The Directorate-General of Budget, Accounting and Statistics forecasts that Taiwan’s economic growth rate for this year will reach 8.14 percent — the highest in 21 years. However, the same institution’s survey of household incomes shows that the average income of the 20 percent of households with the highest incomes now stands at 8.22 times that of the lowest 20 percent.
This wealth gap is the widest on record. As economic growth hits a record high and the rich-poor gap stretches wider than ever, many people can’t help asking exactly who is benefiting from this economic growth.
Three main factors have contributed to driving Taiwan’s wage and salary earners into this poverty trap. First, distorted government distribution of resources; second, the movement of productive industry offshore; and third, inadequate development of emerging industries and those catering to the domestic market.
In Taiwan, developmental statism, in which industry is guided by government, is the norm. Under this setup, governments often employ such distorted means of allocating resources as tax concessions and financial rewards for specific industries to stimulate investment in and development of those sectors. However, decisions about how to allocate capital don’t always take proper account of international comparative advantage. Some decisions are even the result of lobbying by particular interest groups. This development model tends to foster so-called “vegetable industries” and “zombie companies” that lack the ability to develop their own technology, require ever greater inputs of capital, make less and less profit over time and can only survive if the government pours more and more resources into them.
Because of their inability to upgrade technologically, such companies compete instead by fierce cost cutting. This is often achieved by moving production offshore, which removes job opportunities from Taiwan and widens the gap between rich and poor.
Those manufacturers who choose to stay in Taiwan and upgrade and restructure, generally become more capital and technology intensive.
Indeed, becoming more capital intensive is a necessary and inevitable trend in industrial development, so one of the things government must do to tackle unemployment and narrow the wealth gap is provide an optimal environment for the development of emerging and domestic-oriented businesses.
This includes fostering mechanisms that encourage people to set up new businesses, such as angel funds. What government must not do is repeat the mistakes of the past and allocate resources in a distorted way in order to prop up “vegetable industries” and “zombie companies.”
Unfortunately the government has so far failed to take any action to fundamentally correct the distortion of economic growth and resource distribution that leads to a widening gap between rich and poor. At the moment, all it is doing is copying the bad old ways of the past by designating six emerging industrial sectors and promoting investment in them through such means as tax concessions.
However, while existing industries follow a capital-intensive path and neither the environment for emerging and domestic-oriented businesses nor the existing political and economic system are improved, no matter how much capital is invested it will not result in more job opportunities or higher salaries, much less bring about a long-term narrowing of the gap between rich and poor.
Lu Chun-wei is a researcher at the Taiwan Thinktank.
TRANSLATED BY JULIAN CLEGG
There is a modern roadway stretching from central Hargeisa, the capital of Somaliland in the Horn of Africa, to the partially recognized state’s Egal International Airport. Emblazoned on a gold plaque marking the road’s inauguration in July last year, just below the flags of Somaliland and the Republic of China (ROC), is the road’s official name: “Taiwan Avenue.” The first phase of construction of the upgraded road, with new sidewalks and a modern drainage system to reduce flooding, was 70 percent funded by Taipei, which contributed US$1.85 million. That is a relatively modest sum for the effect on international perception, and
At the end of last year, a diplomatic development with consequences reaching well beyond the regional level emerged. Israeli Prime Minister Benjamin Netanyahu declared Israel’s recognition of Somaliland as a sovereign state, paving the way for political, economic and strategic cooperation with the African nation. The diplomatic breakthrough yields, above all, substantial and tangible benefits for the two countries, enhancing Somaliland’s international posture, with a state prepared to champion its bid for broader legitimacy. With Israel’s support, Somaliland might also benefit from the expertise of Israeli companies in fields such as mineral exploration and water management, as underscored by Israeli Minister of
Chile has elected a new government that has the opportunity to take a fresh look at some key aspects of foreign economic policy, mainly a greater focus on Asia, including Taiwan. Still, in the great scheme of things, Chile is a small nation in Latin America, compared with giants such as Brazil and Mexico, or other major markets such as Colombia and Argentina. So why should Taiwan pay much attention to the new administration? Because the victory of Chilean president-elect Jose Antonio Kast, a right-of-center politician, can be seen as confirming that the continent is undergoing one of its periodic political shifts,
On Sunday, elite free solo climber Alex Honnold — famous worldwide for scaling sheer rock faces without ropes — climbed Taipei 101, once the world’s tallest building and still the most recognizable symbol of Taiwan’s modern identity. Widespread media coverage not only promoted Taiwan, but also saw the Republic of China (ROC) flag fluttering beside the building, breaking through China’s political constraints on Taiwan. That visual impact did not happen by accident. Credit belongs to Taipei 101 chairwoman Janet Chia (賈永婕), who reportedly took the extra step of replacing surrounding flags with the ROC flag ahead of the climb. Just
RSS