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President
will not quit over storm
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TIME OF MOURNING: Ma Ying-jeou announced that in the wake of the disaster, Double Ten National Day celebrations and a trip to allies would be canceled
By Ko Shu-ling and
Meggie Lu
STAFF REPORTERS
Wednesday, Aug 19, 2009, Page 1
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People attempt to push a truck up a steep, boulder-strewn road in Chiayi County yesterday in the wake of Typhoon Morakot. PHOTO: TSAI TSUNG-HSUN, TAIPEI TIMES |
President Ma Ying-jeou (°¨^¤E) said yesterday he would not resign over his
government¡¦s response to Typhoon Morakot, but apologized for any shortcomings.
¡§I will not run from my responsibilities,¡¨ Ma said.
¡§I know there are areas to improve and as president, I have to shoulder the
responsibility for [victims¡¦] relocation and resettlement in the future,¡¨ he
said. ¡§I cannot escape my duties.¡¨
Leading Vice President Vincent Siew (¿½¸Uªø), Minister of National Defense Chen
Chao-ming (³¯»F±Ó), Vice Premier Paul Chiu (ªô¥¿¶¯) and Central Emergency Operations
Center Commander Mao Chi-kuo (¤òªv°ê) in a deep bow ¡X a symbolic apology ¡X Ma said
that as the leader of the country he would take full responsibility for all the
mistakes made during the disaster and that he wanted to offer his most sincere
apology to the public, especially those who lost loved ones.
Ma had apologized on Saturday for the pace of rescue efforts, but blamed the
weather and road conditions. Ma said yesterday that had it not been for bad
weather, the rescue efforts would have been better and started earlier. He
promised to review the rescue system, correct problems in the system and punish
those officials responsible, hoping to finalize the penalties by early next
month.
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President Ma
Ying-jeou, third left, Vice President Vincent Siew, second left, Vice
Premier Chiu Cheng-hsiung, second right, and other key officials bow at
a press conference in Taipei yesterday to apologize to the public and
disaster victims for failings in the government¡¦s emergency response
following Typhoon Morakot. PHOTO: GEORGE TSORNG, TAIPEI TIMES |
Ma also apologized for ¡§improper¡¨ remarks he made during
inspection trips to disaster areas, saying the way he expressed himself had
mistakenly caused people to think he was arrogant and aloof.
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A boy uses a handheld device while religious volunteers call on relatives of victims of Typhoon Morakot to pray together near a temporary helipad at Cishan High School in Cishan Township, Kaohsiung County, yesterday. PHOTO: CNA |
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He blamed the public impression of the ¡§slow¡¨ and
¡§disorderly¡¨ relief efforts on ¡§poor communication.¡¨
As Chen dismissed criticism that the military reacted too slowly, Ma said he
thought he demonstrated ¡§strong leadership¡¨ amid the crisis by ordering the
military to increase their participation in the rescue operation.
Asked whether he thought the manner in which he handled the aftermath of Morakot
was comparable to the US government¡¦s much criticized handling of Hurricane
Katrina in 2005, Ma didn¡¦t answer the question, instead insisting that he had
exercised ¡§strong leadership, but not necessarily in the face of the media.¡¨
¡§We are working actually by the system instead of by the individual,¡¨ he said.
While some have accused Ma of forgetting his role as commander-in-chief, Ma said
he did not necessarily have to take charge when disaster struck because his job
was to ¡§mobilize people and resources¡¨ so they could be allocated more
effectively.
Ma proposed replacing the National Fire Administration with a disaster
prevention and rescue agency under the Ministry of the Interior. Local
governments should also establish disaster prevention bureaus, he said. He
promised to equip them with sufficient manpower and budget for more effective
operations.
The military should include disaster prevention to its mission, he said. To
better equip search and rescue teams, Ma said his administration would buy 45
Black Hawk helicopters, 15 fewer than the original plan. The NT$10 billion
(US$300 million) saved would be spent on improving the equipment of the National
Airborne Services Corps.
