THE CHANGING NATURE OF THE “IRON TRIANGLE” PHENOMENON: A CASE STUDY OF THE “IRON TRIANGLE” IN THE POSTAL INDUSTRY AND POSTAL REFORMS IN JAPAN

Abstract: The “iron triangle” phenomenon, or nexus between politicians, bureaucrats and business, is an important element of the Japanese postwar political economy system, known as the “1955 system” or “Japan Inc.” Although, originally created to facilitate high-speed economic growth by ensuring efficient cooperation between the government and business, over time it became associated with high-profile corruption and massive government spending on economically unnecessary projects which boosted Japan’s public debt. The “iron triangle” in the postal industry was particularly important because it was directly linked to the postal savings funds, the source of money which financed “iron triangles” in other sectors of the Japanese economy. Extensive reforms of the postal sector undertaken in Japan in 2001 have changed the mechanism of the postal “iron triangle” and created serious implications for its actors. The purpose of this study was to explore the process of transformation of the postal “iron triangle relationships under the influence of the postal reforms (FILP reform and privatization reform). It found that as a result of these reforms, the “iron triangle” relationships in the postal industry have weakened to a considerable degree. Particularly, two sides of the triangle became negatively affected by the postal privatization: politicians-postmasters and politicians-bureaucrats alliances. At the same time, the bureaucracy-business connection appears to remain resistant and viable. The study further explained the transformation process as a result of declining efficiency and effectiveness of the “iron triangle” as an organization. It found out that the two sides of the postal “iron triangle” have weakened because all the three factors of their efficiency and effectiveness (well-balanced incentive structure; information and knowledge symmetry; and high degree of adaptability) were eliminated by the postal reforms. However, the third side of the postal “iron triangle” remained strong because all the three factors of its efficiency and effectiveness were not affected by the postal reforms.