I am moving into a new place, in a large house in an upscale neighborhood on the east side of Taichung. “There are 96 households in this development,” my new landlord announced as we signed the contract. She then began ticking them off on her fingers. “On that side they are all retired school teachers, this side too.” House after massive house, all retired. Gradually it dawned that, at 59, I was probably the youngest person in the neighborhood.
Last week the IMF predicted that Taiwan’s GDP would grow 3.2 percent. The Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) forecast Taiwan’s GDP growth would be 3.96 percent, noting that “achieving 4 percent growth would be difficult amid worsening inflation, tight monetary policies and geopolitical tensions,” this news paper reported.
I’ve always had a soft spot for the second digit after the decimal in economic forecasts — it makes predictions just seem so much more legit, like equipping the villain of a movie with a high-class British accent.
Photo: AFP
The central bank and the Directorate-General of Budget, Accounting and Statistics (DGBAS) both sturdily predicted 4 percent, no extra digits necessary. Demand for semiconductors, Taiwan’s specialty, remains strong, though domestic consumer demand remains weak.
Export orders were up, though not as much as last year. In January, Taiwan Stock Exchange Chairman Hsu Jan-yau (許璋瑤) proudly announced that the combined market value of all publicly listed companies in Taiwan was NT$62 trillion (US$2.24 trillion), higher than that of South Korean listed firms.
It’s rather astonishing, even miraculous, that Taiwan’s economy just keeps chugging along, even with so many of its factories offshored and so much of its capital invested in socially unproductive activities, like land speculation, and abroad building up the island’s most potent enemy, China.
Photo: AFP
Since 2000 Taiwan has experienced just two years of negative GDP growth, 2001 and 2009. By contrast, GDP growth has exceeded 5 percent in eight of those years.
Our cult of GDP compels us to kow-tow to those numbers, but many others also testify to the ongoing miracle that is Taiwan. Generally, Taiwan ranks 6th in number of patents in the US, comfortably behind Germany but well in front of France.
Our electronics sector is well known, but it is just one of Taiwan’s technology successes. In 1984 Taiwan had not a single biotech firm listed on a stock exchange, anywhere. Now there are well over a hundred. Every day the nation’s biotech prowess gives lie to the claim one often hears from right-wing pundits that a nation with a national health insurance program cannot succeed in medical research.
The growth of Taiwan’s biotech industry has been driven by large government fund outlays, over US$100 million US annually, given to Taiwan’s tech bodies for biotech development. COVID-19? No problem, our medical industry has a homegrown vaccine for it.
Taiwan’s ability to constantly reinvent its economy obscures, as many have observed, the sad plight of its labor force, facing wages that have barely risen since the late 1990s. The real miracle of the Miracle economy is not that occurred, but that it never generated widespread worker revolts.
STAGNANT WAGES
Taiwan’s successes cloud our view of the nation’s complex wealth problem, not merely the oft-discussed rich-poor inequality and stagnant wages, but an intergenerational maldistribution of wealth.
The old are rich. The young, not so much.
A paper by a group of local scholars on this wealth gap out in March last year observed that the 20-29 cohort saw its assets grow 29 percent between 2004 and 2014. This was due in part to gifts from its elders. The 30-39 group grew just 6 percent. By contrast, people aged 70 and above saw their wealth jump 70 percent over the same period.
The elderly gained from their soaring holdings of real estate. In 2010, 75 percent of residential properties were owned by people over 45. In 2018, Ministry of Finance data showed that 77 percent of Taiwan’s roughly 8 million landowners over 45, with 28 percent over 65. The number of landowners in the 34-45 cohort actually fell.
Writing in 2018 in Taiwan Insight on inequality, Chang Chin-fen (張晉芬), a Research Fellow at the Institute of Sociology, Academia Sinica, lamented the state of workers: “More than half of Taiwanese households had annual disposable income of less than NT$290,000 (US$9,527) and among them, some had no income at all.”
GENDER GAP
Hidden in these numbers is a gender gap. Research shows that sons benefit from generational wealth transmission more than daughters.
This wealth gap is also driven by Taiwan’s engagement with China, an embrace that corrodes almost every aspect of Taiwanese life, from its economy to its democracy.
Lin Thung-hong (林宗弘) at Academia Sinica co-authored a study on the effect of trade with China on Taiwan’s youth. Their analysis, presented in a piece at Taiwan Insight, demonstrated that Taiwan’s dependency on China increased “the youth unemployment rate from 2002 — when the post-1977 cohort was 25 years old — as the labor market usually offered them precarious jobs with low wages and a permissive career.”
Another hidden generational effect of the China dependency Lin identified in a different study was that large Taiwan firms in China killed their small and medium-sized competitors in Taiwan (who might have grown large otherwise). The middle-aged, blue-collar workers most affected formed the base of presidential candidate Han Kuo-yu (韓國瑜) in 2018, while the marginalized younger workers and females who might have been pro-green went for Taipei Mayor Ko Wen-je (柯文哲). Those groups are the most affected by the generational wealth gap.
The generational wealth gap and China trade thus played a major role in driving the most important populist movements of the last decade: the Sunflower movement in 2014 and the rise of Han and Ko. The vast pool of potential customers for populist politics created by these issues suggests that these movements are only the beginning, the stuttering, dry-throated heaves of a young dragon about to breathe fire for the first time.
If the rest of the world is any guide, Taiwan could take a precipitous rightward swing. Across Europe right-wing parties are on the rise, epitomized by the success of Marie Le Pen in the recent French elections. Taiwan’s center-right construction-industrial state with its extensive array of state-owned enterprises and public welfare programs is far more like Europe than the US model. It is likely that its future politics will resemble Europe’s as well.
Thus far, would-be right-wing populists in Taiwan such as Han and perhaps Terry Gou (郭台銘), the billionaire co-founder of Hon Hai Precision Industry Co (鴻海精密), also known as Foxconn Technology Group (富士康科技集團), have been shackled by their medieval cross-strait policies. At the same time, the possibility of a left-wing populist leader emerging was crippled by the shambles that the New Power Party (NPP) has become.
When the dust of these failures clears, someone will emerge.
Will they be a strong leader? Or just a strongman?
Notes from Central Taiwan is a column written by long-term resident Michael Turton, who provides incisive commentary informed by three decades of living in and writing about his adoptive country. The views expressed here are his own.
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