Showing the upside of bumbling

By Frank Hsiao 蕭聖鐵  / 

Thu, Dec 20, 2012 - Page 8

Recently, British weekly The Economist published an article titled “Ma the bumbler.” The article, published on Nov. 17, set off a considerable media and political storm in Taiwan, partly due to mistranslation of the word “bumbler” as “stupid” by local media. It even prompted Representative to the UK Shen Lyu-shun (沈呂巡) to write a letter to the magazine to defend his boss one week later.

In the letter, Shen pointed out President Ma Ying-jeou’s (馬英九) (dubious) macroeconomic and diplomatic “achievements,” but apparently accepted that he was an “ineffectual bumbler” — as the author of the article aptly observed — in terms of microeconomic and domestic policies.

The results of those policies include huge increases in fuel and electricity prices, stagnating wages and salaries, and a financially troubled pension plan for civil servants. Shen provided several statistics to substantiate Ma’s little-known “achievements.” Here is a reality check of his assertions:

In his letter, Shen wrote that: “President Ma … has reached 18 agreements with mainland China.”

However, the agreements were not signed on a country-to-country basis, but rather between semi-governmental organizations. For many Taiwanese, “easing tension and promoting peace” across the Taiwan Strait would mean pushing the economy — and, eventually, their political system — under Chinese control, costing the nation its sovereignty. Because Taiwan is declining and China rising, it is not clear that peace in the Far East and the South China Sea could be maintained.

Furthermore, in the two years since the cross-strait agreements have come into force, no visible benefits can be seen domestically and, contrary to expectations, the Taiwanese economy has been declining, as observed by Chen Po-chi in Look magazine in an article published on Aug. 8 last year. The expected free-trade agreements with other countries have never been realized, though Taiwan’s neighbors have managed to secure such pacts.

Shen also wrote that: “Taiwan’s average economic growth rate between 2008 and 2011 was 3.4 percent.”

However, despite the promise of ushering in a “golden decade” for the Taiwanese economy that Ma made before the 2008 election, the economic growth rate was much lower than the 5.6 percent achieved under former president Chen Shui-bian (陳水扁) between 2004 and 2007.

Taiwan’s ranking on the World Competitiveness Index has been “bumbling” widely: From 2008 to this year, it has been 13, 23 (not 27 as indicated by Shen), 8, 6 and 7. While the ranking is still high, it has been consistently lower than Hong Kong (No. 1 last year and this year) and Singapore (No. 4 this year). Similarly, according to the CIA World Factbook, Taiwan’s exports last year reached US$325 billion, 18th in the world. Taiwan’s ranking is not only lower than that of South Korea (7), it is also lower than that of Hong Kong (10) and Singapore (14). Taiwan’s export competitiveness has clearly been deteriorating.

Shen also wrote to The Economist that: “According to your Economist Intelligence Unit, Taiwan’s GDP per person (PPP adjusted) in 2011 was US$41,385, well over that of Britain (US$35,725), Germany, France, Japan and South Korea.”

The assertion raised considerable interest and consternation among Taiwanese and non-Taiwanese, as if people had only just discovered that Taiwan’s living standards are as good as the world powers’. However, using just one source to make such a claim is unconvincing.

The Economist Intelligence Unit uses a special Big Mac Index to measure purchasing power parity (PPP) adjusted GDP. While the idea is innovative and pedagogically interesting, one should be aware that there are at least four other important sources for world rankings using this figure. These are the World Bank, the IMF, the CIA and the World Table of the University of Pennsylvania. The data for last year recently became available on Wikipedia and although Taiwan was ignored by the World Bank, it was included in the last three sources, which ranked it 20th, 29th and 28th, respectively.

Taiwan’s ranking is higher than South Korea’s (27, 40 and 36), but well below Singapore’s (3, 6 and 6) and Hong Kong’s (6, 11 and 16). Unlike the Economist Intelligence Unit, Germany was ranked slightly higher than Taiwan by the IMF, the CIA and the World Table (17, 27 and 23). However, the IMF and the CIA ranked France (24, 36), the UK (22, 34) and Japan (25, 37) lower than Taiwan, while the university ranked France, the UK, and Japan slightly higher than Taiwan (26, 21 and 27, compared with Taiwan’s 28).

These statistics reveal the following important points: Generally speaking, the estimation of GDP per capita in PPP differs with each organization. One cannot use the results of one organization to draw any solid conclusions. In addition, the nation’s high GDP per capita has not been shared by a majority of Taiwanese, contributing to Ma’s dismal approval rating of 13 percent.

Furthermore, much smaller economies in terms of population and area, like Singapore and Hong Kong, have overall competitiveness and GDP per capita much higher than that of Taiwan. Thus, Taiwan having a higher GDP per capita than say, the UK, does not prove that Ma is not a bumbler.

This being said, one can at least see that Taiwan is as competitive and wealthy as Britain, Germany, France, Japan and South Korea. This is an unexpected consequence of Shen’s international comparison: alerting Taiwanese, as well as non-Taiwanese, to the strength of the country’s economic status. Based on various macroeconomic indicators compiled by international organizations and institutes, Taiwan’s economic activities and performance in various arenas have been among the highest of the 200 or so countries and regions in the world.

However, Taiwan is not recognized as a sovereign country by most other nations, nor as what Shen calls in his letter the “Republic of China (Taiwan).” The term “Republic of China” is extremely confusing. It has caused many to confuse Taiwan with the People’s Republic of China, for example, the White House announcer when Chinese President Hu Jintao (胡錦濤) visited the White House in 2006.

Furthermore, when it comes to the records of Taiwan’s economic data or achievements, most foreign and international documents list Taiwan by bogus names like Taiwan, Province of China (false); Taiwan, China (ambiguous); or Taipei, China (funny); or simply do not list it at all.

If Ma and Shen are really concerned with the face of the presidency and growing isolation of a great and independent nation, should they not insist with confidence on rectifying the proper use of its name by calling Taiwan “Taiwan?” Or even better, should they not push for Taiwan to be granted full membership in the UN?

Frank Hsiao is professor emeritus of economics at the University of Colorado.