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Economic 'downturn' exaggerated

Freedom House, an independent non-governmental US organization supporting the expansion of freedom in the world, listed Taiwan as a free country for the first time in 1996. Ten years later, it was rated World's freest country (along with US) by the organization.

Almost the whole world praises the decade-long democratic transformation. But at the same time, some Chinese-language media

see Taiwan's stagnant per capita income over the past decade as evidence that Western democratic values are incompatible with Chinese culture. I feel compelled to respond to the ridiculous claims about Taiwan's economic regression by these media.

First, I would like to clarify that many factors affect a country's GDP growth rate, such as increases and decreases in the domestic and international labor force, birth rates and so on. Even if an economy experiences rapidly growing GDP, that growth is not necessarily reflected in production value per capita.

Take Hong Kong for example, where the average GDP growth rate was 5.3 percent between 2000 and last year. Per capita income last year, however, was only 1 percent higher than in 2000 in Hong Kong currency.

Some media see Taiwan's stagnant GDP per capita over the past decade as evidence of an economic downturn. However, a comparison of GDPs between East Asian countries over the decade between 1996 and last year shows that only those of China and Vietnam, both with low per capita incomes, experienced steady growth, while those of the other countries all declined to varying degrees.

Most economists believe that this phenomenon was related to the 1997 East Asian financial crisis and the resource crowding-out effect following in the wake of communist countries' economic liberalization.

Following a painful decade-long adjustment, only the successfully democratized Taiwan and South Korea are now experiencing clear per capita GDP growth.

Meanwhile, GDP per capita in Hong Kong under China's "one country, two systems" is even lower than it was at the time of the hand-over to China in 1997, while Singapore's GDP has grown by a mere 6 percent.

And yet, Taiwan's performance has still been taken as evidence by some media outlets that Western democratic values are incompatible with Chinese culture. This is both stunning and unbelievable.

Some media point out that South Korea's per capita GDP last year was US$1,020 higher than that of Taiwan, saying that this is evidence of the nation's economic downturn. No one, however, explains that along with such growth was the growth rate of consumer price index that is four times higher than Taiwan's.

According to the CIA's World Factbook, per capita income calculated by purchasing power parity (PPP) shows Taiwan pulling ahead of South Korea by US$5,000 since the Democratic Progressive Party (DPP) took power in 2000.

The CIA's data show that Taiwan's per capita GDP last year was US$26,700, just behind Singapore at US$29,900. Excluding exchange rate and price fluctuations, Taiwan's per capita GDP growth has been the highest of the four Asian tigers during the DPP's six-year rule.

Also, according to IMF statistics, the country's per capita GDP last year reached US$27,572, almost as high as Singapore's US$28,100, an even smaller difference than implied by CIA figures. So the so-called economic downturn claimed by some Chinese-language media is, once again, not to be believed.

During the decade-long democratic transformation, Taiwan's average unemployment rate was the lowest among the four Asian tigers, and its misery index was the second-lowest next to Singapore's 0.3 percent. Taiwan's suicide rate was also the second lowest next to Singapore's.

Additionally, Taiwan's average unemployment rate after the power transfer in 2000 has been 1.9 percentage points lower than that of Hong Kong and the bad loan ratio dropped from 8.8 percent in 2002 to 4.35 percent in 2004.

According to the Growth Competitiveness Index, released by the World Economic Forum, Taiwan remains the most competitive country in Asia. Furthermore, according to the World Competitiveness Yearbook released by the International Institute for Management Development in Lausanne, Switzerland, Taiwan has moved another six spots ahead of Zhejiang, the province with China's highest GDP per capita, and it moved another two spots ahead of South Korea.

The supposed economic downturn in Taiwan claimed by some Chinese-language media is indeed worth investigating further.

David Su is a doctoral student in the Department of Economics at the University of Rhode Island.

Translated by Eddy Chang
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