Wed, Sep 27, 2000 page8

• Welfare is compatible with growth

  • By Ku Yeun-wen
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  As I came across recent media reports that economic development will become the government's new priority and social welfare programs will be postponed, my instinctive response was that we were returning to the era of KMT rule.

  The recent transition of political power, financial predicaments, stock market slumps and the controversies over the National Pension Program, the Fourth Nuclear Power Plant and the like, will be mere illusions.

  Before the DPP came to power, the KMT typically argued, "It will affect economic development," and "How can you have social welfare without economic development?" whenever the DPP proposed social welfare policies. Surprisingly, those words have now come from President Chen Shui-bian's (陳水扁) mouth. The more things change, the more they stay the same, as the saying goes.

  A close analysis shows at least three assumptions behind Chen's words. One, economic development and social welfare are mutually incompatible. If you want the former, you must sacrifice the latter, and vice versa. Two, under any circumstances, economic development has a higher priority than social welfare. Social welfare, therefore, can wait, but economic development cannot. Three, the DPP's past platform on social welfare was wrong, or at the very least, infeasible in practice.

  As to the first assumption, do we really have to choose between economic development and social welfare? People who argue that they are incompatible will give a pile of reasons why it is so. The most common example is the so-called "crisis of the welfare state" experienced in European countries during the 1970s.

  But so far none of the European welfare states have collapsed from overburdening social welfare expenses. On the other hand, there have been numerous examples of widening gaps between the rich and poor resulting in social unrest in states such as Indonesia, which lack social welfare or similar income redistribution mechanisms.

  This was exactly the reason why the 1998 APEC summit in Kuala Lumpur urged the states to strengthen their social safety nets. In the recent lively debates over "knowledge economies," moreover, many commentators have expressed concern that the new economies might widen the gap between rich and poor; they have also pointed out the importance of appropriate social security systems. All this highlights the possibility that economic development and social welfare may indeed be compatible -- that they may not be in a total zero-sum game.

  As to the second assumption, will economic development automatically change for the better when social welfare programs are postponed? Interestingly, the very next day after Chen's speech in which he announced his new policy direction, the TAIEX fell by 143 points and went below the finance ministry's 7,000-point bottom line. The development was ironic, even though the level of the stock market does not fully reflect the country's economic condition. In other words, even foregoing all social welfare programs does not guarantee uninterrupted economic growth.

  The problem cannot therefore be simplified to an equation whereby "the economy will naturally grow if we cut social welfare." If this simplistic logic held true, then African countries should be witnessing the most tremendous economic growth in the world. They should have become examples from which all countries should learn. But is this the reality? Conversely, the US and European countries, which have the highest social welfare standards in the world, also top the world in terms of per capita income, economic prowess and political stability. Are these merely coincidences?

  Finally, as to the third assumption, the issue has added another uncertainty to the already lukewarm relationship between the DPP and Chen's administration, even though it might not be as embarrassing for the DPP as getting it to admit that "Taiwan independence is a dead-end road." Such embarrassment, however, may be a good thing if it helps politicians to kick their awful habit of making indiscreet social welfare promises in election campaigns.

  During the 1970s, "new left" theorists argued over whether the state was an administrative body above capitalists, or whether it was shackled by capitalist structures. Chen's abandonment of his erstwhile social welfare platform in favor of economic success would seem to lend weight to the latter view. He thus makes it all the more difficult to clear the name of social welfare from the charge of "economy killer" any time soon.

  Ku Yeun-wen is a professor of social policy and social work at National Chi Nan University.

  Translated by Francis Huang
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