Thursday, December 2, 2010

Ma Administration Financial and Economic Policies Should Consider the Common Man

Ma Administration Financial and Economic Policies Should Consider the Common Man
China Times editorial (Taipei, Taiwan, ROC)
A Translation
December 2, 2010

During the recent five cities elections, the KMT retained control over three cities. But it received 400,000 votes fewer than the DPP. This was partly due to the Yang Chiu-hsing Effect in Kaohsiung, which split the Blue vote. But no matter how one runs the numbers, at least 30% of County Chief Yang's support was his own. Therefore, the Blue Camp lost by at least 100,000 votes. Such an outcome is a clear warning sign that bodes ill for Ma Ying-jeou's re-election prospects. The reasons for this outcome deserves careful analysis by the current administration.

One month ago, the US held its midterm elections. The Democratic Party under by Barack Obama suffered a disastrous defeat. Outside observers attributed this to a sluggish economic recovery and long-term unemployment. Economic issues such as these dragged down the ruling Democratic administration. But this was not the case on Taiwan. A few days before the election, the Directorate-General of Budget, Accounting and Statistics announced the economic growth figures for the first three quarters. GDP growth for this year will exceed 10%, thanks in part to a low baseline last year. Not only did Taiwan's growth reach a new 20 year high, it outpaced the other Asian Tigers. The unemployment rate was not bad either, falling below 5% in October. The Executive Yuan supported a range of short-term employment relief programs. In any event the numbers were much better than in the US. Why were the rejuvenation of the economy and the stablization of cross-Strait relations not reflected in the election outcome?

A closer look at the Ma administration's economic policies suggests a single answer: "Pride goeth before a fall." The Ma administration's general thrust has been to break the bonds imposed upon the nation during the DPP era, to promote the normalization of cross-Strait economic and trade relations, and Taiwan's formal integration into the global community. The DPP has invariably opposed Mainland China at every turn. It has welcomed other aspects of globalization without hesitation. But it has refused to "go west" toward the Mainland. Although its recalitrance applied only to the Mainland, given Taiwan's geographical situation, such recalcitrance effectively precluded the possibility of global integration. The Ma administration's policy addresses this gap. It enables businesses to fully integrate with the global economy. Naturally it has provided a major boost to the economy.

The Ma administration's business policy however, has not necessarily benefitted the common man. The experience of governments the world over has shown that under globalization entrepreneurs are invariably the ones who profit. Disadvantaged workers often become victims. Globalization often widens the gap between rich and poor, and between high-tech talent and low-skilled labor. Therefore, although the Ma administration's cross-Strait policy was sound overall, it ignored the differing impacts on different segments of society. It failed to compensate for them. The most obvious example was the government's liberaization of cross-Strait trade, The government welcomed globalization. It threw the doors open to entrepreneurs, providing them with tax cuts. It dared not touch the capital gains tax. It greatly reduced business taxes and inheritance taxes. By comparison, the disadvantaged felt exploited.

When the Ma administration liberalized cross-Strait exchanges and signed ECFA, it threw open the doors. It boosted economic momentum. But it ignored micro level concerns. The gaps in its policy were glaring. If the Republic of China was a totalitarian nation, such gaps would have no aftereffects. But the Republic of China is a democracy. Therefore the feelings of ordinary people will find expression come election time. The Ma administration implemented only one end of the fiscal policy spectrum. Needless to say ordinary citizens who failed to benefit found little to agree with.

We wholeheartedly agree with the Ma administration's liberalization of relations across the Taiwan Strait, and abandonment of isolationism. But the more ambitious the policy, the more it demands close attention and detailed implementation. It must never be implemented in haste. Take the 17% business tax cut for example. It contravened decisions already made by the Executive Yuan. It ignored the need to balance mid-term and long-term government revenue and expenditures. The result? Most people feel the government was only "looking after Big Business." Such policies make ROC tax rates the lowest in the world. The Ma administration simply will not have the funds required to care for the socially disadvantaged. This may be why so many people feel discontent. Some government officials are single-mindedly populist in their thinking. The Presidential Advisory Group on Finance cabinet members failed to correct them. The results, needless to say, were regrettable.

The Ma administration's economic policies have focused on cross-Strait liberalization and tax cuts. But they neglected the welfare of the common man. Think of economic policy as the structure of a house. Current policy has only the steel skeleton, but no walls or floors, let alone interior spaces. Such a financial policy has breadth and depth, but lacks flesh and blood. It fails to relate to the common man.

The Ma administration has just over a year to redress these shortcomings. By then the 2012 presidential election will no longer be about who is elected president. It will be about whether the Open Door Policy can be maintained. If the current administration loses, and a Closed Door Policy is reimposed, that will be Taiwan's tragedy.

馬政府財經政策 應考量庶民感受
2010-12-02 中國時報









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