Praised as “a prophet of risks,” US economist Paul Krugman gained a great deal of attention during his recent trip to China and Taiwan. Krugman predicted the 1997 to 1998 Asian financial crisis and the current global recession and won the Nobel Memorial Prize in Economics last year. On his trip to Beijing, Shanghai, Guangdong and Taipei, Krugman was treated as a celebrity, with his speeches attracting large crowds that caused a lot of discussion and “Krugman frenzy.”
Krugman, a self-described liberal, has always assumed a harsh and critical attitude toward neo-conservatism. He has been open about his political affiliations in the US and he often lashes out at Republican policies. Krugman has been referred to as a reincarnated Keynesian, an advocate of socialist state projects and agendas and a controversial champion of the extreme left-wing with liberal political and economic views for his state-market ideology.
With viewpoints like these, one can become baffled by the prevailing Krugman worship in Taiwan.
In Taiwanese politics, the economic beliefs and policies of the major political parties have never had anything to do with Keynesianism. Instead, they are based on neo-conservatism, something Krugman denounces.
Furthermore, Taiwan’s traditional economic education places heavy emphasis on neo-conservative principles, which has influenced the nation’s economic values. As a result, students, the public, media outlets and technocrats call for “respect for market mechanisms” and criticize government interference in the market because of this education. This is the reason there is no room for Keynesianism and left-wing politics in Taiwanese society.
However, that may be changing now that former Democratic Progressive Party (DPP) legislator Luo Wen-chia (羅文嘉) has proposed the “second Dangwai,” or “outside the party,” movement to add center-left elements to the ideology of “pro-localization.”
British economist John Keynes developed a theory about respect for market mechanisms, government intervention and the distinction between “market” and “state.” Krugman says that US Democratic politicians should follow the New Deal policies initiated by late US president Franklin D. Roosevelt to carry out social justice by setting fairness as the foundation of freedom.
Krugman’s theory can be explained in terms of the spirit of the New Deal: When the unequal distribution of economic growth leads to high levels of social injustice, the government should correct the situation through tax reform and social security to build a competitive society with equal opportunities.
This government correction flies in the face of the neo-conservative economic values prevalent in Taiwan.
Vice President Vincent Siew (蕭萬長) said that amid the global financial crisis, Taiwan increased demand and raised economic figures by adopting economic stimulus measures, adding that Taiwan was a good example of Keynesianism. However, if we examine the way the government handled the financial crisis in light of Keynesian theories of building a social security through tax reforms, the government just cited one part of the theories to prove the effectiveness of their policies. It does not really believe in Keynesianism at all.
Just 2 percent of Taiwan’s population holds 70 percent of the nation’s wealth and the gap between the rich and poor has increased by 58 percent. The problem of economic inequality has become very serious and needs to be solved. The financial crisis stems from the collapse of the global financial system, which became possible after neo-conservatives lifted financial constraints. Now that our entire nation is crazy about Krugman, the government should take all of his concerns into consideration instead of just part of them.
I truly hope that the “Krugman frenzy” is not just a belief bubble created by the media, banks and the government. I also hope that the frenzy will not be like the egg tart craze that swept through Taiwan a few years ago, when swarms of people started up egg tart stores, most of which went bust.
If the government believes in Krugman’s theories, obviously it needs to do much more. Just reading the economist’s book and listening to his speeches are not enough.
Jeff Wu is a doctoral candidate in economics.
TRANSLATED BY TED YANG.
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