly,” he added.

Since the late 1950s, Japan’s infant mortality rate has fallen almost tenfold, from around 40 per 1,000 live births to 4.3 per 1,000 in the 1990s — one the lowest in the world.

Expenditure on education in the 1960s and 1970s — was five per cent of the Gross Domestic Product (GDP) — the highest for any single sector in the national budget.

Into the 1990s, Japan has remained ahead of the pack with more than 2,000 dollars per head spent on education and health, compared to the world average of 336 dollars.

This, coupled with quick advances in the technological sphere, resulted in an educated and professional workforce that allowed entrepreneurs to expand their businesses rapidly.

“Contrary to the accepted norm, it was not exports that led Japan’s economic success but the domestic economy which was fostered by the production of consumer durables,” Ishikawa observed.

Another key investment policy was in the fostering of small and medium companies and the agricultural sector, the latter benefiting from selective price support measures which stemmed the population flow from the rural areas to the urban areas.

This compares favourably for example, with the situation that exists today in rapidly developing South-east Asia where large flows of foreign capital investment are directed at the urban centres.

With little incentives from the respective governments, tens of thousands of farmers are abandoning their lands in search of work in capital cities.

The Japanese government policy of providing easy credits to small and medium-sized enterprises similarly meant that much of the population was afforded the opportunity of starting their own businesses. The spin-off was expanded employment opportunities.

Today, 50-60 per cent Japanese workers are now employed in companies with a staff of less than 100 people. Compare this to the fact that Japan major conglomerates employ less than a quarter of Japan’s labour force.

Stringent land reform and tax policies ensured that the less well-off could secure homes, while it was the rich more than the poor that filled up government coffers.

Between the early 1960s and the mid-1980s, the share of national income received by the wealthiest 20 per cent of households fell from 50 per cent to around 45 per cent while that of the poorest 20 per cent rose from five per cent to 10 per cent.

“One crucial reason for this double success in growth and human development was a commitment to equity in opportunities,” says the UNDP report.

Analysts acknowledge however that even post-war Japan started off at an advantage since it had a historical commitment to educating its population and a well-defined infrastructure, particularly with regard to transport and postal services.

This point was also taken up by Marina Ponti of the Italian- based non-governmental organisation ‘Mani Tese’ which campaigns for justice, solidarity and respect among people.

“While the lessons learnt from Japan’s experience or that of South Korea, are very important, it is difficult to emulate the model in other parts of the world which have a different culture and historical background,” she pointed out.

Moreover, there are a few blotches on the Japanese report card like on the environmental fall-out from industrialisation, reduced job security and empowerment of women.

“There are new problems in Japan that need to be addressed,” explained Sakiko Fukuda, Japanese head of the UNDP in Japan and co- author of the report.

“On gender equality Japan lags behind the OECD (Organisation for Econocmic Cooperation and Development) countries and even some developing countries such as Mexico. There is also much scope in improving the people’s living standards and the environment,” she said.