Figures recently released by the Financial Data Center at the Ministry of Finance (財稅資料中心) show that the average annual income of the highest-earning 5 percent of taxpayers in 2007 was 62 times higher than that of the lowest 5 percent. This is the highest-ever recorded wealth gap in Taiwan’s history.
This figure is an accepted index for measuring the gap between rich and poor. Ten years ago, the richest 5 percent were “only” 32 times richer than the poorest. The degree of inequality has, therefore, almost doubled in just a few years.
In reality, the real rich-poor gap is even higher than the figures show because those in the richest 5 percent of the population can use many loopholes to avoid paying taxes, while the real poorest 5 percent of the population is not counted in the figures because they are too poor to pay tax at all. Therefore the factor of 62 is more precisely the gap between the working class and the rich, who, by avoiding taxes, appear less rich than they really are.
Even if the gap were only as big as stated, the disparity would still give cause for concern. Taiwan experienced positive economic growth from 1998 to 2007, except for a brief interlude of negative growth in 2001. The 62-factor gap means wealth distribution in Taiwan has become completely decoupled from economic development. The fruits of economic growth have been pocketed by a few, and Taiwan’s distorted tax system has played a pivotal role in concentrating wealth instead of distributing it.
This decade of almost uninterrupted growth coincides with the most heated phase of Taiwan’s democratization. In 1996, then-president Lee Teng-hui (李登輝) became the nation’s first directly elected president, and in 2000, Taiwan experienced its first transfer of power from one party to another when Chen Shui-bian (陳水扁) was elected president. Thus the march of democracy proceeded step by step. Considering that incumbent President Ma Ying-jeou’s (馬英九) only took office last year, his administration has no responsibility for the 2007 figures.
However, last year’s financial turmoil has opened a door for a number of so-called “tax reforms” that once again more favor the wealthy. There is no reason to believe that Ma will do any more than his predecessors to distribute wealth equitably. In other words, the three directly elected presidents have all gone in the same direction, running a relay to achieve this regrettable doubling of Taiwan’s rich-poor divide.
At least we can take comfort in the fact that Taiwan’s record in this respect is not as bad as that of some other countries. Nations that became democratic during what late right-wing political scientist Samuel Huntington called the “third wave” of democratization in the late 20th century have all experienced a drastic increase in wealth inequality. This third wave of democratization has indeed meant the downfall of former totalitarian and authoritarian states around the world, but this wave of democratic change has not brought about a correction of social inequality or the advancement of economic justice. In this respect, it has been quite different from the previous two waves of democratization.
The key difference is that left-wing parties and class-based movements featured prominently in what Huntington called the first two waves of democratization. They played an important and onerous role in every battle.
The same is not true of the third wave. In already democratic Western countries, labor unions have been weakened and parties of the left have changed direction, leaving the field open for neoliberalism calling for free markets and free trade. As to those countries that have been newly democratized in the third wave, some started out from Cold War conditions of right-wing state terror, while others underwent the worldwide collapse of the former communist bloc. These countries’ initial experience of democracy has occurred in historical partnership with neoliberal-style economic liberalization.
Taiwan is no exception, since the “booty” of democratization has included privatization of state-run enterprises as well as financial and tax reforms.
From this point of view, the third wave of democratization has not been a continuation of the first two waves. Rather, it has been a break with them, or a mutation, because the process of democratization in the third wave has not been accompanied by a parallel improvement in economic equality.
On the contrary, one has been exchanged for the other. The focus on political democratization has in fact been a cover for the abandonment of economic equality.
People in Taiwan should be aware of this “exchange,” but should not accept it without question. When you think about it — back in the days of martial law, did the Chinese Nationalist Party (KMT) not often present Taiwan’s high economic growth rate as a rationale for its authoritarian rule? Luckily, people were not taken in by this sophistry, otherwise Taiwan would have remained stuck in the old repressive ways.
The question these days is not much different from what it was in the past. Political democratization is still used as a cover for unbridled economic authoritarianism. The contradiction is there for all to see. It’s high time we started thinking about how to resolve it.
Wu Ting-feng is an assistant professor at the Research Center for Humanities and Social Sciences at National Cheng-Kung University.
TRANSLATED BY EDDY CHANG AND JULIAN CLEGG
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