The government will map out a standard operation procedure for compulsory
evacuation programs and educate the public on the matter. Emphasizing the
importance of relocating mudslide-prone hillside villages, Ma said the Executive
Yuan was reviewing the National Land Development Plan (°ê¤gpµeªk).
Ma also announced that Double Ten National Day celebrations and his planned trip
to South Pacific allied countries would be canceled because of the disaster.
Commenting on Ma¡¦s press conference, Lee Mao-sheng (§õZ²±), a retired policeman in
Kaohsiung County¡¦s Namasiya Township (¨ºº¿®L), said that an apology was not enough.
¡§What type of government leaves its people in pouring rain for three days before
it begins rescue work?¡¨ Lee said.
Xiaolin Village (¤pªL) survivors said that without having paid them a visit since
the storm struck, Ma¡¦s press conference was meaningless to the victims.
Xiaolin Self-Help Association spokesman Tsai Song-yu (½²ªQ¿Ù) said his villagers
demanded that Ma come and pay his respects to the souls of the dead on the 14th
day after their deaths.
According to traditional Taiwanese belief, family members of the deceased
prepare a treat for their loved ones and hold religious rituals every seven days
for 49 days.
¡§Don¡¦t you think that after a disaster of this magnitude, the president should
come?¡¨ Tsai said.
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Ma denies
Beijing affected decisions
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POLITICAL CONSIDERATIONS:
Former vice president Annette Lu questioned whether Ma delayed appealing for
foreign aid because of interference from Beijing
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By Ko Shu-ling
STAFF REPORTER
Wednesday, Aug 19, 2009, Page 3
President Ma Ying-jeou (°¨^¤E) yesterday denied Beijing had played a role in his
decision to delay accepting international aid following Typhoon Morakot.
Ma said his administration considered international assistance humanitarian in
nature, not political, adding that the country had received cash and non-cash
donations from the US, Japan, Singapore, China, Australia, Germany and other
countries.
¡§We don¡¦t have any political sort of attitude toward these donations,¡¨ he said
in English at a press conference for foreign correspondents at the Presidential
Office. ¡§They are purely humanitarian.¡¨
When asked whether China played a role in his decision-making process, Ma said
¡§No, not at all, not at all.¡¨
Earlier yesterday, former vice president Annette Lu (§f¨q½¬) questioned whether
China interfered in the government¡¦s delay in appealing for foreign aid, asking
Ma to offer a clear account of whether he had waited until Beijing agreed to
donate money before he asked for international assistance.
Lu said she would like to know whether political considerations played a role
and outweighed the lives of Taiwanese people and Taiwan¡¦s sovereignty.
¡§If the first priority of the country¡¦s president is to gauge the attitude of
other countries, it is bitterly disappointing,¡¨ she said.
Lu said Ma owed the public an explanation on whether he accepted China¡¦s
assistance under the condition that he reject international aid and not declare
a state of emergency.
Lu also raised the question of whether Washington and Beijing capitalized on the
disaster to engage in a power struggle, saying that Washington conveyed via the
media that the US military was ready to help as a means to pressure the Ma
administration.
While Ma has become the main target of criticism, Lu said it was not totally
fair to compare the performance of Ma and former president Lee Teng-hui (§õµn½÷)
because Lee had served as president for 12 years before the 921 Earthquake
happened so he knew how to be a president and commander-in-chief.
¡§Ma is still learning how to be a president and does not know how to exercise
his power as commander-in-chief,¡¨ she said. ¡§Premier Liu Chao-shiuan [¼B¥ü¥È]
should be condemned for failing to do a better job since he has experience with
relief efforts from the 921 Earthquake.¡¨
Lu proposed postponing year-end local elections until new administrative zones
are drawn. She suggested establishing a special administrative zone for the
30-odd Aboriginal villages. She also suggested the president appoint a head of
the special region and the central government take charge of disaster prevention
and relief work.
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Human
factors slowed typhoon rescue efforts: analysts
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By Shih Hsiu-chuan
STAFF REPORTER
Wednesday, Aug 19, 2009, Page 3
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A US Navy heavy helicopter flies over a temple in Kaohsiung County¡¦s Jiaxian Township yesterday as it carries excavation machinery to disaster-hit Taoyuan Township. PHOTO: CNA |
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The record-breaking rainfall brought by Typhoon Morakot was
the main reason behind the floods and landslides that claimed hundreds of lives,
but the natural disaster couldn¡¦t mask the calamitous man-made errors wrought by
the present government¡¦s dysfunctional disaster prevention and rescue system,
analysts said.
