Media  Global Economy  2017.08.09

Problem of Public Administration in Japan Hidden in Kake Gakuen Scandal

The article was originally posted on Webronza on July 21, 2017

What is the Kake Gakuen scandal?

The Kake Gakuen (whose official English name is Kake Educational Institution) scandal can be summarized as follows: the Ministry of Education, Culture, Sports, Science and Technology (MEXT), which had not authorized any school to open a new veterinary medicine department other than the existing 16 universities operating such departments, thereby limiting the number of vet students, for more than half a century on the grounds that Japan had enough veterinarians, decided at the request of the City of Imabari, Ehime, which had been repeatedly made in and after 2007 to allow a veterinary medicine department to open at a site in the city not through the ordinary administrative process but within the framework of National Strategic Special Zone if four conditions were met.

Since the chairman of Kake Gakuen, which had wanted to set up a new veterinary medicine department in Imabari, is Prime Minister Abe's friend, it is said that close aides to Prime Minister Abe pressed MEXT to expedite the approval of the project. The issue has developed into a major scandal involving a former administrative vice education minister who alleged that "administrative processes were distorted" by such pressure.

According to newspaper reports, the main question at issue appears to be whether a process had been set up from the outset to let Kake Gakuen go ahead with its school plan and the Cabinet Office put pressure on the education ministry opposing such a process. In other words, at the center of a controversy is the latter part of the above summary, which is more scandalous than the former part. As a former employee of the national government, I do not consider the latter scandal subjected to criticism as an unlikely event. Meanwhile, an assertion made by a member of the National Strategic Special Zones Working Group that the minutes of the group's meetings clearly show there was no intervention from the Cabinet Office makes me think that such an event is unlikely to have occurred.

What is really distorted?

If such an intervention should be the case, we can say that "administrative tasks performed by education ministry officials" were distorted. The debate over the Kake Gakuen scandal seems to be focusing only on this point.

However, what if "administrative tasks performed by education ministry officials" who had not authorized the opening of a new veterinary medicine department were distorted in the first place?

Who at all determines if there is an oversupply or shortage of veterinarians?

Let me pursue the subject using a simple example of prices for cabbage. When the price of a head of cabbage is 50JPY, does this reflect cabbage oversupply or cabbage shortage? How about if the price is 300JPY?

Neither case reflects cabbage oversupply or cabbage shortage. In a market, the price of any goods adjusts/changes until quantity demanded equals quantity supplied. This is a basic economic theory introduced to high school level students.

Then, why do we say that there is an oversupply or shortage?

This depends on whether we view the market from a producer (supplier) perspective or from a consumer perspective. When a head of cabbage is priced at 50JPY, producers consider that the low price is due to "an excess supply" of (or low demand for) the product. In this case, no consumers would say anything because they can buy cabbage at a lower price.

By contrast, in cases where the price of a head of cabbage is 300JPY, consumers would complain about cabbage shortages. From their perspective, cabbage is too expensive, on account of an inadequate supply. It goes without saying that no producers would say anything because they can sell cabbage at a higher price. As seen above, whether cabbage is expensive or cheap varies depending on from which perspective you consider its price. However, from a market perspective, it is the price, whether high or low, that balances the supply of and demand for the product.

Is there an oversupply of veterinarians?

As shown in the example above, those who complain that low prices are the result of an oversupply are the producers. Let us shift from the cabbage market to the veterinary market. The suppliers (providers) of veterinary services are veterinarians. This means that those who do not want an oversupply of the services, i.e. who want the price of the services to be maintained at a high level, are veterinarians or the organization of veterinarians. If the supply of veterinary services increases and the prices of the services (veterinary service fees) reduce, livestock farmers and pet owners gain benefits. However, the government takes no heed of such benefits.

This problem, unique to public administration in Japan, is not limited to the field of veterinarian but commonly exists in a wide range of fields, from medical doctor to taxis and rice.

In order to provide producers and suppliers of goods and services with guaranteed incomes by maintaining the prices of such goods and services at certain high levels through measures such as regulations on new entry and supply restrictions, the Japanese government has striven to control the supply and prevent an excess supply in the light of producers and suppliers from occurring.

What is hidden

Hidden behind the claim that there is an oversupply is the government's and the industry's judgment that the market price is far lower than the "normal or appropriate price", due to the excess supply. They do not clearly or explicitly state what the "normal or appropriate price" is.

Whereas in market economies, where prices adjust to balance supply and demand, it is strange that they are never factored into the government supply-and-demand outlook or projections. (From the viewpoint of those who have studied economics, this is a fraud conducted by the government against its people. However, as most administrative officials are lawyers ignorant of economics, none of them question the "supply-and-demand table without prices".)

Whose interests does public administration in Japan endeavor to protect?

If asked their opinions regarding the vet issue, the Japan Veterinary Medical Association and the Ministry of Agriculture, Forestry and Fisheries may say that even at the present stage, there is a vet oversupply in Japan and thus just insist that the government take measures to prevent the number of animal doctors from increasing any further. This will ensure the stable management of the 16 universities currently operating veterinary medicine departments, as well as the reassignment of ex-education ministry officials after their retirement from the government to positions at those universities.

The vet issue has been further distorted by agricultural administration. Under normal circumstances, livestock farmers are supposed to ask veterinary services to be provided at reasonable or appropriate prices from the viewpoint of their farming buisiness. However, through measures such as raising the prices of animal products by high tariffs and subsidizing livestock farmers, agricultural administration in Japan has established a mechanism under which livestock farmers can afford to pay for and will not complain about expensive veterinary services.

As a matter of course, taxpayers and consumers eventually have to pay for these politicy distortions.

Even if vet supply really exceeds vet demand and veterinary service fees reduce, it would only end up with a decrease in the number of students applying for admission to veterinary medicine departments. There is no need to restrict from the start the number of university departments and students. Departments with bad reputations may just see the number of applicants decline and be eventually weeded out of academic circles.

To put it in a nutshell, the root of the problem of public administration in Japan lies in the fact that the community consisting of industries, bureaucrats, politicians and universities controls supply and maintains the prices at high levels from the standpoint of suppliers (producers), thereby endeavoring to ensure producers' gains.

It is regrettable that in connection with the latest Kake Gakuen scandal, little debate has taken place over this fundamental problem of public administration in Japan.

Let me point out one more thing here. We encounter the newly developed animal diseases such as BSE and avian influenza caused by globalization. These should be controlled internationally. In addition, there would be more and more demand for veterinary services of high quality in emerging economies. The judgment of whether there is an oversupply or not is currently made based only on domestic markets. I think there may be more demand for Japanese veterinary services, when taking the foreign demand and the export of such services into consideration. However, neither the Japan Veterinary Medical Association nor the Ministry of Agriculture, Forestry and Fisheries appears to be discussing the feasibility of the export of such services.

(This article was translated from the Japanese transcript of Dr. Yamashita's column in "Webronza" on July 21, 2017.)