Addressing the issue of wealth redistribution following the signing of an economic cooperation framework agreement (ECFA) between Taiwan and China, President Ma Ying-jeou (馬英九) has said his government would control uneven distribution of wealth through taxes and social welfare measures.
These comments are in relation to the main concern surrounding the ECFA talks — that the rich will get richer, while the poor get poorer.
Today, the government is in a financial crisis. After repeatedly reducing taxes for the wealthy over the past two years, there is no room for debt financing.
By talking about taxes and social welfare measures, Ma is building castles in the air.
Early last month, the Hong Kong Institute of Asia-Pacific Studies at the Chinese University of Hong Kong released the results of a local public opinion poll, entitled Public attitudes toward the harmonious society in Hong Kong.
The results showed that the most serious social contradictions were those between the rich and the poor and those between residents and conglomerates.
Surprisingly, a quarter of the respondents agreed with employing “radical means” to force the government to respond to the problems.
Behind Hong Kong’s brilliant economic figures lies a serious income gap.
Despite Hong Kong’s per capita GDP exceeding US$30,000, an analysis by the Hong Kong Council of Social Service last year showed that the poverty rate was approximately 17.9 percent and that 1.236 million people in poor households with low incomes live below the poverty line.
The latest statistics show that Hong Kong’s Gini coefficient — a measure of wealth distribution where 0 describes perfect equality and 1 describes perfect inequality — has reached 0.533, the widest income gap among all developed economies.
Looking at Taiwan, Chiu Hei-yuan (瞿海源), an Academia Sinica research fellow, says that if Taiwan does not handle its cross-strait and industrial policies cautiously, the income gap is likely to be even worse than that in the next two or three years.
An ECFA is essentially the same as the Closer Economic Partnership Arrangement (CEPA) China signed with Hong Kong, as they are both free-trade agreements with “Chinese characteristics.”
That also means the approach to informing the WTO is handled with “Chinese characteristics” — that is, Taiwan’s leaders lean toward China. Putting aside any sovereignty concerns, an ECFA will mean increased social contradictions as the rich get richer the poor get poorer.
The director of China’s Taiwan Affairs Office, Wang Yi (王毅), said during an interview on March 30 that the signing of an ECFA was first proposed by Taiwan.
The process is the same as with the CEPA. With Taiwan’s initial request and China’s active cooperation, the Chinese Nationalist Party (KMT) and the Chinese Communist Party hope to duplicate the “successful experience” of the CEPA in Taiwan.
They also hope to boost Taiwan’s economy and Ma’s support ratings through a proposed ECFA, which is said to be even more preferential than the CEPA.
The vision the government promotes by proposing an ECFA is a mirage.
It will duplicate Hong Kong’s social problems by increasing the polarization between rich and poor and this will surely lead to tragedy as the ranks of the poor keep growing.
Hong Chi-chang is a former chairman of the Straits Exchange Foundation.
TRANSLATED BY EDDY CHANG
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