The past year unfolded with Japan’s unprecedented triple disaster and closed with U.S. Secretary of State Hillary Clinton’s historic trip to Myanmar. Moving into 2012, Europe’s economy creaks along uncertainly and China gears up for a major leadership change. In an interview with the Ukranian magazine Glavred, political science professor Phillip Lipscy discusses landmark Asian economic and political events of 2011, and what they could mean in the coming year.

What was the most significant event in terms of Asia’s economy in 2011?

The March 11 Great Tohoku earthquake and tsunami: Besides the tragic loss of life and property, the disaster disrupted global supply chains and plunged the Japanese economy into a recession. The nuclear meltdown in Fukushima also led many countries to question the future of nuclear energy—this will have long-lasting consequences for global energy markets and efforts to deal with climate change.

What was the most significant political event?

Signs of political opening in Burma/Myanmar could have profound consequences not only for that country but for the rest of Asia as well. Hillary Clinton became the first U.S. Secretary of State to visit the country in 50 years. Aung San Suu Kyi has been released from detention and the National League for Democracy has re-registered as a political party. If this leads to democratization, it will be remembered as an important turning point.

What new policy and economic trends appeared in 2011? Which of them will continue into the coming year?

There seems to be a subtle shift in views towards China's economy. Chinese government officials are deeply concerned about the "middle income trap." China has reached a level of development where many countries saw their economic growth slow down sharply. Rising incomes are eroding China's advantage in low-cost manufacturing. There is much talk of multinational companies relocating their operations to even cheaper countries, such as Vietnam. This is an important transition for China, and it will remain an important issue in coming years.

In terms of people, who do you feel was the most notable, and who was
the most disappointing this past year?

The people of Japan, who responded with remarkable perseverance, order, and discipline to such a tragic natural disaster.  

The most disappointing were the political leaders of Japan, who could not set aside
their differences and come together for the sake of their country.

Will China continue to spread its influence in 2012, and might any countries oppose this process?

China is now the second largest economy in the world and an important military power. It is inevitable that China will rise in international stature and influence. However, Chinese leaders also face some important challenges—rising inequality, an overheated housing market, and bad loans in its financial system. The focus of international attention should be on integrating China into the world order as a peaceful, responsible stakeholder—not on confrontation.

What impact could the economic crisis in Europe have on the economics and international policy of the Asia-Pacific region?

If the financial crisis in Europe is mismanaged, nobody will escape the consequences. Europe is a crucial export market for Asian countries, and European financial institutions are major lenders to emerging economies in the region. Equally as important, repeated financial crises and political mismanagement in the United States, Japan, and Europe could begin to undermine perceptions of democratic government and capitalism.

What will be most important event in Asia next year?

China's leadership transition, particularly given the many immediate challenges the country faces.

Phillip Lipscy, an assistant professor of political science and a center fellow at the Freeman Spogli Institute of International Studies, is currently conducting research on energy efficiency and financial crisis response. Here he discusses his recent research within the context of contemporary Japan, and comments on current social and political conditions in Japan after the March 2011 disaster.

What is the primary focus of your research right now?

One focus is on the politics of energy efficiency. I am exploring the question: Why do some countries, like Japan, pursue very aggressive efficiency measures, while others, like the United States, choose not to?  

I am also researching the politics of financial crisis response. My key research questions include: What political factors determine the speed and effectiveness of crisis response? When do countries act decisively? What policies are chosen and under what conditions?

In your recent research about energy-efficient policymaking, what are some of the cases and issues in Asia that you have explored?

Japan is a very important case. Its economy is one of the most energy efficient in the world based on measures such as energy intensity. There are a lot of questions, however, about whether any of that is due to policy measures.

I have been examining Japan’s transportation sector with Lee Schipper, a senior research engineer at Stanford’s Precourt Energy Efficiency Center, and our findings are counterintuitive. Most of Japan's relative advantage in transportation sector efficiency is not due to automobile fuel economy, which is what the Japanese government tends to play up. Instead, Japan is characterized by an abnormally high rail share and less total distance traveled. [A great loss to the Stanford community, Dr. Schipper recently passed away. More information is available here.]

