Mon, Aug 15, 2011 - Page 8 News List

Taiwan must find political space

By Ian Inkster

Where is the global gridlock? In Chinese politics or in US society? What is most essential right now, a major political change toward liberalism within China led by the rising middle class, or a social revolution led by the public sector in the US?

While people in the US continue to ignore China whenever they can, they also carp continuously about the inability of weak governance in Europe to prevent anything but the hardest of immediate landings across the Atlantic, while providing a misleading chorus that drowns out the major threnody of the US’ own economic mismanagement and hesitancy of governance.

In contrast, Chinese economic growth at the time of writing leads the world and unlike rapid growth in other developing countries, such as those of its fellow BRIC nations (Brazil, Russia, India and China) or more developed economies such as France, Britain or even Germany, remains overwhelmingly a result of very fast growth in real industrial production.

At present, the impact of US debt dominates the global scene. If we agree that the current federal debt of US$10 trillion held by the US public accounts for a mere slice of a much larger structural problem that has generated the entire fiscal gap, amounting perhaps to 20 times that figure, then it appears that the long-term future of the international political economy hangs on political decisions (the debt ceiling) and public sector expenditure and revenue structure (the total liabilities of the entire economy) within the US system. If the worker-beneficiary transition is the real driver of the US economy, then it might be argued that political economy in East Asia over the long-term is being determined by social policy (or lack of it) in the US.

Yet the more common assumption among Western commentators, economists and historians is that the political machinations of communism in China is the limiting factor in the global political economy, as in the major contribution of Will Hutton in 2007, The Writing on the Wall. In that work Hutton called for a “Chinese enlightenment,” a sweeping combination of cultural and political change in China that must be supported in the West for the good of all.

Clearly, commentators such as Hutton were somewhat premature in their forecast of the imminent collapse of the Chinese economy as the principal cause of general global economic downturn. As we have seen with the prolonged financial recession and as we now see with the US debt crisis, the danger comes from the West not from the East.

For Taiwanese, perhaps an even more interesting feature is the absence of debate on defense expenditure. Whether Republicans who advocate spending cuts arguing with Democrats who support tax increases, or those who argue with neo--Keynesian advocates about the more risky tactic of expanding public expenditure as a means of creating growth and employment and thus the size of the tax base, few influential Americans are seriously advocating cuts in defense expenditure. Many more are considering innovative ways of saving or diffusing expenditures on social security, Medicare and other health or welfare provisions. Most of the US and European journals and magazines are not indexing or listing China or defense as significant issues.

In many ways this is good news for Taiwan. At present, a low profile might be best. Is there any evidence of severe downward pressure on US defense spending as a result of the crisis? For the next financial year, total direct defense spending in the US is budgeted at US$881 billion and US President Barack Obama’s economic stimulus plans have not so far threatened military expenditure. In fact, federal spending is even greater than this if we take into full account the continual servicing of past military spending.

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