Abstract

Chinese commentators assessing the 2010 US Nuclear Posture Review (NPR) acknowledged a number of ways in which they felt it was "better" than the 2001 NPR but still found much to criticize and many reasons for concern regarding the review's implications for China and for strategic stability. They welcomed the reduction of US nuclear inventories and reliance on nuclear weapons, the commitments to seek ratification of the Comprehensive Nuclear-Test-Ban Treaty and to not conduct nuclear tests, the declaration that the United States would continue to reduce the role of nuclear weapons in deterring non-nuclear attacks, and a number of other points. Commentators generally devoted more attention to issues that were seen to have negative implications for China's deterrent (e.g., continued development of missile defense capabilities and advanced conventional weapons). Their assessments of the NPR were initially colored by the downturn in Sino-US relations in the months prior to the review's release but became more positive as the overall bilateral relationship improved.

"Ultimately, progress toward our goals in dealing with North Korea depends not so much on the weight of the force we bring to bear—sanctions, UN resolutions—but on how well we understand the North Korean regime and its views of domestic and foreign policy challenges.  If we fail to grasp that North Koreans believe they have their own national interests, then we fall into the trap of thinking we can force them, sweet talk them, or bribe them into doing what we want" says CISAC's Robert Carlin.

(excerpt) The last time a global depression originated in the United States, the impact was devastating not only for the world economy but for world politics as well. The Great Depression set the stage for a shift away from strict monetarism and laissez-faire policies toward Keynesian demand management. More important, for many it delegitimized the capitalist system itself, paving the way for the rise of radical and antiliberal movements around the world.

This time around, there has been no violent rejection of capitalism, even in the developing world. In early 2009, at the height of the global financial panic, China and Russia, two formerly noncapitalist states, made it clear to their domestic and foreign investors that they had no intention of abandoning the capitalist model. No leader of a major developing country has backed away from his or her commitment to free trade or the global capitalist system. Instead, the established Western democracies are the ones that have highlighted the risks of relying too much on market-led globalization and called for greater regulation of global finance.

Governments confront difficult political choices when they must determine how to balance their spending. But what would happen if a government found a means of spending without taxation? In this book, Gene Park demonstrates how the Japanese government established and mobilized an enormous off-budget spending system, the Fiscal Investment Loan Program (FILP), which drew on postal savings, public pensions, and other funds to pay for its priorities and reduce demands on the budget.

Although other governments have operated systems of policy finance, none have approached the Japanese system in size or been structured to deliberately relieve pressure on the budget so that it could remain balanced and low-tax. Park lays out a compelling puzzle leading us to ask why and how the Japanese created this system, why and how it was allowed to grow to such immense size, and then why it has begun to be reformed and wound down.

-Leonard Schoppa, University of Virginia

[P]rovides a compelling rationale for FILP's importance in Japan's postwar political economy. . . . [N]o one has brought to bear the sustained focus, historical scope, or analytical rigor that Gene Park has with this book.

-William W. Grimes, Boston University

Park's book argues that this system underwrote a distinctive postwar political bargain, one that eschewed the rise of the welfare state and Keynesianism, but that also came with long-term political and economic costs that continue to this day. By drawing attention to FILP, this study resolves key debates in Japanese politics and also makes a larger point about public finance, demonstrating that governments can finance their activities not only through taxes but also through financial mechanisms to allocate credit and investment. Such "policy finance" is an important but often overlooked form of public finance that can change the political calculus of government fiscal choices.

Gene Park is an assistant professor in the Department of Political Science at Baruch College. He has also been a Shorenstein Fellow at the Walter H. Shorenstein Asia-Pacific Research Center, and a visiting scholar at the Japanese Ministry of Finance's Policy Research Institute. He was also the receipient of a Fulbright IIE fellowship. He has a PhD in political science for the University of California, Berkeley.