Oleh: Rudy | Agustus 20, 2007

Iron Triangles: The Constraint of Japanese Political Economy Reform

Iron Triangle is very important factors to explain why it will be difficult to reform Japanese political economy. We can understand the Iron Triangle from the example case of car inspection service in Japan (shaken).

In Japan, there is regulation for car owner to regularly check their car every two years since 1951 to ensure the safety of the car. In addition, you must have a dealer or auto shop perform a shaken inspection every two years (three years for new cars, then every two years thereafter). The shaken includes vehicle registration, two years of mandatory liability insurance, and inspection and repairs (any repairs deemed necessary by the mechanic) are performed. The shaken typically costs between 100,000 and 200,000 Yen, and besides the actual inspection includes a weight tax (typically 8,000 to 50,000 Yen) and a mandatory insurance (about 30,000 Yen).

The system is “inspect then fix”, it allows car owner first to take their cars in for inspection, then have only specified trouble spots repaired or replaced. But after that it is still necessary to go once again to the inspection station for yet another check up. This not only doubles the car owner’s inconvenience, but the presence of the third class mechanics at the government stations provide no reassurance to owner that repairs have been done properly.

We can see that this service is very costly for car owner and this inspection has been implemented since 1951. This condition is held for long time without any significant changes because there is a strong chain among bureaucrat, politician (diet member) and business sector called “Iron Triangle”

We can understand this iron triangle by following logic. Vested interest (business) always protect their interest, they will make efforts as hard as they could to preserve regulation which protect their interest. The example is garage inspection in Japan which gives much benefit to garage owner, in order to keep their benefit through regulation, garage owner make effort to preserve the system. In what effort should the effort to be conducted, obviously the guard of the system in the form of legal regulation is bureaucrat and politician.

Business sector then makes relation with politician and bureaucracies. Politician and bureaucracies in this case have power to preserve the system through law implementation. Business sector then promise the politician to give their votes to help politician to be elected again. By taking these businesses into their support group, politicians not only get the votes from business sector but they also get money as political contribution from each garage service business. In exchange, they protected the shaken system or car inspection system in Japan.

Every car owner abhors this rigid and costly system. The Transportation Ministry however insist that it is precisely because we have shaken that the accident rate low and the ministry says Japanese Police put the number accidents clearly attributable to “bad maintenance”. In 1951 some mediocre automobiles were being produced by Japanese car makers. For safety’s sake, a strict shaken system was undoubtedly necessary. But today, with Japanese companies having attained the world’s highest level of technology, ordinary citizens feel there is almost no need for it. So why does the ministry of Transportation cling to the system? The reason is clear: to protect the Garage Service Business. And it is doubtless for this purpose that ministry bureaucrat are sent upon retirement under Amakudari (fall from heaven) to serve at the Business Sector and have good position in it.

Each party interest leads to iron triangle and preserve car inspection policy in Japan. One might surprise why vested interest which is only minority can influence the decision maker to preserve the garage inspection system against car owner which is majority?

Car owner has problem with free rider (part of the group who wait and see) problem. Free rider problem is more important matter in majority because it hard inspects and finds free rider. In the other side, Vested interest does not have problem regarding free rider because within the minority there is strong monitoring and coordination to achieve the goal.


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