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Government and Economy

Politics and Money in Democracy

Masaru Kohno
Professor, Faculty of Political Science and Economics, Waseda University

A series of affairs related to Ichiro Ozawa, the secretary general of the Democratic Party of Japan, and his secretaries has highlighted again how difficult it is to establish rules about politics and money. As is well known, the Political Fund Control Act has been amended over and over in Japan. In fact, it is an endless loop in which every amendment is followed by problems where its defects are exploited, making yet another amendment inevitable. For example, the media is reporting as a big story that Rikuzankai, Ozawa's political fund management organization, purchased real estate with political funds. This type of purchase is prohibited by the current law, but not at the time of the purchase. The expensive real estate still owned by the organization is nothing but a symbol of the loophole in the previous law.

Why does closing one loophole result in another loophole emerging in the form of another law? One answer would be simply that there is a classic conflict of interest. The Political Fund Control Act restricts politicians' daily behavior more directly than any of the other numerous laws. The legislative power, however, can only be exercised by the sole law-making organ-the Diet-and the active politicians inside it. The source of difficulty is the fact that politicians themselves have to create laws which are to regulate their own behavior.

However, a more fundamental cause, perhaps, of the recurring problems of politics and money is that a serious discussion has been lacking in Japan on the principle of how to deal with these issues in the democratic system. This essay is an attempt to promote such a discussion from a more theoretical point of view for the improvement of rules governing politics and money.

In general, there are three major approaches to restricting political funds: First, to limit the amount of donations from individuals or groups; second, to require politicians or political organizations to report their revenues and expenses in detail in order to make the incoming and outgoing flow of funds more transparent; and third, to stiffen penalties for violations of amount limits or reporting requirements. The current Political Fund Control Act uses these three approaches in combination. Many of the packages that have been proposed for solving the problems of politics and money also incorporate these three elements.

Upon reflection, however, these approaches are not necessarily based on the commmon principle or on the same understanding of democracy. If these three elements involve any contradictory views or philosophies, they should not be easily integrated.

For example, the first approach-limiting the amount of donations-is, in other words, a notion that politicians or political parties may not collect unlimited amounts of money. This view assumes that there is, or there should be, an appropriate level set as the total amount that politicians or political parties may spend. In contrast, the second approach-increased transparency in the flow of funds-would work even without assuming such an appropriate level. In fact, the idea behind requiring politicians to disclose funding information is that the appropriate level should be determined by general voters. Sufficient dissemination of information would allow individual voters to judge for themselves whether specific politicians have collected too much money-or whether certain political parties have received contributions from only particular types of groups-and then the voters can make their voting decisions accordingly.

This difference between the first and the second approaches ultimately reflects the difference in philosophy about how to perceive democracy. According to the libertarian view, different voters should consider different amounts of money as appropriate for political activities. This leads to a conclusion that it is wrong to fix a monetary level binding the behavior of politicians or political parties. For libertarians, such an arbitrarily defined level itself would be against the principle of democracy in the first place. On the other hand, a more interventionist notion emphasizes that this libertarian assumption itself may result in a bias in favor of specific classes of people or groups. Interventionists argue that the democratic society, consisting of voters with varying capabilities, cannot be a political version of a simple economic "market," and therefore appropriate levels of funding must be set up at various stages in the political process as a matter of course.

The third approach-heavier penalties-is also not always consistent with the second one. Increasing transparency is important precisely because the electorate believe that they can punish politicians whom they regard as inappropriate by voting. On the other hand, the idea of strengthening fines or other criminal penalties is based on a view about democracy that punishing inappropriate politicians takes more than just voting. This reasoning implies that the first and the third approaches are similar in that they are interventionist, and that the difference between them is whether they rely on ex ante or ex post intervention.

Following the series of the affairs mentioned above, it is expected that the Diet will discuss various bills for amending the law during the rest of the current session, such as the abolishment of corporate donations and the introduction of a tax system encouraging individual contributions. It is, however, difficult to generate constructive discussion regarding politics and money due to the interests of the political parties that are intricately intertwined with each other. Establishing a broad consensus for reform would first require fully recognizing the beliefs underlying specific proposals and the respective understanding of democracy.

Masaru Kohno
Professor, Faculty of Political Science and Economics, Waseda University

Prof. Kohno was born in 1962 and graduated from Faculty of Law, Sophia University. He received an M.A. in International Relations from Yale University and a Ph.D. in Political Science from Stanford University. He has been a Professor on the Faculty of Political Science and Economics at Waseda University since 2003 after serving as an Assistant Professor at the University of British Columbia; a National Fellow for the Hoover Institute at Stanford University; an Associate Professor for Aoyama Gakuin University, among other positions. Prof. Kohno is also a Research Associate at the Waseda Institute for Advanced Study and a Fellow at The Tokyo Foundation Virtual Center for Advanced Studies in Institution (VCASI).

[Major Publications]
Masaru Kohno, Japan's Postwar Party Politics, Princeton University Press, 1997.
Ichiro Miyake, Yoshitaka Nishizawa, and Masaru Kohno, Politics and Economy under the 1955 System: Analysis of Jiji Public Opinion Data [55-Nen Taisei-ka no Seiji to Keizai: Jiji Yoron Chosa Dehta no Bunseki], Bokutakusha, 2001
Masaru Kohno, Institution [Seido], Theories and Models in Social Sciences Vol. 12 [Shakai Kagaku no Riron to Moderu 12], University of Tokyo Press, 2002.
Masaru Kohno, ed. From Institution to Governance: Intersection of Knowledge in Social Sciences [Seido kara Gabanansu e: Shakai Kagaku ni okeru Chi no Kousa], University of Tokyo Press, 2006
Masaru Kohno and Frances Rosenbluth, eds. Japan and the World: Japan's Contemporary Geopolitical Challenges. New Haven: Yale University Council on East Asian Studies, 2009.
Masaru Kohno, ed. Expectations, Institutions, and the Global Society [Kitai, Seido, Gurohbaru Shakai], Keisoshobo, 2009
Aiji Tanaka, Masaru Kohno, Airou Hino, Ken Iida, and Opinion Poll Department of Yomiuri Shinbun Newspaper, Why did the change of the administration take place in 2009? [2009-nen, Naze Seiken-koutai dattanoka], Keisoshobo, 2009