The Right Medicine for the Unemployment Crisis
China Times editorial (Taipei, Taiwan, ROC)
February 2, 2009
This time around, the government is clearly preparing to guard against a wave of unemployment. In this it deserves affirmation and support. We hope the government will make effective use of its resources amidst the current financial crisis, and that it will prescribe the proper medicine for the current wave of unemployment.
First rule of economics is that the purpose of economic development is to enhance the nation's quality of life. The fruits of economic growth must be enjoyed by all the people. Imbalanced economic growth that benefits only the few must be classified as unsatisfactory economic growth. The government's economic policies must benefit a majority of the people.
The government has not sought to restore past economic prosperity and growth. It has merely cried "Help!" The three stages of a financial crisis are: One. Financial turmoil. Two. Traumatized economic fundamentals. Three. A traumatized job market. We are now half way through the process. The extent of the damage is difficult to estimate while the process is going on. The wealth of the super-rich has shrunk. Business owners are making smaller profits. Some are even suffering losses and business closures. Ordinary investors' wealth have evaporated. Many are no longer able to make a living. No one is immune. No one is unaffected. The unemployed are the most severely affected. They are the ones most in need of government relief.
Unemployment is not merely an economic issue. It is also a social issue. Unemployment can cause any number of domestic problems. It can constitute a blow to an individual's self-esteem. It can even lead to a decline in law and order. A look at the society section will show us how many problems are caused by unemployment. If the government cannot reduce unemployment during the initial phase of the crisis, unemployment may well result in a vicious cycle. First, unemployment leads to a fall in domestic consumption. The fall in domestic consumption leads to more business closures. Business closures in turn create more unemployment. By then one must hit bottom before things can turn around.
That is why we fully support the government's unemployment initiatives. The government may spend money as if it was water while coping with the current economic crisis, its future revenues will surely diminish. Therefore it must pinch every penny, conserving its limited resources. It must spend its resources wisely, and only on those who truly need it.
One. The government's main thrust should be to substantially increase public construction and government procurement. Given Taiwan's current infrastructure, many areas still need improvement. It should take advantage of the opportunity to improve the infrastructure. It would simultaneously be laying a foundation for the next wave of economic growth and quality of life improvements. If companies have business and construction projects, they will be eager to hire people. They are hardly likely to lay anybody off. We must of course guard against sweetheart deals and the construction of useless projects. The CEPD intends to split large construction projects into smaller ones. This approach will result in major after-effects, and should be discouraged.
Two. While creating job opportunities, the government should take into account market demand. When the Democratic Progressive Party was in office it created job opportunities in order to combat unemployment. But the jobs it created were jobs pruning flowers and weeding grass. They were jobs for which the market had no demand. Once the government's budget ran out, most of these people found themselves unemployed again. Therefore, we hope the government's job creation program does not merely give the unemployed fish for a few years, but instead teaches them how to fish.
Three. The government should not not save employees by saving companies. This approach will squander too many resources and too much of its budget. Saving companies requires immense outlays, often hundreds of thousands of dollars. Much of the wealth goes straight into the pockets of business owners or other market players. Furthermore, businesses often employ hundreds, thousands, even tens of thousands of employees. The government simply has no way of deciding which employees ought to be saved. The government need not squander its resources on highly-paid employees, some of whom enjoy profit sharing, or on well to do employees. They have the resources to survive the downturn. Governments resources should be used on unemployed individuals with entire families dependent upon them.
Four. The government should establish a social safety net. It should maintain a minimum standard of living for those who did not benefit from the first wave of Full Employment measures. After all, the government of a nation with a per capita income of 20,000 USD, should make every effort to ensure a minimum standard of living.
During the early 70's Mideast Oil Crisis and Taipei Tenth Credit Cooperative Crisis, the mid-80's Asian Financial Crisis, the domestic financial crisis, and the post Y2K Internet Bubble, the domestic unemployment rate nearly doubled. Frankly the government will find it hard to keep unemployment below 4.5% during the financial crisis of the century. But it must do what it must do. The rest is in the hands of higher powers.