President Ma Ying-jeou¡¦s (°¨^¤E) role in rescue efforts came under the most
scrutiny.
Ma failed to employ his constitutionally enshrined right to declare a state of
emergency and he failed to order the mobilization of the armed forces to help
stranded typhoon victims at the very beginning of the disaster, some analysts
said.
They said these two decisions hobbled the much-criticized rescue process from
the start.
Ma¡¦s rationale that ¡§to proclaim emergency decrees was unnecessary as the 11
articles in the decree are incorporated into the Disaster Prevention and
Protection Act [¨a®`¨¾±Ïªk]¡¨ was ¡§unacceptable,¡¨ said Chan Shou-chung (¸â¦u©¾), a former
senior legislative aide involved in writing the Act in 2000.
¡§The issuance of an emergency decree has a dual meaning. Politically, it
declares the government¡¦s determination to make an all-out effort to rescue
people as well as the president¡¦s commitment to take charge of the relief work.
Apparently Ma did not want this responsibility placed upon him,¡¨ Chan said.
Furthermore, Chan said, not all of the principles of the emergency decrees are
embodied in the Act.
¡§For example, the central government is entitled to deploy the military when an
emergency decree is applied, but the Act stipulates that local governments may
request support from the army in accordance with necessary procedures,¡¨ he said.
Speaking of the difficulty a local government has in requesting military aerial
support, Yang Chiu-hsing (·¨¬î¿³), commissioner of Kaohsiung County, where hundreds
of people were buried by landslides, said that the National Rescue Command
Center (NRCC) did not respond to his request positively until Aug. 10.
¡§[The NRCC] told me that they were waiting for a green light from their
superiors, and it took two days,¡¨ Yang said.
Data on the Web site of the Ministry of National Defense showed the number of
soldiers sent to help typhoon victims in the six counties and cities did not
reach more than 16,858 until Aug. 12, the fifth day after the disaster, up from
740 on the first day, 2,157 on the second, 5,358 on day three and 9,121 on the
fourth day.
The NRCC is a standing agency of the National Fire Administration, under the
Executive Yuan, responsible for aerial or marine rescues. Established after a
tragedy in 2000 when four workers were washed away in Chiayi County¡¦s Pachang
Creek (¤K´x·Ë) after their rescue was delayed by dithering officials, the NRCC is
supposed to coordinate the deployment of the country¡¦s rescue resources, but the
disaster has called its effectiveness into question again.
¡§The case highlighted how inefficient and chaotic the rescue system is,¡¨ Chan
said.
Because Ma did not declare a state of emergency nor order the military to carry
out rescue operations in his capacity as commander-in-chief, responsibility for
the direct relief mission shifted onto the Central Emergency Operation Center (CEOC),
an ad hoc facility.
The CEOC, led by Vice Premier Paul Chiu (ªô¥¿¶¯), who doubles as the chairman of
the Executive Yuan¡¦s National Disaster Prevention and Protection Commission, was
activated on Aug. 6 after the sea warning for Typhoon Morakot was issued, with
Minister of the Interior Liao Liou-yi (¹ù¤F¥H) appointed commander.
On Aug. 9, Premier Liu Chao-shiuan (¼B¥ü¥È) decided to form a forward command post
in Pingtung County, where thousands of people were stranded in inundated
villages and Liao was relocated to command the new post.
With Liao in Pingtung, Minister without Portfolio Frank Fan (S¨}ù×) became CEOC
commander. However, he got into a quarrel with Tai Chiung-mei (À¹Ã£±ö), a
Government Information Office (GIO) official, over handling the media. The CEOC
received its third commander on Aug. 14, when Fan was replaced by Minister of
Transportation and Communication Mao Chi-kuo (¤òªv°ê).
