An inquiry into Japanese egalitarianism

A mechanism causing Japan’s transition failure

Yasushi Suzuki, Graduate School of Management, Ritsumeikan Asia Pacific University [About | Email]

Volume 12, Issue 2 (Article 7 in 2012). First published in ejcjs on 26 October 2012.


This paper aims to shed light on some unique features of Japanese egalitarianism mainly through the lens of western contemporary political philosophy, in particular, John Rawls’ theory of social justice and his egalitarianism in the original position. In doing so, this paper suggests an explanation for Japan’s difficulty in responding to the huge fiscal deficit that it has accumulated. It appears that it would be advantageous for the Japanese egalitarian society to transit to a mode of Rawlsian property-owning democracy seeking greater equality in the initial endowment as a social ideal, as a solution for resolving fiscal problems. This paper argues that the Japanese egalitarianism seems to be characterized by a different element from Rawls’ egalitarianism in the original position allowing the difference principle of justice. The occasionally observed Japanese teleological egalitarianism seems to stem from the mechanism of “envy avoidance” embedded in the Japanese group-oriented society based upon reciprocity and benevolence. The advantage can turn out to be the weakness. When a problem exceeds the response capacity among the members, reciprocity and benevolence in general are likely to be eroded in the system. This paper suggests that the Japanese egalitarianism in this case can make the transitional path in any direction more costly.

Keywords: Difference principle, Egalitarianism, Envy, Japan, John Rawls, Justice, Transition failure.


Inequality fosters conflicts ranging from lack of trust in exchange relationships and incentive problems in the workplace to class conflict and ethnic clashes1 (Bowles and Gintis 1998). However, “high levels of conflict and the lack of agreed-upon rules of division with broad legitimacy often preclude solutions to the coordination failures that beset sophisticated economic systems” (Bowles and Gintis 1998: 5). On the other hand, some welfare states in making a greater commitment to the equality of outcome have undermined the incentives of economic agents particularly at the top and bottom of the society and have hindered economic growth. Other welfare states, including Japan, had to allow severe fiscal deficit in the governmental sector to sustain social welfare such as pensions and health care.

Japan has accumulated a much higher fiscal deficit than any other OECD country. The long-term outstanding debt held by the central and local governments was predicted to reach JPY 894 trillion by the end of the fiscal year of 2011 (Ministry of Finance Japan 2011). Measured by general government gross financial liabilities, Japan’s fiscal liabilities were almost twice as much as the nominal GDP in 2010 (Fukuda and Yamada 2011). This ratio suggests that Japan’s fiscal deficit is much more serious than that of any of the PIGS countries (Portugal, Ireland, Greece, and Spain) that faced fiscal problems after the global financial crisis. The ratio of Japan’s fiscal deficit to its annual budget has reached 47.9 percent, while the ratio of interest expenses to the budget has reached 10.7 percent (Ministry of Finance Japan 2011).

Apparently, Japan’s huge fiscal deficit led to a severe inequality among generations. Who is to pay for the debt? Should the senior generation or the younger generation (or future generation) be responsible for it? How can we justify which generation will bear the burden of the enormous fiscal deficit? As is observed later, it appears that the Japanese egalitarians agree with teleological (telic) egalitarians who think inequality is in itself (or intrinsically) bad. However, the Japanese telic egalitarians tend to avoid thinking of the principles of how to distribute the scarce resources. This paper aims to shed light on some unique features of the Japanese egalitarianism mainly through the lens of western contemporary political philosophy, in particular, John Rawls’ theory of social justice and his egalitarianism in the original position. In doing so, this paper suggests an explanation concerning the difficulty of Japan in responding to the huge fiscal deficit that it has accumulated.

