Former health minister Yaung Chih-liang (楊志良) has said that the Labor Insurance Fund’s (LIF) NT$7 trillion (US$239 billion) deficit is the result of the deceitful activities of a fraud ring organized by two political parties, their legislators and big business. He may have used strong words, but certainly not too strong.
Twenty years ago, former legislator Ju Gao-jeng (朱高正) said that politics is “an advanced game of deceit.”
At the time, Taiwanese democratization was just getting underway and with every star politician still having a shining halo around their head, Ju’s statement was sneered at by everyone. However, today everyone is terrified by the impending bankruptcy of the LIF and no one dares challenge Yaung’s assertion.
Political deceit permeates every corner of Taiwan. The Labor Insurance Fund, the Civil Servant Pension Fund and the Health Insurance Fund are all about to go bankrupt, all for the same reason.
Very few people disagree with the view that President Ma Ying-jeou (馬英九) won the presidency thanks to two great lies: his “6-3-3” election pledge and the so-called “1992 consensus,” which he claimed were the only ways to solve Taiwan’s economic problems.
Both these lies are built on a common “theoretical” foundation: Trade liberalization is required to break through the Democratic Progressive Party’s (DPP) isolation of Taiwan and create prosperity by hitching Taiwan’s economy to China’s.
This may seem to make sense, but the economic strategy of South Korea over the past decade — which after having previously fallen behind Taiwan has now overtaken it — has been to direct all its efforts toward signing free-trade agreements (FTAs) with the US and the EU.
The general principle of this approach is that trade liberalization, while having a strong negative impact on weaker domestic industries due to a rise in imports, will cause stronger domestic industries to surge forward thanks to growing exports. This leads to a positive development and elimination process among businesses that creates the best possible overall effect.
Those sacrificed in the process will be cared for through a set of welfare policies. These were the general expectations when Taiwan joined the WTO, and huge amounts were set aside as subsidies for weaker companies.
However, South Korea was not satisfied with WTO membership and went one step further by signing FTAs with other countries.
Seeing South Korea’s strategy, Ma wanted to emulate it.
In choosing this strategy, South Korea was well aware that liberalization, in addition to offering great benefits, also incurs great costs. For example, they allowed the import of US beef despite strong local protests. However, decisiveness and daring is something that the Ma administration lacks.
During the first round of talks regarding the Economic Cooperation Framework Agreement’s early harvest list, the government did not dare push for the inclusion of panels, upstream petroleum products, advanced precision machinery, finished cars and other products where Taiwan enjoyed an advantage.
When it came to weaker industries, the government was unwilling to allocate a budget to help them through the transitional period as it did when Taiwan joined the WTO and instead only asked China to forego some of its benefits to help protect these industries.