Friday, October 29, 2010

Official Salaries: Do Not Put the Cart Before the Horse

Official Salaries: Do Not Put the Cart Before the Horse
United Daily News editorial (Taipei, Taiwan, ROC)
A Translation
October 29, 2010

Yesterday the Control Yuan held a press conference. Control Yuan Members Chao Yung-yao and Ko Yung-kuang pointed out that the annual salary of the Director of the Department of Health, National Health Research Institute was 8.41 million NT. The annual salary of the President of the Ministry of Economic Affairs, Industrial Technology Research Institute, was 7.8 million NT. Both were higher than the 6.24 million NT annual salary of the President of the Republic of China. The Control Yuan pointed out that these foundations had no objective salary scale, and that their salaries were much too high. The Control Yuan said the Executive Yuan had failed to properly supervise and manage them, therefore the Control Yuan should address this oversight.

The Control Yuan's corrective move is consistent with the public's desire to "stick it to the fat cats." Legislators have demanded answers. Pundits have raised a stink. Fat cat salaries have become a hot issue. The Control Yuan has officially intervened. It appears the Executive Yuan has no choice but to deal with the problem. But we do not approve of the Control Yuan's populist logic vis a vis salary evalution. We do not think the salaries government agencies provide these foundations should be dealt with in such a crude manner.

First let's address their logic. Why must the salary of the Director of the Industrial Technology Research Institute or the Director of the National Institute of Health be lower than that of the president or a ministry head? Control Yuan members explained their reasoning during their press conference. "Who has a busier schedule? The Minister of Economic Affairs, or the Chairman of the Industrial Research Institute?" The implication was that salaries should be directly related to how busy the individual is. Because ministry heads are busier than the chairmen of research institutes, therefore ministry heads' salaries ought to be higher. Based on the same logic, the president must attend to hundreds of matters each day, therefore his salary ought to be the highest of all. But this reasoning is utterly inconsistent with the basic principles of personnel management.

Economic theory tells us that the salary a person receives, depends on his economic contribution. Textbooks refer to this as their "productivity." Highly productive people receive high salaries. Less productive people receive lower salaries. Busy high officials are not necessarily economically productive. They are likely to be busy with ribbon-cutting ceremonies, busy giving speeches, busy attending weddings and funerals, and busy sucking up to their superiors. They may be busy dealing with unending, pointless issues that legislators have raised. These ministry heads run about like chickens with their heads cut off. What reason do we have to reward them with high salaries?

By contrast, when Morris Chang, the Director of the Industrial Technology Research Institute, planned and promoted Taiwan's semiconductor industry, he may have been in his office all day, poring through technical data. He may have been recruiting talent. He may or may not have been all that busy. But his contribution to our economy was enormous. What's wrong with paying him a higher salary? If every president of the Industrial Research Institute was comparable to Morris Chang, the taxpayers would be ahead even if they paid them five or ten times as much as the president. What would be wrong with that? The first mistake the Control Yuan members made was to compare the salaries of foundation heads with ministry heads. Their second mistake was to correlate their salaries to how busy they were. What right to they have to "correct" the Executive Yuan?

Secondly, our legislators and Control Yuan members, in criticizing the salaries received by certain people, have ignored the underlying cause. With hindsight, a high-paying job can be a featherbed for incompetents. But high-paying jobs can also attract highly capable talent. Even if we believe the current job holder does not deerve the salary he is being paid, that does not mean the government should reduce the salary for the job as such. If the Republic of China hopes to once again achieve new heights of industrial achievement, akin to those once pioneered by the ICT industries, we must not cut salaries. On the contrary, we must increase salaries for these industries. Only then can be attract the next batch of Morris Changs.

If the government allows itself to be corrected by the Control Yuan, and reduces the salaries of the President of the National Institute of Health in half, then the government will no longer be able to attract first-rate talent. We believe the salary of the President of the Industrial Technology Research Institute should not be reduced. We believe the salaries of senior government officials are on the low side. Everyone on Taiwan wants to emulate Singapore, but not when it comes to salaries for ministry heads. Singapore's ministry heads receive annual salaries amounting to 40 million NT, approximatly 18 times the salary of ROC ministry heads. It is precisely because public officials receive such excellent treatment, that Singapore is able to attract the best people to work in its government.

Government ministries are the entities that manage private enterprises. The ability of managers is supposed to be superior to the ability of those being managed. That is the only way management can work. But the situation is exactly the opposite on Taiwan. The salary of the Chairman of the FSC is far less than the salary for the general manager of any financial conglomerate. Is it necessary to ask how an individual of ability will decide when choosing between a public sector job, or a private sector job in the financial sector? The Minister of Economic Affairs is paid far less than the executive vice president of a computer company. Is anyone who understands the industry going to want to enter government service? It is precisely because the salaries of ministry heads on Taiwan are too low, that legislators and Control Yuan members do not respect them. Our society is unable to recruit competent people to become ministry heads.

The Control Yuan is not thinking about increasing the benefits for ministry heads in order to attract talent. Instead, it is using low salaries as a reference point, in the hope of cutting the salaries of the heads of the Industrial Research Institute and the National Institutes of Health. This is truly astounding. It is nothing less than putting the cart before the horse.

【聯合報╱社論】 2010.10.29










Thursday, October 28, 2010

Wang Cho-chun Represents Official Policy, Jiang Ping Represents Individual Conduct

Wang Cho-chun Represents Official Policy, Jiang Ping Represents Individual Conduct
United Daily News editorial (Taipei, Taiwan, ROC)
A Translation
October 28, 2010

Two incidents have provided answers to questions surrounging recent cross-Strait controversies. They offer important indicators for future cross-Strait exchanges. First, National Police Administration Chief Wang Cho-chun led a delegation to the Mainland. This tells us the direction cross-Strait policy will be taking. Secondly, we have confirmation that the bizarre words and deeds of Mainland delegation leader Jiang Ping during the Tokyo Film Festival incident was merely a case of "individual conduct."

Yesterday Taiwan Affairs Office spokesman Yang Yi responded to the Tokyo International Film Festival controversy. He said it "may have been due to a lack of communication between the two parties. It precipitated "a situation we do not want to see." The "we" Yang Yi referred to, is the central government in Beijing. The "do not want to see," Yang Yi referred to, was the consequences of Jiang Ping's words and deeds. Yang said, "Cross-strait relations are continually developing and improving. Under such circumstances, the two sides should avoid both external and internal frictions." His statement implied that Jiang Ping's conduct was a form of internal friction that ran counter to "continually developing and improving cross-Strait relations."

Most observers on Taiwan concluded that the Tokyo International Film Festival last weekend was the result of "individual conduct." They concluded that it could not have been an "offically sanctioned act by Beijing." This suggests that the two sides have established considerable mutual trust. No one believed that the central government in Beijing could possibly have committed such and ignorant and irrational act, given "continually developing and improving cross-Strait relations." Today, Yang Yi's remarks have confirmed that this mutual trust is real and well-founded. The two sides have struggled for two years on behalf of better relations. This should be an enormous relief to those with high hopes for improved cross-Strait relations. It is also a test of those relations, one whose result has not let them down.

Some Mainland netizens consider Jiang Ping a hero for the waves he generated during the film festival. But this is not the official position represented by Yang Yi. Even members of the Mainland delegation to the Tokyo Film Festival were displeased with Jiang Ping's conduct. Some feel his words and deeds did not represent the views of the delegation, but was merely a case of 'Jiang Ping directing a "Love Song of Kangding",' and backing out of the Tokyo International Film Festival. One delegation member said, "It was absurd. I cannot believe it represented the attitude of the [Mainland] Chinese government. It was merely a case of individual conduct." Turn the clock back two years, and it is unlikely delegation members would have been so free in expressing their opinions. As we can see by the attitudes expressed by Mainland delegation members, most people on the Mainland currently have a much better understanding of cross-Strait relations, and much deeper trust.

Contrast their views with Jiang Ping's faux pas. National Police Administration Chief Wang Cho-chun's visit to the Mainland constitutes an affirmation of our policy direction. The 17 member delegation will tour Beijing, Shanghai, Jiangsu, and Zhejiang over eight days. Mainland Minister of Public Security Meng Jianzhu will refer to Wang Cho-chun as "Taiwan's National Police Administration Chief." There will be no "white gloves." They will not refer to each other by such euphemisms as, "administrative experts." This may constitute only "one small step" in formal protocol. But it represents "one giant leap" in substantive progress. It deserves recognition, and should be encouraged. Jiang Ping shrilly insisted that "the Taiwan delegation to the Tokyo International Film Festival is part of the [Mainland] China delegation." Beijing's Minister of Public Security Meng Jianzhu on the other hand, greeted Taipei's National Police Administration Chief Wang Cho-chun on a basis of equality. Contrasting the two gives us a better understanding of what Mainland political advisor Zheng Bi-jian meant when he said, "Ideas determine one's path, Vision determines one's horizons."