Some unique features of the Japanese way of dealing with properties

Egalitarianism has attracted much attention among contemporary political theorists. Yet, as Holtug and Lippert-Rasmussen (2007) point out, it has turned out to be surprisingly difficult to provide a fully satisfactory egalitarian theory. This section looks at some features of the Japanese egalitarian society. This section begins with the hypothesis developed by Shichihei Yamamoto explaining the tendency of the Japanese to regard the classless social structure as a Japanese social ideal. Although he was not an academician, Yamamoto is well known as an intellectual who contributed to the study of the Japanese way of thinking and decision-making through his many writings.

Yamamoto (1997) refers to “seiden-sei” (jǐngtián zhìdù) as a root of creating a classless social structure. Seiden-sei is an ancient Chinese land system referred to as an ideal system by Mencius (Meng zi). According to Mencius, the unit of “Sei” which is the square one “Ri” (approximately 405 meters in length) should be divided into nine equal parts. They constitute the centre field as “public”, while equally allocating the surrounding eight fields as “private” to eight families (see figure 1). These eight families collectively cultivate the public field for paying the imposed taxes.

Figure 1: The concept of “seiden-sei”










Yamamoto (1997) points out that ancient Japan imported the concept of “seiden-sei” from China and implemented, or at least tried to implement it under the land law of “handen-shuujyu”, and that several thinkers in the Tokugawa (Edo) period developed a form of Japanese egalitarianism based upon this concept of seiden-sei. Yamamoto’s hypothesis entails further clarification. However, it is worth noting that the Japanese seem to have a tradition of regarding equality in the initial endowment as a social ideal and goal.

Francis Fukuyama is also a well-known scholar who sheds an analytical light on the unique feature of the Japanese society. According to his celebrated book, Trust: The Social Virtues and the Creation of Prosperity, the Japanese ie (usually translated as “household”) is “more like a trust for the assets of the household, which are used in common by family members, with the head of the household acting as chief trustee” (Fukuyama 1995, p. 172). Fukuyama argues that Japan has been a “high-trust” and “group-oriented” society. He simultaneously points out a unique feature of a solidarity-driven society. According to Fukuyama, what is important is the continuity of the ie through the generations. “It is a structure whose positions could be occupied temporarily by the actual family acting as its custodian. But these roles do not have to be played by biological relatives” (Fukuyama 1995: 172).

For example, the position of household head is usually passed from father to eldest son, but the role of eldest son could be played by any outsider to the family, provided he had undergone the appropriate legal procedures for adoption. In Japan, in sharp contrast to China, the practice of adoption of non-biological outsiders is both widespread and relatively easy. […] Not only was it possible to adopt a son, but there was a certain wariness against the dangers of lazy or incompetent sons. Evidently it was fairly common to pass over a biological son who for one reason or another was deemed unfit to succeed to leadership of the ie, in favour of a total stranger. This practice was more common in premodern times than since the Meiji Restoration, particularly in merchant and samurai households (which had more assets to pass on) […]. The rate at which natural sons were passed over in favour of adoptive heirs for such groups ranges from twenty-five to thirty-four percent. These sorts of practices were far less common in China (Fukuyama 1995: 172-181).

Jansen (2000) introduces the well-known political scientist Maruyama Masao who referred to the diffusion of Confucianism as a set of categories through which the Japanese people saw their world (see also Maruyama 1974). In Tokugawa times those categories began with loyalty, including obligation, duty, harmony and diligence (Jansen 2000: 191). Moreover, Jansen (2000) points out that it was assumed that a basic reciprocity was involved. Being closely described as a covenant, the “benevolence” from those above induces an obligation (on) from those below which implies an obligation to be just on those above. This network of relationships was prevalent in society and obligatory on both sides, including ruler and ruled, master and servant, landlord and tenant, and of course lord and vassal (Jansen 2000: 191).

Egalitarians adopt a particular interpretation of the assumption of moral equality between individuals. “They hold that persons should have equal shares of goods such as resources or welfare, or perhaps equal access to, or opportunities to obtain, these goods” (Holtug and Lippert-Rasmussen 2007: 2). The above examples shed light on some unique features of the Japanese egalitarian society. First, it appears that the Japanese have a tradition of regarding greater equality in the initial endowment as a social ideal. Second, it appears that the Japanese have shared values and social capital upon which they are able to subordinate individual interests to those groups to which they belong. But we should ask; to what extent are these claims held as variables which would have a positive or negative impact on Japan’s social welfare?

