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Well-being and Happiness in

Japan’s Economic Development ― In Search of the New Goals of Development ―

August 31, 2012 Shigeru T. Otsubo & Yumeka Hirano

Graduate School of International Development(GSID), Nagoya University

(http://www.gsid.nagoya-u.ac.jp/sotsubo/)

Happiness as the Goal of Development l  The idea of happiness as the goal of development was

brought to the attention of the international community by the PM of Bhutan during the Sixty Fifth session of the United Nations General Assembly in September, 2010.

l  The new UN resolution passed unanimously at the General Assembly in July 2011 1)  “to pursue the elaboration of additional measures that

better capture the importance of the pursuit of happiness and well-being in development with a view to guiding their public policies”

2)  “to develop new indicators and other initiatives to share information thereon with the Secretary- General as a contribution to the United Nations development agenda, including the Millennium Development Goals”

2 (Ref.: UN Genera; Assembly, the agenda item 13 ‘implementation of the follow-up to the outcomes of the major United Nations conferences and summits in the economic, social and related fields, resolution (A/65/L.86)’, 13 July, 2011. )

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Bhutan’s Development Philosophy: “Happiness” and “Well-being”

l  Gross National Happiness (GNH): designed in an attempt to define an indicator that measures quality of life or social progress in more holistic and psychological terms than only the economic indicator of GDP.

l  In November 2008, the Royal Government of Bhutan has adopted the GNH index.

l  The purpose of the GNH index is to reflect GNH values, set benchmarks, and track policies and performances of the country. The GNH index was developed by the Centre for Bhutan Studies (CBS), under the leadership of Dasho Karma Ura.

l  Happiness of the people was made the guiding goal of development. The exact phrase GNH is more important than GDP was coined by His Majesty the 4th King of Bhutan, who is the author of GNH.

l  GNH has attracted attention, and opinion around the world has started to converge on happiness as a collective goal.

(Ref.: GNH The Centre for Bhutan Studies http://www.grossnationalhappiness.com/gnhIndex/gnhIndexVariables.aspx ) 3

l GNH 9 key dimensions – Psychological wellbeing – Education – Time use – Ecology – Culture – Community vitality – Health – Living standards – Good governance

(Ref.: GNH The Centre for Bhutan Studies http://www.grossnationalhappiness.com/gnhIndex/gnhIndexVariables.aspx )

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Bhutan’s Development Philosophy: “Happiness” and “Well-being” (cont.)

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l  Green and Happiness Index (GHI) –  To encourage people participation –  To be a major tool for suggesting the national

development’s guidelines –  To be a driving force for well-being development –  To be a guideline for developing data bases and

indicators l  GHI is primarily based on the philosophy of

Sufficiency Economy, human-centered development, and the vision of the “Green and Happiness Society,” as stated in the 10th National Economic and Social Development Plan, 2007 to 2011.

(Ref.: Thailand Foreign Office, The Government Public Relations Departmenthttp://thailand.prd.go.th/view_inside.php?id=2154)

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Thailand’s Development Philosophy: “Happiness” and “Well-being”

l GHI key 6 components – Health – Warm and loving family – Community empowerment – Economic strength and equity – Good quality environment and ecological

system – Democratic society and good governance

(Ref.: Thailand Foreign Office, The Government Public Relations Department http://thailand.prd.go.th/view_inside.php?id=2154) 6

Thailand’s Development Philosophy: “Happiness” and “Well-being” (cont.)

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Attention to “Happiness” around the World l  Japan: Cabinet Office introduced “Happiness Indicator” to measure well-being

of people. (HP: http://www5.cao.go.jp/keizai2/koufukudo/koufukudo.html) l  The UK: “New measure of national well-being "could give us a general picture

of whether life is improving" and eventually "lead to government policy that is more focused not just on the bottom line, but on all those things that make life worthwhile”. The first official measure of the nation's well-being will be published in summer 2012. (BBC News “Plan to measure happiness ‘not woolly’ Cameron”, 25 Nov 2010 http://www.bbc.co.uk/news/uk-11833241)

l  France: French national statistics office produces guidelines on measuring well-being as precursor to national happiness index. (http://www.guardian.co.uk/world/2010/nov/17/france-happiness-index 17Nov, 2010)

l  Germany: RTE News “German politicians are investigating ways to gauge the country's quality of life and prosperity as a way to complement its GDP indicator”, 17 Jan 2011http://www.rte.ie/news/2011/0117/happiness-business.html)

l  Independent think-tank “The Happy Planet Index”: Introduced the index, which combines environmental impact with human well-being to measure the environmental efficiency with which, country by country, people live long and happy lives. (http://www.happyplanetindex.org/) 7

