Bill Emmott - International Author & Adviser

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Tony Blair´s lessons for Japan
Toyo Keizai - July 28th 2007

Tony Blair is undoubtedly a model for political success. After all, he survived for 10 years as Britain’s prime minister and won three general elections in a row, the first two of them (in 1997 and 2001) by huge majorities. He is a celebrity among politicians, the sort of man who becomes the centre of attention as soon as he walks into a room. That is partly, no doubt, because he has been in the public spotlight for so long, but it is also because, like Bill Clinton, he has a magical smile and a very comfortable way of dealing with people. And yet he left office on June 27th disliked and distrusted by the British public themselves. What can a Japanese prime minister learn from him?

            Shinzo Abe’s popularity ratings are even worse than Mr Blair’s, and that is after less than a year in office. Mr Abe, and anyone who succeeds him if he should have to step down as prime minister, does, however, share some of the same problems of public policy that Mr Blair faced when he entered office in 1997. Mr Blair’s central problem was that the economic interests of Britain required him to maintain and if possible reinforce the market-based reforms that had been introduced by Margaret Thatcher during the 1980s. But there was a political outcry against the inequality produced by those reforms. The LDP-led coalition government in Japan today faces the same sort of problem.

            In seeking to learn from Britain’s success since 1997, the LDP can and should ignore one part of Mr Blair’s initial behaviour when he entered office. This is the claim that he had a new philosophy, which he called “the third way”, a philosophy that was neither socialism nor neo-liberalism (ie, market fundamentalism). Such an idea also gained popularity with Gerhard Schroeder, who became chancellor of Germany a year after Mr Blair became Britain’s prime minister, and served from 1998 until 2005. In German, it was called “die neue Mitte”, or “the new middle”. Today, however, no one in either Britain or Germany talks about this at all. The reason is that it was nonsense. There was no new philosophy. It never existed. 

            “The third way” and “die neue Mitte” were simply ways to convince left-wing parties that their leaders—Mr Blair and Mr Schroeder—were not betraying them by adopting right-wing policies. Mr Blair needed to contrast himself with Mrs Thatcher and her Conservative Party successor, John Major, while actually continuing most of their policies. Mr Schroeder needed to contrast himself with Helmut Kohl, from the right-wing Christian Democrats. But both knew they had to continue with economic reforms if they were to achieve economic growth and thus survive in office. So they were in fact betraying their left-wing supporters, especially those in trade unions. The notion of a new philosophy was designed to disguise this betrayal, to make it acceptable. Soon, though, most people realised that there was no new philosophy at all. The phrase “the third way” was dropped. Even Mr Blair never mentions it.

            In that effort, Tony Blair had more in common with Junichiro Koizumi than with Shinzo Abe. Like Mr Koizumi, Mr Blair campaigned against the traditional interests and supporters of his own party. Mr Blair forced his Labour Party to abandon its outdated commitment to putting British industry in state ownership. He even called his party “New Labour”, to show that it had changed. He needed to convince British voters that he wasn’t going to take Britain back to the failed Labour policies of the 1960s and 1970s, with high taxes, high public spending, nationalised industries and powerful trade unions.  “Change the LDP, change Japan” came from the same spirit: Mr Koizumi needed to convince voters that he really did stand for change and reform, even though he led the party that had governed Japan almost the entire time since 1955.

            Today, Mr Abe’s problem is different. He does not need to campaign against his own party, as Mr Blair did. He does not need to find a philosophical disguise for his right-wing economic policies, as Mr Blair did. What he does need to do, however, is to find ways to show poorer voters and those who are concerned about inequality that the LDP, the party of conservatism, of big business and, under Mr Koizumi, of pro-market reform, is aware of their concerns and has solutions for them. He also needs to show that the pro-market reforms brought in by Mr Koizumi can be sustained in a stable way, and will not simply be distorted or recaptured by selfish business groups inside the LDP.

            For these problems, there is much that can be borrowed from Tony Blair’s period in government. When he became prime minister, he talked a lot about inequality and about social justice. The talk was no doubt important politically. The real action was confined to just two policies, however. One of them was a success, the other a failure.

            The successful policy was the introduction of a law setting a minimum wage, in 1999. This was the first time Britain had had any law of that sort. Many people—and I was among them—worried that it would simply cause unemployment to rise. If wages were set by the government at a level higher than employers wanted to pay, then companies would simply hire fewer people and so unemployment would get worse.

            Yet that didn’t happen. The reason was that the British economy was growing strongly at the time the new wage was introduced, and so employers could afford to pay more. Unemployment in Britain has stayed low throughout the past 10 years, despite the fact that the Labour government has permitted a substantial amount of new immigration, especially of workers from Central Europe. If you have a minimum wage, it needs to be adjusted each year to take account of price inflation; in America, which has had a minimum wage for decades, that adjustment has to be done by Congress which often means it is not done. In Britain, a new body called the “Low Pay Commission” was set up and given the legal power to adjust the minimum wage every year. It is now £5.52 per hour, which is about Y1,350.

            Mr Abe’s new economic blueprint, released on June 20th under the name of “Basic Policies for Economic and Fiscal Management”, does include the idea of raising Japan’s minimum wage. But it doesn’t mention any planned new level for the wage. No doubt employers will object to any rise. One lesson he could draw from Mr Blair is that he can afford to be bold. With Japan’s labour force shrinking as the baby-boomers retire, the likelihood of causing higher unemployment is very low. Companies are making record profits. The second lesson is that he should set up an independent body, including employers, unions and other experts, to oversee the minimum wage and to set new levels every year. Higher wages for the poor will boost consumption. They will also put extra pressure on companies to boost productivity, which is what Japan needs.

            Mr Blair’s other attempt to deal with inequality was by using special tax concessions to help the poor, especially poor families. Copying a policy pioneered by Bill Clinton, he (and his finance minister, now successor, Gordon Brown) introduced what was called the “earned income tax credit”, and that was given different names as it evolved later on. It was in effect a tax subsidy. But it was too complicated to administer: there has been a lot of fraud, and it is not clear that the money has gone to help the people it was intended to support. Most of the money has probably been wasted.

            Overall, the main lesson of Tony Blair’s time in government is that economic success must be the first priority. To achieve it, he and Mr Brown gave full independence to the Bank of England, in order to make anti-inflation policy credible; strengthened anti-trust laws and enforcement to increase the amount of competition; and made sure the government budget deficit never got out of control. Tax revenues boomed along with the economic growth, and Labour has spent the money on improving public services such as health and education. It has done so mainly by copying Conservative policies of increasing competition, privatisation and choice. Inequality has not been solved as an issue, but it has been made less politically controversial by the introduction of the minimum wage, and because there have been plenty of jobs available amid all the economic growth.

            So why, after such a successful decade, is Tony Blair so unpopular? The answer is mainly the Iraq war, but it is also the fact that he is no longer considered trustworthy. It is believed that he lies and distorts the truth—for example, by his early claims that he had found a “third way”. He hadn’t. His policies were really what might be called “compassionate conservatism”. Where have we heard that phrase before? From George W. Bush.


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