New egalitarianism and Rawlsian property-owning democracy

For Jeremy Bentham, the goals of civil law are to promote subsistence and security as primary goals followed by equality and abundance. While the effect of greater equality on the economy is clear, Bentham pointed out that a too great concern with equality can affect the security of property rights; and if output collapsed as a result, everyone would suffer (Bentham 1931). Besides, the debate between the inequality of opportunity being the most pervasive source of injustice and inequality of outcome being more important has been extensive. It partly emphasised how government can enhance welfare by allocating opportunities to gain education, work, improve skills or by redistributing resources to the poor. As Krouse and McPherson (1998) summarise, the two alternative regimes – “welfare-state capitalism” and “property-owning democracy” - “exemplify two alternative strategies for providing justice in the political economy: Welfare-state capitalism accepts as given substantial inequality in the initial distribution of property and skill endowments, and then seeks to redistribute income ex post; property-owning democracy, in contrast, seeks greater equality in the ex ante distribution of property and skill endowments, with correspondingly less emphasis upon subsequent redistributive measures” (Krouse and McPherson 1998: 84).

Welfare-state capitalism in the form of a hybrid between laissez-faire capitalism and bureaucratic state socialism as commonly understood accepts severe class inequalities in the distribution of physical and human capital, and seeks to reduce the consequent disparities in market outcomes through redistributive tax and transfer programs. It is observed that many developed countries including Japan face the severe fiscal deficit as a result of responding to an increasing demand of social security such as unemployment insurance, public assistance, and medical care. Some countries have started to argue on how to tackle the accumulated fiscal deficit. For instance, it is worth noting the recent priority of “the new egalitarianism” (Diamond and Giddens 2005, Miliband 2005) in the United Kingdom, which is to invest in human and cognitive capacities that promote individual opportunity, rather than in reparation after the event. Diamond and Giddens (2005: 106-108) distinguish between egalitarianism as it used to be understood, the egalitarianism of the traditional left, and the new egalitarianism, in the following ways.

  1. Old egalitarianism treated economic dynamism as incidental to its basic concern with economic security and redistribution. New egalitarianism holds that expanding the productive efficiency of the economy is necessary for governments to have a long-term impact on the distribution of income and wealth.
  2. Old egalitarianism was concerned with removing class distinctions, and the pursuit of equality of status. New egalitarianism is about equalizing life chances across the generations by levelling up more than levelling down, in the context of a far more diverse society than existed in the past.
  3. Old egalitarianism held that social justice could be achieved within the boundaries of the nation-state, and that support for its reforms would come by forging a national coalition based on class solidarity. The new egalitarianism recognizes the impact of globalizing influences, and accepts that there may be a trade-off between support for ethnic and cultural diversity and the social solidarity necessary for strong welfare states.
  4. Old egalitarianism was inclined to treat rights as unconditional claims. New egalitarianism ties rights to corresponding responsibilities.
  5. The new egalitarianism focuses primarily on widening opportunities rather than traditional income redistribution – equality of outcome – per se. Yet to a large extent, one reinforces the other. The left’s traditional distributive goals should be pursued not only through income distribution or solidaristic wage policies, but through more concerted action to change the initial distribution of assets and productive endowments.

With opportunities and outcomes being inextricably intertwined and preceding generation’s outcome becoming the new generation’s opportunity, market-determined outcomes are not based on a fair starting-point in our societies. In the United Kingdom, those from poorer backgrounds are at least four times less likely to end up in the highest income range than those who are the children of rich parents (Miliband 2005). Steps towards the new egalitarianism coincide with a hybrid system of a ranking property-owning democracy over welfare-state capitalism, though the new egalitarianism in the United Kingdom understates the restriction on private property rights.