¡§The rescue system has been in a state of anarchy as officials at the CEOC were
not in a position to make major decisions in many aspects. Neither were they
able to spur the armed forces into action. The biggest problem with the system
was that officials who have the final word were not in charge,¡¨ Chan said.
An official, who spoke on condition of anonymity, said that the squabble between
Fan and Tai took place when Tai rejected Fan¡¦s order to speak with the press,
which she said was the duty of the GIO minister. This event showed the chaos of
the rescue system, the official said.
¡§[Tai¡¦s defiance] was understandable. With the higher-ups hidden from the
frontline, how could you expect a civil servant to do a job beyond the scope of
her position,¡¨ he said.
Yang Yung-nane (·¨¥Ã¦~), a professor at the Department of Political Science at
Cheng Kung University, said that the CEOC was bound to be uncoordinated as it
was an ad hoc facility.
In accordance with the regulations established by the Executive Yuan¡¦s National
Disaster Prevention and Protection Commission, senior civil servants from
different government departments take turns serving at the CEOC during the
period of the center¡¦s operation.
¡§As its members are from different departments of government, the CEOC is
afflicted with selfish departmentalism. The golden time for rescuing survivors
lapsed when the center was still floundering. Collecting, gathering and
analyzing data or integrating rescue resources such as equipment, machines and
manpower all fall under the jurisdiction of different departments,¡¨ Yang said.
The government¡¦s failure to reveal disaster information promptly and
transparently was another problem.
It was not until Aug. 14, the seventh day after the disaster, that the CEOC
began holding press conferences twice a day to update the public on the latest
developments.
Before then, when facing reporters¡¦ inquiries regarding the disaster, Executive
Yuan spokesman Su Jun-pin (Ĭ«T»«) referred questions to the CEOC, where reporters
were told to check the Web site, which provided very limited information making
it unlikely people would have their questions answered by an official.
In an interview with CNN on Aug. 16, Ma said he would take full responsibility
for the disaster, by which he meant looking into what went wrong with disaster
prevention and rescue efforts and disciplining officials.
Shieh Jyh-cherng (Á§ӸÛ), a professor at the Department of Bio-Industrial
Mechatronics Engineering at National Taiwan University and the secretary-general
of the 921 Earthquake Relief Foundation, disagreed with Ma¡¦s approach.
¡§There weren¡¦t too many problems with the system per se that needed to be
addressed. I don¡¦t think it was problems with rules and regulations or the
system that made the relief work weak and disorganized, but the human factor.
The point was whether politicians could find it in their hearts to protect
people,¡¨ Shieh said.
For example, the regulations concerning emergency evacuation of people are
clearly stipulated in the Disaster Prevention and Protection Act, but eventually
it depends on the authority¡¦s resolution to carry out a mandatory evacuation if
it considers the move necessary because it might cause public complaints, he
said.
¡§Even in a legal vacuum, to give a prompt response to help disaster victims is
also possible. After the 921 Earthquake [that hit Taiwan at 1:47am on Sept. 21,
1999], the Hengshan Military Command Center swung into action by 3am, the armed
forces were already in quake-devastated areas by early morning, and the first
foreign rescue teams from Japan arrived in the disaster areas that night, all
this happened before former president Lee Teng-hui [§õµn½÷] declared a state of
emergency, which occurred on Sept. 25,¡¨ he said.
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Ex-US
adviser urges FTA with Taiwan
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COUNTER-BALANCE: A top policy
adviser to former US presidents Richard Nixon and Ronald Reagan said the US
should counteract Taiwan's increasing reliance on China
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By William Lowther
STAFF REPORTER IN WASHINGTON
Wednesday, Aug 19, 2009, Page 4
Richard Allen, a former top foreign policy adviser to Republican
administrations, has published an article in the Wall Street Journal calling for
a free-trade agreement (FTA) with Taiwan.
Allen, now a senior fellow at Stanford University¡¦s Hoover Institution, said:
¡§While [US] President Barack Obama was highly critical of free-trade agreements
during his campaign, he has signaled a different attitude since taking office,
and US Trade Representative Ron Kirk has noted that deepening trade ties with
Asia is a new priority for the administration.¡¨
¡§At a time when there is a pressing need for markets for US exports, a
free-trade agreement with Taiwan would serve US interests in the short and
long-term,¡¨ Allen said.
