An increasing number of business owners are demanding that the government allow the New Taiwan dollar to depreciate to shore up the competitiveness of the nation’s export industry, but every time they raise the issue, they are accused of wanting to use scooter drivers’ gasoline money to subsidize the export industry.
This attitude echoes the statements of former Japanese vice-minister of finance for international affairs Eisuke “Mr Yen” Sakakibara that “a strong yen is good for the country” and that “depreciation increases the burden on people traveling abroad.”
Has a strong yen really been good for Japan? Japan’s 23-year-long experiment says it all.
Mr Yen’s argument is similar to Karl Marx’s views. Marx’s theory of exploitation rejected the contributions of business owners, positing them as exploiting the working class only.
Yet, after ridding themselves of all the business owners, communist economies still did not improve the public’s income and welfare.
On the contrary, the result was that everyone was equally poor.
Following the same line of reasoning, a strong yen meant that Japanese businesses died or were on the brink of dying.
While scooter owners enjoyed cheaper gasoline and people traveling abroad enjoyed lower travel expenses, salaries in Japan stagnated: The average salary in the manufacturing industry fell from ¥326,000 (US$3,458) per month in 2000 to ¥323,000 in 2011.
In short, everyone was equally poor.
Compare this to South Korea, whose currency depreciated by 16 percent from an annual average of 951 won to the US dollar in 1997 to an annual average of 1,108 won to the US dollar in 2011.
At the same time, average salaries in the manufacturing industry increased by 129 percent, from an average 1.32 million won in 1997 to an average 3.03 million won in 2011.
The currency depreciated and gasoline prices increased; however, salaries more than doubled.
Is it scooter drivers that will save the export industry or is it exporters that will save the scooter drivers?
In discussions about the exchange rate’s influence on the economy, it is important never to let the short-term view decide, because the process from depreciation to increased business profits, and from using these new profits to increasing investments, which in turn leads to increased employment and higher salaries, will take between one and three years.
It was as early as 2011, three years after the financial crisis in 2008, that the South Korean company Samsung managed to deal a blow to Taiwan’s DRAM industry.
In other words, if the South Korean central bank had not devalued the currency to save the country’s export industry, Samsung would not be what it is today, nor would its workers be paid twice that of Taiwanese workers.
Currency devaluation is of course no panacea, and a country’s export competitiveness cannot be improved on devaluation alone.
The crucial point is whether the government is capable of following up on a devaluation by seeing to it that the increased profits are reinvested — in Taiwan rather than in China — and used to improve equipment and strengthen research and development expenditure and, in the end, also achieve the goal of raising workers’ salaries.
If all the government knows is to deregulate, relax controls and then deregulate some more, the question is: Do we really need a government?
Huang Tien-lin is a former presidential adviser.
Translated by Perry Svensson
Could Asia be on the verge of a new wave of nuclear proliferation? A look back at the early history of the North Atlantic Treaty Organization (NATO), which recently celebrated its 75th anniversary, illuminates some reasons for concern in the Indo-Pacific today. US Secretary of Defense Lloyd Austin recently described NATO as “the most powerful and successful alliance in history,” but the organization’s early years were not without challenges. At its inception, the signing of the North Atlantic Treaty marked a sea change in American strategic thinking. The United States had been intent on withdrawing from Europe in the years following
My wife and I spent the week in the interior of Taiwan where Shuyuan spent her childhood. In that town there is a street that functions as an open farmer’s market. Walk along that street, as Shuyuan did yesterday, and it is next to impossible to come home empty-handed. Some mangoes that looked vaguely like others we had seen around here ended up on our table. Shuyuan told how she had bought them from a little old farmer woman from the countryside who said the mangoes were from a very old tree she had on her property. The big surprise
The issue of China’s overcapacity has drawn greater global attention recently, with US Secretary of the Treasury Janet Yellen urging Beijing to address its excess production in key industries during her visit to China last week. Meanwhile in Brussels, European Commission President Ursula von der Leyen last week said that Europe must have a tough talk with China on its perceived overcapacity and unfair trade practices. The remarks by Yellen and Von der Leyen come as China’s economy is undergoing a painful transition. Beijing is trying to steer the world’s second-largest economy out of a COVID-19 slump, the property crisis and
Ursula K. le Guin in The Ones Who Walked Away from Omelas proposed a thought experiment of a utopian city whose existence depended on one child held captive in a dungeon. When taken to extremes, Le Guin suggests, utilitarian logic violates some of our deepest moral intuitions. Even the greatest social goods — peace, harmony and prosperity — are not worth the sacrifice of an innocent person. Former president Chen Shui-bian (陳水扁), since leaving office, has lived an odyssey that has brought him to lows like Le Guin’s dungeon. From late 2008 to 2015 he was imprisoned, much of this