Jon Adams dispatches another excellent piece, this one on the tycoon buffoon handing out money to Taiwan's poor, observing:
Taiwan's per-person wealth may still be far higher than China's, at around $18,500 compared to some $4,300. But growth rates have sagged in Taiwan while soaring to double or high single digits in China. And in the last few decades, the island has seen a growing income gap. (Measured by the Gini coefficient, inequality rose from 0.28 in 1980 to 0.34 in 2006.)There is no capital gains tax and Taiwan's wealthiest can easily avoid taxation. Much of this income inequality is the result of the steady drip of accumulation by the wealthy over time -- in the 1980s the difference between top and bottom wasn't that great, but thirty years of accumulation later....
Like other advanced economies, manufacturing jobs have shrunk as factories move to China and elsewhere. Lower-paying, non-unionized service sector jobs have taken their place. The service sector is now nearly 70 percent of the economy, compared to 50 percent 20 years ago. And since the global downturn, Taiwan firms have been increasingly relying on "dispatch" or temp workers, like Japan and South Korea.
The result has been a new legion of "working poor" or "new poor," as they're called here. They may not show up on unemployment statistics. But they struggle to make ends meet with two or even three low-paying jobs, but no job security.
"Those people cannot get help because they're not ill, or victims of a disaster, and they're not poor by the government's standards," said Taiwan sociologist Chiu Hei-yuan. "So they are just helpless — and they hope to get some unexpected help from people like Mr. Chen."
Twelve percent of the workforce now earns less than $700 per month, and average monthly wages are at 1998 levels, according to labor groups.
Meanwhile, highly-skilled workers in the technology and other sectors pull in ever-fatter paychecks, sharpening inequality between the haves and have-nots. "Taiwan's social welfare system cannot solve the problem of the gap between the rich and the poor — especially the 'new poor,'" said Chiu.
Since everyone is asking whether China could go the way of Egypt (not China, but I bet India has severe problems this year), I thought I'd have a little fun and ask about Taiwan. Taiwan's worsening inequality is a problem, but food prices will likely be more stable here -- as I posted a couple of months ago, Taiwan imports most of its grains and oils, but staples like eggs, vegetables, fruit and seafood are mostly produced locally. Incomes are high enough that food is affordable, unlike Egypt. Taiwan boasts excellent health insurance, a strong manufacturing sector, and relatively low unemployment by global standards. Moreover, its "inefficient" banking sector with strong state interference has minimized the damaged Wall Street has done here. The population has also become an active participant in the democratic process and is getting used to solving problems that way. Further, Taiwan does not suffer from the kind of right-wing religious insanity that Egypt does.
Still, the changes in the working population, income inequality, and so on are likely to have political effects as voters search for a party that can solve them. Political volatility in Taiwan may well translate into swings from one party to the other from election to election.
UPDATE: Anon writes:
Michael, need a correction/update: there's no capital gains tax, true, but the rich generally aren't very good at investing in stocks and the minimum tax law passed in 2006 requires that gains in shares of private companies be counted towards a minimum tax rate of 20%. In other words, investments in hedge funds, private equity funds, venture capital funds, private placement gains, are all taxed at 20%. There may be cheating, but it's exactly that--you're breaking the law, not just merely "avoiding" taxes.
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