The Liberty Times Editorial: Economic cost of policy missteps

Thu, Apr 25, 2013 - Page 8

“Bleak” is the latest buzz word used to describe the nation’s economy. It began with Premier Jiang Yi-huah (江宜樺), who said a few days ago that the nation was limited by its industry’s inability to upgrade and transform, and that this has resulted in stagnating salaries and an unemployment rate hovering at about 4 percent.

Jiang added that the nation has been stuck in a rut for some time and that if he were to describe its economic development in a single word, that word would be “bleak.”

“Bleak” is the perfect description of the state of the economy.

President Ma Ying-jeou (馬英九) has often said that he “feels good” about the economy as it is and, backed by a clique of sycophant underlings like former Council for Economic Planning and Development minister Yiin Chii-ming (尹啟銘) and his ilk, does not feel the need to reflect.

By comparison, Jiang’s statement about the bleak economy — while not a particularly brilliant observation since he only said what most people were already thinking — was at least an acknowledgement of Ma’s failure, which is not very common in Ma’s government.

However, if Jiang is unable to propose concrete policies and actions to alleviate the situation and does nothing but complain, then all this talk about “bleakness” is nothing but a new rhetorical trick. It will not be able to halt the economy’s decline and end the bleakness.

The premier is the most powerful administrative official in the nation and not just a political commentator or pundit. He must come up with solutions that generate results instead of chiming in with public criticism in an attempt to use self-mockery to divert public attention.

Objectively speaking, the stagnating economy, falling salaries and high unemployment cannot be entirely blamed on the Ma administration. However, during his election campaign, Ma promised he would provide solutions, saying “I am ready” and painting a pie in the sky with his i-Taiwan 12 construction projects and “6-3-3” economic platforms. He appeared to have a constructive blueprint for their implementation and managed to trick people into voting for him.

After five years in power, Ma has backtracked on one promise after another and his political achievements are meager at best. His misconceived policies have sped up the nation’s decline, let down the voters who supported him and, in the process, dragged down those who did not vote for him as well. Under Ma, there are no winners, only different degrees of losers.

The most frightening thing is not his ineptitude, but his failure to understand and admit it. This is why he never acknowledges a mistake, feels sorry for himself, believes that the bad economy is due to international factors and even complained that the public does not understand the difficulties of carrying out reforms.

With this kind of attitude, the government will become increasingly headstrong and self-willed. Regardless of any mistakes it makes, it will not budge an inch and in its arrogance and conceit, it will think that standing in direct opposition to the public is the right and courageous thing to do. Having the government and the public on a collision course can only lead to tragedy.

The following two examples highlight the negative consequences of the government standing in direct opposition to the public. First is the government’s one-sided pro-China policies, which are suffocating the Taiwanese economy. Second is its proclaimed focus on fairness and justice, which is suppressing economic growth, as exemplified by the capital gains tax on securities transactions.

The pro-China stance has caused an outflow of Taiwanese capital, companies, human resources and technology to China, leaving businesses in Taiwan unable to upgrade and transform, instead sticking to the contract manufacturing model, salaries falling near the levels of Chinese workers and employment plunging.

Despite this, Ma continues to view China as the solution to the nation’s problems and pins all his hopes for an economic revival on the Chinese market. This style of governance is like speeding up when heading for a collision and refusing to change course.

The Ma administration is filled with academics who like to talk about theory and ethics, while ignoring the real world in their pursuit of fame and glory. The capital gains tax is an excellent example of this attitude. While the revival of this tax may allow Ma to go down in history for tax fairness, it has weighed heavily on the nation’s already weak stock market. It has scared off retail and institutional investors, and caused trading volume to drop sharply.

Last year, revenue from the securities transaction tax dropped by between NT$40 billion and NT$50 billion (US$1.34 billion and US$1.68 billion). With the stock market faltering, it has yet to reach the 8,500-point level where the capital gains tax will kick in, which means that it might not bring in a single New Taiwan dollar in government revenue this year.

The Control Yuan has reprimanded the Ministry of Finance for the tax, saying the policy has caused the TAIEX to lose NT$2 trillion in value, public wealth to shrink sharply and domestic capital to flow out of the country. Last year, the net outflow of capital reached a record-high US$45.3 billion, leading a Control Yuan member to say: “Erroneous policies are even more frightening than corruption.”

This is a typical example of how the government works against the public.

After decades of effort, Taiwan possesses solid economic fundamentals. Although the economy looks bleak, it is not too late to take action. Unfortunately, the government is not even aware that a crisis is looming. It remains smitten with itself and does as it pleases, which repeatedly puts it at odds with the public. It even takes pride in its daring to do so, and this is creating disaster and causing the economy to collapse.

Protected by the high threshold for a presidential recall, the man who sits asleep at the wheel is likely to remain there for another three-and-a-half years, and that is tragedy for Taiwan and its people.

Translated by Perry Svensson