The Need for Defining a New Economic Paradigm l  High-level Meeting On Wellbeing And Happiness: Defining A New

Economic Paradigm, 2 April 2012, United Nations Headquarters, New York

l  Recognized the urgent need for a new global economic system l  Happiness as a fundamental human goal and universal aspiration l  Discussed various issues, including wellbeing and happiness,

ecological sustainability, efficient use of resources, and fair distribution.

l  Broad agreement: Government worldwide can take practical and immediate steps towards adoption of the new well-being and happiness-based economic paradigm.

8 (Ref.: The , The Government Bhutan, Defining a New Economic Paradigm: The Report of the High-level Meeting on Wellbeing and Happiness http://www.2apr.gov.bt/images/BhutanReport_WEB_F.pdf)

How does your country define a New Economic Paradigm?

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Objectives of This Presentation The purpose of this presentation is six-fold: Presenter: Prof. Shigeru T. Otsubo 1)  to introduce the 4 phases of the postwar Japanese economic

development and evolving development goals; 2)  to review the evolution in the goals of Japanese indicative and

consensus-building economic development plans; 3)  to show the elements/state of ‘satisfaction’, ‘well-being’, and

‘happiness’ in the Japanese society; 4)  to introduce/discuss some of the Japanese traditional values

behind the Japanese social capital/network; and 5)  to discuss the directions/goals of development in Japan after 3.11. Presenter: Ms. Yumeka Hirano 1)  to discuss two significant disparities in Japan (gender inequality

and intergenerational gap) in conjunction with ‘happiness’ discussion.

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Four Phases of Japanese Economic Development

Phase I (1945-1960s) Catching-up Process

1. Post-war Rehabilitation & Economic Reforms (1945-mid 1950s) 2. High Economic Growth Period (mid 1950s – early 1970s)

Democratization Common Goals

Phase II (1970s-1980s) Failure to Reform

& “Bubble” Economy

1. End of Catch-up Process & Need to Change (1970sè1980s) 2. Overcoming Oil Crises (1970s ) 3. ‘Bubble’ (latter ½ of 1980s) No More Common Goals

Autonomous Actions

Phase III (1990s-2009) Long Stagnation

& Koizuminomics

1. Bubble Burst (1990) & Long Stagnation (1990s-2000s) 2. Koizuminomics Supply-Side Policies & Widening Inequality (2001-2006-)

Phase IV (2009-) Political Regime Change,

3.11 and Beyond

1. First Regime Change through Election LDP+ è DP+ (2009) 2. 3.11 & Fukushima

In Search of New Goals

Socio-Economic Outcome (-1970-)

Environmental Issues Social Dimensions NNW(1973)

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14 economic plans officially adopted

Economic plans in a free market economy

‘Indicative-type’ rather than ‘Command-type’ Sharing of information between the government and the public (business and household sectors)

-- Medium-run development scenario the government assumes, including target economic growth rate and other indicators

-- Medium-run economic policy stance and policy priority, including allocation of funds for investment in

social overhead capital -- Economic behavior of household and business sectors that the government deems desirable

Economic Planning for Consensus Building

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From MEIJI Revolution (1867-) to the end of WWII (-1945)

Individual Well-being < National Wealth/Goals ‘I do not want anything until our country wins the war.’

‘Luxury is our enemy. Etc.

êPhase I (1945-1960s) Catching-up Process

1. Post-war Rehabilitation & Economic Reforms (1945-mid 1950s) 2. High Economic Growth Period (mid 1950s – early 1970s)

Democratization Common Goals

Individual Well-being = National Wealth/Goals

Individual Well-being ≥ National Wealth/Goals

ê

ê

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THE CONSTITUTION OF JAPAN CHAPTER III. RIGHTS AND DUTIES OF THE PEOPLE Article 13. All of the people shall be respected as individuals. Their

right to life, liberty, and the pursuit of happiness shall, to the extent that it does not interfere with the public welfare, be the supreme consideration in legislation and in other governmental affairs. Note: Japan’s constitution was drafted and promulgated under the guidance of the GHQ（General Headquarters), constructed upon General Douglas MacArthur draft in 1946. Therefore, the article 13 perhaps reflects the US Declaration of Independence that includes/supports ‘pursuit of happiness’.