Property-owning democracy aims at sharply reduced inequality in the underlying distribution of property and wealth, and greater equality of opportunity to invest in human capital, so that operation of the market generates smaller inequalities to begin with (Krouse and McPherson 1998). According to Krouse and McPherson (1998), Rawlsian political philosophy, a combination of seeking greater equality in the initial endowment and of a competitive market, is categorized as a property-owning democracy regime. In what follows, we look at the essences of the Rawlsian principles of justice which underpin this regime.

John Rawls was an American political philosopher, and indeed “the leading political philosopher of our time [in the liberal tradition]” (Sen 2010: 52). Rawls’ rightly celebrated approach of “justice as fairness” yields a unique set of “principles of justice” that are concerned with setting up “just institutions”. His theory of justice as fairness envisions a society of free citizens holding equal basic rights cooperating within an egalitarian economic system. His account of political liberalism addresses the legitimate use of political power in a democracy, aiming to show how enduring unity may be achieved. According to Rawls, the primary subject of justice is the basic structure of society, in other words, the way in which the major social institutions distribute fundamental rights and duties and determine the division of advantages from social cooperation (Rawls 1971: 7). Here, the legal protection of freedom of thought and liberty of conscience, competitive markets, and private property in the means of production are examples of major social institutions in terms of social rules that constrain economic activities and behaviours. In applying the notion of pure procedural justice (Rawls 1971: 83-90) to distributive shares, Rawls thinks that it is necessary to set up and monitor impartially a just system of institutions. “Only against the background of a just basic structure, including a just political constitution and a just arrangement of economic and social institutions, can one say that the requisite just procedure exists” (Rawls 1971: 87). According to Rawls, its various institutions are to be connected with the two principles of justice.

At the centre of Rawls’ argument are the two principles of justice that he chooses in the original position. First, “each person is to have an equal right to the most extensive basic liberty compatible with a similar liberty for others”. Second, as is known as the difference principle, “social and economic inequalities are to be arranged so that they are both (a) reasonably expected to be to everyone’s advantage, and (b) attached to positions and offices open to all” (Rawls 1971: 60). The two principles are observed as a case of a more general conception of justice that can be expressed as follows; “all social values – liberty and opportunity, income and wealth, and the bases of self-respect – are to be distributed equally unless an unequal distribution of any, or all, of these values is to everyone’s advantage” (Rawls 1971: 62).

A conception of social justice, according to Rawls, should be regarded as providing a standard as a “social ideal” (Rawls 1971: 9) for assessing the distributive aspects of the basic structure of society. His guiding idea provides an understanding of “the principles that free and rational persons concerned to further their own interests would accept in an initial position of equality as defining the fundamental terms of their association. These principles are to regulate all further agreements; they specify the kinds of social cooperation that can be entered into and the forms of government that can be established” (Rawls 1971: 11). Rawls refers to this way of conceptualization of the principles of justice as “justice as fairness”.2

Rawls asserts that it would be rational to choose two principles under what he calls the notion of the veil of ignorance3; that is, “equality in the assignment of basic rights and duties” and that “inequalities of wealth and authority are just only if they result in compensating benefits for everyone, and in particular for the least benefited members of the society (Rawls 1971: 14-15). According to him, “the arbitrariness of the world should be corrected for by adjusting the circumstances of the initial contractual situation upon the principles of justice” (Rawls 1971: 141).

Rawls’ underlying assumption is that the distribution of natural assets is sufficiently equal so that it would not upset the ability of a competitive economy, with a just basic structure, in order to avoid great disparities in the (pre-tax) distribution of income and wealth (Krouse and McPherson 1998: 93). In parallel, Rawls places great emphasis upon the symmetry of social contingency and natural fortune, which are “arbitrary from a moral point of view” (Rawls 1971: 72). For Rawls, while the basic structure of society should be designed to be advantageous to the individual’s interests, “the social order can be justified to everyone, and in particular to those who are least favoured; and in this sense it is egalitarian” (Rawls 1971: 102-103). Here, the “difference” principle (see also Rawls 1971: 102) expresses a conception of “reciprocity”; in other words, “a principle of mutual benefit” (Rawls 1971: 102). In justice as fairness, according to Rawls, “society is interpreted as a cooperative venture for mutual advantage. This basic structure is a public system of rules defining a scheme of activities that leads men to act together so as to produce a greater sum of benefits and assigns to each certain recognized claims to a share in the proceeds” (Rawls 1971: 84).

