President Ma Ying-jeou (馬英九) won the support of voters by campaigning on the Chinese Nationalist Party’s (KMT) vast pool of economic experts, their years of experience and two slogans: “We’re ready and “6-3-3” — 6 percent economic growth, a 3 percent unemployment rate and a per capita income of US$30,000. However, voters have now discovered that the KMT government cannot offer a new Eden and Premier Liu Chao-shiuan (劉兆玄) has been forced to admit that there is in fact no economic panacea and that it will take time for the economy to improve.
The government’s honeymoon has been cut short and it is facing a chorus of complaints because it underestimated the deterioration of the global economy while overestimating its own capabilities. The result was a series of unattainable goals: The 6-3-3 policy might have just been possible if times were good, but it is naive at a time when economic experts are worried by domestic and international stagflation. Growth-promoting measures will add to inflationary pressures, while anti-inflationary measures are likely to offset economic growth measures. The government’s view of this dilemma is too simplistic.
Another miscalculation was an inability to make the right priorities. When the new administration took over on May 20, prices were an urgent concern. The three-pronged impact of rising global prices for oil, commodities and food caused prices in Taiwan to shoot up. The government’s response was to say it was helpless against imported inflation and it raised domestic oil prices, thereby adding to inflationary pressures. As prices rise across the board, the public has begun to lose confidence in the government.
The third miscalculation was placing so much emphasis on the Chinese market, hoping that opening up Taiwan to Chinese tourism and deregulating Chinese investments would boost Taiwan’s economy at a time when China also is suffering from a slumping stock market, high inflation and slowing economic growth.
Although the government has introduced policies to expand internal demand and government investment, these policies were made in haste. As history has shown, the result will be massive waste as the central and local governments look for any excuse to spend money. One can only wonder how much this will actually stimulate the economy.
A month into their terms, Ma and Liu have been forced to admit to the public and stock market investors, who have lost an average of NT$530,000, that it will be quite some time before the economy turns around. Perhaps it is some kind of progress that the government is now willing to face reality and stop lying to the public.
In order to solve a problem, one must define it. At present, the primary goal should be to curb inflation. Since the central bank has announced that it is tightening monetary policy to ease inflationary pressures, the Ministry of Economic Affairs should consider whether it is wise to raise fuel prices again tomorrow to avoid policy conflicts between the central bank and the ministry. The end result of trying to make everything perfect may be that nothing works out in the end.
After the Cabinet announced eight measures to boost the stock market, the Presidential Office held a meeting to discuss the economic situation yesterday evening, leaving us with the impression that Ma and Liu are working along different lines to deal with the economy. However, a correct understanding of the causes of the current problems is more important than offering a few quick fixes.
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