The Political Economy of Policy-Making
This chapter purports to offer a conceptual framework for the study of the political economy of policy-making mainly in Japan and other developing countries. Its main concern is not any particular policy itself but the political and economic factors that affect the decision-making and implementation of fiscal and other governmental policies. Economics and economists are usually concerned with the former; namely, what policies are appropriate in a given economic situation to attain certain policy objectives, such as economic growth, full employment, price stability, or redistribution of income and wealth. But adopted policies are often not the policies that economists recommend as the best or even the second best. The main reasons are that policies are made not just on the basis of economic analysis but under the influences of non-economic, social, and political forces. Moreover, policies must be put into practice in a society which somehow must accommodate itself to the vested interests of various pressure or special interest groups.2 The influence of these non-economic factors seems to be more important, or at least less transparent and non-systematic, in developing countries than in the developed countries. Recommendation of any economic policies must take into account these political and social factors and clearly state the assumptions about the responses of the social groups involved in the execution and implementation of those policies.
KeywordsPolitical Economy Fiscal Policy National Economy Vested Interest East Asian Country
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- 2.In this connection, one may be reminded of J. M. Keynes’ famous remark at the end of his General Theory: “Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas. Not, indeed, immediately, but after a certain interval; for in the field of economic and political philosophy there are not many who are influenced by new theories after they are twenty-five or thirty years of age, so that the ideas which civil servants and politicians and even agitators apply to current events are not likely to be the newest. But, sooner or later, it is ideas, not vested interests, which are dangerous for good or evil.” Thus, many pressures or opinions expressed in the debates on policies are reflecting not only the vested interests but also the ideas behind the opinions.Google Scholar
- 3.This statement was made in 1989 but the financial crisis came to Thailand and other East Asian economies in 1997, as was expected earlier. As of early 1998, one cannot see the end of its repercussions.Google Scholar
- 4.That is why it is argued nowadays in Japan that Japan needs a new law like Freedom of Information Act in the United States. The author supports the view on the basis of lus more than 16 years of service as members of many government committees and councils.Google Scholar
- 5.Evidence is given by court hearings that are available from time to time. See Nishihara, Masashi, Tonan Ajia no Seijiteki Fuhai (Political corruption in Southeast Asia) Sobunsha, Tokyo, 1974.Google Scholar
- 6.See M. Olson, “The Principle of Fiscal Equivalence,” American Economic Review, Proceedings, Vol. 59, no. 2, (May 1969): pp. 479–489.Google Scholar
- 8.Shinichi Ichimura, “Institutional Factors and Government Policies for Appropriate Technology: Survey Findings in Indonesia, Thailand and the Philippines,” World Employment Program Working Paper, WEP 2–22/WP. I 10 (January 1983)Google Scholar