Rawls emphasizes that pure procedural justice requires that competitive markets be set within a framework of appropriate background institutions. Probably, secure and just property rights would prevent what we would call free-riding, and create stable expectations about future rewards to labour and capital which in turn encourages investment and long-term planning. Rawlsian justice ranks property-owning democracy over welfare-state capitalism.

It appears that Japanese egalitarianism traditionally shares with the core elements of Rawlsian property-owning democracy the social ideal of seeking greater equality in the initial endowment. However, Japan is now facing a severe fiscal deficit as a result of having sought material equality. What strategies might be effective in promoting a regime of property-owning democracy, assuming the initial existence of great inequality in property holdings already?

Rawls follows the sociologist James Meade in supposing that the key institutional means of preserving widespread property ownership in a property-owning democracy are inheritance laws and taxes that encourage wide dispersal of property at death, encouragement’s to saving for families of modest means, and public policies that promote equal opportunity in education (Krouse and McPherson 1998: 99). Among these, the restriction on private property rights4 is the most challenging instrument to aim at the sharply reduced inequality in the initial distribution of property and wealth.

As Bowles and Gintis (1998) point out, with assets more equally distributed among the population, estate taxation may also be a considerably more potent instrument of intergenerational redistribution than it is with a highly unequal wealth distribution. “For where wealth is highly unequally distributed, the rich have critical positions in the economy that they can deploy to ensure the transfer of their capital across generations. Where wealth is more equally distributed, however, no asset holder has a significant degree of economic power.” “Perhaps more important, with a more egalitarian distribution of wealth, intergenerational redistribution becomes a form of social insurance to which most relatively modest wealth holders might readily assent, prior to the unfolding of their own individual histories of success or failure” (Bowles and Gintis 1998: 53).

Rawls expects markets to provide an essential means of ensuring equal liberty and fair equality of opportunity. However, in reality, we know the examples of “market failure” including externalities in which the market mechanism (price mechanism) does not always lead to the optimal allocation of resources. Rawls also emphasizes that if the fair value of political liberty is to be maintained, background institutions for upholding distributive justice must prevent excessive accumulation of property and wealth (Rawls 1971: 87). But we know the examples of unproductive “rent-seeking”5 for accumulating and maintaining the vested interest in the reality of political activities. Naïve adoption of Rawls’ perspective on property-owning democracy would not be plausible.

Informal constraints are potentially important factors determining the direction and pace of institutional changes, because formal institutions are, in general, designed and created on the foundation of informal conventions and norms. Institutions have been distinguished as formal and informal. The former are enforced by third parties and include the structure of laws, the rules under which governments, local governments and all types of economic organizations operate. Informal institutions are rules that are not enforced by third parties but are either self-enforcing or enforced informally. They include conventions, customary practices, norms, or rules emanating from culture or religion.

Probably, how strongly we feel the equality of the initial endowment as a social ideal, and how we subordinate individual interests to those of larger groups depend on the informal framework each country has developed for intentionally or even unintentionally stabilizing social expectations. Endowments of “social capital”, trust and spontaneous sociability are mainly related to the enforcement of informal institutions, but they also affect the operating and enforcement costs of formal ones. In general, the informal institutions constituting the foundation of society as conventions and norms stabilize social expectations and structure social life. “Because they are self-enforcing, the efficacy of these rules depends on the extent to which social actors find it in their self-interest to comply with them” (Knight 1992: 171).

