Though the term the Lost Decade was often heard in the early 2000s, the Lost Two Decades has become common in recent years, and there is growing concern that it might be replaced by the Lost Three Decades or the Lost Four Decades, if the current economic conditions continue. In fact, Japan is suffering from an annual growth rate of as low as one percent, while other Asian countries show rapid progress. Is there no way out of this quagmire?

Money is earned in Tokyo, and the surplus is distributed in local regions

In my book Kansai Economic Management Theory: Principles and Arguments published at the end of last March, I suggest one way out of the stagnating Japanese economy. Though the title refers to the Kansai economy, my argument applies to areas other than the Kansai as well. Promoting the self-sustained development of local businesses is the only way to recover and emerge from the economic stagnation in Japan. From this viewpoint, I discussed what to do and how to think in the book.

Simply put, the current economic structure in Japan is earning money in Tokyo and distributing the surplus among local regions. From the viewpoint of the relationship between the central and local governments, Japan's economic strategy has been extensive distribution to local communities since the period of high economic growth. In spite of this, local regions have been exhausted while Tokyo and some metropolitan areas have developed. I wonder what has made the difference. The Japanese economy cannot be revived until we solve this great mystery.

If Tokyo were able to develop while continuing its distribution of the surplus, Japan could manage to recover. The current situation is so severe, however, that the burden Tokyo shoulders in supporting regional economies already has Tokyo itself struggling to stay afloat. Regional economic independence is an issue associated with local regions as well as with Tokyo.

Debate over decentralization sans economic independence

Decentralization is intended to change this structure. Though there are many proposals-including the transfer of power and money, decentralization to local sovereignty, and the regional system-many of these proposals fail to address the heart of the matter because they do not consider regional economic independence. For example, the regional system, a proposal to change the structure of a nation, only requires the restructuring and streamlining of administrative organizations. More important standpoints or arguments, such as what is needed for each region to achieve economic independence, are lacking.

The question, then, is why such a problem occurs. One factor is the preponderance of specialists. Many of the people considering the regional system are specialists in either administration or finance, and as a result, they only approach issues from the perspectives of administration or finance. A still more crucial problem, however, lies in economics itself.

This is a profound issue. Typical economics does not regard regions as basic units of economic development. Economics has regarded the nation state as the basic unit since its inception. The person who challenged this premise, which dates back before Adam Smith (that is, since the mercantilism period), was not an economist, but rather a civil rights activist named Jane Butzner Jacobs. Her book entitled The Death and Life of Great American Cities-of which a complete translation was published this April-has drastically changed the urban renewal policies of the twentieth century. She was a great theorist in economics as well, on the order of Einstein or Planck.

The book Kansai Economic Management Theory is subtitled: Principles and Arguments. Economic development should not be discussed based on a unit of Japan. Thus, the economy of each region should be reconsidered from the principles of its development. We cannot discuss regional economies without reforming the very principles of economics. No book has ever been published which discusses regional economies from this perspective.

In addition to the Kansai Economic Management Theory, as described at the end of Section 1 of the Inside Part, many books about Japanese economy should be written such as the Kyushu Economic Management Theory, Hokkaido Economic Management Theory, Okinawa Economic Management Theory, and Chukyo Economic Management Theory. Then these books can be integrated into a Japanese economic management theory. Existing books about regional economic management theories only show the history of economic development or analysis of the current condition in each industry. They almost never help achieve regional economic autonomy for the future. Centralism lasting from the Meiji era has affected even on an academic field named economics. In this respect, the Kansai Economic Management Theory: Principles and Arguments is a model for books about regional economic management theory to be written in future.

Developing human resources to create the economic strategies required in each region

Since the professional graduate school program was launched in 2003, more than ten political graduate schools have been established nationwide. Many of them are called graduate schools of public policy, but some also offer comprehensive policy and other courses. One of the aims for the development of human resources at these graduate schools is to nurture local government employees who are strong in policies. The actual state, however, is discouraging. Students are only taught conventional microeconomics and macroeconomics, and even better, Japanese economics and development economics. I am wondering whether these courses can develop human resources who can create the economic strategies required in each region.

Existing theories are of no use in creating regional policies. It is crucial that young researchers, policymakers, and activists think for themselves to create policy, and I hope that the Kansai Economic Management Theory: Principles and Arguments provides an heuristic toward that end.