In addressing these crises of democracy and capitalism, Taiwan must embark on structural reform, steering itself toward a social democracy. This social democratic reform will help the country escape a preoccupation with competition that exploits the natural environment and workers, and change the political and economic system to be more geared toward workers and their values.
In a social democracy, the government guarantees citizens have a basic income. Likewise, basic social services should be directly provided by the government and not left to the whims of the market. The thinking behind this is that the commodity supply and demand for government-controlled basic social services can effectively dictate, within a certain scope, the price at which those services are provided in the private-market sector.
This means that over half of the overall commodity supply and demand of basic social services can be kept within a relatively stable price structure, so that households on a median or lower income can be spared having to spend a considerable amount of that income on essential services. Meanwhile, the private-market sector can cater to those with higher powers of consumption.
Based upon this premise, it is recommended that the majority of basic social services are provided directly by the government and that current private welfare services be re-nationalized and administered directly by the state, with the costs absorbed by the government.
These costs should be paid for by increasing the top income tax bracket rate to 60 percent and levying a capital gains tax on income from securities transactions and increments in land value and a windfall tax.
In terms of actual policy, the proportion of the government’s stake in each sector of public service should be increased. Essentially, by monopolizing the public-services market, the government will be able to determine the price level at which the market settles, guaranteeing conditions for workers. Specific sectors include education, child and elderly care, and housing.
Taiwan must embrace globalization and industrial improvement. However there is a proviso: The process of increasing industrial production capacity will require a quality workforce if the economy is to cope with international industrial competition. The drivers of the so-called “knowledge economy” are financial markets, companies and the workforce in the IT sector. However, increasing production capacity requires innovation in manufacturing, processes and organization. For innovation to be possible, people need fundamental guarantees of income and basic social services.
A welfare state, founded upon public services, will provide Taiwan with the fundamental guarantees it needs to encourage innovation. Of course, globalization and innovation are necessary for the nation to compete in the world, but the welfare state will serve as a safety net for the country in this uncertain environment. All are necessary, none can be forgone.
Social democracy is a major requirement for the consolidation of Taiwan’s democracy in the second wave of the nation’s democratic reforms. At the same time, it will also bring the nation in line with the rest of the world going forward.