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ê

Individual Well-being >National Wealth/Goals

Individual Well-being ≥ National Wealth/Goals

ê

è

Phase II (1970s-1980s) Failure to Reform

& “Bubble” Economy

1. End of Catch-up Process & Need to Change (1970sè1980s) 2. Overcoming Oil Crises (1970s ) 3. ‘Bubble’ (latter ½ of 1980s) No More Common Goals

Autonomous Actions

Phase III (1990s-2009) Long Stagnation

& Koizuminomics

1. Bubble Burst (1990) & Long Stagnation (1990s-2000s) 2. Koizuminomics Supply-Side Policies & Widening Inequality (2001-2006-)

Phase IV (2009-) Political Regime Change,

3.11 and Beyond

1. First Regime Change through Election LDP+ è DP+ (2009) 2. 3.11 & Fukushima

In Search of New Goals

Individual Well-being >=National Wealth/Goals

*New Public Commons *Minimum Unhappiness Society

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Examples of Adopted Economic Plans I

Name

1.Economic Self- Reliance Plan

3.Doubling National Income Plan

5.Economic and Social Development Plan

7.Economic and Social Basic Plan

8.Economic Plan for 2nd Half of the 1970s

Plan period 1956

~1960 1961

~1970 1967

~1971 1973

~1977 1976

~1980

Major purposes

Economic self-reliance Full employment

High growth Higher living standard Balanced and fulfilled

economy/society People’s welfare

International relations Stable development

Fulfilled people’s living

Growth target /actual growth

4.9% 8.8% 7.8% 10.0% 8.2% 9.8% 9.4% 3.5% 6%+ 4.5% 15

Examples of Adopted Economic Plans II

Name

9.New Economic/ Social 7-year Plan

10. Vision/Guideline for the 1980s

12.Lifestyle Superpower Plan

13.Economic and Social Plan for Structural Reform

14.Vision for Society and Economic Revitalization

Plan period 1976

~1985 1983

~1990 1992

~1996 1995

~2000 1999

~2010

Major purposes

Stable economic development Quality of people’s life Peaceful/stable intn’l relations

Security & well-being of people’s life

From economic superpower to Lifestyle superpower Freer and dynamic economy

Well-being & Security of people’s life

Society with diversified wisdom Preparing for aging/depopulation

Coexistence with environment

Growth target /actual growth

5.7% ?.?% 4%± ?.?%

3.5%± ?.?% 3%± ?.?% 2%± ?.?% 16

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Part I.1: Postwar Economic Reforms and Rehabilitation

(1945 – mid 1950s)

Phase I (1945-1960s) Catching-up Process

1. Post-war Rehabilitation & Economic Reforms (1945-mid 1950s) 2. High Economic Growth Period (mid 1950s – early 1970s)

Democratization Common Goals

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l Human loss – 1.85 million (2.8 million) deaths l Material loss – 25% of national wealth l Industrial production dropped to 1/10 of the

prewar level. l Hyper-inflation with commodity shortage

Devastation during WWII (1941-1945)

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Zaibatsu dissolution Dissolution of

Zaibatsu conglomerates; Prevention of economic

power concentration

Agrarian reform Elimination of tenant system; Growing # of

independent farmers

Democratization of the Economy

Fair market rules Anti-trust Law;

Securities Exchange Law; etc.

Post-war Economic Reforms

Labor market reform Legalization of labor

movement; Establishment of

labor unions 19

l  Introduction of new technology to fill the gap –  Steel (strip mills); shipbuilding (electric

welding); chemical fertilizers; synthetic fiber; consumer electric appliances, etc.