Allen served as chief foreign policy adviser to former US president Richard
Nixon and as National Security Adviser to former US president Ronald Reagan.
Earlier this month, the Economist magazine published an article saying that a
plethora of free-trade deals was driving Taiwan closer to China.
¡§Mr Ma [Ying-jeou (°¨^¤E)] is willing to take the political risk of tying the
self-ruled democratic island economically to its giant authoritarian neighbor
because of the rest of the world¡¦s craze for free-trade deals. Most nations
recognize China and fear to sign FTAs with Taiwan lest they incur China¡¦s
wrath,¡¨ it said.
A number of Washington-based trade analysts dealing with Taiwan have told the
Taipei Times over the last few weeks that they believe a US-Taiwan free-trade
agreement is highly unlikely under Obama.
But in a paper published last year, Claude Barfield, a resident scholar at the
American Enterprise Institute, argued that China¡¦s assertion that bilateral FTAs
with Taiwan violate Beijing¡¦s ¡§one China¡¨ policy is fundamentally flawed because
the international community ¡X and Beijing ¡X have accepted Taiwan¡¦s membership in
the WTO and in the APEC as a ¡§customs territory.¡¨
In his op-ed article, Allen said there had been an ¡§extraordinary shift¡¨ in
Taiwan¡¦s policies under Ma, including consideration of a cross-strait FTA.
¡§There is no more talk of Taiwanese independence and no campaign for UN
membership,¡¨ Allen said.
¡§The Obama administration is presented with significant opportunities to improve
security in a region vital to US interests. The US can take the important twin
steps of engaging Taiwan to create a free-trade agreement and proceeding with
the next phase of defensive weapons sales to Taiwan,¡¨ he said.
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Rescue
alternatives
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Wednesday, Aug 19,
2009, Page 8
The US has responded to a request from the government of Taiwan by sending a
heavy-lift helicopter to carry rescue equipment to otherwise inaccessible areas
following Typhoon Morakot, and China has also offered to loan helicopters if
Taiwan needs them.
There are two other kinds of vehicle that Taiwan could consider requesting from
other countries on this occasion.
Hovercraft can travel over water, mud, marsh and dry land as long as it is
reasonably flat, allowing access to places where boats and wheeled or tracked
vehicles cannot reach. They may be useful in Taiwan now in places where there is
deep mud. Two hovercraft were purchased by coastguards at Burnham-on-Sea in
England after a girl died on mudflats. Since then they have been used to rescue
people and animals from the town¡¦s mudflats on several occasions. Hovercraft
have also been used to rescue people from flooding in Japan. Hovercraft of
various sizes are used by the armed forces and/or coastguard in at least the
following nearby countries: China and North and South Korea.
Helicopters have proved essential for rescue in Taiwan over the last few days,
but unfortunately three crew members died when their helicopter crashed on a
mountainside. Following the 921 Earthquake, there was an unfortunate accident in
which downdraft from one of four helicopters carrying President Lee Teng-hui
(§õµn½÷) and his inspection team broke off a tree branch, which killed one girl and
injured four other people. Downdraft also blew down tents in which earthquake
victims were living. These accidents might have been avoided if airships were
used instead of helicopters. In Japan, airships operated by the Nippon Airship
Corporation have been used for surveillance and rescue following natural
disasters such as landslides. Helicopters and airships serve a similar purpose,
each having their advantages and disadvantages. Taiwan could consider requesting
loan of one or two airships from Japan for use as an alternative to helicopters
in appropriate conditions.
JULIAN CLEGG
Taipei
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Rethinking
emergencies
Much criticism has been published in your pages of the Ma Ying-jeou (°¨^¤E)
administration¡¦s response to the disaster wrought upon southern Taiwan by
Typhoon Morakot. Naturally, much of this criticism has drawn attention to the
implication that Taiwan¡¦s central ideological dispute, which roughly parallels a
north-south geographical divide, was a dispositional factor in determining the
nature of the government¡¦s response to Morakot.
