Irrational highway demands

Gregory Clark (Honorary President of Tama University)

The debate over privatizing Japan's four highway and bridge corporations has moved from the absurd to the ridiculous.

Privatization advocates have long been upset over the fact that some highways are "unprofitable" in the sense that they are unable to cover all construction, finance and maintenance costs from toll revenue. They point angrily at the 40 trillion deficit run up by the four corporations as a result. They demand that the privatized entities set up to replace the corporations pay off this deficit and desist from building any more "unprofitable" projects.

Curiously, in their calculations of "unprofitability," there is no allowance for the external economies lower transport costs, boosts for regional development provided by these projects.

Elsewhere in the world, it is taken for granted that such external economies mean construction and other costs should be funded mainly by tax monies. Usually there is no attempt even to impose tolls. Only in Japan do we find this weird demand that all costs be funded from toll revenue.

But the absurdity does not stop there. The recent decision by the government to retain some control over the privatized entities is condemned as a sellout, despite the fact that government loan guarantees will be crucial to the "profitability" of the privatized entities. A promise to go ahead with all existing plans for new projects, including the partly completed and badly needed second Tomei highway, is ridiculed.

Strangely, there is no demand for "profitability" when Japan builds ordinary roads and bridges. It is taken for granted that they serve a public function and should be funded by tax monies. But when it comes to major highways and bridges, different principles apply.

Part of the problem is the inefficiency, waste, feather-bedding and corruption that surrounds major public works in Japan. The corporations have been as guilty, if not more guilty, than most.

Ending the waste and corruption is one thing and the shifting of control over the highways away from Japan's tribalized ministries and into the hands of more independent entities will no doubt help. One of Prime Minister Junichiro Koizumi's better points is his determination to wrest executive power from turf-protecting ministry bureaucrats and place it under central control. But the critics want more. They want a virtual stop to all new highway construction. They want to throw out the baby with the dirty bath water.

We see the same lack of logic in the demands for privatizing the post-office system, whose main sin has been to be far more efficient than the private banking system in soaking up Japan's dangerously high level of surplus savings and diverting them to useful public purposes, like highways and bridges. True, we sometimes see the sticky hands of Japan tribal bureaucrats and politicians at work. But that, too, is hardly a good reason to throw out a perfectly healthy baby.

Part of the problem is the Japanese reluctance or inability to think conceptually. The external economies from transport and quite a few other public projects are abstract, as is the role of the post offices in helping rescue Japan from the swamp of domestic demand insufficiency. They lack direct expression. So they are ignored. Meanwhile, obsessive attention goes to those stick-out figures for national and corporation indebtedness, as if they proved everything.

In most advanced nations, calculating the external economies from new transport projects has become a science in itself. Many universities have transport economics departments. In Japan the concept barely exists.

In official committees on shinkansen and bridge-building projects, I meet blank stares when I ask whether there is any calculation of external economies, or kaihatsu koka as they are called in Japanese. Only recently, as Koizumi tries to defend his decision to retain some government control over corporation functions, has the term begun to appear in public debates.

Japan's first and possibly only genuine Nobel Prize winner, Hideki Yukawa, made the same point even more strongly at a 1964 international conference on Japanese culture. As he put it, the Japanese mind is "incapable" of dealing with the abstract. It can focus only on the tangible and the concrete.

I would add that the Japanese mind also seems to find it hard to relate to the big and unwieldy. The small, compact and artistic bento boxes and bonsai is more to its liking.

Incredibly, many in the public and media even opposed the Tohoku highway and shinkansen railway projects that so successfully opened up northern Honshu to the rest of Japan in the 1980s. Too massive and obtrusive was one of the objections. These projects have not only provided enormous economies; today they are even generating enough direct revenue to cover costs.

If the reformers want a target, they should take a look at Japan's self-indulgent Self-Defense Forces. These people soak up around 5 trillion in tax monies every year. Their accumulated "deficit" would be far in excess of 40 trillion. Constantly we are confronted with examples of their waste, inefficiency and bid-rigging corruption. In parades they cannot even march straight.

When they go abroad on Rwanda-style peacekeeping missions, they do little more than secure a site for safe living, complete with Japanese bath. In Iraq, enormous amounts are being spent for an operation that promises little more than self-glorification and a minor water-purification exercise.

If ever there was a candidate for privatization, it is this outfit. But don't expect the reformers, Koizumi especially, to be able to get their minds around this idea.

(This article appeared in the March 30, 2004 issue of The Japan Times )