In September Mainland Culture Minister Cai Wu visited Taiwan. His counterpart, Council for Cultural Affairs Chief Emile C. J. Sheng greeted him. More and more unprecedented, direct, face to face meetings between central government officials have taken place. Wang Cho-chun met with a Mainland delegation in his official capacity, using his official title. This should be considered a milestone. It also suggests a bold breakthrough on the part of Beijing. After all, they must deal with leftists such as Jiang Ping. In fact, both sides have Jiang Ping counterparts. When Cai Wu visited in September, we hoped Mainland Affairs Council Chairwoman Lai Shin-yuan and Taiwan Affairs Office Director Wang Yi could meet. The two sides' economic leaders have met frequently. The two sides' premiers have also met. Beijing is able to accept "Taiwan's National Police Administration," and may be able to accept "Taiwan's premier." In other words, through our deeds, we can change the attitudes of Jiang Ping counterparts on both sides of the Taiwan Strait. We can gradually persuade them to accept a reasonable and legitimate "framework of equality." In that case, a "Ma Hu Summit" would no longer be an impossibility.

Jiang Ping's words and deeds have been rejected by most people on both sides of the Taiwan Strait. This shows that most people share the same views, and hope to improve cross-Strait relations. Jiang Ping's individual conduct can only lead to a dead end. Wang Cho-chun's official visit represents official policy, and a way out of the previous impasse. The waves generated by Jiang Ping were not something the two sides were happy to see. Wang Cho-chun's visit, on the other hand, represents a trend that everyone is happy to see.

【聯合報╱社論】 2010.10.28








Wednesday, October 27, 2010

Suhua Highway Improvement Project: Proceed with Caution

Suhua Highway Improvement Project: Proceed with Caution
China Times editorial (Taipei, Taiwan, ROC)
A Translation
October 27, 2010

The Suhua Highway has experienced its most serious landslide ever. Hundreds of people were trapped in their vehicles. As of today, 25 people are still unaccounted for. Typhoon rains struck the Suhua Highway. They shook public confidence in highway safety along the Hualien/Taitung scenic route. Local governments are demanding that construction on the Suhua Highway Improvement Project begin as soon as possible.

Hualien County Chief Fu Kuen-chi uttered some harsh words. He demanded that the central government begin construction on the Suhua Highway Improvement Project immediately. Otherwise, he might lead people the long way around to the nation's capital, as a gesture of protest. Fu Kun-chi said that "The construction of the Suhua Highway Improvement Project is not an economic issue, but a humanitarian issue." The central government must not continue making excuses. The Suhua Highway landslide was not merely a "national embarrassment," it made us an "international joke." Numerous Mainland tourists were among the casualties. Taiwan's image as a destination for international tourism has suffered considerable damage.

Yesterday the Hualien County Council's regular session was changed to a special inquiry into the Suhua Highway Improvement Project. Council Members blasted the central government for long neglecting the fundamental rights of Hualien citizens. County Speaker Yang Wen-chi said that if construction on the Suhua Highway Improvement Project did not begin immediately, the county council would adjourn and stage a long term protest.

The Suhua Highway landslide caused a significant number of casualties. EPA Chief Chen Shi-hong pointed out that "out of on humanitarian concerns, the EPA would expedite its administrative procedures." He said that such an unfortunate incident must not be allowed to recur. He said that following "sufficient discussion and respect for professionalism," the EIA for the Suhua Highway Improvement Project would be completed as soon as possible. Chen Shi-hong also believes that even before preliminary assessment, the developer had already reached an understanding with environmental groups and local citizens. As a result, the preliminary assessment encountered little controversy. It appears it will be passed as soon as possible.

Environmental groups have been under considerable pressure. Anything they say at this moment, is unlikely to be well received. They insist that the EPA can expedite its assessment process, but must not rubber stamp the project and rush it through. In their view, the purpose of an EIA is to help everyone solve problems. For example, if the geological conditions along the route are not suitable for construction, then any potential hazards must be addressed. The Suhua Highway Improvement Project is feasible. But we must proceed with extreme caution.

First, we should point out that calls from folks on the eastern seabord for a "safe way home" must be viewed from the perspective of social justice, rather than economic development. The question concerning the Suhua Highway Improvement Project is not "whether the highway should be improved," but "how the highway should be improved." Past discusssions of the Suhua Highway Improvement Project were about balancing "economic development" and "environmental sustainability." Today however, it is all about "social justice." The Suhua Highway Improvement Project must be implemented as soon as possible, It will improve traffic safety and disaster relief capabilities along the Suhua Highway. During the planning and construction process, we must of course do everything in our power to minimize the environmental impact.

If we wish to discuss the Suhua Highway Improvement Project, we must go back and discuss the Suhua Highway Project. Past controversies over the Suhua Highway did not concern the northern section, where the current disaster occurred. They concerned the southern section, the section south of Chung-teh. The northern section was prone to disaster. A consensus had already been reached. That section had to be rebuilt as soon as possible. According to Highway Administration statistics, between '94 and '98, the Suhua Highway was impassable in both directions for as many as 224 days. The annual average was 45 days. Whether residents could connect with the outside world depended on Mother Nature's whims.

When the DPP was in power, the Suhua Highway EIA authorized construction toward the northern section, but reserved judgment on the southern section. But following the second change in ruling parties, the DPP decided to leave this political hot potato to the incoming Ma administration. The Ma administration followed up by announcing the construction of the Suhua Highway Improvement Project.

According to Directorate General of Highway plans, the Suhua Highway Improvement Project would cost 46.5 billion NTD. The Suhua Highway collapsed in three places. Eroded and endangered coastal stretches are being improved. Seven long and short tunnels will be constructed along the 77 km section between Suao and Chung-teh, improving safety. Two single opening two lane tunnels will be constructed between Suao and Tungao, one of the stretches most seriously affected by landslides. The stretch between Tungao and Nanao will follow its original route. The Suhua Highway Improvement Project will be only 60.4 km long. But it will save about 45 minutes of driving. The Suhua Highway Improvement Project has affected the environmental impact assessment statement issued on October 8 of this year. Planning and design are proceding simultaneously. We only hope that by the time the EIA has been completed, bidding can begin immediately.

But no matter how one looks at it, the Suhua Highway Improvement Project has not solved all the problems. The current landslide took a toll in human lives. But it had little to do with the expedited environmental assessment of the Suhua Highway Improvement Project. The government must not focus on the new road while neglecting the old road. Even if we construct new roads, we will continue to use the old road. Even if the Suhua Highway Improvement Project tunnels are completed, the old road may still experience landslides. Similar incidents may still happen. We must look at them from a scientific and engineering point of view. We must establish early warning systems. We must prevent falling rocks from causing injuries to people and vehicles.

In the face of climate change, extreme weather conditions have become the norm. In the face of unpredictable weather, we must build better early warning systems. We must also review the effectiveness of Taiwan's disaster prevention measures.

2010-10-27 中國時報












Tuesday, October 26, 2010

Tokyo Film Festival Confrontation:
Opening Fire is Easy, Making Peace is Hard
China Times editorial (Taipei, Taiwan, ROC)
A Translation
October 26, 2010

A minor incident can sometimes lead to a major disaster. One individual's rash conduct can sometimes lead to a policy impasse. Against enormous odds, the two sides of the Taiwan Strait have finally managed to moderate cross-Strait hostility, and promote reconciliation and cooperation. Who knew the Tokyo Film Festival would become the occasion for a confrontation over name change, and undermine the improved political atmosphere? This shows us just how difficult the road to reconciliation is, and how fragile the fruits of reconciliation are. If Beijing is sincere about improving cross-Strait relations, it must demonstrate its sincerity by taking concrete action.

