20120501 The Liberty Times Editorial : Economy’s link to China is ruinous

The Liberty Times Editorial : Economy’s link to China is ruinous

According to information released by the Directorate-General of Budget, Accounting and Statistics (DGBAS), Taiwan still has the highest unemployment rate of the four Asian Tigers. The data also showed average wages had fallen by 2.1 percent from January to February compared with the same period last year.

After accounting for a rise in commodity prices, real wages experienced negative growth of 2.34 percent. This was the fourth-largest drop in real wages in history — after the 1973 oil crisis, the burst of the dotcom bubble and the recent global financial crisis. Average wages are now lower than they were 14 years ago.

Singaporean Deputy Prime Minister Tharman Shanmugaratnam recently commented about the brain drain Taiwan is experiencing because of its refusal to allow foreign skilled workers to work here, saying it has led to a drop in average income. Shanmugaratnam said Singapore cannot afford to become another “Taiwan story.”

Regardless of whether his remarks were correct, the country’s stagnant wages are indeed a very serious problem. When President Ma Ying-jeou’s (馬英九) administration comes up with its industrial and economic policies, it must realize that the crux of the problem is the relocation of Taiwanese industry and that this situation must not be allowed to deteriorate further.

What cannot be denied is that after four years in power, Ma has devoted himself to linking the national economy to China’s. This will not change over the next four years. According to Ma’s “advanced thinking,” linking Taiwan’s economy to China’s will spur economic growth, job creation and income increases.

Unfortunately, the truth is the exact opposite. Numerous trade agreements — such as the Economic Cooperation Framework Agreement — with China have already been signed. The vast majority of the public have had to endure the problems caused by these agreements instead of reaping any benefits. The only people who have gained from these agreements is perhaps a tiny minority of corporations. Taiwan is now a country increasingly divided between the wealthy and the poor.

Because the government has pinned all its hopes on China, its industrial and economic policies are not aimed at improving the domestic investment environment to make small and medium-sized enterprises (SMEs) want to stay and develop, which would attract foreign investment and create job opportunities.

Instead, the Ma government’s policies seem to be aimed at achieving the exact opposite — encouraging the industries still here to go to China or shut down.

For example, the rise in production costs caused by the recent gasoline and electricity price hikes have resulted in loud complaints from struggling SMEs and small shop owners. The resulting increase in costs will cause many business to close down, which means unemployment increases will soon follow. Is this the “golden decade” Ma keeps talking about?

Regardless of whether it is the salary increases for the military, government officials and public school teachers or the gasoline and electricity price increases, mistaken government policies have caused private enterprises to lose their competitiveness so there is no more room to offer their employees wage increases. It is not that private companies do not want to pay their staff more, they just cannot afford to because they do not have taxpayers’ money to spend.

If the government really does have a set of industrial and economic policies in place, then these have really only helped a handful of large corporations. These corporations then invest and set up factories in China and create employment opportunities over there and the people who get pay rises as a result are Chinese laborers. This really makes one wonder if Ma’s idea of eventual unification involves getting Taiwan’s workers to all relocate to China.

People living here now are extremely unlucky. Businesses are folding and there are increasingly fewer job opportunities. Even worse is that their salaries are not increasing. Young people bring home an average salary of little more than NT$20,000 per month and cannot afford to have children or buy a house. This is a direct result of Ma’s policies of linking the national economy to China’s.

In the past, when the national economy was linked to advanced economies in the West, the factor price equalization effect pulled up the wages here.

Now the economy is being linked to the Chinese economy, which has a much lower average wage, and as a result, the factor price equalization effect is pulling down pay levels. It is certain that if the nation’s economy gets any more intertwined with China’s, salaries and wages will keep falling.

This is a simple idea and surely Ma is capable of understanding it. However, he has ulterior motives and does whatever he wants.

A few days ago, he declared during an interview that since he is about to enter his second term, he should no longer try to win over voters by giving in when it comes to gasoline and electricity prices. This attitude is unlikely to be limited to just gasoline and electricity.

Over the next four years, since he will not have to worry about an impending election and pandering to voters, Ma will be able to really put his foot down and fully implement his policies aimed at fully linking the economies of Taiwan and China, regardless of the disastrous effects that will have.

This has nothing to do with Ma’s intelligence as a politician; it has to do with what Ma wants to go down in history for achieving.

He is not interested in having Taiwanese content and living at peace, enjoying equal distribution of wealth. What Ma really wants is eventual unification and the further development of China’s economy.

Translated by Drew Cameron