Tue, May 13, 2008 page8

• Could it be the economy, stupid?

  • By Gerrit van der Wees
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  Back in 1992, then-US Democratic presidential candidate Bill Clinton hammered away at his opponent — incumbent president George H.W. Bush — by saying his administration was to blame for the downturn in the economy.

  “It’s the economy, stupid” became a catchphrase. Bush Sr, who had an approval rating of 90 percent the previous year because of his successes in handling the end of the Cold War and the Gulf War, lost the election.

  This year in Taiwan, presidential candidate Ma Ying-jeou (馬英九) used very much the same tactic against the Democratic Progressive Party (DPP) government. However, in Taiwan there were some significant differences. First, President Chen Shui-bian’s (陳水扁) administration was already in the doldrums for other than economic reasons and it was difficult for DPP candidate Frank Hsieh (謝長廷) to distance himself from the sitting administration.

  Second, the economy was actually doing quite well, growing at a rate of 5.7 percent last year. Still, the “economy-is-down” argument stuck. There are several reasons why.

  First, we must remember that Taiwan has a developed economy: At a per capita GDP of US$29,600 (2006), it has surpassed many countries in southern Europe and is close to the high-tech economies of western Europe.

  On the S-curve of economic development, Taiwan is close to the top and therefore necessarily has a relatively flat growth rate. Still, Taiwan’s growth would be the envy of many a Western country. Indeed, it is very much sustainable.

  China, on the other hand, is — with a per capita GDP estimated at US$5,300 (2006) — still near the bottom of the S-curve, although there are pockets of high development along the coast, in the industrial zones of Shenzhen and Shanghai. Particularly in view of the environmental costs and high income discrepancies, many economists do not believe China’s present growth rate is sustainable.

  When Ma’s camp compared the apples of Taiwan’s 5.7 percent growth with the oranges of China’s 11.4 percent growth, the absolute levels of development were conveniently not mentioned.

  The results of a recent opinion poll punctures the myth — expounded by most international news media — that a vote for Ma was somehow a vote for closer relations with China. The poll, published by the DPP on April 27, shows that 82 percent of respondents disagreed that the results of the presidential elections indicated that Taiwanese were more willing to accept unification with China — even among pan-blue respondents the percentage who disagreed was 76.5 percent. Of those surveyed, 69.3 percent agreed that any important future cross-strait agreement must be voted on through a referendum. Some 88.3 percent of respondents agreed that Taiwan and China were separate, sovereign countries. Even among pan-blue respondents, the figure was 86.4 percent.

  Thus, for many voters the economy was the decisive factor in casting their vote. Why did economics get so much traction during the elections? The main reason was that although the overall economy did very well the income distribution was increasingly skewed: Well-off businesspeople grew richer from their investments in China, while the incomes of workers and farmers stagnated, precisely because of the opening to China. Workers saw their jobs disappearing to China, while farmers saw an increasing flow of cheap Chinese agricultural products flood the local market.

  So, what will happen in the next four years? Ma campaigned under the “Six-three-three” slogan: 6 percent economic growth, less than 3 percent unemployment and a per capita GDP of US$30,000. At the end of last month, Ma was already backtracking, saying that the 6 percent growth was probably not feasible and that it would be more likely in the neighborhood of 5 percent.

  After an initial honeymoon, it will become increasingly clear that Ma’s campaign promises are a far cry from reality: Taiwan is closely linked to the global economy and the economic downturn in the US — some speak of a recession — will have a major effect on China’s export-oriented economy, which in turn will have severe repercussions on Taiwan’s economy. That is the danger of Taiwan’s economy being too closely tied to China’s economy.

  So, what is Ma proposing? Opening up further to China and linking Taiwan’s economy even closer to China’s. This is a recipe for disaster, since it is tying Taiwan’s robust but still relatively small economy to that of the Chinese supertanker that is hitting an iceberg.

  Taiwan’s political and economic viability can only be ensured if the new policymakers in Taipei steer away from China and strive toward making Taiwan a full and equal member in the international community, not a mere appendix of China.

  Gerrit van der Wees is editor of Taiwan Communique, a publication based in Washington.
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