The Tokyo Film Festival incident was apparently the handiwork of Mainland delegation leader Jiang Ping as an individual. The Tokyo Film Festival is a non-governmental activity. Movie industry exchanges have nothing to do with politics. In the past, Taipei has always used the name "Taiwan" when participating in the Tokyo Film Festival. This usage never elicited any controversy. This time however, Jiang Ping suddenly demanded that the Taipei delegation's name be changed to "China, Taiwan," or "Chinese Taipei," in accordance with Olympic Committee rules. Frank Chen, leader of the Taipei delegation, flatly refused. To everyone's surprise, Jiang Ping began shouting and pointing at him in the crowded lobby of a five-star hotel. He even threatened him, saying "Do you still want to sell your films to [Mainland] China?" His rude speech and behavior disgusted not just the public on Taiwan, but the entire world.

Frank Chen was baffled. The two sides had just signed ECFA. Exchanges had become more and more frequent. What prompted the Mainland delegate to behave that way? The two sides have expended immense time and energy, and overcome countless obstacles, creating an environment conducive to reconciliation. They are now awaiting the opportunity to follow-up and actively promote cooperation. But suddenly, this atmosphere has been spoiled by a single individual, posturing as a hero. Jiang Ping's imperious manner and crude language were broadcast on television for all to see. Against all odds, by means of a "diplomatic truce," the two sides reached a reconciliation longed for by the international community. Suddenly that reconciliation has been shattered, casting doubt on the Mainland's sincerity. This situation is hardly what the Beijing authorities want to see.

Specifically, the dispute over names prevented Taiwan stars such as Vivian Hsu, Ethan Juan, and Chang Chun-ning from appearing on the green carpet. Vivian Hsu was reduced to tears. The treatment these stars were subjected to will have an impact, particularly on younger generation people on Taiwan. Young people seldom care when government officials engage in one-upsmanship across the Strait. But when their idols are bullied, young people may lash back at Mainland China.

The two sides have been in conflict for such a long time. Everyone looks to the fading away of historical grievances. That would allow the younger generation to inhabit a peaceful and friendly environment, to understand each other, and to develop feelings for each other. Now however, a single act of self-righteous behavior has sown seeds of enmity in the hearts of countless young people. It has canceled out the goodwill cultivated over many years by others. The cost is inestimable, both in intellectual perception and in hurt feelings. For cross-Strait relations, this was absolutely unnecessary. It was a lose/lose proposition.

From Jiang Ping's perspective, he may feel justified. He may even believe he did nothing wrong. The expression, "There is only one China in the world. Taiwan is an inalienable part of China." is the most politically correct mantra one can recite anywhere on the Mainland. Even now, no government agency has dared to say Jiang did anything wrong. This clearly underscores the gap in Beijing's Taiwan policy. This gap is a problem the Mainland must confront and deal with.

Those who understand Mainland politics know that Beijing's basic policy toward Taipei has not changed that much. It is merely Beijing's tactics and methods that have changed. For example, Beijing no longer attempts to lure away our diplomatic allies. It allows Taipei to enjoy observer status in the WHO. It does not object to Taipei signing free trade agreements with other governments. But at the moment these practices are applied differently within and without, and also differently between different agencies. Taipei-related agencies are more flexible. . Their attitude is relatively friendly. Other agencies still adhere to their previous rigid stance.

There are two aspects to the problem. First, complex and delicate cross-strait issues. A single word can often convey very different meanings and attitudes. Taipei-related agencies have a better understanding of the nuances. They know how to speak in language Taipei understands. But other departments may not understand these niceties. Naturally they fall back on long held dogma.

This, in turn, involves a second gap. Many leaders in Beijing have expressed goodwill towards Taipei. They have made substantial adjustments in their strategy towards Taipei. But just what changes in policy do these adjustments imply? Decision makers at the central government level have yet to communicate these changes to their subordinates. Furthermore, information is controlled on the Mainland. Even though its Taipei strategy has changed, it will not be the focus of news reports. The result will be that other agencies have no understanding of these changes. Nor does the rest of Mainland society.

This gap will make the public on Taiwan wonder whether Beijing's goodwill is genuine or false. Taipei-related departments are friendly toward Taipei. But the rest of the Beijing government has yet to be updated on its policy toward Taipei. The failure of Beijing leaders to deal with this gap implies that the policy has not really changed.

The development of cross-Strait relations should be considered from the perspective of the public. What kind of future is beneficial or detrimental to the public on both sides, as well as mankind? What kind of responsibilities do those in power bear? These issues all deserve careful consideration.

東京影展「暴衝」 交火容易和解難

2010-10-26 中國時報












Monday, October 25, 2010

Conditions and Timing for a Ma/Hu Summit

Conditions and Timing for a Ma/Hu Summit
United Daily News editorial (Taipei, Taiwan, ROC)
A Translation
October 25, 2010

Do we want a "Ma/Hu Summit?" If so, when would it be held? Consider last weekend's controversy over the Tokyo Film Festival, and the answers to these questions should be clear.

In response to talk of a Ma/Hu Summit, President Ma said, "If we fail to do our homework, it would be better not to have a summit at all." Premier Wu Den-yih said, "The conditions have not been met, and the timing is not right." Beijing's Taiwan Affairs Office Director Wang Yi said, "Let nature take its course. When the time is ripe, things will happen of their own accord."

In our opinion the real obstacle to a Ma/Hu Summit is the inability of the two sides to define their political status in a pragmatic and equitable manner. In other words, in what capacity should Ma and Hu, or any other future cross-Strait heads of state meet? Surely they cannot meet as "Mr. Ma" and "Mr. Hu." Nor can they meet in their capacity as "KMT Chairman" and "Communist Party General Secretary." Lien Chan and Wu Po-hsiung have already done that. The expressions, "the leader of Taiwan" and "the leader of the Mainland" were coined by the Mainland media. They are not titles specified in the Constitution of the ROC and the Constitution of the PRC. Therefore, as long as we cannot refer to things by their proper names, we will inevitably find it difficult to get things done.

A Ma/Hu Summit is difficult not merely because Ma and Hu have been unable to reach an agreement regarding their political status as individuals. It is difficult due to other issues related to political identity, including "Taiwan vs. the Mainland," or "the Republic of China vs. the Peoples Republic of China." The Tokyo International Film Festival issue is the Ma/Hu Summit issue. When Chen Yunlin met Ma Ying-jeou, he could only address Ma as "you." If Ma and Hu meet under the same circumstances, why bother? How could they meet in the first place? How the two sides address each other may appear to be a superficial matter. In fact it encapsulates one of the most fundamental problems in cross-Strait relations. It is not merely a matter of nomenclature, but a matter of substance.

If cross-Strait relations are to reach new heights, the two heads of state must meet. People are well aware that significant progress has been made in cross-Strait relations, for example, with ECFA. But the Big Picture remains deadlocked over the issue of political identity, with no way out. A solution will require policy goals and conscious planning. One cannot simply "Let nature take its course" in the hope that "When the time is ripe, things will happen of their own accord." Even the Tokyo Film Festival ended in deadlock. One can only imagine what might happen with a Ma/Hu Summit.

We need "liberation of thinking" and "policy innovation." For example, Beijing says the cross-Strait status quo is the legacy of civil war. It has used this as a basis for the "One China Principle." It agrees that the civil war led to "divided rule within the same nation." In this case, perhaps we can use the "legacy of civil war" premise to establish a political framework for cross-Strait relations. It is difficult to imagine the President of the Republic of China meeting with the President of the Peoples Republic of China as "Taiwan's leader." Unless this obstacle can be overcome, it really would be better not to meet at all.

In the event a Ma/Hu Summit is held, Ma Ying-jeou says he has no problem addressing Hu Jintao as "Chairman Hu." The question is whether Hu Jintao would have a problem addressing Ma Ying-jeou as "President Ma." A deeper problem is whether the two sides can find a way to adhere to the "One China Principle" even as Ma and Hu address each other as "Chairman Hu" and "President Ma." This is why we have repeatedly called for the two sides to seek a solution through an "in progress form of One China." Such thinking is hardly unreasonable. After all, East and West Germany, South and North Vietnam in the past, and South and North Korea in the present, never referred to each other as "German Berlin," i.e., "Chinese Taipei." They referred to each other as "President Kim" rather than "the leader of Taiwan." Yet they were able to adhere to a One Germany, One Vietnam, or One Korea principle. Why shouldn't the two sides of the Taiwan Strait be able to do the same?

