Address Poverty Before Addressing Emergencies
China Times editorial (Taipei, Taiwan, ROC)
August 20, 2012
Summary: We warn the business community and the public. We must liberalize. If we do not, we will commit economic suicide. We are currently in a recession. We cannot sit and wait for the dawn. We cannot hope that the economy will improve and that our problems will disappear. We must recognize the warning signs for Taiwan's competitiveness. Otherwise, when the global economy picks up again, others will be eating steak, and Taiwan will be eating table scraps.
Full Text below:
Last week the Executive Yuan Budget and Accounting Office issued its latest economic report. The economic growth rate this year has been revised downward to 1.66%. This figure is likely to put us in last place among the Four Asian Tigers. The Executive Yuan implemented emergency mobilization countermeasures long ago. We hope Taiwan can safely negotiate the economic downturn. We hope the government will forsake its outmode ways of thinking. An old expression says "one must address emergencies before addressing poverty." But the economic downturn suggests just the opposite. It suggests that the government should "address poverty before addressing emergencies."
This year's economic growth rate was set optimistically at over 4%. This quarter it has been downgraded to 1.66%. The main reason for this is the swiftly declining global economic environment. The European debt crisis persists. The EU economy has gone into recession. It economic growth rate this year is -0.3%. The U.S. market remains weak. Its economic growth rate has been revised downward to 2.1%. Even the Mainland's sustained double-digit growth has slowed. Its economic growth rate has fallen below 8%. Projections for this year have been lowered to a mere 7.7%. Economic growth for the rest of the Four Asian Tigers has been lowered to about 2%. Taiwan's exports accounted for 70% of its GDP. The international economy is slowing. Taiwan cannot remain unaffected.
Consider the economic data. Taiwan was originally first among the Four Asian Tigers. Today it is last. This is not due entirely to international factors. An important factor is Taiwan's declining competitiveness. Between January and July, Taiwan's exports shrank by 5.8%. This was the largest drop experienced by any of the Four Asian Tigers. The three other Asian Tigers are still experienceing positive growth. Exports of Taiwan's ICT products, so-called technology products, have abruptly fallen over 20%. One need not look at the data. One need only look at the domestic technology industry. Taiwan's DRAM industry has already been sidelined globally. Industries on their last gasp still don't know what to do. In flat panel displays we still retain our global market share. But our technology lags behind. Financial losses have occurred. How can we bounce back and keep fighting? The LED and solar energy panel industries are in trouble. The PC and smart phone industries have also hit bottom.
When the economy was booming, it made no difference whether we were competitive or not. Businesses still made money. But when the economy and market conditions deteriorate, the first to fall are the less competitive businesses. This is typical capitalist elimination of the unfit. Unfortunately during the current global recession Taiwan's economic and industrial competitiveness has clearly declined.
During the Asian financial crisis, a domestic financial crisis, or the financial tsunami, the economy declined. But now no matter how competitive a business might be, it can still fail. At times like these, all that a government can do is address the emergency. It tries to save every industry, sound or unsound, in order to avoid affecting the situation overall. This includes industries having difficulty adapting, or facing a loss of capital, or whose markets have contracted.
At least this downturn does not mean across the board austerity and recession. Its causes are clearly related to industry and business competitiveness. The government must not rush to rescue troubled businesses. It should not adopt emergency measures and rush to inject capital. Instead it should allow businesses without a future to fail. It should allow sunset industries to fade away. The government's focus should be on how to strengthen the constitution of the economy and industry as a whole.
The government has stressed policies that facilitate FTAs and economic and trade liberalization. President Ma said "History teaches us that liberalization brings hope, but that protectionism brings atrophy." We agree. But we must also warn the government. So-called "liberalization" is not the low level "liberalization of goods and trade" of 20 years ago. It is the comprehensive liberalization of laws, capital, skilled labor, and government regulations. The fact is, society has consistently resisted such liberalization. The government often says one thing while doing another. Take overt and covert restrictions on the importation of foreign and Mainland labor. Take controls over corporate equity transactions and the buying and selling of "official discretion." Take restrictions on domestic business investments on the Mainland -- the way they are approved or rejected. These policies and practices stand in the way of liberalization. They persist in many industries. The government must review these first. It must liberalize far more than it has. Taiwan's economy and industry must be subjected to greater market discipline.
We warn the business community and the public. The government may sign an infinite number of FTAs. But they are not a panacea that will ensure exports. They invariably involve other costs. We must liberalize. If we do not, we will commit economic suicide. Businesses and the public must accept the challenges. They must increase their own competitiveness. We are currently in a recession. We cannot sit and wait for the dawn. We cannot hope that the economy will improve and that our problems will disappear. We must recognize the warning signs for Taiwan's competitiveness. Otherwise, when the global economy picks up again, others will be eating steak, and Taiwan will be eating table scraps.