What I show in my research is that Japan's efficiency achievements are closely tied to traditional pork barrel politics. High costs have been imposed on the general public—for example, through automobile taxes and highway tolls. The revenue from these measures was traditionally redistributed to key constituencies of the Liberal Democratic Party (LDP), namely rural residents and the construction industry.

This arrangement worked nicely for several decades, reducing energy consumption while also helping to keep the LDP in power. These arrangements, however, have become unsustainable with political changes since the 1990s, particularly the coming to power of the Democratic Party of Japan. These political changes have put Japan's energy efficiency policy in a state of flux. The current electoral system makes it more difficult to impose diffuse costs on the public—such as through gasoline or CO2 taxes—but there is no obvious alternative mechanism.


A young boy helps with clean-up efforts after the March 11 earthquake and tsunami. (Flickr/DJ Milky)

As far as you can speculate at this point, what impact do you think that the Fukushima nuclear disaster will have on Japan’s future energy policy?

Before the Fukushima disaster, Japan had planned to increase electricity generated by nuclear power to 50 percent by 2030. These plans are almost certainly going to be shelved. Prime Minister Naoto Kan recently announced plans to gradually move away from nuclear power in the coming years.

This discussion is not unique to Japan. Germany, Italy, and Switzerland have all recently announced anti-nuclear policies in response to Fukushima. On a recent trip to Taiwan, I found a similar discussion underway there. Taiwan, however, is very similar to Japan in terms of its high dependence on energy imports. This dependence creates a dilemma.

Japan's economy is already one of the most energy efficient in the world, making it more difficult to realize incremental energy savings through efficiency gains. Oil and natural gas are volatile and subject to geopolitical shocks. Renewables are not yet able to meet the kind of energy demand you have in a large economy like Japan. For the foreseeable future, less nuclear energy means higher costs and greater dependence on fossil fuels. That is going to have negative implications for energy security and climate change.

You recently returned from a trip to Japan. What is your perception of the way that everyday people are dealing with the triple disaster that took place in March? What is your assessment of the political situation?

The most remarkable thing is how quickly the Japanese people came together to support disaster victims and conserve energy. There was an outpouring of help, especially volunteer activities and financial contributions. People are taking energy conservation seriously, keeping air conditioning off even during the unbearably humid summer.

The situation at Fukushima was a big blow to the national psyche though. There have been some media reports overplaying the dangers of radiation, and people are deeply concerned about food safety.

Unfortunately, the political situation has been truly tragic. Even for a political scientist like myself, the inability of Japanese leaders to come together after the disaster is troubling. It took less than a month after the earthquake for bickering and squabbling to return full force. On a more positive note, local government leaders and some private sector actors have filled the void to some degree.

It was striking to find how much the Japanese private sector was stepping in to take over functions that we generally associate with government—things like disaster relief, provision of supplies, and screening food for radiation contamination.


A view of the floor of the Tokyo Stock Exchange. (Flickr/Stefan)

What publications are you currently working on?

I just finished a manuscript, co-authored with my former student Philippe de Koning, on how Japan's defense establishment has dealt with fiscal austerity over the past decade. Now that the United States and Europe are dealing with similar pressures to cut back defense spending, we wanted to see how Japan had managed. We found that Japan's defense planners have fared relatively well within the domestic budgetary process, but they are in an extremely tough situation. Without a major change in  policy, when the short-term coping measures being implemented today run  their course over the next decade, Japan will face a sharp reduction in its military capabilities.

In addition, I collaborated during the past academic year with Hirofumi Takinami, a Shorenstein APARC Visiting Fellow from Japan’s Ministry of Finance, to examine lessons from Japan’s financial crisis in the 1990s. We looked at the extent to which the United States took these lessons into account when it encountered its own economic downturn in 2008. We found that Japan's crisis influenced the U.S. response quite a bit, but there was some variation by policy area based on the degree of politicization. For example, in monetary policy, which is technocratic and politically insulated, the lessons from Japan were implemented quickly. It was slower for financial sector bailouts though, and especially so for fiscal policy.

In this coming academic year what are the courses that you will be teaching?

I will be teaching a graduate seminar on political economy, primarily intended for PhD students in political science, as well as an undergraduate course on the politics of financial crisis.