The Hu/Wen regime is already preparing for the transfer of power. The transfer of power includes two important items. First, political reforms. Second, cross-Strait issues. First, allow us to address the former. In terms of reform and liberalization, Hu and Wen's achievements have been brillant. Add to them the Beijing Olympics and the Shanghai World Expo, and Hu and Wen's historical legacy is assured. But on the eve of the handover, Wen Jiabao seems unwilling to remain silent. He has loudly called for "political reform." Apparently Hu and Wen are deeply aware of the risks that loom, and are concerned about their successors. That is why they have spoken so bluntly. They are paving the way for future generations of political reformers. After all, these things are better broached by Hu and Wen, rather than left for future generations. In fact, Hu and Wen could do the same with cross-Strait policy.

Hu and Wen's policy of "peaceful development" coincides with the rare opportunity presented by Ma Ying-jeou's election as president in 2008. This has made cross-Strait relations the best they have been in 60 years. This can be considered an achievement of the Hu/Wen regime. However no significant progress has been made in establishing an "in progress form of One China" or defining the two sides' political status. Hu and Wen are about to consolidate their historical legacy. If at this moment they could make a major breakthrough regarding the status of the Republic of China, they would clear the way for cross-Strait relations in a hundred different ways. That would be the finest legacy they could leave their successors.

If that is possible, then the preconditions for a Ma/Hu Summit will have been met.












Friday, October 22, 2010

Help SMEs Develop Within the Mainland Domestic Market

Help SMEs Develop Within the Mainland Domestic Market
United Daily News editorial (Taipei, Taiwan, ROC)
A Translation
October 22, 2010

The Fifth Plenary Session of the 17th Party Congress has passed a "ten two five plan." The plan will attempt to rapidly change the direction of the Mainland Chinese economy over the next five years. It will increase domestic demand and improve people's lives, and enable the domestic consumer market to become the strategic focus of economic development. Private consumption is expected to reach 36% of total GDP, a significant increase from its current low level. For thousands of SMEs on Taiwan, this Mainland market is an earnest invitation to a golden opportunity that must not be passed up.

The signing of the cross-Strait economic cooperation agreement (ECFA) was the opening shot. The Mainland has over 200 products ready to enter the Taiwan market, tariff free. Taiwan meanwhile, has over 500 products that will enjoy zero tariff or low tariff treatment, beginning next year. These can make a major push into a vast market of 1.3 billion consumers. Most of these products are manufactured by SMEs. How will small and medium enterprises from Taiwan fare amidst the influx of goods from the Mainland? This question has many people worried. Conversely, many more daring and promising Taiwan enterprises, face an inconceivably vast Mainland market. How can they achieve a stable footing, make the most of their competitive advantages, and expand their businesses? This is a rare opportunity one could never have hoped for.

A shining opportunity has suddenly appeared. Taiwan has over a million SMEs. But how many are ready to take advantage of this generous invitation? Regrettably, very few. For small and medium enterprises, the risks have always been high. Over the past several decades, regardless of whether those in power were Blue or Green, large enterprises and high-tech industries have always received preferential treatment. Traditional and small and medium enterprises have received only neglect. They were forced to sink or swim. For small and medium enterprises, life is short. They rarely last more than ten years. Those that master their market niches, that are able to survive, stick largely to their niche markets, maintaining the status quo. Apart from OEM enterprises and suppliers of essential raw materials, they rarely have the courage to overstep their bounds. As a result, they allow others to seize the value-added market, while they maintain their closed and conservative business model. Even professionals in the information, design, and marketing industries, seldom have the courage to make any further moves.

These small and medium enterprises have enormous potential. Their untapped value is amazing. Once the doors to the Mainland are thrown open, they will be looking at a vast market. Even if tempted, they will be afraid to act rashly. Conquering new territories and achieving bold victories is not their forte. Even if they had the courage to take bold steps, the odds would still be stacked against them. But once the Mainland market has been thrown open, wealthy and powerful Mainland tycoons will sift through these SMEs. They will pick out the uncut diamonds. They will separate the wheat from the chaff. These SMEs will become part of a highly profitable Mainland market. Taiwan will be left with the dregs. These SMEs will be like brides who have been married off, totally unable to resist.

Yesterday President Ma attended the "Global Chinese Business Summit." He spoke enthusiastically of the post-ECFA era. He said companies on Taiwan should seize this low-tariff, no-tariff opportunity to enter the Mainland market, They should take advantage of domestic demand to build their own brands. They should break free of the the low margin OEM business model. This is fully consistent with our own reasoning. President Ma however, is urging them to jump directly from their OEM business model to building their own brands. Apparently he is unaware of the dangers, difficulties, and frustrations that confront conservative Taiwan enterprises, which consequently may miss this golden opportunity.

The Mainland market has magnanimously rolled out the red carpet for Taiwan products of superior quality. Taiwan's design skill and marketing talent have already reached maturity. But if no one has the determination to cut and polish the many hundreds of thousands of diamonds in the rough, bridging the Taiwan Strait will be difficult, and all their efforts will be in vain.

Twenty-five years ago, export industries began relocating. Taiwan's industrial chain was severed. Businesses with competitive advantages, such as upstream and midstream raw materials exporters, relocated. Downstream branded products suitable for an international market were missing. This was our fatal mistake going up against South Korea. We failed to fill in this gap as soon as possible. Just how many brands on Taiwan can be developed? Two remedies are available. One is to offer guidance to upstream and midstream industries, fully integrating their existing design and marketing talent, energetically developing high-quality downstream industries. The second is to take advantage of rising labor costs on the Mainland, and the relocation of large numbers of downstream industries. Provide an environment, carefully select industries with the most potential, invite them to Taiwan to merge with upstream and midstream industries, thereby creating an unbroken industrial chain.

President Ma sees the opportunity for SMEs. The Ma administration should swiftly make the necessary preparations, and implement its plans as soon as possible.


【聯合報╱社論】 2010.10.22 0

中共十七屆五中全會通過的「十二五」計畫的建議,確立中國大陸未來五年將致力加快轉變經濟發展方向,堅持擴大內需、改善人民生活,這將使內需消費市場成為經濟發展的戰略重點;民間消費可望自目前佔GDP 36%的偏低水準大幅上升,這對於萬千面對大陸市場躍躍欲試的台灣中小企業而言,如同鄭重發出的邀請,不能錯過此一大好機會。








Thursday, October 21, 2010

Mainland China's Paradox: The More Developed the Economy, the More Serious the Political Crisis

Mainland China's Paradox: The More Developed the Economy, the More Serious the Political Crisis
United Daily News editorial (Taipei, Taiwan, ROC)
A Translation
October 21, 2010

Executive Summary: The Fifth Plenary Session of the 17th Party Congress has adjourned. No major political reform programs emerged. The quest for stability remains the ultimate concern of the Chinese Communist Party. This does not mean that demands for political reform can be postponed, or that the people's voices can be ignored. Observers believe Beijing is merely shelving them, with the intention of dealing with them later. They do not believe Beijing is an ostrich burying its head in the sand. They do not believe Beijing will allow the situation to deteriorate. Recently rumors have emerged that President Hu Jintao intends to promote a "socialist two-party system." If true, Beijing has already broken out of its mental box. The rumor may be true, or it may be false. Either way, Mainland China's political reform has reached a watershed. The Hu-Wen regime knows only too well that "defying the will of the people is ultimately a dead end."

Full Text below:

The Fifth Plenary Session of the 17th Party Congress has adjourned. No major political reform programs emerged. The quest for stability remains the ultimate concern of the Chinese Communist Party. This does not mean that demands for political reform can be postponed, or that the people's voices can be ignored. Observers believe Beijing is merely shelving them, with the intention of dealing with them later. They do not believe Beijing is an ostrich burying its head in the sand. They do not believe Beijing will allow the situation to deteriorate.

One reason for their belief is Wen Jiabao, who recently said, "Defying the will of the people is ultimately a dead end." The words "dead end" reveal that the Chinese Communist Party is fully aware of the problem. On the other hand, during an interview with a Western reporter, Wen mentioned death in another context. He said, "come rain or come shine, we will not give up until we are dead." This underscores the difficulty of political reform.

These invocations of the word "dead" or "death," offer an overview of political reform on the mainland. On the one hand, Beijing is aware that if it fails to undertake reform, it will eventually reach a dead end. On the other hand, Beijing is aware of the difficulty of reform, and how slim the chances for successful reform are. But political reform is no less urgent merely because real world difficulties abound. Especially when the key reason for the Chinese Communist Party's difficulties is its own procrastination.