I do not dismiss this view, but I would urge the people of Taiwan not to allow
their resulting rancor to be transformed into ¡§political capital¡¨ by the
opposition movement. Political point scoring is a potentially fatal distraction
from a rational attempt to address the practical problem of how best to manage
this sort of disaster in the future. It is with respect to this problem that I
should like to make some observations together with a suggestion for
improvement.
The essential problem with the organization of the disaster response has been
the fact that resources are under centralized bureaucratic control. Difficulties
in resource allocation and communication channels are precisely what one must
expect from the inherently inefficient and blundering nature of government,
quite irrespective of any ideological tension. Even if Morakot had befallen
Taiwan during the Democratic Progressive Party administration, such problems
would still have existed and that is because they are the natural consequences
of trying to solve the problem of resource allocation by state bureaucracy. Who
happens to be in charge of the bureaucracy is of far less importance than the
removal of the bureaucracy itself.
A potentially better way of managing the impact of such disasters in future is
to replace the state bureaucracy¡¦s control over allocating resources such as
trucks, helicopters, search and rescue teams, food, water and medical supplies,
with a private insurance model. Why not allow the citizens of each county to
voluntarily fund a privately run insurance plan ¡X not to replace the value of
damaged property in cash terms ¡X but to provide the necessary resources for
disaster management and to take responsibility for the direction and management
of this response?
This solution ¡X the private insurance model ¡X has several advantages over the
current system.
First, it allows for the development of much more finely honed communication
channels and logistical organization systems than does the current system of the
military, central government and county governments all just shouting past each
other.
Second, because such an insurance model would have to emerge from the private
sector, there would likely be structural incentives for the continuous
improvement of logistical, communication and general organizational efficiency
due to the presence of market competition ¡V say, between insurers operating in
different counties for example.
Third, there could be no party political fallout from any future disaster with
the resulting implication for rising political tensions across the island.
In short, a private insurance model could be a much more constructive way
forward in respect of preparing for and dealing with such disasters as Morakot
in the future.
MICHAEL FAGAN
Tainan
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Chinese
aren¡¦t going to end the economic crisis
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By Larry
Elliott
THE GUARDIAN
Wednesday, Aug 19, 2009, Page 9
¡¥Chinese President Hu Jintao¡¦s government is petrified by the possibility
that recession will lead to social unrest.¡¦
China is heading for big trouble. Fearful of a political backlash from the sort
of deep recession being suffered in the west, Beijing has embarked on a program
of reckless expansion that is providing short-term gain at the expense of
long-term pain.
This is an unfashionable view. The conventional wisdom is that China has taken
the bold steps necessary to tackle the global downturn, and that its mixture of
Keynesian pump-priming and Leninist centralised control will help drag the rest
of the world back to prosperity.
Strategically, it¡¦s a pivotal moment. It is assumed that at some point in the
21st century, the role of the world economic (and hence political) superpower
will be ceded by the US to China, and that the slump of the past two years will
hasten this process.
Why? Because traditionally it has been the US that has acted as the locomotive
for the rest of the global economy and this time it is China in the vanguard; if
German manufacturers now look to Guangdong rather than the Midwest to boost
their order books, that marks a shift in power.
One half of this argument certainly rings true. The US remains by far the most
powerful nation on earth, but bubble economics and military overstretch have
sapped its strength.
Little wonder, then, that consumer spending is weak. With unemployment likely to
hit 10 percent over the coming months and total hours worked in the economy¡¦s
private sector down 7 percent on a year ago, the US is in no position to act as
the buyer of last resort for the rest of the world.
The US economy has deep-rooted problems: It has a hollowed out industrial base;
it has over-indebted consumers; it has a crippled housing market.
To make matters worse it now has an exploding budget deficit and gently rising
long-term interest rates. There is a very real risk of a double-dip recession in
the US.
As a result, all eyes are now on China. On the face of it, there are encouraging
signs. China¡¦s economy bounced back in the second quarter and on some estimates
grew at an annual rate of almost 15 percent in the three months ending in June.
