Welfare and Capitalism in Postwar Japan (review)

Margarita Estevez-Abe offers a reasonable argument—that Japan's welfare state is shaped by politics—and takes it to provocative lengths in this important new work on Japan's system of social protection.

Let me start with the reasonable argument, which begins with the best account I have read on how Japan's welfare state compares to those of other industrialized nations. Most comparative studies of welfare states, especially those compiled by Europeanists, focus on welfare spending. By this measure, Japan's welfare state looks extremely small, with welfare spending constituting a much smaller share of gross domestic product than any European state. Estevez-Abe insists that we look at the broader range of policies that cushion workers and citizens from market forces, including job protections, regulations that limit competition, financial system interventions, and public works spending. She calls these programs "functional equivalents" on the grounds that programs making it difficult to lay off workers and helping employers get through difficult times offer workers the same income security as ones that write them checks when they are laid off.

In a single chart-filled chapter (pp. 19–50), Estevez-Abe situates Japan's welfare state in comparative context and shows that Japan's system of social protection is only "small" in a few specific areas. It has large pension and health programs, and it also has some of the largest "functional equivalent" programs: massive public works, high levels of job protection, trade protection for farmers, and regulatory protection for large swaths of the economy. It is small only in its formal welfare programs for workers and families. Both unemployment insurance and family benefits are miserly, right down there with the United States. This combination, she argues, makes Japan's welfare state distinct from the conventional welfare state models. It is neither "liberal" like Britain nor "conservative" like Germany nor "social democratic" like Sweden. It belongs in its own "fourth" world.¹

In describing and situating the Japanese welfare state in this manner, Estevez-Abe is taking on much of the conventional wisdom on the subject. Many authors on the Japanese welfare state have emphasized its small size, ignoring the role of functional equivalents. Others, such as Gregory Kasza in his recent book, have taken the opposite position.² Emphasizing the size of Japan's health and pension programs, he argues that Japan's welfare state has developed in the same way as European ones. By stressing both the small and large elements of the Japanese system of social protection, Estevez-Abe disagrees with both of these characterizations.

Her emphasis on functional equivalents also challenges the broader scholarship on welfare states, most of it focused on Europe, which insists that only government spending programs can count as welfare. Her account rightly insists on including job protection policies, credit policies, and the other functional equivalents she catalogues. By providing data on OECD nations in these new areas, Estevez-Abe makes an important contribution to the comparative work on this subject.

Estevez-Abe also makes a contribution through her analysis of why Japan's welfare state has taken on such a distinctive shape. Most accounts of policies in this issue area, in Japan and in other industrialized nations, emphasize the role played by socioeconomic forces. Everywhere, industrialization produces demands for social welfare as societies confront new social needs that were less urgent when most people lived in rural areas surrounded by family. The classic accounts explain the divergence between the various European models by pointing to differences in the power of labor unions and other aspects of the political economy: did labor or capital make a deal with farmers, do leading firms depend on highly skilled labor, and does a nation rely heavily on trade?

Estevez-Abe puts all of this aside and insists that the divergence is driven primarily by political structures, especially a nation's electoral system. If a nation has a Westminster system, with single-member districts (SMDs) and a...