Using public funds effectively without leaving it up to bureaucrats

KOBAYASHI: Today, I'd like to hear your firsthand comments on the issue of children from an economist's point of view. For many years I have been under the impression that in Japan the state budget allocated for children is too small, disproportionately scanty in comparison with the budget for the aged.^*1 That's very disturbing.

UZAWA: Japan's postwar society succeeded in achieving remarkably high economic performance, but the importance given to human values has consistently declined. One result is today's relatively low state budget for children. I have lived in many different countries, so I can tell you that Japan, compared with other countries, has become a leading nation in neglecting children. Sad, isn't it?

KOBAYASHI: If the state wants to improve the environment of children, it should first make financial outlays for it, right?

UZAWA: I agree, but the crux of the problem is not the amount of the outlay, but the purpose of the allocation and the idea behind how it should be spent. Quality, not the quantity, is the question.

KOBAYASHI: In reality, not only is the budget low, but the way it is spent is also questionable.

UZAWA: In Japan, the amount of money at the government's disposal is so great that bureaucrats of lesser virtue can easily waste it on superfluous and grandiose construction projects. Our money is not spent efficiently at all. We have to stop letting bureaucrats do whatever they like, and instead work out an effective system that caters to people's demand to safeguard the well-being of children.

In the United States, just to give you an example, about one half of university endowment funds come from private bequests. In Europe and North America, bequests are exempt from estate taxes and managed in accordance with the wishes of the individual donors. Similarly, the so-called 1% Law, which originated in Hungary, has spread throughout the European Union. It allows taxpayers to make a donation of up to one percent of their income tax to an eligible NGO or a listed public cultural institution of choice. In this way, people can put their money to use in ways that are meaningful to them and beneficial to society.

In Japan, too, at the beginning of the Meiji Era, villagers used to donate their common woodland to build elementary schools. Lumber from these woodlands was used to construct school buildings or raise the funds needed. That's why elementary schools then were sometimes housed in impressive buildings.

Social common capital as shared assets over generations

KOBAYASHI: Dr. Uzawa, your economic approach focuses on the notion of social common capital, and you refer to education and medical care in that context. Could you explain it more?

UZAWA: Briefly, it refers to "something equally precious to everybody" that should be carefully protected as "common property of society." Today, even students of economics tend to regard it as a discipline that merely deals with the pursuit of market profitability. They forget about such concepts as the fair distribution of wealth or eradicating poverty, although they have always been a part of classical economics.

We can think of social common capital in terms of three main categories: the natural environment, social infrastructure, and institutional capital. Both education and medical care belong to the category of institutional capital and are deemed necessary for the all citizens to maintain human dignity and exercise civil liberties to the maximum degree. Above all, it is important to keep in mind that social common capital belongs not only to our generation, but also to following generations.

KOBAYASHI: Three years ago, we established an academic society called the Japanese Society for Child Science. It is an interdisciplinary association of people who want to improve the environment for child development. Members of this association are dealing with "Child Caring Design, " a key concept that includes all issues relevant to children, such as city planning and design, as well as social institutions and industrial planning.

You are quite right, Dr. Uzawa, in pointing out that Japan cares very little for children. That's why I am currently searching for ways to tackle this problem from a scientist's point of view. I want to trace back the problem to the very root, namely to discuss how we can create a society that assures an optimal environment for child development. By the way, let me ask, who is supposed to manage this social common capital? A public institution?

UZAWA: That's an important point. Social common capital consists of the common property and assets of an entire society that are necessary for people to live like human beings. As such, it should not be subject to the vagaries of the market in the pursuit of profit nor should it be administered perfunctorily as part of the mechanism of state administration.

For instance, you cannot regard the medical care needed for children suffering from incurable diseases as merely a cost factor. Nor can you make a manual that standardizes the type of care that requires intricate human interaction in terms of rules laid down by the government. Whatever medical care the doctor considers to be necessary ought to be adequately provided, regardless of the cost and the administrative measures involved.

