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2 Those bubbling property
markets By Chan Akya
Politicians of all hues across Asia have
one major issue to agree on, and that is the
futility of land reforms. That's a pity, because
this failure to address the most important factor
for economic growth all too often produces
distortions that transcend immediate economic and
social issues to create longer-term demographic
issues. Japan's experience should serve as an
eye-opener to both South Korea and China, but it
might well be too late already.
Fancy a
steak? The world's most exquisite piece of
meat is arguably a medium-
rare
porterhouse cut of Wagyu cattle reared lovingly in
the plains of southern Japan - what the
cognoscenti refer to as Kobe beef. An expensive
delicacy this may be for the average American or
European, but it is even more so for a Japanese
person. That's not a function of what it costs to
order a plate in Tokyo, but rather what its
economic cost truly is.
An expensive
delicacy serves as a visual - given what it costs,
literally just that for most people - reminder of
how large tracts of farm land co-exist in a
country with among the highest property prices in
the world. During the 1980s, as the Japanese
economic miracle came of age, severe restrictions
on the end use of land persisted across the
country, as the government sought to preserve both
food security and the livelihood of its farmers.
In a previous article, [1] I argued that true food
security is a function not of growing one's own
produce, but of freeing up the trade in food
items.
A corollary to the zealous guarding
of domestic production of food emanates from the
assiduous cultivation of farmers by the Liberal
Democratic Party over the 1960s and 1970s. As
Japan's postwar nationalism faded and more
youngsters started questioning the role of the
LDP, the party became increasingly reliant on two
interest groups, namely farmers and the
construction business.
From a pure
economic perspective, the fit couldn't be any
better - protecting the livelihood of farmers
demanded the continuation of their access to cheap
land, while the construction lobby needed the
exact opposite, namely land scarcity, to improve
its fortunes. While Japan is hardly the place
where the idea of restricting land usage arose
(that dubious honor belongs to England), it is
certainly where it became enshrined as a way of
life because of the political exigency of the LDP.
The success of the LDP's arrangements
became apparent in the soaring price of urban
land, and stable if not rising farm incomes. The
mix was, however, to have a less than salutary
consequence on Japan's demographics over the
1970s. Unable to afford apartments, Japanese
increasingly stayed with their parents, ending up
with late marriages in many cases. The sheer
pressures of living in Tokyo meant rampant
compromises on the quality of life, particularly
in terms of buying apartments far away from the
city center. The daily ritual of enduring packed
subway trains added to the deliciously boring
rubric of life, sapping reproductive instincts.
Thus, as Japan's property prices starting
falling at the beginning of the 1990s, avaricious
property barons came up against the uncomfortable
demographic that made price cuts pointless given
the sheer inelasticity of falling demand.
Seoul-mates The echoes of
Japanese policymaking are to be found in other
countries, most notably South Korea and China.
In much the same way as Japan, the two
countries have skewed demographics, with Seoul
accounting for a fourth of the entire South Korean
population, a strange choice in the best of times
that was made more perilous by the proximity to a
dangerously deranged dictator next door in
Pyongyang. As with Japan, the obduracy on land
usage meant that many companies seeking to move
away from Seoul were simply dissuaded from doing
so by the lack of available local talent, a
function itself of fewer
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