Pursue social democratic reform

By Lue Jen-der 呂建德  / 

Sun, Mar 09, 2014 - Page 8

The major achievement of Taiwan’s democracy since it was first introduced in 1987 was the establishment of a free, democratic system of government. However, strangely enough, in the 20 or so years since democratization, social and economic changes have not proceeded at the same pace.

While the economic growth rate and salary levels have increased, wealth disparity has worsened. The unemployment rate has risen steadily since it broke 3 percent in 1996, even going over 5 percent during financial crises in 2001 and again in 2008.

While democratizing, Taiwan has had to deal with major external changes resulting from globalized capitalism, with the gradual emergence of globalized and neoliberal hegemonies and internal structural changes in the party-state system, with shifts in the relations between politics and business.

These external and internal structural changes have produced several social consequences. These include the gradual — and perhaps irreversible — evisceration of the power of unions; consistent lowering of taxes, especially of capital gains and land taxes; the privatization of state-owned enterprises and basic social services such as hospitals, education, childcare and care for seniors, and housing; and the persistent widening of the gap between the rich and the poor.

Democracy offers people more than just a guarantee of the right to participate in the political process: It should also assure them of the right to basic subsistence. The fruits of economic growth should be distributed to the entire populace along with assurances of access to basic social services, guaranteeing the right to self-actualization and to the fulfillment of personal life goals.

However, measuring the nation’s achievement of these socioeconomic goals during democratization uncovers disappointing progress. Democratization seems to have gradually expended its ability to serve as a utopia worth attaining and has started to show some serious cracks in the paint.

Over the course of the past two decades or so of democratization, the nation has seriously strayed from moving toward a social democracy, from providing guarantees for the middle and working classes. Rather, an over-emphasis on developing a liberal democracy has resulted in the emergence of a purely nominal electoral democracy that benefits only the major political parties and big business, and in which a minority, as well as certain groups, has come to monopolize the channels by which the majority should be able to express their opinions and determine policy.

This means that income and wealth have been concentrated among certain groups and industries, while the expanding middle and working classes shoulder the country’s tax burden and serve as the workforce.

Furthermore, the biggest problems created by the neoliberal agenda — with its emphasis on supply-side economics that has held sway since the 1990s — have been the increased risk of global structural unemployment and a fall in the purchasing power, in real terms, of the working class. The emphasis on lowering production costs has continuously suppressed workers’ wages, but at the same time, the workers are the consumers in the market. Falling wages become problematic in this regard, as it leads to surplus production.

In addition, the privatization of public services places a serious burden on household spending for the expanding working and middle classes. In Taiwan, this particularly affects the skyrocketing costs for education, housing and child and elderly care, which are especially troubling for low-income households.

In addressing these crises of democracy and capitalism, Taiwan must embark on structural reform, steering itself toward a social democracy. This social democratic reform will help the country escape a preoccupation with competition that exploits the natural environment and workers, and change the political and economic system to be more geared toward workers and their values.

In a social democracy, the government guarantees citizens have a basic income. Likewise, basic social services should be directly provided by the government and not left to the whims of the market. The thinking behind this is that the commodity supply and demand for government-controlled basic social services can effectively dictate, within a certain scope, the price at which those services are provided in the private-market sector.

This means that over half of the overall commodity supply and demand of basic social services can be kept within a relatively stable price structure, so that households on a median or lower income can be spared having to spend a considerable amount of that income on essential services. Meanwhile, the private-market sector can cater to those with higher powers of consumption.

Based upon this premise, it is recommended that the majority of basic social services are provided directly by the government and that current private welfare services be re-nationalized and administered directly by the state, with the costs absorbed by the government.

These costs should be paid for by increasing the top income tax bracket rate to 60 percent and levying a capital gains tax on income from securities transactions and increments in land value and a windfall tax.

In terms of actual policy, the proportion of the government’s stake in each sector of public service should be increased. Essentially, by monopolizing the public-services market, the government will be able to determine the price level at which the market settles, guaranteeing conditions for workers. Specific sectors include education, child and elderly care, and housing.

Taiwan must embrace globalization and industrial improvement. However there is a proviso: The process of increasing industrial production capacity will require a quality workforce if the economy is to cope with international industrial competition. The drivers of the so-called “knowledge economy” are financial markets, companies and the workforce in the IT sector. However, increasing production capacity requires innovation in manufacturing, processes and organization. For innovation to be possible, people need fundamental guarantees of income and basic social services.

A welfare state, founded upon public services, will provide Taiwan with the fundamental guarantees it needs to encourage innovation. Of course, globalization and innovation are necessary for the nation to compete in the world, but the welfare state will serve as a safety net for the country in this uncertain environment. All are necessary, none can be forgone.

Social democracy is a major requirement for the consolidation of Taiwan’s democracy in the second wave of the nation’s democratic reforms. At the same time, it will also bring the nation in line with the rest of the world going forward.

Lue Jen-der is an associate professor in National Chung Cheng University’s Department of Social Welfare.

Translated by Paul Cooper