The DPP government is trying to explain why it should not take responsibility if the economic growth rate falls under 5 percent or if the unemployment rate exceeds 4 percent.
When the DPP came to power, the economy was very strong. So it believed that it didn't need to worry about economic affairs. One year later growth is going to fall below 5 percent and unemployment is going to rise above 4 percent. Over the past year, the US, EU and Japanese economies have all taken turns for the worse. Naturally, the bearish international economy has become a scapegoat and has had to take the blame for Taiwan's economic woes.
Foreign trade is a major driving force behind Taiwan's economic growth. A slowdown in a few major economies such as the US, EU and Japan will have a negative impact on Taiwan. Attributing the country's slowing economic growth and rising unemployment to global economic trends, however, smacks of shirking responsibility.
Corporate investment and private consumption account for the largest portions of Taiwan's national income structure. Whether the corporations will dare to invest and consumers will dare to spend their money largely depends on their confidence. But the quality of government policymaking over the past year has hardly been a cause for confidence on the part of entrepre-neurs and consumers.
In addition, many recent signs have indicated that the worst times may be over in the international economic environment. Recovery may be just around the corner.
The first sign is that the US stock markets have remained stable in the face of continuing bad news as far as US economic statistics and corporate revenues are concerned. The Department of Labor, for example, announced in April that employment fell by the largest margin since February 1991. Earlier, network facilities manufacturer, Cisco Systems, had said its future prospects for revenues were not good. But the US stock markets responded to the news with miraculous stability. Instead of falling, all the major stock indices rose -- an indication that the US financial market is regaining confidence.
The second sign is that theUS Federal Reserve has lowered interest rates by a margin of 2 percentage points since the beginning of this year. The Fed has also said clearly that it will further lower interest rates if necessary. Over the past 80 years, whenever the Fed lowered interest rates three times in a row, the stock markets never failed to rise in the following nine months to one year. And the economy never failed to turn for the better.
The third sign is that excessive inventories in the technology industries were a major cause of the US economic slowdown. But the demand for technology products grows much more rapidly than demand in the traditional industries. US corporations have also been working hard recently to reduce their inventories. In other words, the economic slowdown caused by excessive inventories should disappear just as quickly as it arose.
In addition, the massive tax cuts being promoted by the Bush administration and the falling international crude oil prices are both beneficial to international economic recovery.
A good turn in the international economic environment is like a double-edged sword for a DPP government. If Taiwan's economy does improve in line with the global economy, then the government and the DPP can no doubt take credit for something they did not do. But if it doesn't, that will surely make the government's incompetence all the more obvious. Then we will see what scapegoat the government will find to blame.
Huang Jyh-dean is an associate professor in the international business department at National Taiwan University.
Translated by Francis Huang
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