From Welfare State to Future Investment State

The Liberal Democratic, Democratic Progressive, Komeito and Communist parties all proposed the same policy in their campaigns for the previous House of Councilors election: benefit payments for pensioners, no pay for childcare workers and nurses, and academic cash scholarships with no need for repayment.

The principle idea behind this policy is that ‘people can be at peace because the government will take care of elderly and under aged people.’

This welfare state ideology, however, will most definitely collapse.

How Welfare States Have Failed

In the 1970s when welfare services were free in the Soviet Union, national finances were experiencing a huge deficit. Medical funding was reduced and the level of service dropped along with it. Infant survival rate also dropped and the average male life span was shortened.

The same thing is happening in the welfare superpower, Sweden.

The expensive annuity and nursing costs are supported by a tax burden of roughly 56%. It is not strange then, that the Swedish economy has been stagnant since the late 1980s. People then began to realize that high welfare support does not work. In the welfare reforms that took place after 1992, employment rates continued to drop, many of the elderly couldn’t move into nursing homes, and professional medical treatment became a rare thing.

The Swedish Minister for Finance has lamented that the national treasury is empty, and the previous President is remembered for his warning to be prepared to work until the age of 75.

Private banks have been suggesting a cumulative deposit scheme for post-retirement purposes, but most people already get 60% of their income taken from them as taxation, so they have a hard time saving.

In his book, “The Road to Serfdom”, Austrian economist Friedrich Hayek predicted an unpleasant future for Sweden. He was right.

From Divided Wealth to Concentrated Wealth

A similar unpleasant future is approaching Japan.

Back in 2013, social security expenses in Japan amounted to ¥111 trillion (around US$1 trillion). Of this, around ¥43 trillion came from taxes, as social security fees were insufficient. This means the government shouldered a debt of ¥43 trillion. Simply put, the government is forcing the continuation of social security through debts.

Japan’s leaning towards a welfare state is clear if we compare it to Sweden.
In Sweden, 64% of collected taxes money and security fees went into social security (in 2008), and in Japan it is currently 67%. This shows that Japan is even more of a welfare state than Sweden.

The problem with Japan, however, is that no politician will ever admit that this welfare state is a failure.

Master Ryuho Okawa, founder of Happy Science, points out how the government should be using money:

The socialist approach of dividing wealth will not result in generating more wealth than the initial investment. On the other hand, concentration of wealth can bring a return on the investment many times over. One person who put this into practice was former Prime Minister of Japan, Kakuei Tanaka (1918-1993).

GDP Will Triple With 1/3 Travel Time

Kakuei had been dreaming of a Remake Japan Theory even from before he became Prime Minister. He explained that if we make a national Shinkansen (bullet train) railroad of over 9,000 km, every major city in Japan would be within 1 hour’s travel and the cities would all naturally become unified.

Kakuei dreamt of Japan becoming one big city, with Niigata and Toyama prefectures becoming part of Tokyo, and Shimane and Kochi prefectures as part of Osaka. He also predicted that the gross national production levels and private income would rise relative to people’s daily radius of action.

We can feel that this is true. Before the Shinkansen opened in 1956, travelling between Tokyo and Osaka took seven and a half hours; but in 1992 this was reduced by one-third to two and a half hours. Within those 36 years, the real GDP per person tripled. That is, each person’s average income was tripled.

Even including the Maglev currently under development, only 30% of Kakuei’s Shinkansen dream has been achieved so far. Japan is currently suffering from extremely low interest rates and poor money flow, but it could possibly triple its current GDP if we open these railroads all over country within the next 5-10 years.

For example, Shin-Osaka to Matsue takes three and a half hours via Okayama, but with the planned Sanin Shinkansen it will take only an hour and a half.. If travel time is reduced to less than half, it could double the income of people living in Shimane and Tottori.

Shinkansen Is the New Social Security

The Shinkansen income increase hypothesis is proven by the Hokuriku Shinkansen that opened last year and the Kyushu Shinkansen that opened in 2011. The annual income per household in Kyushu reportedly increased by ¥50 thousand (around US$480). Just like Kakuei said, wealth is created in an area where the radius of action is expanded.

Prefectures where there are no Shinkansen stations have a higher elderly population. By having the Shinkansen pass through these areas, not only will jobs increase, but the younger population will no longer be forced to migrate to major cities, and as a result they will be able to care for the elderly.

Aging regions also have a higher suicide rate. Some researchers suggest that this is due to the delay in maintenance and opening of the Shinkansen. This means that by extending the Shinkansen and Maglev all over the country, we can get the young generation to support the old, and save people who may otherwise resort to suicide.

No More Need for Social Security

The Liberal Democratic Party of Japan is going to lend the Japan Railways (JR) funds of around ¥30 trillion (roughly US$290 billion) for Shinkansen and Maglev maintenance. But to end ‘divided wealth’ and start ‘concentrated wealth’ so that each region can support its elderly, we would need an investment to replace the current social security funds. This would have to be around ¥100 trillion (US$96 trillion).

So, if we were to proceed by making all railroads into Maglevs as per Kakuei’s plan, by connecting Osaka, Matsue, Kochi and Matsuyama, they would each be 40 minutes from each other: they could all become part of Osaka. With that, wouldn’t this transportation revolution be worth the investment?

If we invest an additional ¥100 trillion in airports, national defense and aerospace, it would be no mere dream to build a space plane that would allow travel between Japan and the U.S. in a matter of a couple hours. Travel time could be reduced to a fifth of the time: it would feel like a domestic flight.

The Happiness Realization Party will continue Kakuei’s dream with a New Remake Japan Theory. If this is achieved, we can innovate this collapsing welfare state and make it into a future investment state.

Jiro Ayaori

 
Japan’s Failed Welfare State

• If the current welfare services continue and expenses are covered by the raised consumption tax, by 2060 68.5% of expenses would be relying on taxes. [Research by Yutaka Harada former professor at Waseda University]
• Social security expenses for each person over the age of 65 amounts to ¥2 million 530 thousand (in 2010). It is the same as if a working person sent his/her parents around ¥5 million (US$48 thousand). [Harada]
• Former Minister of State for Financial Services, Heizo Takenawa, said the truth when he announced “if we were to give each person over 65 their pension, it wouldn’t be enough if the consumption tax was 30%”.
• Medical expenses for people over 70 cannot be paid even with a 60% tax rate. [Research by thinknet.org under Ichiro Yamamoto]
• Current public services under social welfare cannot be sustained without an average income of ¥8.9-9.2 million (around US$85 thousand) per household. [thinknet.org]