President Ma Ying-jeou (馬英九) has appointed Vice President Vincent Siew (蕭萬長) as convener of a new panel to advise the Presidential Office on financial and economic affairs. But does Siew really have any bold economic vision? Nothing he has said goes beyond the usual free-market mechanisms, relaxation of laws and regulations, a complete free rein for Taiwanese companies to “go west” and forming a common market with China.
Siew’s policies comply with the fashionable pillars of globalization — deregulation, denationalization and minimizing the role of government. That is as far as his vision goes. Can such a vision really get Taiwan through the current economic troubles?
An article in Thursday’s New York Times asks if the US is any longer the global beacon of unfettered free-market capitalism. In bailing out Bear Stearns, Fannie Mae and Freddie Mac and American International Group (AIG), the US has not just broken the cardinal principles of the free market, but also undermined the US’ authority in any future efforts to sell the idea of economic globalization to other countries.
In the Times article, US financial historian Ron Chernow said the Bush administration, which stands for free market economy, is now doing things even countries that advocate state intervention would not dare to do. These actions will provide excellent ammunition for opponents of the free market.
Whenever the IMF offers to help countries, it always demands that the country receiving aid implement what the IMF calls “structural adjustments,” including deregulation, market liberalization, unfettered exploitation of natural resources, privatization of public assets and state enterprises, reduced tariffs, social spending cuts, and so on.
For example, during the 1997 Asian Financial Crisis, when the IMF pledged South Korea US$20 billion to help it weather the storm, one of the “structural adjustments” it demanded as a condition for the loan was that the Seoul government not prop up troubled banks and companies, but rather allow them to be eliminated according to the workings of the free market. The IMF pushed South Korea to open up its domestic market and thoroughly liberalize its economy.
Now that the US is facing its own financial crisis, however, the US government has transgressed the free-market dogma it has been imposing on other countries by resorting to state intervention on a massive scale. Is the nationalization of giant investment and insurance firms not tantamount to what the French call “economic patriotism?” The Times article was highly critical of the US government’s actions.
If the US government finds itself compelled in the final analysis to act counter to the fundamental principles of its own free-market capitalist creed, what authority is left for the idea of economic globalization, which has been in vogue for the past three decades? Even Republican presidential candidate Senator John McCain declared that he and Alaska Governor Sarah Palin, if elected, “are going to put an end to the reckless conduct, corruption and unbridled greed that have caused a crisis on Wall Street,” while another Times article pointed out that you can’t trumpet the virtues of the free market on the one hand while attempting to protect investors by using state powers to clean up after the greedy gamblers of Wall Street on the other.
As to Ma and Siew — where is their vision? If interventionist policies are necessary for the US government, it proves that an unbridled free-market system cannot work. The Ma government’s policy of economic integration with China is a free-market strategy. Ma and Siew’s real purpose would seem to be political convergence, even if it comes packaged in the guise of economic integration.
Allen Houng is a professor at National Yang Ming University.
TRANSLATED BY JULIAN CLEGG
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