Fri, Dec 19, 2014 - Page 8 News List

The Liberty Times Editorial: KMT loss shows need for reforms

After the Chinese Nationalist Party’s (KMT) defeat in last month’s elections and the Cabinet reshuffle that was not a reshuffle, the KMT chairmanship election and even the preparations for the 2016 presidential and legislative elections continue to be mired in old-power thinking. At the same time, President Ma Ying-jeou’s (馬英九) disapproval rating has risen to 78 percent, removing any legitimacy his continued rule may have had, and both the state apparatus and the ruling party seem to have come to a crashing halt.

Ma has more than a year and a half left of his term in office, and as the government is unable to operate; here are two suggestions for reform, in the hope that the ruling and opposition parties will be able to shelve old disputes and cooperate for the sake of restarting Taiwan’s development.

First, there is the reform of the retirement pension system.

The KMT suffered a loss because dissatisfied voters wanted to teach the party a lesson, but what signal does that send? It is probably a protest against generational and class inequalities and unfair distribution. A main public complaint has long been the huge difference in retirement benefits for military personnel, civil servants and public-school teachers on the one hand, and the general public on the other. The high replacement rate and the 18 percent preferential interest rate on savings enjoyed by the former groups are far higher than what other people receive, and this creates class inequalities. In addition, it is a huge expenditure that is all but certain to break government finances and leave the debt to future generations. Current generations are living off coming generations and their future, and this creates inter-generational inequalities.

This is the reason a thorough reform of the retirement pension system is required, so that military personnel, civil servants, public-school teachers and other groups receive equal treatment, and so that a system of sound, reasonable and sustainable retirement guarantees is established. This is really the only way to eliminate inequality and conflict between generations and between classes.

The second reform is the stabilization of consumer prices and raising of incomes.

Over the past two decades, globalization has picked up speed and the global economy has taken off, but due to the international division of labor, the massive labor force in less-developed countries like China and India and countries in eastern Europe and Southeast Asia has not only caused a shift in the global economy, but led to a universal expansion of income inequality and a disappearing middle class.

In addition, the free international movement of capital is causing too much capital to be invested in the pursuit of short-term profit. Instead of being invested in the real economy, this capital is used for capital market and commodities speculation, which causes consumer and housing prices to rise and has a heavy impact on people’s bottom line. As an important part of the international economic system, Taiwan cannot escape the global economic development framework, and so falling salaries and an expanding wealth gap have become universal in Taiwan too.

However, Taiwan is also unfortunate in that it is geographically close to China. Because of a common language, when Taiwanese companies and individuals experience bottlenecks in their development, China offers an easy way out. Companies are unwilling to spend time and money on transformation or research and development, and instead move capital and factories to China. This creates a situation in which most Taiwanese foreign investment finds its way there and more than 50 percent of all export orders are manufactured outside of Taiwan. This strips Taiwanese industry of assets, drives down salaries and raises unemployment. Adding rising consumer and housing prices to this is a recipe for disaster as public suffering leaps off the charts.

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