Print

Mail

wiki links

Combatting the Chinese economic pestilence

There is a theory in international economics called the "Factor Price Equalization Theorem," meaning that after trade between two countries is unconditionally opened up, rates of return on the same production factors in those two countries will gradually become equalized.

In plain language, this means that if Taiwan removes all restrictions on trade with China, the rates of return on capital -- as well as land prices and even wages -- in these two countries will move toward parity.

The close economic links between Taiwan and China over the past decade have benefited Taiwanese capitalists, harmed the interests of Taiwanese real estate owners and drawn Taiwanese wages closer and closer to those in China. This was a theoretical prediction that has now become a reality.

Apart from trade, Taiwan's economic link to the backward China has expanded into direct investment, thereby speeding up the process of "wage equalization."

This has enabled Taiwanese entrepreneurs to continue using their old methods to make more money in China without striving for progress in Taiwan, boosting China's employment situation and upgrading its competitiveness.

But, at the same time, it has created unemployment pressures for Taiwanese laborers and lowered their real wages, causing the nation's economy to decline.

From the perspective of economics, we seem to see a similar "equalization" principle at work in the public health field after the foot-and-mouth disease and SARS (severe acute respiratory syndrome) outbreaks. I'll just call it the "pestilence equalization principle."

This principle means that after two countries between which traveling is convenient allows completely unrestricted mutual contacts, the prevalence rates of all epidemics will be gradually equalized.

My argument goes like this: Due to convenient communication and free contact with other areas, disease will easily spread from countries with backward public health systems and high epidemic prevalency rates to countries with advanced public health systems.

In contrast, countries with advanced public health systems have fewer infectious diseases and better hygiene, and are therefore less likely to spread their epidemics to countries with backward public health systems.

Moreover, people in countries with backward hygiene systems may have developed antibodies and stronger immune systems, and would therefore be less likely to contract infectious diseases breaking out in countries with advanced hygiene systems.

However, people in countries with advanced hygiene systems have weaker immune systems and they are less likely to be immune to rare diseases. They are therefore more likely to contract infectious maladies spreading from countries with backward hygiene systems.

Deplorably, Taiwanese people's alertness to containing the contagious disease and their correct understanding and support of government intervention are not reflected in trade with and investment in China.

The people of Taiwan lack a sense of alertness to, and do not protest strongly against, the harm to their interests resulting from the deregulation of trade with China and from China-bound investment. This is partly because they are being deceived by the Taiwanese capitalists and the mass media.

At this critical moment, some people go so far as to encourage the government to deregulate and establish direct links with China and even advocate "laissez-faire" and "respect for the market mechanism." This is no different from asking the government to disregard the spread of SARS from China.

Lin Kien-tsu is an associate professor at Tamkang University.

Translated by Jackie Lin
This story has been viewed 2756 times.