Political reform is urgent. Consider an historical precedent. As Soviet President Mikhail Gorbachev noted in his "Message to Compatriots in the Soviet Union," "When I became head of state (in 1985) the nation was clearly in a state of crisis. The reasons were obvious. Society, shackled by a bureaucratic command system, was close to suffocation. Society was forced to serve ideology. Society was forced to bear the burden of the arms race, and was already exhausted. Partial reform measures had failed. We could no longer live like this. We had to fundamentally change everything." Isn't Gorbachev's tone similar to that of Wen Jiabao?

Conditions in the Soviet Union just before its implosion cannot be compared to conditions on the Mainland today. But the core issue remains the same. The nation is under the control of a single party dictatorship which dominates society and monopolizes its resources. Mainland China's political system has undergone three decades of "reform and liberalization." The CCP is now caught in a cycle from which it cannot escape. The more it implements "reform and liberalization," the more corruption spreads, and the greater the public's perceived sense of deprivation. As a result, reform becomes ever more threatening and ever more difficult. As a result, even though the CCP is aware of the need for reform, partial reform efforts invariably end in failure. Intellectuals such as Liu Xiaobo say "we can not go on like this." Wen Jiabao of course understands that "without guarantees of political reform, the results of economic reform may be lost."

Reform and liberalization means forsaking class struggle and moving toward "economic development as the central value." It makes no difference whether the society is referred to as socialist or capitalist. What matters is liberating the productivity of the people and society. But one-party dictatorship has concentrated the wealth produced in the hands of those in power -- central and local level government officials. Government officials and business interests have monopolized most of the benefits. Economic growth fattens the pocketbooks of the rich and the powerful. Many party officials live lives of unbridled decadence. Compare this to the past. Mao Zedong's Great Leap Forward and class struggle impoverished the nation, to the point where everyone was utterly destitute. Indignation and discontent were widespread. But if one compares yesterday's universal suffering, with today's unequal suffering. Inequality may grate on people's emotions even more than suffering. As a result, the greater the economic development, the greater the social unrest.

The Fifth Plenary Session is aware of the problem of inequality. Discussions of the "ten two five plan" have therefore concentrated on narrowing the income gap, the urban vs. rural gap, the east vs. west gap, and the rich vs. poor gap. The Fifth Plenary Session touts "inclusive growth." It understands that "unless one divides the pie evenly, it will be impossible to bake a bigger pie." The problem is not merely inequality. Inequality is merely a material issue. The problem involves two issues. One is corruption. The CCP has already experienced a serious loss of public trust. The moral foundation of its rule is built on quicksand. The other is dictatorship. The CCP remains a one-party dictatorship. This democratic dictatorship is guilty of uncontrolled corruption. It exploits the public. It deprives them of their rights. The public is unable to seek redress. Therefore on the surface, Mainland China's economy appears increasingly prosperous. But a closer look reveals that the greater the economic development, the more severe the political and social crises. Hence, Wen Jiabao's references to death.

Recently rumors have emerged that President Hu Jintao intends to promote a "socialist two-party system." If true, Beijing has already broken out of its mental box. The rumor may be true, or it may be false. Either way, Mainland China's political reform has reached a watershed. The Hu-Wen regime knows only too well that "defying the will of the people is ultimately a dead end."

中國弔詭:經濟愈發展 政治危機愈嚴重
2010.10.21 01:33 am









Wednesday, October 20, 2010

Democracy and Foreign Relations will Test the Next Generation of Mainland Leaders

Democracy and Foreign Relations will Test the Next Generation of Mainland Leaders
China Times editorial (Taipei, Taiwan, ROC)
A Translation
October 20, 2010

On the 19th of this month, during the Fifth Plenary Session of the Chinese Communist Party, Xi Jinping was elected Vice President of the Central Military Commission. This move confirmed his status as one of the next generation leaders of the CCP. Less than two weeks apart, both North Korea and Mainland China held elections, confirming successors for Vice-Chairman of the Central Military Commission. Neither government has an arrangement western governments would term democratic. But Mainland China has created its own unique system of elections. North Korea on the other hand, is entirely subject to the rule of men.

In North Korea, Kim Jong Eun, who is not even 30, has been made Vice-Chairman of the Central Military Commission. His sole qualification is that he is the grandson of Kim Il Sung, and the son of Kim Jong Il. Xi Jinping meanwhile, was not made a fifth-generation successor solely because his father Xi Zhongxun was a Communist Party elder. He is a seasoned veteran who has held both party and government positions. He is currently the leader most able to ensure a consensus within the Chinese Communist Party.

More importantly, the system of succession on Mainland China is predictable in nature. For example, the 70 year age limit for membership of the Politburo Standing Committee has become an iron law. The same is true of the system of succession. When Xi Jinping was made Vice President during the 17th Party Congress, everyone expected him to gradually assume control over both the party and the government. Now that he has been made Vice-Chairman of the Central Military Commission, he is following in the footsteps of Jiang Zemin and Hu Jintao.

Because the system is predictable, the political situation should remain stable. This differs from North Korea. Kim Jong Eun may be the designated successor. But no one can predict when Kim Jong Il will die, and what sort of chaos might ensue. Mainland China has freed itself from such a chaotic fate. It may lack democratic institutions. But it has this political model unique to Mainland China.

Xi Jinping has been elected Vice-Chairman of the Central Military Commission. We cannot ignore another question. Hu Jintao is still Chairman of the Central Military Commission. How long will he retain that position? Will he resign during the 18th Party Congress? Speculation is rife. But most likely he will remain Chairman of the Central Military Commission.

We are only two years away from the 8th Party Congress. Xi Jinping will then assume the role of General Secretary and State President. That much is known. But with only two years of experience in the Central Military Commission, the Vice Chairman will need to "be helped onto his horse, and accompanied part of the way." In the past Deng Xiaoping and Jiang Zemin retained their positions as Chairman of the Central Military Commission. They continued to influence the Central Military Commission. Hu Jintao is not "retiring completely." There is a precedent for this as well.

Nevertheless, after the 18th Party Congress, fifth generation leaders Xi Jinping and Li Keqiang will be the successors. They will take over the reigns of government from fourth generation leaders Hu Jintao and Wen Jiabao. They will face new challenges. Some of these challenges will be domestic, some foreign.

Committment to ongoing reform and liberalization is no longer in question. During the Hu and Wen era, a minority still had doubts. But today the entire party, the entire nation has reached a consensus. They disagree only about execution. Take the "ten two five plan" adopted by the Fifth Plenary Session. Some people still disagree about the future ratio of state-owned enterprises vs. private enterprises.

We must point out that the fifth generation leaders' real challenge comes from freedom and democracy. When Jiang Zemin passed the baton on to Hu Jintao, the only stipulation was "never reverse the verdict on the June 4 Tiananmen Incident." Now however, the situation is much more complicated. Liu Xiaopo has won the Nobel Peace Prize. That is merely one of many indicators. Others include grievances over the gap between rich and poor and uneven regional development. Wen Jiabao's repeated talks on democracy reflect differences in thinking within the party. Also, modern means of mobilization and communication could allow the situation to quickly spin out of control.

No consensus has been reached within the party regarding the development of democracy. The same is true of foreign policy, the currency war, territorial sovereignty, and maritime disputes. Mainland China wants a peaceful rise. But this is no easy task. In the face of so many international challenges directed at Mainland China, should it continue keeping a low profile, or should it stand up and speak out? Should it not be afraid of war, and engage in tit for tat with the world's great powers? The fourth generation leaders did not need to make such decisions. But the fifth generation leaders will not be able to avoid confronting these challenges.

Regarding cross-Strait relations, some are pinning their hopes on Xi Jinping. Xi worked for many years in Fujian. He has many Taiwanese friends. He has feelings for Taiwan. Therefore his Taiwan policy may involve new thinking.

Naturally we hope the new generation of Mainland Chinese leaders will have a good understanding of Taiwan. We hope they will have a first-hand grasp of the situation. But Mainland China's institutionalized system of succession means the institutionalization of decision-making. Major decisions will be made collectively. Taiwan policy will be no exception.

Past CCP leaders had absolute authority. "One word from Mao Zedong was the same as ten thousand." But with successive generations, the authority of individual leaders has diminished. Cross-Strait policy makers on Taiwan have focused their attention on Xi Jinping's personal character and leadership style. Instead, they should attempt to understand the background of the fifth generation leaders as a whole.

In particular, they must not overlook the role President Hu Jintao will play after stepping down. During Hu's final days in power, he will want to leave a legacy. That will be a driving force in cross-Strait relations.