–  “First machine is imported and the second machine is produced domestically”

‘Improved Engineering’

l  Rural-urban transfer of young workforce ‘Shudan Shushoku’(1954-1975) l  Industrial Policy

–  Business Rationalization Promotion Act (1952)

–  Government-owned financial institutions – JDB, ExIm Bank, Small Business Credit Corporation

–  Establishment of long-term credit banks

From rehabilitation to enhancing competitiveness

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Part I.2: High Economic Growth Period

(mid 1950s – early 1970s)

Phase I (1945-1960s) Catching-up Process

1. Post-war Rehabilitation & Economic Reforms (1945-mid 1950s) 2. High Economic Growth Period (mid 1950s – early 1970s)

Democratization Common Goals

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Dual structure -- lower productivity and poorer working conditions in small businesses, consumption-goods and service sectors National consensus -- trickle-down strategy

8.8 9.2

4.5 4.43.34.9

1.5 1.0 1.4

11.1

024681012

1956-60

1961-65

1966-70

1971-75

1976-80

1981-85

1986-90

1991-95

1996-2000

2001-2005

Average real growth rate

Source: National Accounts

Entering Virtuous Cycle Period of rapid growth (1955--1970)

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Rapid growth as a “catching-up” process

Catching-up process Goal of development Consensus formation

Advantage of latecomers -- introduction of technology and process innovation -- lower business risks -- incentive for innovation and quality control through

competition in foreign market

National Income Doubling Plan (1961-70): great success 23

l  Demand side –  Shortage of production capacity – investment

demand –  New consumer durables – consumer demand –  Increased Quality and undervalued exchange rate –

export expansion l  Supply side

–  Innovation seeds from overseas –  Growth of working-age population and its migration –  Increase in household savings –  Rise in education attainment to enhance human

capacity

Demand and supply side factors for rapid growth

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3 Sacred Treasures in the latter half of 1950s

3 Cs in the High-growth period of 1960s

1956 Economic White Paper “We have come out of the post-war rehabilitation.”

1964 : Tokyo Olympic Game, OECD Membership, IMF Article 8 Country

TOYOTA Corolla (1966-) vs. NISSAN Sunny (1966-) 1000cc 1000cc 1100cc affluence of plus 100cc 1200cc neighbor’s car looks smaller

Drive to Material Happiness/Affluence

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Socio-Economic Outcome of Rapid Growth

( – 1970s – )

Socio-Economic Outcome (-1970-)

Environmental Issues Net National Welfare(1973)

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l  Labor market – labor surplus to labor shortage –  Wage increase – productivity-differential inflation

l  Infrastructure –  Tokaido bullet train; Meishin super highway –  Physical transportation modes – motorization

l  Negative side –  Underdevelopment of social overhead capital

(infrastructure) for better living –  Overpopulation in urban areas and depopulation

in rural areas –  Environmental degradation

l  Public pension system extended to self-employed

Socio-Economic Transformation Employment share 1955 1970

Primary industry 41.3% 19.7% Secondary industry 24.9% 35.3% Tertiary industry 33.8% 45.0%

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40

50

60

70

80

90

100

1955

1965

1975

1985

1995

2004

1,000-

500-999

300-499

200-299

100-199

50-99

30-49

20-29

40

50

60

70

80

90

1947

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

Longevity Fem ale

M ale

Positive Outcomes of the Rapid Growth

0

10

20

30

40

50

60

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2006

M aleFem ale

Total

Wage gap by size of company

Manufacturing

Percentage of students who enter colleges/universities

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15

M ovem ent fromrural to urban

M ovem ent fromurban to rural

M ovem ent inside urbanfrom one prefectureto another

M ovem ent inside ruralfrom one prefectureto another

Net inflow of populationto M etropolitan Tokyo

thousand

Negative Outcomes of the Rapid Growth (1) Overpopulation and Depopulation

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Negative Outcome of the Rapid Growth (2) Environmental degradation

00.010.020.030.040.050.060.07

1965

1970

1975

1980

1985

1990

1995

2000

2004

SO 2(ppm )NO 2(ppm )

Atm ospheric polution

SO 2(ppm )

Source: Ministry of Environment

Sulfur Dioxide (SO2) Yokkaichi-city Asthma

30

16

20

40

60

80

100

1975

1980

1985

1990

1995

2000

2004

Lakes

Rivers

W ater pollution% of attaining environm ental standard

Source: Ministry of Environment

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010,00020,00030,00040,00050,00060,00070,00080,00090,000100,000

1970

1975

1980

1985

1990

1995

2000

2005

0

500

1,000

1,500

2,000

2,500

3,000Atm ospheric pollutionrelated disease (left)

M inam ata disease (right)

Num ber of patients

Source: Ministry of Environment

Minamata Disease caused by mercury poisoning

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