Put another way, the global economy grew by 1.6 percent in the second quarter;
without China it would have been flat at best.
The optimistic case goes as follows. China is doing the heavy lifting for the
rest of the world by pouring trillions of yuan into infrastructure projects and
by expanding its money supply at a faster rate than any other country. Beijing¡¦s
actions will provide an outlet for exports from the rest of Asia and from
Europe, while giving the US time to recuperate.
This all sounds a bit too good to be true. First, China, despite its explosive
growth in the past three decades, remains a much smaller economy than the US.
Measured by market exchange rates, the size of China¡¦s economy is about 20
percent of the US or the EU, and that limits the extent to which it can act as
an economic locomotive.
Nor are its economic statistics as squeaky clean as they might be. John Makin,
in a piece for the American Enterprise think tank, said China was having a
¡§bogus boom.¡¨ Dodgy accounting practices, he said, meant that goods count as
sold when they leave factories, not when they are actually bought by consumers,
and bank loans count towards GDP as soon as they are disbursed, even if
companies hoard the cash or use the money to buy shares.
Second, China¡¦s growth has been dominated by investment and exports. Consumption
has accounted for a declining share of national output, in contrast to the west,
which means ¡X as the Marxist writer Chris Harman notes in a forthcoming book ¡X
that the colossal increase in production cannot be absorbed domestically.
Instead, the surplus goes into still higher levels of investment or is
channelled into overseas markets.
Finally, it is almost inevitable that much of the stimulus package has been
squandered. While it is comforting to believe that the leadership of the Chinese
Communist Party calmly produced a blueprint for global recovery, the reality is
somewhat different.
Chinese President Hu Jintao¡¦s (JÀAÀÜ) government is petrified by the possibility
that recession will lead to social unrest. As Jonathan Fenby put it for Trusted
Sources, a research group that specializes in emerging markets: ¡§China¡¦s policy
responses to the current economic downturn are being powerfully shaped by
political factors, given the regime¡¦s need to maintain its claim to legitimacy
through growth.¡¨
In political terms, the policy is working. Opinion polls showed that people in
China are far more positive about the prospects for the economy than people in
the west. Economically, though, there is a cost.
Chucking money at the economy will lead to an even bigger problem of
over-investment, an explosion in bad loans and a tendency for a good chunk of
the increase in the money supply to leak out into speculation. Over-capacity and
falling profit rates will mean that many inefficient companies kept alive by the
injection of cheap money will have real problems in servicing their debts.
This approach to crisis management is nothing new. China has responded in the
way that Alan Greenspan did after the dotcom crash: It has solved the problems
of one bubble by creating another.
China¡¦s fiscal boost is being spent on domestic infrastructure projects rather
than on the military spending and the tax cuts favored by former US president
George W. Bush, but by copying what Washington did between 2001 and 2003 Beijing
is running similar risks. The reports of a spate of fake mortgages to buy flats
on bank credit have clear echoes of the sort of malpractice associated with the
subprime scandal in the US.
Fenby warns that China¡¦s path out of the crisis ¡§looks longer and more complex
than the headlines suggest¡¨ and Chinese policy makers are certainly worried by
rising property prices, a doubling in value of the Shanghai stockmarket and the
need to mop up some of the excess liquidity sloshing around the economy. In
June, the China Banking Regulatory Commission warned of ¡§grim credit and market
risk¡¨ as a result of a fall in corporate earnings and excess capacity.
It is encouraging that Beijing is aware there could be big trouble ahead, but
being aware of a potential problem and doing something about it are quite
different.
Tackling China¡¦s economic problems will be tough, unpopular and time-consuming.
But if Beijing ducks the economic challenge for political reasons, the
consequences threaten to be severe. Albert Edwards, analyst with Societe
Generale, says China is now an accident waiting to happen.
¡§If the US in 2007 was a slow motion train wreck with carriage after carriage
coming off the rails in turn, China will at some point soon be pile-driving
straight into the buffers,¡¨ he said.
What¡¦s more, if the recent US experience is anything to go by, the crash will
not be long in coming.
Larry Elliott is the Guardian¡¦s
economics editor.
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