民主、外交 考驗中共下一代接班人















Tuesday, October 19, 2010

Just What Are James Soong's Intentions?

Just What Are James Soong's Intentions?
United Daily News editorial (Taipei, Taiwan, ROC)
A Translation
October 19, 2010

James Soong has thrown his support behind Yang Chiu-hsing. He is attempting to persuade voters to "dump Huang to save Yang." He either wants to split the Blue Camp, or to ensure that Yang is elected.

But given the bigger picture, such tactics may not guarantee Yang Chiu-hsing's victory. The move has already led to a complete break between Ma and Soong, and may ensure that Chen Chu is elected.

The reasons are simple. James Soong's move will leave the KMT with even less room to maneuver. Now all the KMT can do, is limit the damage James Soong has inflicted upon the Blue Camp. Soong has clearly made his play. His is attempting to "dump Huang to save Yang" in Kaohsiuing. He has blasted Hau Lung-ping for "failure to make Taipei look like a national capital." Soong has already precipitated a complete schism. This forces the KMT to back Huang Chao-shun in Kaohsiung to the bitter end. The KMT now has no choice but to prevent the "James Soong factor" from spreading to Taipei and Xinbei City. If the situation persists, if both Huang and Yang remain in the race to the very end, if both manage to retain over 10% of their diehard supporters, then Huang Chao-hsun stands no chance of getting elected. James Soong's attempt to ensure that Yang gets elected will fail. Therefore James Soong's move is really intended to split the Blue Camp. His attempt to get Yang elected is merely a pretext

The real problem is that Blue Camp voters no longer have the same opinion of James Soong they once did. Any attempt to promote a "dump/save effect" in Kaohsiung hinges on Pan Blue voters' desire to bring down Chen Chu. But this collective desire rests on the premise of "Blue Camp solidarity." James Soong's attempt to exploit this "dump/save effect" involves flagrant attempts to discredit Ma and Hao. These may be unacceptable to most Blue Camp voters. Therefore Soong's attempt to play the "dump/save card" may on the one hand incite "defeat Chen Chu above all else" sentiment among Blue Camp voters. They may intensify support for Yang Chiu-hsing. They may on the other hand may provoke intense Blue Camp voter anger against James Soong, and persuade them to support Huang to the bitter end. Another possibility is that such offensive tactics may alienate them so badly they boycott the election altogether. These are all reasons why Soong's attempt to persuade voters to "dump Huang to save Yang" may not succeed.

With this "shot in the arm," Yang Chiu-hsing may have overplayed his hand. He has forced the KMT's hand. Now there is no turning back. The KMT must now fight him to the end. Yang's move will inevitably provoke a backlash. It will inevitably incite Blue Camp anger against a common enemy. Also, the Chen Chu camp, seeing Soong and Yang come together, is bound to point to this move and attempt to dissuade Green Camp voters from dumping Chen Chu to save Yang. This will reduce Yang's final vote count. Therefore, once the dust settles, Yang Chiu-hsing may find that his piece of the pie has actually shrunk. The Blue Camp initially had a chance to play the "dump/save card" in the Greater Kaohsiung election. But James Soong's move has mired the Blue Camp in a deadlock.

This is not the first time James Soong has sprung such a surprise. His February 24, 2005 "Bian/Soong meeting" was a classic case. The purpose of the "Bian/Soong meeting" was to "dump the KMT to save the PFP." Soong's methods have not changed. First, he wanted to split the Blue Camp. Secondly, he wanted the People First Party and Chen Shui-bian to agree to "DPP/PFP co-rule." Eventually the "Bian/Soong meeting" led to James Soong's downfall. Why? Because voters disapproved of James Soong's attempt to "sell out the Blue Camp for selfish gain." Even People First Party legislators were troubled. James Soong overestimated his personal charm. In the end, he was forced to withdraw in disgrace.

James Soong's image is not what it used to be. It is no longer what it was years ago. Therefore persuading voters to "dump Huang to save Yang" will be correspondingly difficult. When Soong lashed out, he immediately impacted the larger political picture. Even Hau Lung-bin was dragged in. Soong's public pronouncements will inevitably become increasingly intemperate. This of course will affect the feelings of Blue Camp voters. Some may agree with Soong. But others may become even more contemptuous of him. In short, for Blue Camp voters, this is highly emotional matter. The impact of Soong's move is not limited to "dump Huang to save Yang" in Kaohsiung. It is bound to impact every one of the five cities elections. It is bound to impact the Ma administration's 2012 re-election bid.

In the twenty years since martial law was lifted, the most prominent feature of politics on Taiwan has been "trickery above all." As a result, political moves are never rooted in moral principles, but in political calculation. Lee Teng-hui was once "a party chairman and a half." He was full chairman of the KMT, plus a half chairman of the DPP. In the end however, this was also the cause of Lee's downfall. The aforementioned "Bian/Soong meeting" was classic Machiavelli. In the end however, Soong ended up with nothing. Politicians overestimate their own charm. They underestimate the people's intelligence. They come to believe they can perform miracles, that they can control the political weather in a god-like manner. In fact, voters will not necessarily permit themselves to be manipulated. Twenty years of experience since the lifting of martial law has confirmed that those who live by trickery, will die by trickery.

Yang Chiu-hsing recruited James Soong. Has this made it easier for him to play the "dump/save card?" Or more difficult? James Soong has backed Yang Chiu-hsing. Has this destroyed the Blue Camp, or has it destroyed his own image and credibility? Has he helped out Yang Chiu-hsing, or hindered him? The answer will soon become apparent.











Monday, October 18, 2010

The Nobel Prize and Economic Policy

The Nobel Prize and Economic Policy
United Daily News editorial (Taipei, Taiwan, ROC)
A Translation
October 18, 2010

The winners of the Nobel Prize in Economics have been announced. The 1.5 million USD prize will be divided equally among three candidates: Peter Diamond. Dale Mortensen, and Christopher Pissarides. But the prize money is a minor matter. The reputations of these Nobel laureates will be enhanced dramatically. That is a far greater reward. The Swedish Central Bank established the Noble Prize in Economics in 1968. Since then, controversy has raged over whether the awards criteria and even the science of economics are objective.

One best-selling author became famous when he warned of the financial tsunami in advance. The day before the award was announced, he filed a claim against the Swedish Central Bank. Nobel Prizes were awarded to scholars who invented a portfolio risk model. Their portfolio risk model received the blessing of the Nobel Prize Committee, and encouraged bankers to take their theory seriously. The result was a serious blow to the global economy. Investors suffered heavy losses, and taxpayers were compelled to bail investors out with their hard-earned money.

Worse still, after this prize-winning portfolio risk model failed, more heavyweight Nobel Laureates in Economics warned that the world would be plunged into a terrifying Great Depression. Their columns led to the collapse of public confidence in the world's governments, and the paralysis of the global economy. They worsened the financial tsunami by pouring gasoline on the fire.

Two years have passed since the 2008 financial tsunami. The economies of the United States, Europe, Japan and other countries have yet to fully recover. Constant fear of a second recession remains. Are economists attempting to stem the tide, or make larger waves? Actually, they are doing both. Another accomplice looks on, far from the crime scene. The Great Depression led to the development of Keynesian theory in the 70s. Keynesianism has been repudiated by three decades of experience. But when the global economy became paralyzed, governments the world over rallied behind the US and collectively adopted Keynesian deficit spending policies. They did everything possible to borrow, spend, and build. Mainland China was the most extravagant. In a single breath, it invested four trillion RMB in new highway construction, high-speed railway construction, and housing construction. The result was no improvement to the economies of many countries. Meanwhile, because the proportion of government debt was too high, they turned to tax increases and budget cuts, in accordance with Keynesian policies of austerity. Such on again, off again policies, operating in fits and starts, battered their economies. Government debt was so heavy, their political stability was at risk.

Not only that, economic experts painted such a terrifying picture of the financial tsunami, Keynesian deficit spending policies were taken to an extreme. Monetarists -- long time rivals of the Keynsians -- offered their own policies. They lowered interest rates to zero or historic lows. They resorted to loose money policies to save the market. This policy was tantamount to printing paper money, and pumped unlimited quanties of paper money into the market place. Industries supposedly helped by real investments remained in the doldrums. Instead, hot money scattered, creating trouble everywhere. Financial bubbles burst in every country.

