On March 12, National Development Council Minister Kuan Chung-ming (管中閔) gave a report to the Chinese Nationalist Party’s (KMT) weekly Central Standing Committee meeting, saying that although a low inflation rate could increase real purchasing power, it would also increase the unemployment rate. It seems that he made the remarks in a bid to explain the recent sharp price hikes in the prices of daily necessities.
President Ma Ying-jeou (馬英九), who doubles as KMT chairman, agreed with Kuan’s remarks, which has caused a lot of discussion and criticism among the public. Some even joked that the Nobel Prizes in economics should be awarded to Ma and Kuan for their “contributions” to the field of economics.
It was not very surprising to hear Ma and Kuan’s comments, because although the causal relationship between low commodity prices and rising unemployment is not absolute and could even be wrong, it still seems as if it were possible to use a traditional Phillips curve to describe a negative relationship between commodity prices and unemployment.
The current situation with high commodity prices accompanied by high unemployment is closer to stagflation, which cannot be described using a Phillips curve.
However, the government says that commodity prices are at a reasonable level, and that the jobless rate has declined constantly since 2009, which means that stagflation is not a problem. Since that is the case and everything then is alright, one can only wonder why Ma and Kuan made these statements with their absurdly mistaken cause-and-effect logic. It is no wonder they were mocked.
However, the public anger over this issue is quite confusing. Remember that Ma was elected president in a landslide victory in 2008, despite proposing the absurd policy of expanding domestic demand in order to fight inflation. By comparison, his recent statements really are not a very big deal.
How could the expansion of domestic demand possibly reduce inflation? In a normal situation, the expansion of domestic demand will only result in rising inflation. Anyone with a basic knowledge of economics should be stunned by such a claim, and I even thought that it was a campaign-time slip of the tongue or a joke.
Therefore, it was very surprising, when, after Ma came to power, the Council for Economic Planning and Development endorsed this policy, saying that in response to both the surging international oil prices and the US sub-prime mortgage crisis, which are causing the downturn of the global economy, the government plans to expand domestic demand by increasing local construction in order to relieve the impact of commodity price hikes and stimulate economic growth. The Ma administration’s level of economic expertise was thoroughly disappointing. Taiwan’s current economic predicament has showed that my concern back then was justified.
As the Chinese saying goes: “Three feet of ice is not the result of one cold day.” Judging from Ma’s and Kuan’s economic knowledge, there is no reason to be surprised over Taiwan’s economic situation.
Lin Hsuan-chu is an associate professor at National Cheng Kung University’s Department of Accountancy.
Translated by Eddy Chang
During the US-India Strategic Partnership Forum’s third leadership summit on Aug. 31, US Deputy Secretary of State Stephen Biegun said that the US wants to partner with the other members of the Quadrilaterial Security Dialogue — Australia, India and Japan — to establish an organization similar to NATO, to “respond to ... any potential challenge from China.” He said that the US’ purpose is to work with these nations and other countries in the Indo-Pacific region to “create a critical mass around the shared values and interest of those parties,” and possibly attract more countries to establish an alliance comparable to
On August 24, 2020, the US Secretary of Defense, Mark Esper, made an important statement: “The Pentagon is Prepared for China.” Going forward, how might the Department of Defense team up with Taiwan to make itself even more prepared? No American wants to deter the next war by a paper-thin margin, and no one appreciates the value of strategic overmatch more than the war planners at the Pentagon. When the stakes are this high, you can bet they want to be super ready. In recent months, we have witnessed a veritable flood of high-level statements from US government leaders on
China has long sought shortcuts to developing semiconductor technologies and local supply chains by poaching engineers and experts from Taiwan and other nations. It is also suspected of stealing trade secrets from Taiwanese and US firms to fulfill its ambition of becoming a major player in the global semiconductor industry in the next decade. However, it takes more than just money and talent to build a semiconductor supply chain like the one which Taiwan and the US started to cultivate more than 30 years ago. Amid rising trade and technology tensions between the world’s two biggest economies, Beijing has become
With a new White House document in May — the “Strategic Approach to the People’s Republic of China” — the administration of US President Donald Trump has firmly set its hyper-competitive line to tackle geoeconomic and geostrategic rivalry, followed by several reinforcing speeches by Trump and other Cabinet-level officials. By identifying China as a near-equal rival, the strategy resonates well with the bipartisan consensus on China in today’s severely divided US. In the face of China’s rapidly growing aggression, the move is long overdue, yet relevant for the maintenance of the international “status quo.” The strategy seems to herald a new