As mentioned earlier, Rawls’ “difference” principle expresses a conception of “reciprocity”, in other words, “a principle of mutual benefit” (Rawls 1971: 102). This position of Rawls reminds us of what the sociologist James Coleman has called “social capital”, arguing that the ability of people to work together for common purposes in groups and organizations and their ability to associate with each other depends on the degree to which communities share norms and values and are able to subordinate individual interests to those of larger groups. According to Rawls, “clearly the two principles of justice and the principles of obligation and natural duty require us to consider the rights and claims of others”, “once we consider the idea of a contract theory it is tempting to think that it will not yield the principles we want unless the parties are to some degree at least moved by benevolence, or an interest in one another’s interests” (Rawls 1971: 148).

Japan is described as a country imposing higher rates of inheritance tax, maintaining a high propensity to save and providing wider opportunity in higher education. For example, the Ministry of Finance Japan (2011) estimates the burden ratio of inheritance tax amount to dutiable amount in the case of the succession of properties to the spouse and two children, among Japan, the United Kingdom, France, Germany and the United States as of January 2011. According to this estimation, if the dutiable amount is 300 million yen or equivalent, the burden ratio in each country is as follows; 14.52 per cent in the United Kingdom, 7.67 per cent in Japan, 7.40 per cent in France, 2.21 per cent in Germany and 0 per cent in the United States. Then, if the dutiable amount exceeds around 1.4 billion yen or equivalent, Japan’s burden ratio becomes the highest.

As was observed by Fukuyama, Maruyama and Jansen, it appears that Japan is endowed with several informal institutional settings seeking for a reciprocity and benevolence-driven egalitarian society, which would be advantageous to transit to an intermediate between property-owning democracy and welfare state capitalism. In reality, however, Japan has fallen into a “hold-up” situation in front of the huge fiscal deficit accumulated partly as a result of seeking for the equality of outcome as well as the equality of opportunity. We should review the feature of Japanese egalitarianism to explain why Japan has fallen into a failure to resolve the increasing fiscal deficit, leaving the inequality in the generations unsolved.

Mechanism of envy avoidance

It is worth noting a distinction between what Derek Parfit (1991) has called teleological (telic) and deontological (deontic) egalitarianism. Telic egalitarians think inequality is in itself (or intrinsically) bad. Deontic egalitarians do not. For, unlike telic egalitarians, deontic ones would seem to have no objection to natural inequalities or to inequalities between people living in different communities that do not interact with one another. Parfit suggests that these forms of egalitarianism can be distinguished in respect of both their scope and their vulnerability to the levelling down objection (Holtug and Lippert-Rasmussen 2007: 23).

It appears that recent Japanese egalitarians tend to seek for the equality of outcome, occasionally the levelling down equality, which may be categorized into the mode of telic egalitarianism. Japan has long been known as one of the most equal countries in the world where 90 percent of citizens used to have a “middle class consciousness”. Yamamoto (1997) holds a warning against Japanese egalitarianism (and democracy) in which the Japanese tend to reject any principle except “equality” and to think that the rejection per se is “democracy”. Therefore, Japanese telic egalitarians tend not to prepare an ex ante rule or guidance (Yamamoto 1997: 137), for instance, so as to set up any difference principle.

Jon Elster asserts that egalitarianism results from a combination of envy and altruism, with the latter in turn being largely the effect of envy-avoidance (Elster 1989: 261). Elster points out in his book, The cement of society, several features of envy, including the mechanism of “envy-avoidance.”6 The first urge of “envy” is not “I want what he has”, but “I want him not to have what he has, because it makes me feel that I am less” (Elster 1989: 253).

I may give to assuage the feeling of guilt that your envy causes me to have. I might even abstain from becoming superior in the first place, to prevent any envy from arising. [...] The social consequences of the private vice of envy depend on the reactions of the envied or potentially envied to the fact of envy. Envy-avoidance is closely related to witchcraft and, especially, to accusations of witchcraft. In many societies, successful people have been branded as witches (Elster 1989: 259).

