Only Narrowing the Wealth Gap Can Increase Happiness
China Times editorial (Taipei, Taiwan, ROC)
July 18, 2011
Last year, economic growth on Taiwan exceeded 10%. International competitiveness greatly exceeded that of South Korea. The chief editor of South Korea's Dong-a Ilbo heaped praise on President Ma Ying-jeou, saying he far outperformed South Korean President Lee Myung-bak. But on the happiness index, South Korea brought up the rear, and Taiwan trailed even South Korea. For both economies, their well-being indices lagged far behind their economic growth indices. Most people within the two economies are not experiencing the benefits of economic growth. That is why the two presidents are trailing in the polls.
Consider last year's data. In terms of economic growth. Taiwan far outperformed South Korea. Consider the past decade, South Korea enjoyed an average growth rate of 4.17%, higher than Taiwan's 3.93%. During the financial crisis, Taiwan's economic growth rate was -1.9%. South Korea by contrast, was one of the few members of the Economic Cooperation and Development (OECD) to maintain a positive growth rate. Since 2004, Korea has surpassed Taiwan in per capita income, This year, for the first time, per capita income on Taiwan surpassed 20,000 USD. It now has a chance to surpass South Korea.
Consider the unemployment rate. Over the past decade the unemployment rate for South Korea has remained at 4% or less. During the financial crisis it never exceeded 4%. During the financial tsunami, the unemployment rate on Taiwan soared past 5%. It fell to 4.27% in May of this year. But it still ranks first among the Four Asian Dragons. It is worth noting that South Korea's atypical employment rate (temporary workers, employment agencies) has increased significantly, in recent years. Taiwan has also experienced the same trend.
Taiwan and South Korea's are economic rivals. But behind the bright economic growth, both economies face a widening gap between rich and poor. According to South Korean government figures, per capita income for the 20% of people at the top of the economic pyramid rose 55% over the past decade. Per capita income for the 20% of people at the bottom of the economic pyramid decreased 35%. As the local media put it, the wealth gap is clear from where people live. The "royalty" live in the the exclusive Gangnam District. There, one ping goes for 30 million won (about 1 million NT). In other parts of of the city one ping goes for 14 million won (about 400,000 NT) Below that is where one finds ordinary people or servants.
Unfortunately, in recent years, the wealth gap on Taiwan has become worse than in Korea. The "Gini coefficient" is an international indicator of the wealth gap. The higher the coefficient, the greater the gap between rich and poor. South Korea's Gini coefficient is 0.314. Taiwan's is 0.345. In recent years, the biggest public grievance has been soaring housing prices. In June the government introduced a luxury tax. But housing prices in the greater Taipei area remain virtually unaffected. In June existing-home prices soared another 10%, setting new highs. In Taipei luxury housing goes for two to three million NT per ping. People without homes can look but not touch.
Consider the manufacturing industry. Revenues earned by former South Korean tycoons account for 70% of the nation's GDP. The South Korean government fully backs its large enterprises. During the financial crisis the Korean Won depreciated nearly 50%. Yet large export-oriented enterprises such as Samsung and Hyundai showed record profits. Ironically, real purchasing power for locals fell due to currency devaluation and higher prices, Life became even more difficult for them. A clear example occurred in June, when South Korean students protested excessively high tuition fees. Many parents could not afford tuition fees approaching 20 million Won (about 300,000 NT). Some students even committed suicide because they could not pay their tuition. To solve the problem, President Lee Myung-bak has pledged to cut tuition at the end of June.
Lee Myung-bak has been called the CEO President. His top priority has been to boost the economy. He introduced a number of policies favorable to conglomerates. According to statistics, the number of subsidiaries controlled by South Korea's thirty largest chaebols has doubled since the financial turmoil. Even small businesses making pizza and tofu have not been spared, Many small and medium enterprises have been swallowed up. Outside criticism and the upcoming election, persuaded President Lee Myung-bak to order a "large and small enterprises shared development committee" review at the end of June. Over 200 types of businesses, including tofu manufacturing, will be reserved for SMEs. Will the "bean curd campaign" work? It will depend on Lee Myung-bak's political will.
Economic growth is up. But are people happier? South Korea's local media wonders. Over the past decade, South Korea's per capita income rose from 10,000 US to 20,000 US. But the South Korean people's happiness index has declined. South Korea's well-being index in the OECD is at the bottom of the heap. Consider the Gallup "global happiness" survey. Among the 124 economies evaluated, Denmark had the highest happiness index. As many as 72% of the population was optimistic about the coming five years. In South Korea, that number was 35%. On Taiwan it was a mere 32%. Both economies were in the bottom half of the class.
Consider the economic growth rate, the wealth gap, and the happiness index. South Korea and Taiwan have many similarities. But a wise leader must realize that economic growth is not necessarily shared by all. It does not make all people happier. Only specific policies that narrow the gap between rich and poor can enhance happiness for most people.