Sun, Mar 16, 2008 page8

• EDITORIAL: Growth may not be what is needed

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  The economy and standard of living are both important issues in the presidential election campaign. Democratic Progressive Party (DPP) presidential candidate Frank Hsieh (謝長廷) is proposing a "happiness economy" while Chinese Nationalist Party (KMT) rival Ma Ying-jeou (馬英九) is proposing a "cross-strait common market" and a "633 policy" -- 6 percent economic growth, 3 percent unemployment and 3 percent inflation.

  The main difference between the two candidates may in fact lie in the manner in which they want to open up toward China. Ma wants a wider opening, while Hsieh stresses that national security must be a consideration and that the opening of cross-strait trade should be more limited, focusing more on global markets. Although both candidates are talking about a prosperous economy, neither of their economic prescriptions may be what Taiwan needs at this stage.

  Although the 5.7 percent economic growth Taiwan experienced last year cannot compare with the double digit growth of developing countries, it was a brilliant performance for an economically developed country. Despite this, many Taiwanese still feel life is hard. Why?

  The discrepancy between economic data and daily life is the result of deteriorating income distribution -- economic growth has not trickled down from the top earners to the lower income levels, resulting in an M-shaped distribution. High income earners are monopolizing most of the benefits from capital investments and technological innovation, while middle class incomes are not seeing gains, with many people even falling behind and joining the ranks of low income households, feeding a rapid increase in the newly poor.

  This income distribution is the result of globalization and competition with China. Salaries are kept down by China's low prices and cheap labor. As Taiwanese demand higher salaries, companies relocate to China, resulting in a virtual salary freeze in Taiwan over the past few years. As soon as local product prices increase, similar but inferior Chinese products are introduced. Meanwhile the Taiwanese public is also suffering from cost increases brought on global increases in oil, grain and raw material prices.

  Although both candidates want to promote economic growth, failure to address unequal income distribution might make that problem even worse, causing even more people to feel exploited. In particular, Ma's 633 policy and his all out promotion of economic growth might have an even bigger negative impact on income distribution than Hsieh's economic policy suggestions, especially since Ma's "cross-strait common market" proposal means further deregulating labor, product and capital exchanges. As far as products, prices, salaries and capital movement go -- these changes could add fuel to the fire of negative impact.

  Ma's economic thinking seems to be based on the outdated mindset of a developing country. He seems unable to recognize that Taiwan has already entered the low to medium economic growth phase of a developed economy. At this stage, high economic growth will not necessarily have a positive impact on Taiwan's development because problems are no longer of a supply character, but are rather related to income distribution.

  More emphasis on social justice and concern for welfare policies for the lower income levels are what this country really needs.
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