The same applies to education: In my opinion, society cannot consider education simply in terms of the return on its investment in children. Nor should the wide diversity of individuality of children be controlled through a uniform and bureaucratic curriculum. The teacher ought to do whatever he or she deems necessary to enhance the child's capabilities.

In other words, social common capital must be managed and administered on the basis of knowledge and professional discipline of experts in relevant fields, independently of state and market control, that is to say, purely from the standpoint of providing fundamental civil rights.

Deeply moved by Yoshishige Abe's words

KOBAYASHI: Given that expert knowledge and professional discipline, as you say, are indispensable, then institutions for higher education come to bear a very important role in fostering such experts.

UZAWA: I recall a scene just after the end of the World War II when the officers of the Occupation Army came to the First Imperial High School in Tokyo to requisition the school facilities for their headquarters. Mr. Yoshishige Abe, then the school principal, firmly refused, saying, "Our school has a mission to teach liberal arts. Liberal arts are the arts, culture and learning that are legacies of humankind. This is the sacred place where these great legacies are passed on to future generations. It cannot serve such a vulgar purpose as military occupation!" I was deeply moved by his words then.

KOBAYASHI: Mr. Abe was, indeed, a man of great dignity. Later, he was appointed Minister of Education in the administration of Prime Minister Kijuro Shidehara.

UZAWA: Mr. Abe was a remarkable person. I guess, he was then already thinking on behalf of the future generations. Higher education based on the liberal arts is crucial to educating experts qualified to manage and administer social common capital and Mr. Abe was willing to risk his life to protect it. In other words, professional knowledge and expertise must be solidly backed by sense of ethics and human character. Only experts of such caliber can be trusted to administer and manage social common capital, or the common property of our society.

Value of relationships through personal encounters

KOBAYASHI: I thought that your idea of social common capital might be something radical, but now it seems to be something rather nostalgic for our generation.

UZAWA: It's a matter of common sense, you know, in that it asserts that human beings should be valued and respected. We want to solve the problem of poverty, develop children's abilities, cure illness, create safe and stimulating communities for children, and protect the natural environment. What should we do to make society more livable and comfortable in human terms? The concept of social common capital asks this question and makes it a central one in economics. That's why the social common capital cannot be realized through bureaucracy, market principles, or other impersonal means. I am anxious to prove this proposition from the perspective of economics.

KOBAYASHI: Do you mean that an economic approach that takes the human mind into account is feasible?

UZAWA: There were actually some economists including Adam Smith who took the human mind into consideration. Modern economists, however, under the influence of neoclassical economic theory regard the human mind as irrelevant to the economy, and pay no attention to it. Marxist economists are not occupied with humans either, but only with social class. Among the Keynes' followers, I recall that Joan Robinson emphasized the importance of considering children when writing about economics, but this does not necessarily mean that children were a factor in the theoretical framework of economics.

KOBAYASHI: Why not? It should be possible.

UZAWA: Unfortunately, modern economics cannot deal with factors that cannot be given a monetary value, and this applies to the natural environment and children. These cannot be priced and exchanged on the market. Maybe that's why they tend to be neglected. Common assets of society, to be sure, are not free goods that can be exploited wantonly, but something that we must protect dearly.

KOBAYASHI: In your opinion, what lesson should younger generations learn that will contribute to greater valuation and respect for human beings?

UZAWA: Nothing complicated. It is through personal contact with others that we come to learn the value and the joy of taking care of human beings. Try to care for people around you: your grandmother, your neighbors or your friends. In that sense, teaching and medicine are sacred vocations. I only wish that those who aspire to those professions will keep that in mind. (November 22, 2005)

*1
For instance, according to the report released by National Institute of Population and Social Security Research last year, the percentage share of the social security expenditure for elderly(i.e. retirement pensions, medical care, welfare services) in FY2003 was over 70% while the share of expenditure for children and their family(i.e. child allowance and childbirth allowance) was only 3.8%.