These mutally contradictory policies were ineffective, even counterproductive. The Nobel Prize in Economics has been awarded for 32 years. The United States has a virtual monopoly on them. These leading economists have touted, advocated, and promoted failed policies. This proves one thing: The science of economics remains frozen at a primitive stage of development. Theories abound, but none of them has stood the test of reality. Contrast this with the Nobel Prize in Physics or Chemistry, first awarded in 1901. There is no comparision.

The biggest difficulty with economics, is that it studies the behavior of mortal human beings. To compare them to atoms, molecules, gravity, and other non-human entities, is to artificially impose a mechanistic model from physics, in order to give the study of economics a "scientific" veneer. In reality, doing so turns one's back on the unique nature of human behavior. Ironically, doing so moves economics further and further away from genuine science. Therefore the more economics resorts to models, abstractions, and quantification, the less its conclusions conform to reality, and the less useful they are to us in the real world.

The three new laureates' greatest contribution is their realization that the market does not conform to the world of economic theory. In the world of economic theory, information is complete and readily available to both buyers and sellers. In the world of economic theory, unemployment and lack of work never coexist. Diamond's 's search markets theory first discovered that consumers and job seekers must bear expensive search costs, before they can obtain satisfactory results. If we were to ask the man in the street, he would give us the same answer. Is it really necessary to construct an elaborate mathematical model?

The world will arrive at its own evaluation of economic theories, based on how well they fare during financial crises. Nobel laureates' halos may be tarnished, but this should not be considered a bad thing, After all, when 10 different economists offer 11 different opinions, it is dangerous to put too much stock in any one of them.











Friday, October 15, 2010

They Emerged from Purgatory, But Did We Learn Anything?

They Emerged from Purgatory, But Did We Learn Anything?
United Daily News editorial (Taipei, Taiwan, ROC)
A Translation
October 15, 2010

Executive Summary: Rescue operations for the San Jose gold and copper mine in Chile ended yesterday. Thirty-three miners, trapped more than 600 meters underground, were successfully brought to the surface. Looking back at Taiwan, how many of our politicians have this foreman's courage in the face of crisis? When a crisis confronts us, can we work together to survive the difficulties, instead of complaining? When someone needs assistance, do we go all out, acting with precision, doing our utmost? Or do we merely make a token effort, then give up? This group of miners laughed in the face of adversity. Besides admiring them, will we learn from them as well?

Full Text below:

For the first time, human beings were drilling to the center of the earth, not to extract minerals, but to rescue their trapped fellows. For the first time, a developing nation successfully carried out a difficult rescue mission with military precision, and the world looked on with admiration. For the first time, a tragic mine disaster had a happy ending, and redeemed the humanity of people the world over.

Rescue operations for the San Jose gold and copper mine in Chile ended yesterday. Thirty-three miners, trapped more than 600 meters underground, were successfully brought to the surface. Furthermore, they were in better physical condition than anyone expected. Rescuers initially estimated that the rescue would take 120 days, and that the trapped miners could not be extracted before Christmas. But technical and material support from various quarters enabled them to accomplish their "Mission Impossible" in 70 days, with virtually no complications to speak of.

This was the longest rescue operation in history. For the rescuers above ground, it was a difficult project. For the miners trapped underground, the physical and mental challenges were daunting. The amazing thing is that the rescuers above ground did everything right. They never missed a step. The miners trapped underground gave each other encouragement. No one fell apart. The rescue operation is being touted as the greatest rescue in modern history. The rescuers above ground and the miners trapped underground encouraged each other, cooperated with each other. They never lost faith. This enabled the trapped miners to emerge from purgatory and rejoin the living.

This incident forced us to re-examine the "time" vs. "cost" myth. Disaster relief efforts on Taiwan used to be conducted in accordance with an iron law known as the "Golden 72 Hours." The assumption was that once this time frame had been exceeded, the chances the victims were still alive were slim, and rescue efforts would be abandoned. This time however, the miners were found alive by rescuers 70 days after the mine collapsed. The provision of the emergency refuge zone played a role. It had only enough air and water for two days. But rescue workers remained tireless, and continued their search. After seven failed exploratory shafts, they finally located the survivors. Their efforts bore witness to boundless human will and endurance.

The rescue operation required continuous excavation at extremely deep levels. Not only were the risks high, the cost was even higher. The rescue operation cost nearly 600 million NTD. The cost of rescuing each miner was nearly 20 million NTD. The rescue operation had a price. But human life is priceless. People clearly knew that over 30 people were trapped below. No matter how financially strapped the government might be, it had to do its utmost to rescue them. How can one put a price tag on a successful rescue?

The Chilean government's rescue operation was remarkable. Its rescue plan was methodical. It proceeded above ground and below, simultaneously. In the event one rescue plan failed, it simultaneously prepared an alternate plan. For example, rescuers simultaneously drilled two rescue shafts. In the event one of the two shafts missed, they would immediately begin drilling a third, at another location. This substantially increased the cost of the rescue operation. But it was the best way to ensure that the miners would be rescued.

Chile's mines have a poor reputation. Their safety has been questionable. But this time the Chilean Government's rescue effort resulted in success. It looked after the trapped miners, providing them with sustenance. The military cooperated by providing the Phoenix rescue capsule. The government invited experts from the United States to assist, The disaster had a happy ending. It not only united the hearts of the Chilean people, it won the applause of the world.

Most moving of all, was the comportment of the 33 miners. Trapped in a virtual purgatory, subject to physical and mental suffering, facing an unknown fate, they refused to despair. They cheered each other on. Within their dark, narrow space, they maintained discipline and order. They exercised, making their waists smaller, ensuring that they would fit into the rescue capsule. They yielded to one another. Each volunteered to be the last rescued. By mutual agreement, they agreed to write a book about their experience, and to share any royalties.

How can anyone not respect the miners? Yesterday, 54 year old Luis Ursua was the last man to be rescued. This mining foreman may look like just another elderly man. But he is a genuine hero. When the mine collapsed, he led everyone to the refuge zone. He strictly rationed both water and food, ensuring that two days of rations lasted 17 days, and keep them alive until rescuers could reach them. He divided 30 square meters of tunnel into a work area, rest area, and sanitary area. He assigned people to shifts. He simulated day and night by turning the lights on and off, making sure that everyone knew what time it was above. This foreman comported himself with greater calm and wisdom than most generals. That was why 33 miners could stare into the face of death and not panic.

Looking back at Taiwan, how many of our politicians have this foreman's courage in the face of crisis? When a crisis confronts us, can we work together to survive the difficulties, instead of complaining? When someone needs assistance, do we go all out, acting with precision, doing our utmost? Or do we merely make a token effort, then give up? This group of miners laughed in the face of adversity. Besides admiring them, will we learn from them as well?

【聯合報╱社論】 2010.10.15











Thursday, October 14, 2010

Where Are Taiwan's "18 Responses" to the Global Currency War?

Where Are Taiwan's "18 Responses" to the Global Currency War?
China Times editorial (Taipei, Taiwan, ROC)
A Translation
October 14, 2010

For the past two weeks, the most striking aspect of international financial markets has been the struggle between two superpowers, the Chinese Mainland and the US, over the upward revaluation of the renminbi. Emerging markets have joined hands opposing an upward revaluation of the RMB. The current situation is more complex than in the past. The USD, the RMB, the JY, and various emerging market currencies have intersected. The major powers have mutual interests, both positive and negative.

Following the 2008 financial tsunami, the advanced economies of Europe and North America fell into sharp recession. Beijing injected four trillion RMB into its economy to increase domestic demand. It hoped to gradually convert its single-engine economy, driven by exports, into a twin-engine economy, driven by both exports and domestic demand. Because of this, many countries hope Mainland China will be the force behind a global economic turnaround. Washington and Beijing joined hands to fight the financial tsunami. Their relationship has become extremely close. Hence the expression, "G2." The US Currency Report has not listed Beijing as a "currency manipulator state."

This year however, the US has frequently touched sensitive nerves during its Western Pacific military exercises. The US economy has shown no improvement. Unemployment remains close to 10 percent. The US government is under tremendous pressure. At this point, claiming that the yuan has been deliberately undervalued and is "taking away American jobs," is an easy way to find a scapegoat. The value of the RMB rose dramatically after being floated, establishing new highs. Nevertheless the US government demands that the RMB be revalued upward even further. The Chinese Mainland, out of national pride or economic realism, balks at revaluing the RMB as much as the US demands. In fact the tug of war over the revaluation of the RMB is not purely a monetary and economic issue. It is part of a "total war" between two major powers.

