Thu, Mar 12, 2009 - Page 8

Ma’s economics discredited

On May 20, President Ma Ying-jeou (馬英九) pledged that “under the principle of ‘no unification, no independence and no use of force’ … and under the framework of the ROC [Republic of China] Constitution, we will maintain the ‘status quo’ in the Taiwan Strait.”

A mere 10 months later, Ma said that “it is no longer possible to … contend that there is one country on either side of the Taiwan Strait.”

Ma seems to have unambiguously broken another of his post-election promises — that of no unification. He is doing so by subsuming Taiwan into the ROC and resurrecting the ROC’s claim over China.

This should not come as a surprise. In the same inaugural speech, Ma signaled his intent to concede sovereignty when he stated that “in resolving cross-strait issues, what matters is not sovereignty but core values and way of life.” Relegating Taiwan to a “region” and Taiwanese to a “sub-ethnic group” are just two of the Chinese Nationalist Party’s (KMT) strategies to advance unification by stealth.

But the most important battle so far has been building an economic rationale for integration. Despite a campaign to convince the public of the benefits of doing so, Ma’s key arguments for “closer” economic integration with China are being rebutted by businesses and analysts who do not see that an agreement is absolutely necessary, or even beneficial.

There might be two reasons for this. First, the world is experiencing a financial crisis that has shaken many people’s belief in the validity of free-market, monetarist policies.

The Chicago School of economics has been exposed as fundamentally unworkable. Connected to this is the concern many Taiwanese have about Ma’s call to “open up and deregulate the economy to unleash the vitality of the private sector.” WTO analysis shows that seeking foreign direct investment (FDI) to stimulate growth may not bring the dividends promised. Its Web site says that global “FDI rose by 13 times in the 1990s compared with the 1970s, but GDP growth was 50% lower ... [because] foreign investment has concentrated on purchasing assets rather than creating new sources of production (from 1995-98, transfers of property accounted for nearly two-thirds of total FDI flows).”

It says that “current trade liberalization rules and policies have led to increased poverty and inequality, and have eroded democratic principles, with a disproportionately large negative effect on the poorest countries.” Furthermore, “there is no causal link between foreign investment and poverty reduction. 80% of FDI is in the form of mergers and acquisitions, little in the form of productive investment that creates jobs and exports.”

This runs against everything the KMT is claiming. The WTO also found that “there is also no causal link between more foreign direct investment and growth.”

The coup de grace for neo-liberal voodoo economics and Ma’s “China or bust” mentality comes with the conclusion that “a recent review of the evidence of links between trade liberalization and economic growth concluded there is no clear causality.”

Perhaps Ma is failing to persuade the public because his ideas simply don’t add up.