According to Elster, successful people would rather not get too rich (or would donate their wealth to the poor) due to the fear that they will be too envied, while the poor would try to avoid getting too poor due to the fear that they may be provoked into witchcraft (Elster 1989: 261). Envy functions as the glue and cement of binding people in society.

Under the Rawlsian ideal society, a rational individual is not subject to envy7, at least when the differences between himself and others are not thought to be the result of injustice and do not exceed certain limits (Rawls 1971: 532). Rawls argues that a well-ordered society is unlikely to give rise to feelings of envy, partly because material inequalities are likely to be relatively small (Elster 1989: 253). Rawls refers to “strict egalitarianism”, the doctrine of which insists upon an equal distribution of all primary goods, conceivably derives from this propensity. Rawls points out that the conception of strict egalitarianism would be adopted in the original position only if the parties are assumed to be sufficiently envious (Rawls 1971: 538-539).

The tendency of seeking a levelling down of equality (also to respect altruistic behaviour by others) may be related to the mechanism of envy-avoidance as Elster points out. The Japanese national mandated health care system in which all Japanese people are entitled to almost the same level of medical care, or the Japanese traditional employment and payoff practice of the so-called “seniority-waged system” may be raised as examples of derivatives from this mechanism. The Japanese group-oriented society may have created a mechanism of envy-avoidance. Under the seiden-sei land system which was referred to earlier, eight families within the unit have the obligation to collectively cultivate the public field for paying the tax imposed. Basically, these eight families are gathered and equally provided with the same size of a private field, based on the condition that they should fulfil their duties to cultivate the public field. Under this system, they may work together for the common purpose in the unit, and may subordinate individual interests to those of the unit without being directly asked. So far as they share the value as solidarity, they may create a belief in future harmonious and affirmative cooperation. If a member fails to fulfill a shared obligation, they may help the member on a reciprocity basis within the other members’ capacity. However, a problem may arise when an extremely adverse event or a serious conflict beyond the members’ responding capacity occurs. To the extent in which the members have maintained the mechanism of envy avoidance, the case may lead the members to a much more serious hold-up situation (transition failure) in which they would face the difficulty in compromising any difference principle for the solution.

Oliver Williamson asserts that our bounded rationality often generates “opportunism”8 in individuals, causing higher transaction costs in the distribution of resources. From the Williamsonian “opportunism” perspective, the cooperative mode of economic organization, where trust and good intentions are generously imputed to the membership, has its weakness in being endowed with few organizational responses to the debilitating effects of opportunism. “Such organizations are easily invaded and exploited by agents who do not possess those qualities” (Williamson 1985: 64-65). Prevailing opportunism may have increased the number of free-riders on the social security sustained by public finance.

Concluding remarks

The unique characteristics of the Japanese “high-trust” and “group-oriented” society are described by many scholars and researchers, including Shichihei Yamamoto and Francis Fukuyama. Ostensibly, it would be advantageous for the Japanese egalitarian society to transit to a mode of the Rawlsian property-owning democracy seeking greater equality in the initial endowment as a social ideal. However, Japanese egalitarianism seems to be characterized based on a different element from Rawls’ egalitarianism in the original position allowing the difference principle of justice. As Elster points out, “envy” is a glue and cement of society. The Japanese occasionally observed telic egalitarianism seems to stem from the mechanism of “envy avoidance” which is embedded in the Japanese group-oriented society based on reciprocity and benevolence. This advantage can turn out to be a weakness. When a problem such as the huge fiscal deficit causing severer inequality among generations exceeds the responding capacity among the members, reciprocity and benevolence in general are likely to be eroded in the system. This can make the transition path (in any direction) more costly. This result can be a failure that manifests itself as a trap of “collective inaction” where all agents opt to simply maintain the status quo, whatever it is. Argument concerning the unique characteristics of the Japanese egalitarian society, in my view, is necessary to become aware of the weakness in the system retarding the process of setting up any difference principle in the budget allocation.