Meanwhile, the Japanese Yen has been subjected to a huge upward revaluation, The exchange rate is approaching 80 JY to the USD. Japanese companies must bear the brunt of this revaluation. This has forced the Japanese government to intervene with an injection of several trillion yen into its economy. But the Japanese government's unilateral intervention will not necessarily inspire other major industrial nations to ride to the rescue. Other countries are happy to see the JY appreciate. As a result, the effectiveness of the Japanese government's intervention may be limited. The appreciation of the JY has two causes. The underlying cause is spread trading funds covering the JY following the financial tsunami. The proximate cause is the Mainland Chinese government, which has been buying vast quantities of Japanese government bonds. The two Asian powers are arguing over whether Mainland China is deliberately attempting to force an upward revaluation of the JY.

Following the financial tsunami, emerging market countries must confront the world's central banks. First they injected trillions of dollars to the market. Then they implemented a near-zero interest rate policy. They made unlimited funds available with a "quantitative easing" policy, flooding the market knee deep in capital. High interest funds looked to emerging markets, which were the first to recover in the wake of the financial tsunami. Several trillions of dollars in hot money from all over the world poured into these emerging markets. Naturally these national currencies appreciated. But these countries had just climbed out of a recession. Domestic demand was insufficient. They needed to strengthen their exports. They were afraid currency appreciation would impact their export competitiveness. Needless to say, they all did their best to stop any upward revaluation.

As a result, the Brazilian Finance Minister publicly spoke of the race to devalue among nations, Japan 's forceful intervention in the exchange rate, the Central Bank on Taiwan pegging its exchange rates to those of its main competitor Korea, strongly defending the 31 NT per USD level. The interest some emerging market countries showed in the so-called "hot money tax" was a product of this situation. The International Monetary Fund has issued repeated warnings. It is concerned that if governments use monetary policy as a weapon to solve domestic economic problems, they could seriously jeopardize any global economic recovery.

The US wants to compel an upward revaluation of the RMB. The situation is similar to the 1985 Plaza Accord, which attempted to compel an upward revaluation of the JY. The United States was suffering from a weak domestic economy. Japan was enjoying a huge trade surplus with the United States. The United States, along with other major industrial countries, intervened. Japan played along. Today's situation differs. The Chinese Mainland does not need to play along with the United States the way Japan did. The Chinese Mainland has links with all major industrial nations, who may not be able to reach a consensus. Therefore the situation is more complex and unpredictable than in the past.

The most important point for future reference, is of course, the exchange rate report published by the United States. Will it accuse Mainland China of being a currency manipulator? Will it impose punitive tariffs on exports from Mainland China? If it comes to this, then a global trade war could erupt. All manner of protectionist policies and puniitve measures against competitor nations may be imposed. The pace of global economic recovery will inevitably be reversed. History has taught us a series of painful lessons. Unless all nations lose their senses, the probability of this happening is low. But a tug of war and shocks to the system during the consultation process are inevitable. The Republic of China government may not have much leverage in this rivalry among international powers. But it must protect itself. It must maximize the good, and minimize the bad. The government must have "18 Responses," not just the one in which the Central Bank defends to the death the 31 NT per USD exchange rate.

全球貨幣戰爭 台灣的「18套劇本」在哪?









Wednesday, October 13, 2010

How Dare Tsai Ing-wen Attend the National Day Ceremony?

How Dare Tsai Ing-wen Attend the National Day Ceremony?
United Daily News editorial (Taipei, Taiwan, ROC)
A Translation
October 13, 2010

Will Tsai Ing-wen attend the National Day ceremony or won't she? This is basically a non-issue. During Democratic Progressive Party protest marches, flags and banners are so numerous they block out the sun. But one will never see a single Republic of China flag. The party's fundamental nature has not changed. The five cities elections are looming. How dare Tsai Ing-wen attend the National Day ceremony?

This is one of the fundamental paradoxes on Taiwan. A "revolutionary political party" has an unspoken goal -- to overthrow the Republic of China. Yet it runs for Republic of China political offices in the guise of a "democratic political party." On the one hand, at election time, it assures moderate voters that it is a "democratic political party." On the other hand, it assures Taiwan independence supporters that it is a "revolutionary political party." On the one hand, upon taking office, it declares "five noes." On the other hand, it promotes the "rectification of names," the "authoring of a new constitution," a "referendum to enter the UN," and "one nation on each side.“ Over the past eight years, when President Chen Shui-bian presided over the New Year's Day flag-raising ceremony, the DPP parade formation would be filled with "Nation of Taiwan" flags and banners, fluttering in the breeze, blotting out the sun.

The DPP's two-faced nature has reached extremes. Its supporters apparently believe their two-faced nature is a "necessary evil," essential for the growth of Taiwan independence, which cannot survive without it. Perhaps in the beginning the DPP concluded that in order to ensure the survival of Taiwan independence, it had no choice but to adopt this two-faced behavior. But it now engages in this two-faced behavior to exploit Taiwan independence. In other words, it originally engaged in political manipulation to promote Taiwan independence. Now however, it engages in political manipulation to exploit Taiwan independence. This practice has transformed the DPP's two-faced behavior into "ersatz democracy/ersatz Taiwan independence." It can no longer extricate itself, and is dragging its supporters into this moral quagmire.

In order to advocate Taiwan independence, the DPP must express "total opposition." It must incite hatred. It must tear society apart. It must express opposition merely for the sake of expressing opposition. The DPP's unspoken goal is to overthrow the Republic of China. For this it has a tacit understanding with its supporters. How can it possibly accept any of the ROC government's key policies? ECFA is clear example. ECFA is part of the Republic of China path. It is fundamentally opposed to the "Nation of Taiwan" path. If the DPP sides with the Republic of China, how can it possibly oppose ECFA? Conversely, if it champions Taiwan independence, how can it not oppose ECFA?

In almost any political controversy, the DPP criticizes the "Republic of China" from a "Nation of Taiwan" perspective. For example, when typhoons caused flooding in Kaohsiung, DPP officials said the disaster was caused by "too many Mainlanders." For example, during the H1N1 influenza outbreak, DPP officials said "This was the Ma administration's first anniversary gift to Taiwan." The DPP has cultivated in the minds of its supporters the belief that "Taiwan independence is more exalted morally than the Republic of China." It has even cultivated in the minds of its supporters the belief that "Taiwan independence is more exalted morally than any value one can imagine." For Taiwan independence, "repudiating the Republic of China" and "hating the Republic of China" is the highest morality. Therefore for the sake of Taiwan independence, one is morally justified in opposing democracy, the rule of law, even morality itself.

Given this understanding, it is obvious why the DPP felt the courts had no right to judge Chen Shui-bian's corruption. After all, for the DPP, Taiwan independence trumps the rule of law. That is why Chen Shui-bian's 3/19 shooting hoax, Frank Hsieh's doctored audio tapes, and Chen Chu's "gotcha" press conference, were all considered morally justifiable. After all, for the DPP, Taiwan independence trumps democracy. Repeated distortions of the water spinach issue slandered the entire Flora Expo. This was another spectacular victory for the DPP. After all, for the DPP, Taiwan independence is the highest morality, and trumps even morality itself. For the sake of Taiwan independence, any immoral or unscrupulous conduct is considered acceptable.

This is the unspoken goal shared by the DPP and its supporters. On the one hand, the DPP uses this understanding to brazenly engage in all sorts of trickery. It incites hatred, destroys democracy, undermines the rule of law, and ignores moral standards. Nevertheless it still receives over 40% of the vote. On the other hand, it is also the reason the DPP can never transform itself from a "Taiwan Independence Party" into the "Republic of China's loyal opposition." In recent years, the world, the Taiwan Strait, and Taiwan have changed. The moral status of Taiwan independence, its legitimacy and its feasibility, have been increasingly eroded. The DPP and its supporters, with their two-faced advocacy of "ersatz democracy/ersatz Taiwan independence," have destroyed the Republic of China. But they have also hollowed out and falsified the "Nation of Taiwan."

Tsai Ing-wen has already embarked on the same path as all other DPP leaders. She will share the same fate. On the one hand, the DPP wants to seize political power within the Republic of China under the guise of a "democratic political party." On the other hand, the DPP wants to deceive Taiwan independence supporters under the guise of a "revolutionary political party." Tsai Ing-wen cannot attend the ROC National Day ceremony. All she can do is hold high the "Nation of Taiwan" banner as she marches in lockstep formation. All she can do is perpetuate the DPP's two-faced game of self-deception.