The Taipei Times’ recent overall coverage of economic developments displays an attempt at even-handedness that belies a misunderstanding of the nature of what is happening.
On the one hand, your readers are told that Taiwan relies excessively on exports to, and other investments in, China and that there is in contrast a pressing need to “stimulate” domestic demand.
On the other hand, they are told that further depreciation of the NT dollar is necessary to boost Taiwan’s export economy.
You do not have a coherent stance on economic affairs and consequently are of no help to your readers.
Taiwan’s export economy will continue to contract for a long time yet. That is because the US Congress’ “stimulus bill” will fundamentally alter the basic political and economic premises of that country over the coming years. The consequences of that alteration, which is now in progress, will eventually be catastrophic for world trade.
In that context, a chief danger to the Taiwanese people is the risk of the government furthering an inflationary monetary policy in the coming years, not merely to give aid to the export economy and save jobs that cannot be saved, but to pay for massive increases in domestic security expansion.
What better way to thwart such a potentiality than by a shift to a stable monetary system with the abolition of the central bank — such as would be required either under a system of free banking or a revival of the now forgotten gold standard?
Contrary to popular opinion, the technical difficulties of effecting such a transition are far from insurmountable — indeed, they are not overly complicated.
The chief difficulty lies with legal and political barriers, not the least of which is the assured opposition of the government together with a great many exporting industries.
Yet, if enough public pressure were brought to bear on these interests, it may be possible to force them to accept a change in the monetary system. It is therefore high time for a complete change in your overall editorial policy.
A rude awakening
The Directorate General of Budget, Accounting and Statistics has released its latest “shocking” prediction: Taiwan’s GDP will experience an historic decline of 2.97 percent this year. The last quarter alone witnessed a drop of 8.36 percent.
This newly released figure serves as a rude awakening for President Ma Ying-jeou’s (馬英九) government. After all, it optimistically projected 2.5 percent economic growth last month.
In response, many Cabinet members, including Premier Liu Chao-shiuan (劉兆玄), have stepped up efforts to ensure that the public retains confidence in the government.
But foreign investors and commentators, including the Hong Kong-based CLSA and The Economist, share a pessimistic view on the Taiwanese economy.
CLSA predicted that Taiwan is on track for 11 percent GDP contraction. Although Council for Economic Planning and Development Vice Chairman Hu Chung-ying (胡仲英) rushed to dismiss the forecast and labeled it as “exaggerated,” Ma’s administration should re-think its posture.
This month’s edition of The Economist noted that Taiwan’s output dropped by 32 percent in the last year and exports declined by 44 percent in the year to January.
Recent economic developments in Taiwan have proved to be the antithesis of what Ma envisaged and promised in his prominent “6-3-3” campaign slogan. Instead of realizing this vision, the Taiwanese economy has suffered frightful damage, most notably the plummeting of the Taipei Stock Exchange.
In an attempt to reverse the trend, the government implemented a voucher program, offering NT$3,600 to each person. The vouchers, which scored a modest result in Japan in the 1990s, attracted headlines in Taiwan for a few days before losing their magic touch.
Ma is facing an adverse international economic environment. He shares a similar fate with South Korean President Lee Myung-bak, who has been unable to deliver on his campaign promises. But Lee has reshuffled his Cabinet and publicly apologized twice. In contrast, Ma briefly apologized for Taiwan’s poor economic performance in a TV interview.
When a democratically elected president talks of lofty goals, he should methodically outline the steps that will translate them into reality. When facing setbacks, a responsible leader admits to mistakes and adjusts policy in accordance with the national interest.
It’s worse than they think
Taiwan’s leadership misunderstands the world financial crisis. This is no ordinary recession because the bad financial instruments that originated in the US (and then sold around the world) amount to US$100 trillion, not the less than US$10 trillion in the US housing sector that the derivatives were based on.
The Taiwanese economy is inordinately dependent on exports, and those bad investments will substantially curb other country’s imports. Taiwanese banks are holding a tremendous number of bad loans.
In Japan, the bursting of the housing bubble meant that a similar problem with bad assets stalled economic activity for a decade.
In other words, in addition to continued steep declines in exports, the Taiwanese banking system is in no shape to fund an economic revival.
Of course, like almost all governments, Taiwan’s leaders are going to continue to bury their heads in the sand rather than honestly admit to the true scope of the problem.
Recently, it was predicted that Taiwanese GDP would drop more than 10 percent this year, but rebound in the second half of the year.
With that amount of bad international debt and a badly damaged banking sector, plus continued weakness in demand for exports, you will be lucky to have only one lost decade like Japan in the 1990s.
On behalf of the US, I apologize.
Saint Louis Park, Minnesota