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[1] The “income gap league table” introduced by the Guardian newspaper on 14 March 2009 shows how many times more income the richest fifth have in comparison to the poorest fifth. The UK ratio of 7.2 : 1 is one of the highest in the free world. Other economies such as Japan and Finland have only half as much inequality. Also the “economic divides social wounds” chart in the same paper shows that, overall, unequal countries have more problems in terms of social sickness – among them homicide, infant mortality and lack of trust. According to them, in Japan and Sweden incomes are unusually evenly spread, and the chart reveals that both suffer from fewer social problems than other industrial societies.

[2] In justice as fairness, according to Rawls, the original position of equality corresponds to the state of nature in the traditional theory of the social contract (Rawls 1971, p. 12). This is understood as a purely hypothetical situation featuring a certain conception of justice. The principles of justice are selected behind “a veil of ignorance” in the Rawls’ term. This is because, according to his logic, the veil of ignorance would cause the bargaining problem of the original position and fail to secure the desired result for the structure of society, therefore the restrictions on particular information in the original position are of fundamental importance (Rawls 1971, p. 140).

[3] The notion of the veil of ignorance in the Rawls’ term is implicit in Kant’s ethics (Rawls 1971, pp. 140-141). Rawls assumes that the persons in the original position are rational, but they do not know their conception of the good. “This means that while they know that they have some rational plan of life, they do not know the details of this plan, the particular end and interests” (Rawls 1971, p. 142). We can sense a Kantian interpretation of the veil of ignorance, as it attempts to get closer to a notion of autonomous action on freely chosen rational principles. The notion of the veil of ignorance is an analytical device intended to reduce the realism of Rawlsian political philosophy in an effort to render the notion of fairness more precise.

[4] Property rights can be defined as the rights which individuals or groups have to make decisions about the uses to which specific assets may be put. As Ronald Coase points out, individuals who possess property rights actually only possess nothing more than the right to carry out a circumscribed set of actions. They may include the right to use, to sell, to lease out and to pass on to heirs but usually preclude the right to use the asset in ways which explicitly hurt others (Coase 1960). In general, the meaning of the term “property rights” is considered the ability to enjoy a piece of property (Barzel 1997).

[5] According to the definition by Khan (2000), rents refer to “excess incomes” which, in simplistic models, should not exist in efficient markets. “More precisely, a person gets a rent if he or she earns an income higher than the minimum that person would have accepted, the minimum being usually defined as the income in his or her next-best opportunity” (Khan 2000, p.21). Rent-seeking is the expenditure of resources and effort in creating, maintaining or transferring rents (Khan 2000, p.70).

[6] He also refers to another way of envy avoidance. “Acting on envy would leave one with a bad taste in the mouth. Not acting to prevent misfortune, however, could be justified to oneself and others by more acceptable motives, such as ‘sturdy self-reliance’ – ‘I don’t ask for help nor do I give any’” (Elster 1989, p. 256).

[7] Rawls follows Kant’s definition of envy as “one of the vices of hating mankind” (Rawls 1971, p. 532), which is collectively disadvantageous: the individual who envies another is prepared to do things that make them both worth off, if only the discrepancy between them is sufficiently reduced.

[8] In general, opportunism in terms of pursuing self-interest with guile involves subtle forms of deceit and refers to the incomplete or distorted disclosure of information, especially to calculated efforts “to mislead, distort, disguise, obfuscate, or otherwise confuse” (Williamson 1985, p. 47).

About the Author

Yasushi Suzuki holds a PhD in Economics from the University of London, and specialises in Finance Theory, Fiscal Studies, and Economic Policy. He is a professor in both the College of International Management and Graduate School of Management at Ritsumeikan Asia Pacific University. He is the author of numerous books on economics and financial systems, including Japan's Financial Slump: Collapse of the Monitoring System Under Institutional and Transition Failures (2011, Palgrave Macmillan).

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