Tuesday, February 01, 2011

A tale of greed and bad governance

In terms of wealth per capita, Taiwan remains far ahead of China and certainly does not need help from across the Taiwan Strait to deal with poverty, especially when that help comes with unificationist propaganda

It’s hard to tell which is more embarrassing — that hundreds of Taiwanese would prostrate themselves before a wealthy Chinese tycoon so they could receive a “red envelope” from his hand, or the fact that after two-and-a-half years in office, President Ma Ying-jeou’s (馬英九) administration has failed to look after the economic well-being of its own people.

A visit to Taiwan this week by Chinese recycling magnate Chen Guangbiao (陳光標, pictured above), ostensibly on a “thanksgiving” tour to hand out an estimated NT$500 million (US$17.2 million) to Taiwan’s poor, initially sparked controversy when it was revealed that said envelopes were embossed with the inscription “the Chinese race is one family (中華民族一家親).”

Whether this was intentional or not, this gratuitous inscription raised the twin specters of “Han” chauvinism and the Chinese Communist Party’s united-front tactics, this time not by throwing money at Taiwanese corporations, but rather at its underprivileged.

To be fair, once we look past his proclivity for ostentation, Chen has already donated millions of dollars to China’s destitute, which is a testament to his generosity. That said, despite a relative shift in wealth across the Taiwan Strait, Taiwan’s GDP per capita is still five times higher than that of China and the latter has hundreds of millions of people who have yet to be lifted out of poverty.

My op-ed, published today in the Taipei Times, continues here.


mike said...

Happy New Year Michael...

I assume the TT will be taking a break this week?

As you know, I appreciate your stance on defense issues in particular, though I disagree strongly on other things. I trust you don't mind the comments and criticisms I offer from time to time - I'll stop if asked - but in the meantime, I take exception to this:

"...wealth distribution, especially in a rich country like Taiwan, is solely the remit of the government."

No it is not, or at least, it ought not to be. It is properly the remit of free markets, which is what we do not have, as in the correct, "negative" sense of freedom rather than the easily corruptible, "positive" sense (as I try to explain in more detail in this post).

For example, although the occurrence of sticky wages is partly due to market factors, it may also be due to the poor (particularly immigrants) not enjoying the legal freedom to negotiate contractual terms that better suit them, especially with regard to wage and salary increases.

Anyway, I expect you'll have little interest in arguing the toss about this with me, so I'll leave it there.

新 年 快 樂!

J. Michael Cole 寇謐將 said...

Hi Mike: I knew you'd hit me on this very sentence! Of course I don't mind your comments or your disagreeing with me; this is healthy, and I certainly would not ask you to stop doing so.

A very happy new year to you too — and yes, I get two days off for LNY, then will use the annual leave I didn't use last year, as those days expire on Feb. 28.

You seem to have more faith in the ability of free markets to self-regulate. I fully agree with you that part of the problem is, as you write, "poor (particularly immigrants) not enjoying the legal freedom to negotiate contractual terms that better suit them, especially with regard to wage and salary increases."

My question is: Should not the more permissive legal environment you refer to be regulated by the government? I don't think we can leave it to the private sector to flesh out the parameters in terms of wages and so on. Almost every week we have stories in Taiwan about large firms abusing contract workers on overtime, pay, &c.

In terms of wage disparity, countries that have slightly more socialized and interventionist governments — like in Canada, for example — tend to have more equitable (though by no means perfect) distribution. Conversely, unregulated "free markets" will, in my understanding, lead to widening disparity, with a few sickeningly rich and loads of destitute.

mike said...

To take your second point first, I would say two things:

First, although "equity of income distribution" is a commonly held ethical premise by which to judge the "success" or "failure" of markets, I think this is a dangerous mistake for several reasons, the most salient of which in this context is its conflation with concern for the poor. To want to alleviate destitute poverty, and to want more equitable income distribution, is to want two separate things with the unwarranted assumption that the latter is the only or the best means to achieve the former.

Second, poverty, via unemployment, is brought about by distortions to the structure of both capital and labour markets consequent to monetary and fiscal policy - in addition to regulations. In respect of regulations, it is not only the quantity, but the nature of those regulations and to whom they do and do not apply that has critical import for the poor and their ability to help themselves out of poverty. (There are several unpackaged claims there, which I leave unpackaged for the sake of brevity).

Regarding your first point, your question as to whether a "permissive" legal environment should be regulated - no, although certainly there must be "meta-level" legal recognition of self-ownership and property rights.

The reason we hear stories about large firms abusing contract workers is, aside from cultural reasons*, because inequality is built into the nature of the contracts with workers having very little say, if any at all, in how those contracts are to be written. The answer is not to have the Labour Affairs Council or some such other agency regulate these contracts on the workers' behalf (since the LAC can only presume [and often incorrectly] the preferences of workers, and may or may not be vulnerable to corruption) but to allow workers the freedom to partake in negotiating these contracts - in some cases this may be done by unions (e.g. where supply of labour is high relative to demand), but in others it may be done by individuals and/or agents they freely choose from a subsidiary market for such agents.

*The cultural dislike of confrontation, especially between persons of higher and lower status, is as I'm sure you appreciate, an important problem which not only buttresses the unequal "positive" liberty of employers and workers in regard to the legal composition of contracts, but which also retards the flow of communication and feedback leading to other problems in the workplace.

Anonymous said...

Hi, 寇謐將
I like you writing and insights. You articles are are my English composition teachers.

Happy Chinese New Year.

Steve said...

I think Chen's visit would have been much more interesting if people had just ignored him. If opponents of the KMT (in particular) hadn't made a celebrity figure out of him, he could have gone around distributing his red envelopes in relative obscurity. And then no-one would have to give a damn what he chose to write on them.

mike said...

Edit: (sorry - a slight linguistic malfunction on my part) - when I said "unpackaged claims" above I ought to have said "packaged" or "unsubstantiated" or some other such synonym.

I need to find a stronger tea...

Steve: an interesting point, but I disagree; not that Chen shouldn't be free to say such things, but that there may be educational value to be derived from seeing such views challenged in public.