20101126 Is Taiwan following Ireland into disaster?

Is Taiwan following Ireland into disaster?

By Huang Tien-lin 黃天麟

In recent days the Irish government has been facing a financial crisis, and has had to look to the EU for aid. The European Central Bank and the IMF are reportedly preparing to make available a sum of 85 billion euros (US$113 billion).

Ireland was once held up by the Chinese Nationalist Party (KMT) as an exemplar of economic development. In early 2006, the pro-China press in Taiwan, the mouthpiece of the KMT, touted the success of Ireland, asking why Taiwan couldn’t achieve success in the same way. It was a weapon with which to attack the cross-strait policy of the Democratic Progressive Party (DPP), in power at the time. Then-Taipei mayor and current President Ma Ying-jeou (馬英九) made a study trip to Ireland and, on his return, declared the Irish Experience a model for economic development.

In 2008, when the KMT took power again, the Irish experience took on more concrete import. Their decision to adopt a fully open policy with China, including the signing of the Economic Cooperation Framework Agreement (ECFA) and allowing Chinese students to study here, was part of their plan to replicate the “Irish Miracle,” and turn Taiwan into the Ireland of East Asia.

But is the Irish Miracle possible here? It appears to be happening right now, something that Ma is evidently quite proud of. Talking to the crowd at last weekend’s rally for the five special municipality elections, his rhetorical question about whether the crowd thought the KMT was responsible for the 9.98 percent economic growth figure was met with rapturous applause. It similarly lapped up his statement that next year would see an average per capita GDP of US$20,000. To set the record straight: This impressive growth rate follows a rebound from a slump equally impressive in the depths it plumbed. If the growth weren’t remarkable, we would have been in trouble.

Unfortunately, the miracle in Ireland lasted but a few years. It was prosperity without a firm foundation, it was short-term profit, and there now gapes a sudden sinkhole of hardship and loss in its place. The abundant money that once poured in has taken flight, and Ireland’s GDP contracted by 7.1 percent last year, with more contraction yet to come. The streets of Dublin are not paved with gold, they are lined with closure signs and properties to let. House prices have plummeted by 50 or 60 percent, and the banks have been left with bad mortgages on their books. The market value of the Bank of Ireland has gone from more than 2 billion euros in early 2007 to less than a tenth of that now, and is still falling.

The Irish Experience plugged by Ma and co has turned into a nightmare. Are we to follow the same ill-fated route? The omens are already here. Behind the impressive 9.98 percent growth rate is a hollowing out of Taiwan. With entire production lines moving to China, people are losing jobs here and our youth are leaving in search of employment in China. The policy of opening up to China has meant countless Taiwanese businesses in China stand to make more money in the short term, but it has also led to spiraling house prices here and widening income disparity. As far as Taiwanese manufacturing is concerned, the signing of the ECFA is akin to popping economic Viagra: We may be able to perform shockingly well in the boardroom for a time, but at the cost of sapping our basic reserves. Give it a few years, and the Viagra won’t do us any good, we’ll have exhausted ourselves. It is at this point we’ll be whistling the same sorry tune Ireland is now hearing, as jig turns into dirge.

We can avoid this by voting to remove the people who are taking us down the same route Ireland has gone down.

Huang Tien-lin is a former national policy adviser.