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Turncoat TechnocratFormer Japanese insider criticizes government waste
By Peter Landers in Tokyo
Far East Economic Review
April 30, 1998
T
he message is a familiar one: Wasteful public-works projects are endangering Japan's economic future. It's the messenger that's the surprise: The former top bureaucrat at the Ministry of Transportation. Breaking with the tradition of tight-knit camaraderie among ex-officials, Shoji Sumita has created a national stir--and outraged his old ministry--with a new book that accuses bureaucrats of leading Japan to ruin."The new public works they're building nowadays have practically no value as investments," said Sumita, a vigorous 75, in an interview with the REVIEW. "That means we have to cover them with bonds to finance budget deficits. The basic starting point from which I wrote my book is to ask, 'Is it really right to let the debts of national and local governments keep getting bigger and bigger?'"
His answer, of course, is no--and it's clear he has hit a chord. Prime Minister Ryutaro Hashimoto is trying to revive the economy with at least ¥6 trillion ($45.6 billion) in new public spending, answering calls from foreign governments who say Japan must boost demand for goods from depressed Asian economies. But the favourable reviews of Sumita's book, not to mention his packed schedule of interviews, show that many Japanese worry whether the money will be spent wisely.
They ought to be worried, says Sumita. He notes that Japan devotes 6.9% of its annual GDP to public works, compared with less than 3% in the United States and most European countries. Drawing on his 32-year career as a bureaucrat, Sumita focuses most of his book on Japan's ports, his area of specialty at the ministry. One by one, he describes harbours in rural areas where the government has gone to great expense to build berths for huge cargo ships that will probably never turn up.
Some examples: When Sumita visited the ¥45 billion Fukui Port on the Japan Sea coast, not a single ship was docked there--although amateur fishermen found it a prime spot to cast their reels. At Hitachi-Naka north of Tokyo, a port planned decades ago in anticipation of an overflow in Tokyo Bay is finally being built, although current traffic at Tokyo Bay seems quite manageable. The project also calls for a ¥180 billion breakwater to ward off the rough swells from the Pacific Ocean.
Sumita insists that bureaucrats were more conscientious in his day. But he admits that he only fully grasped the idea of return on investment after retiring from the ministry and entering the business world in 1987 as the first president of privatized East Japan Railway, the nation's largest train operator. He now holds the post of supreme adviser to the railway company and boasts that its stock price has outperformed the market thanks to his policy of boldly reducing personnel and squeezing suppliers to cut costs.
"If you're a private company and you waste money, you're going to collapse," he says. He points to Japan Airlines as a good example of a company that's facing the music. Its president and chairman will step down after recently reporting losses of nearly ¥100 billion. "They had to take responsibility," says Sumita. "But in the case of bureaucrats, even if you build a port like the one in Fukui that is barely used, no one takes responsibility."
Even before Sumita published his book in March, concerns about traditional public works had begun to show signs of affecting policy. Hashimoto says new spending will put greater emphasis on hi-tech areas such as developing optical-fibre networks to speed up communications and installing more computers in schools.
Despite Hashimoto's talk of hi-tech programmes, however, many members of his ruling Liberal Democratic Party remain committed to the old ways. "Just what is it that's wrong with traditional public works?" demanded party elder Takami Eto at a mid-April meeting of LDP legislators, according to the Asahi newspaper.
Supporters of old-style programmes such as road building and farm irrigation cite a three-year-old government economic model that shows public works have a greater spillover effect on economic growth than tax cuts. That may be true, but the model doesn't account for the loss in confidence when average Japanese see their government piling up ¥500 trillion in debt. Fears that the future will bring large tax increases and an end to public pensions explain much of Japan's consumer pessimism today--and in turn, the nation's recession.
At Sumita's old stomping grounds, bureaucrats have a worry of their own; the fear is not of recession but that the book's popularity could lead the government to curtail spending on infrastructure--particularly ports. Although The Wasteful Spending of Bureaucrats will never be a best-seller given its technical nature, sales took off after the author appeared on national television. The publisher said 30,000 copies have been printed and a fresh print run is under way.
In retaliation, Ministry of Transport officials have drawn up a document of their own that details the book's alleged flaws. Political sources say it's being distributed to ruling-party legislators. Asked about Sumita at a parliamentary hearing on April 20, Transport Minister Takao Fujii accused him of using outdated figures.
Hideo Kayahara, a recently retired Ministry of Transport official who is criticized by name in the book, claims Sumita "doesn't understand a thing about infrastructure." Kayahara, 58, says Sumita's proposals to concentrate port facilities in urban areas would impoverish rural regions by forcing companies there to pay extra for land transport. "I tried to explain things to him any number of times, but once they pass 70 it's hopeless."
In another personal swipe, Kayahara asks why East Japan Railway shareholders should pay for Sumita's palatial office suite at company headquarters as well as a full-time secretary to help him write his books. "Why don't they eliminate that and use the money to cut train fares?" Kayahara asks.
Sumita doesn't seem fazed by the attacks. What worries him more, he says, is widespread apathy among urban Japanese. They tend not to vote in elections, claiming a loss of confidence in politicians and the system. "People should be getting angry," he says.
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