Beyond National Uniformity: Diverging Local Economic Governance Under Japan‘s Decentralization Reforms By Jung Hwan Lee A dissertation submitted in partial satisfaction of the requirements for the degree of Doctor of Philosophy in Political Science in the Graduate Division of the University of California, Berkeley Committee in charge: Professor Steven K Vogel, Chair Professor T.J. Pempel Professor Jonah D Levy Professor Stephen S Cohen Spring 2010 Beyond National Uniformity: Diverging Local Economic Governance Under Japan‘s Decentralization Reforms © 2010 by Jung Hwan Lee Abstract Beyond National Uniformity: Diverging Local Economic Governance Under Japan‘s Decentralization Reforms by Jung Hwan Lee Doctor of Philosophy in Political Science University of California, Berkeley Professor Steven K. Vogel, Chair Well known for its centralized local economic system under the national equity principle, Japan has experimented with transforming this regional redistribution system into a new local economic system of governance for more autonomous local economic growth over the past decade. This new local economic governance has been characterized by the increasing involvement of social actors, such as large private corporations and local communities, in policy processes. This dissertation reveals that new local economic growth strategies for the new local economic governance have operated under very different models in different regions of Japan, although all new local programs have been introduced under the banner of public-private partnership. New partnership programs in the local economic policy arena in the 2000s have moved toward the market model, in which local authorities pursue growth by attracting international business resources, in the major metropolitan areas around Tokyo, Osaka, and Nagoya, whereas they have moved toward the community model, in which local authorities purge growth by mobilizing local organizational resources, in the rest of Japan. The market model is embedded in market reform for deregulation that makes large private corporations‘ freer activities easy, whereas the community model is an attempt to strengthen the structure of endogenous networks among local authorities and local economic and social elites. This dissertation highlights two variables to explain regional variations of local economic growth strategies: dual local economic structures and diverging politico-economic coalitions. First, under the rule of Koizumi Junichiro, a coalition of promoting market reform among neoliberal politicians and large private corporations has won politically over a coalition for maintaining national equity among politicians embedded in traditional conservative center-local linkages, local business groups, and local leadership of underdeveloped areas, in national politics. The regional redistribution mechanism stopped functioning in this political choice. Instead, market reform and local community participation have been introduced as alternatives to regional redistribution mechanisms. Second, the major metropolitan areas and other underdeveloped areas, which 1 came to stand on equal conditions for autonomous local economic growth strategies under decentralization reforms, are characterized by different situations in attracting private investment. The competitive regions of the major metropolitan areas have taken the market model as their main local economic growth strategy because they are competitive to attract private investment. In contrast, the protected regions outside the major metropolitan areas have taken the community model as their key local economic growth strategy because they have less competitive local economic structure of fading industries and scare population for attracting private investment. Over the past decade, reforms for public-private partnership in the local economic policy arena resulted in the disturbance of the Japanese way of balancing market powers and local interests in the postwar period. In the postwar period, the centralized regional redistribution mechanism, led by national politicians and central bureaucracies, functioned as a tool for social integration with consideration for national equity. However, experiments with the new form of local economic governance were not successful in balancing market reform with local community mobilization. The mobilization of local community resources could not match the political role of the regional redistribution mechanism outside the major metropolitan areas. In addition, market reform, which has been more effective in the advanced major metropolitan areas, has produced increasing regional economic disparity. Japan has faced a complicated stand-off between large private corporations detached from specific localities and local communities locked in place, which were connected by national political coordination mechanisms in the postwar period. Although each of two diverging local economic growth strategies has been effective in different regions, there was no national political mechanism for mediating local variations of these localized programs in the 2000s. 2 Tables of Contents Part I Decentralization Reforms and the New Local Economic Governance ...... 1 Chapter 1 Introduction: From National Equity to Local Partnership .......................... 1 Chapter 2 Institutional Changes and the Introduction of Partnership Programs ....... 21 Chapter 3 The Dual Local Economic Structures and Political Alignment Untied .... 38 Part II Balancing Market Reform with Participation ........................................... 54 Chapter 4 The Megacity versus the Compact City in Local Land Development Policy ........................................................................................................ 54 Chapter 5 Exogenous Investment versus Endogenous Networks in Local Industrial Policy ........................................................................................................ 76 Chapter 6 Professionals versus Social Leaders in Pulbic Facility Management Reform ...................................................................................................... 98 Part III Continuity and Change in Japan‘s Decentralization Reforms ................ 117 Chapter 7 State, Market, Society Under Localized Partnership .............................. 117 Bibliography ................................................................................................................ 131 i List of Figures and Tables Figure 1-1: Divergent Growth Strategies in the Local Economic Policy Arena Figure 1-2: Four Idea Types of Local Governance and Two Local Growth Strategies Figure 1-3: From the Postwar Settlement to Divergent Local Growth Strategies Figure 3-1: New Industrial Cities and Special Industrial Renovation Districts Figure 4-1: National Trends of Private Land Development Projects Applications (November 2001) Figure 4-2: National Trends of City Rehabilitation Special Zone (2007) Figure 4-3: Municipals Designated in the Revised City Planning of Downtown Development Plan (by population, June 2009) Figure 4-4: Municipals Designated in the Revised City Planning of Downtown Development Plan (by regions, June 2009) Figure 5-1: National Trends of Plant Investment, 1985-2007 Figure 5-2: The Annual Growth Rate of Plant Investment (National and Kansai), 1999-2008 Figure 5-3: National Trends of Industrial Cluster Projects, the First Term, 2001-2005 Figure 6-1: Ownership and Management Types of PFI Projects (August 2008) Figure 6-2: Payment Types of PFI Projects (August 2008) Figure 6-3: Leading Companies of PFI Projects (2008) Figure 6-4: Administrator of PFI Projects (2008) Figure 6-5: National Trends of PFI Projects (2008) Figure 6-6: National Trends of the Authorized Manager System (Prefecture, 2009) Figure 7-1: Prefectural Income Gini Indices, 1996-2004 Figure 7-2: Diverging Trends of Prefectural Income per Person, 2002-2004 Table 6-1: Fields and Managers of the Authorized Manager System (2009) ii Acknowledgements I would like to express my gratitude to my committee members at the University of California, Berkeley. Professor Steven K. Vogel has been at the center of everything I have done at UC Berkeley. I cannot image how I could have finished this long journey without his help. His advice, suggestions, and support have always led me in the right direction, from the first-semester seminar to dissertation writing. He has also demonstrated what the ideal of a professional educator and researcher should be. I have also been lucky to be taught by Professor T.J. Pempel. He has always encouraged me to advance my research with generous advice. He intellectually inspired and psychologically revived me whenever I spoke with him. It was my great pleasure to have a chance to study Japanese politics with Professors Steven K. Vogel and T.J. Pempel. I would also like to thank Professor Jonah Levy for his critical advice on theorizing arguments. I greatly appreciate his scrupulous reading of my writings and splendid suggestion for the title. I also benefited from the advice of Professor Stephen Cohen. He offered much insight from the field of city and regional planning. In addition to my committee members, I have received help from several Berkeley faculty members. Professor Hong Yung Lee has always encouraged me to have a positive attitude in an unfamiliar environment. He also gave me the chance to compare my Japanese findings with the Korean case. I would also like to thank Professor Lowell Dittmer for his guidance in academic writing in my first year and Professor