October 11, 2008
In a TV interview on an ASAHI NEWSTAR program aired on October 10, Japanese Communist Party Chair Shii Kazuo commented on the recent worldwide financial crisis triggered by the failure of Lehman Brothers.
In a TV interview on an ASAHI NEWSTAR program aired on October 10, Japanese Communist Party Chair Shii Kazuo commented on the recent worldwide financial crisis triggered by the failure of Lehman Brothers as follows:
Hayano Toru (Asahi Shimbun): The financial crisis was triggered by the failure of the U.S. investment firm Lehman Brothers. Tell me how we should understand the present state of affairs and how we should respond to it.
Shii Kazuo (Chair, Japanese Communist Party): What we are witnessing today is the failure of casino capitalism.
In the present-day world under capitalism, the financial economy is three times the size of the real economy. In such a circumstance, excessive financial speculations became prevalent. There have been numerous cases of fraud and swindles. The sub-prime mortgage crisis is a typical outcome of such financial speculations.
Lehman Brothers was, as it were, one of the major bookies in the gambling arena. The bankruptcy of Lehman Brothers set off the chain reaction of financial crisis in the United States and then in Europe.
U.S. capitalism for years has been geared toward reinvigorating the economy through speculative investments. I think that one important point is that it has become clear that the consequence of such speculative capitalism, or casino capitalism, has to be a catastrophic failure.
In Japan, the government has followed this disruptive path. It in fact has led the way to use money for investment instead of saving it, thus people’s important assets were put at risk. What is more, on the securities market, the deregulation of capital movements has helped to invite more speculative money. This is what Japan has been practicing by uncritically following the U.S. policy. So, it is essential to break away from this disastrous policy.
In these circumstances, we need to envisage an economy we need for Japan.
The ongoing worldwide financial crisis is having an adverse impact on the real economy and has had repercussions in Japan. The question here is how Japan should respond. Should we do it at the risk of ordinary people? Or, should we take measures to protect the standard of living?
Look at what large corporations are doing in such circumstances. Toyota Motor Corp., for example, is reducing its production of cars for North America. This means the carmaker will first sack temporary workers and fixed-term employees. Workers there are being thrown away. Is such a practice acceptable?
Large manufacturers then force small- and medium-sized suppliers to cut their unit prices of supplies. Large banks are increasing profits but becoming more reluctant to lend money to small businesses while mercilessly collecting debts.
For example, Toyota has increased its profit 2.2 times what it earned during the period of the economic bubble. It now holds 14 trillion yen in assets. We should have large corporations use their enormous profits in the interest of the public. This is the way for them to fulfill their corporate social responsibility. In other words, they should fulfill their responsibility by offering workers jobs, improving their treatment of small- and medium-sized businesses, and paying their share for social security and corporate taxes, which are necessary to protect the public.
Politics has a responsibility to fulfill in implementing these measures. It is necessary to act to prevent the cost from being shifted onto the public and adopt policies that give priority to protecting the well-being of the public. It is necessary to work out measures to eliminate the “working poor,” establish rules of employment that ensure that people can work with dignity, and fundamentally improve social services. It is necessary to protect small- and medium-sized businesses and agriculture. It is necessary to give up on any consumption tax increase plans and give tax cuts to ordinary people. This is the way to lay the groundwork for increasing domestic demand, and the way to move away from the policy of relying on foreign demand to a policy of boosting domestic demand and for putting greater emphasis on policies for helping the household economy prosper instead of policies that help large corporations increase their profits even more.
Hayano: The United States has decided to inject tax money to bailout the failed financial institutions. However, the public is dissatisfied with this measure. Do you think that public money may be used to help resolve the financial crisis?
Shii: It is difficult for me to comment on what is going on in the United States regarding the use of public funds for a bailout. However, the public is very critical of the measure. The insurance company in question, AIG (American International Group), has so far made a lot of easy money. It is natural that the public is asking why it is necessary to use tax money to rescue it.
In this circumstance, there arise arguments that justify the use of tax money to rescue failed financial institutions or call for this to happen in Japan. However, the United States in the past exercised certain moderation. From the late 1980s to the early 1990s, many commercial banks went bankrupt, but the government did not use tax money to rescue them. They instead loaned federal money, and the banks repaid all the loans. Therefore, the government may extend loans to banks to make up for shortfalls in a short-term crunch. However, giving away tax money will undermine the morals of capitalism at its foundation.
