While the government is pinning hopes of reviving the country's sagging economy on hefty investments in public infrastructure projects, a renowned US economist said yesterday that the money would be better spent elsewhere.
"Taiwan should do some government spending on education of people," in order to allow the country's economy to rise again when it starts to recover, Lester C. Thurow, an economics professor with the Massachusetts Institute of Technology, said in a speech delivered at the Epoch Foundation Economics Forum yesterday in Taipei.
"As for [spending on] major infrastructure projects, the problem is that it takes too long to plan and too long to really put into force," he explained.
"The question is, given whatever budget you have ... are you going to do some infrastructure projects like that of Japanese and lose or pump that money into a re-skilling program like that of the Swiss and win?"
Thurow cited the US experience of how it dealt with the unemployment problem at the end of World War II when the US demobilized 12 million people from the armed services and axed 12 million people from the war-related manufacturing sector.
"With 24 million people being suddenly thrown out of work, the US government sent them all back to school and job training programs. The result was, the economic transition during that period of time was relatively smooth," he said.
"If you have a recession, it's a good time to do bottom-fishing," Thurow added. Yet, the US economist warned that Taiwan may be tempted to follow in the footsteps of the Japanese and spend big on infrastructure and "build bridges and waste money."
Taiwan can do little to address the current global recession other than wait for the US to recover, Thurow said.
"Taiwan is not going to cure the current recession with anything you do in Taiwan ... though it may help you to make the downturn less painful," he said.
While the government has sought to ease the blow through fiscal stimulus policies such as rate cuts to boost the country's economy, Thurow questioned the effectiveness of these measures.
"The effect of fiscal policy in Taiwan is probably limited. Nevertheless, it actually will make the problem more severe," he said.
And with many Taiwanese businesses looking to the Chinese economy for their future prosperity, Thurow said China is far from being able to play a "world-level" role as its gross domestic product (GDP) comprises only 2-3 percent of world economy.
"China has forecast a 8-percent growth rate for the year, but what that number means is completely meaningless ... because what happened is, in the last 40 years, the Chinese have reported an 8 percent growth rate every year regardless of what happened," Thurow said.
"The forecast [for this year] is completely inconceivable and impossible as the whole world slowed down and they didn't."
Meanwhile, it is hard to speculate exactly how long it will take before the American "U-shaped" economic downturn bottoms out in the wake of the Sept. 11 terrorist attacks on the US, the economist said.
"Taiwan is not alone in this round of recession," he said.
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