Troubling “For-the-Time-Being” Economic Policies
Despite the realization that this crisis is the worst in a century, the policies toward it seem very soft. They act as if they are ordering a beer in an ordinary bar without thinking.
To deal with this worldwide financial crisis, it is crucial, first and foremost, to stem the meltdown. But the recent G20 meeting did not propose any decisive solutions. It is important to build a brand-new framework that is modeled on the Bretton Woods conference of 1944, which sorted out post-war global rules on finance and trade.
In Japan, we have started seeing various effects which are caused by uncertainty over the financial institutions. Decent companies cannot make a profit due to liquidity problems, and end up going bankrupt with a black-ink balance sheet. In this harsh reality, urgent policymaking is imperative. At the same time, the financial system needs to be reconstructed with middle-term and long-term visions, or we will not be able to overcome this difficult situation.
Then, how much is enough to prevent the real economy from cooling down? I was once critical about an almost automatic response of financial intervention, but the scale of the crisis is beyond our knowledge. Worldwide demand has shrunk rapidly in a short period, and government needs to supplement the losses.
A government’s policies cannot cover it all.
However, a government can coordinate the twenty-first-century version of the New Deal to overcome the crisis. I think that investing in green infrastructure and health infrastructure are viable policies for developed countries like Japan and the U.S., if not for developing countries.
Green and Health Infrastructure
Dam construction and forestation projects can be good policies of the New Deal as far as employment is concerned, but the New Deal policy of our time is to move up investment that should be done for the future under the government’s initiative.
Investment in green infrastructure is not about forestry but about anti-global warming policies, to invest in industries such as a solar panel plants, a lithium battery, and an electric car that can in effect contribute to industrial competitiveness.
Health infrastructure is to maintain needed medical and health care services in a hyper-aging society.
Probably it is not a minority’s idea to feel a need for a New Deal for the present. But few talk about a principle of “New Deal Alliance” or “New Deal Realignment Along New Deal Policies.”
F. Roosevelt was elected president of the U.S. by calling for the New Deal in 1932 after the Great Depression. The policies are-well known, but not the preconditions. That is, with the New Deal, the U.S. Democratic Party gained wider support among workers and new immigrants in the cities, and consolidated its constituency.
This new political alliance, which rearranged the popular vote, is probably the most popular coalition among other political realignments in the world.
Integrating the Political Climate and Policymaking
This New Deal alliance is believed to have continued until 1968, with the exception of Eisenhower. And it was this period when the federal government grew bigger. To put it in an extreme way, it was such a change that the Fed appeared ahead of the political scene for the first time. Therefore, those in the U.S. who oppose big government go back to that period, and criticize it.
On the other hand, a political realignment in Japan happened very suddenly when support over the Oso administration plunged. However, the context is within Nagata-cho, Japan’s Washington D.C. A political realignment means rearranging politicians and also parties. But it is hardly sustainable for a long term because it centers on the number of seats needed to win the government and lacks reorganization of popular support.
Policies and political situations are often discussed separately. But the New Deal was actually about the emergence of the government’s increasing reins among alliances and organizations. The relations between those groups inside Nagata-cho and policymaking are weak, and I’m worried about it. In this worst crisis in a century, policies and political climates should be dealt with together.
If we analyzed political and economic changes since the Great Depression, we would realize that New Deal policies and the New Deal alliance are two sides of the same coin. In Japanese politics, we wonder if we could illustrate strategies for the 21st century New Deal alliance based on such policies.
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