In 1998, when Japan experienced a serious financial crisis, we said it would be okay for the Bank of Japan to loan money to banks if the crisis is running a systemic risk. We said giving away tax money will cause moral hazard and enormous damage to the public.
Hayano Toru (Asahi Shimbun): The financial crisis was triggered by the failure of the U.S. investment firm Lehman Brothers. Tell me how we should understand the present state of affairs and how we should respond to it.
Shii Kazuo (Chair, Japanese Communist Party): What we are witnessing today is the failure of casino capitalism.
In the present-day world under capitalism, the financial economy is three times the size of the real economy. In such a circumstance, excessive financial speculations became prevalent. There have been numerous cases of fraud and swindles. The sub-prime mortgage crisis is a typical outcome of such financial speculations.
Lehman Brothers was, as it were, one of the major bookies in the gambling arena. The bankruptcy of Lehman Brothers set off the chain reaction of financial crisis in the United States and then in Europe.
U.S. capitalism for years has been geared toward reinvigorating the economy through speculative investments. I think that one important point is that it has become clear that the consequence of such speculative capitalism, or casino capitalism, has to be a catastrophic failure.
In Japan, the government has followed this disruptive path. It in fact has led the way to use money for investment instead of saving it, thus people’s important assets were put at risk. What is more, on the securities market, the deregulation of capital movements has helped to invite more speculative money. This is what Japan has been practicing by uncritically following the U.S. policy. So, it is essential to break away from this disastrous policy.
In these circumstances, we need to envisage an economy we need for Japan.
The ongoing worldwide financial crisis is having an adverse impact on the real economy and has had repercussions in Japan. The question here is how Japan should respond. Should we do it at the risk of ordinary people? Or, should we take measures to protect the standard of living?
Look at what large corporations are doing in such circumstances. Toyota Motor Corp., for example, is reducing its production of cars for North America. This means the carmaker will first sack temporary workers and fixed-term employees. Workers there are being thrown away. Is such a practice acceptable?
Large manufacturers then force small- and medium-sized suppliers to cut their unit prices of supplies. Large banks are increasing profits but becoming more reluctant to lend money to small businesses while mercilessly collecting debts.
For example, Toyota has increased its profit 2.2 times what it earned during the period of the economic bubble. It now holds 14 trillion yen in assets. We should have large corporations use their enormous profits in the interest of the public. This is the way for them to fulfill their corporate social responsibility. In other words, they should fulfill their responsibility by offering workers jobs, improving their treatment of small- and medium-sized businesses, and paying their share for social security and corporate taxes, which are necessary to protect the public.
Politics has a responsibility to fulfill in implementing these measures. It is necessary to act to prevent the cost from being shifted onto the public and adopt policies that give priority to protecting the well-being of the public. It is necessary to work out measures to eliminate the “working poor,” establish rules of employment that ensure that people can work with dignity, and fundamentally improve social services. It is necessary to protect small- and medium-sized businesses and agriculture. It is necessary to give up on any consumption tax increase plans and give tax cuts to ordinary people. This is the way to lay the groundwork for increasing domestic demand, and the way to move away from the policy of relying on foreign demand to a policy of boosting domestic demand and for putting greater emphasis on policies for helping the household economy prosper instead of policies that help large corporations increase their profits even more.
Hayano: The United States has decided to inject tax money to bailout the failed financial institutions. However, the public is dissatisfied with this measure. Do you think that public money may be used to help resolve the financial crisis?
Shii: It is difficult for me to comment on what is going on in the United States regarding the use of public funds for a bailout. However, the public is very critical of the measure. The insurance company in question, AIG (American International Group), has so far made a lot of easy money. It is natural that the public is asking why it is necessary to use tax money to rescue it.
In this circumstance, there arise arguments that justify the use of tax money to rescue failed financial institutions or call for this to happen in Japan. However, the United States in the past exercised certain moderation. From the late 1980s to the early 1990s, many commercial banks went bankrupt, but the government did not use tax money to rescue them. They instead loaned federal money, and the banks repaid all the loans. Therefore, the government may extend loans to banks to make up for shortfalls in a short-term crunch. However, giving away tax money will undermine the morals of capitalism at its foundation.
In 1998, when Japan experienced a serious financial crisis, we said it would be okay for the Bank of Japan to loan money to banks if the crisis is running a systemic risk. We said giving away tax money will cause moral hazard and enormous damage to the public.
