The recently released Global Competitiveness Report 2004-2005 published by the World Economic Forum ranks Taiwan fourth, making it the only country outside Europe and the US in the top five. This is something that Taiwan should be proud of. But there is another feature of the report that is worthy of note and which can inspire Taiwan in its future development.
The top-ranked country in this report is Finland, followed by the US and Sweden, with Denmark and Norway in fifth and sixth place.
Except for the US, these are all northern Europeancountries, with high taxation and generous social welfare programs. This is a clear indication that a democratic welfare state can maintain a high level of competitiveness.
This observation is not particularly remarkable, for the annual report Doing Business published by The World Bank Group also places northern European countries at the top of its rankings.
"Competitiveness" is regarded by economists as being a very vague concept, but as this report is based on a survey of 9,000 companies, it can be regarded as a good indication of how these firms regard the potential for economic growth in various countries. The question is, how can we explain the competitiveness of these welfare states with heavy tax levies?
The concept of the welfare state developed at the end of the 19th century as a way of balancing the conflicting demands of capitalism and democracy. By the involvement of a democratic government in the operation of the market, the welfare state sought to correct the huge social inequalities created by the capitalist system. But in this era of globalization, a common argument is that the welfare state system is in danger of collapse.
This theory argues that globalization will deprive governments of the tools, such as tax rates and exchange rates by which they can influence the market and that it will force a convergence of the economic and social policies of different countries and blur the divide between the right and left of the political spectrum to create a market-driven society that is "neo liberalism."
But this isn't what has hap-pened. After World War II, Western political and economic policy began to consolidate on the basis of a system of free trade, while at the same time the growing maturity of Keynesian welfare thinking sought to mitigate some of the social inequalities created by free trade.
The countries with the most liberal trade policies often also had the largest bureaucracies; these were mostly the countries of northwestern Europe. In the 1980s, although these welfare states faced numerous challenges, reforms were limited. It is important to note that despite reforms to specific aspects of the welfare system, the social systems of these democratic welfare states remained quite different from that of the UK and the US, which tended toward economic liberalism.
This was because the new wave of economic liberalization brought on by globalization also brought with it greater economic instability and social inequality. Increasing numbers of white-collar and blue-collar workers in both developed and developing nations became victims of globalization, thereby increasing the need for government to bolster its involvement in the market.
These recent reports make it even clearer that a comprehensive social welfare system will not hinder the competitiveness of a country, but can serve as a support in promoting its economic growth and opening up to the world.
A comprehensive social security net can limit the social risks of innovation and liberalization and ease the difficulties of the transitional period. In fact the reason why these countries can rank so highly in competitiveness, is because they have a sound economic environment, an effective legal system and an outstanding ability in technological innovation. It is these that are the key to competitiveness.
The first of the above elements might surprise some people who expect that because these countries have such comprehensive social systems, they necessarily have huge government debt. But because they all have highly advanced tax systems, they have abundant revenues to ensure the soundness of the economic environment so that they even are able to have a surplus.
So we can see that a country's competitiveness can be built on this basis and does not necessarily rely on low taxes to attract foreign investment.
In addition, and not mentioned in the reports, is that these countries also have trade unions that are part of a corpor-atist structure that make them an important player in resolving disputes between labor and management, and key participants in the government's policy-making. Such a system gives investors an even greater sense of security.
Taiwan is also looking for a new relationship between the government, the market and society. We have put a lot of effort into upgrading industry and creating a structure for a knowledge economy, and Taiwan's ranking in the Global Competitiveness Report is a vindication of our efforts over the last few years.
But if there were a similar report about social justice around the world, would Taiwan be able to make it into the top 10? Neither the government nor the opposition parties have been able to establish a national pension system, nor have they been able to reform the tax system to conform more closely with the principles of social justice, all for fear of offending the capitalists. But clearly, based on the experience of the northern European countries, we can see that economic competitiveness can coexist with a just social system.
Chang Tieh-chih is a doctoral student in the department of political science at Columbia University.
Translated by Ian Bartholomew
With escalating US-China competition and mutual distrust, the trend of supply chain “friend shoring” in the wake of the COVID-19 pandemic and the fragmentation of the world into rival geopolitical blocs, many analysts and policymakers worry the world is retreating into a new cold war — a world of trade bifurcation, protectionism and deglobalization. The world is in a new cold war, said Robin Niblett, former director of the London-based think tank Chatham House. Niblett said he sees the US and China slowly reaching a modus vivendi, but it might take time. The two great powers appear to be “reversing carefully
As China steps up a campaign to diplomatically isolate and squeeze Taiwan, it has become more imperative than ever that Taipei play a greater role internationally with the support of the democratic world. To help safeguard its autonomous status, Taiwan needs to go beyond bolstering its defenses with weapons like anti-ship and anti-aircraft missiles. With the help of its international backers, it must also expand its diplomatic footprint globally. But are Taiwan’s foreign friends willing to translate their rhetoric into action by helping Taipei carve out more international space for itself? Beating back China’s effort to turn Taiwan into an international pariah
Typhoon Krathon made landfall in southwestern Taiwan last week, bringing strong winds, heavy rain and flooding, cutting power to more than 170,000 homes and water supply to more than 400,000 homes, and leading to more than 600 injuries and four deaths. Due to the typhoon, schools and offices across the nation were ordered to close for two to four days, stirring up familiar controversies over whether local governments’ decisions to call typhoon days were appropriate. The typhoon’s center made landfall in Kaohsiung’s Siaogang District (小港) at noon on Thursday, but it weakened into a tropical depression early on Friday, and its structure
Since the end of the Cold War, the US-China espionage battle has arguably become the largest on Earth. Spying on China is vital for the US, as China’s growing military and technological capabilities pose direct challenges to its interests, especially in defending Taiwan and maintaining security in the Indo-Pacific. Intelligence gathering helps the US counter Chinese aggression, stay ahead of threats and safeguard not only its own security, but also the stability of global trade routes. Unchecked Chinese expansion could destabilize the region and have far-reaching global consequences. In recent years, spying on China has become increasingly difficult for the US
RSS