Before Troy was destroyed, a priest and a princess had told what it would befall the prosperous citadel of King Priam. Cassandra, his daughter, told the Trojans the Greeks would annihilate Troy. Laocoon, the priest, warned against accepting the Trojan horse as a gift from the Greeks whom he feared “even when they bear gifts.” Well, Cassandra, taken prisoner by Agamemnon, was killed as her captor was slain by his disloyal wife Clytemnestra. Two fearful serpents appeared all of a sudden from the seas off Troy, glided to Laocoon and his two sons, and wrapped their huge serpentine coils around them to crush them out of life, as soon as Sinon, the Greek “defector,” had finished his lie about the Trojan horse at Priam’s court.
I don’t have the ability to prophesize Apollo gave Cassandra. Nor do I want to be a Laocoon. I just wish to warn of a great depression ahead of Taiwan.
History tells us there have been financial bubble bursts time and time again. Robert Harley organized the South Sea Company in 1711 to manage part of the substantial public debt England owed to fight the Northern War in return for the exclusive trading rights in Spain and the Spanish Empire which had been confirmed at the peace table. Offering lower interest rates, the South Sea Company took over the remaining part of the debt not earlier funded by the chartered companies, making as series of stock offerings to finance this undertaking. To create a demand for the stock issues it paid handsome dividends out of the capital – a fraudulent practice – and tendered bribes that may have reached the King himself. The shares rose from 130 pounds to 1,050 pounds in the space of a few months, but as the South Sea Bubble burst suddenly, along with other speculative enterprises in the summer of 1720, financial ruin was brought to countless individuals. The crown itself was in danger because the Court was deeply implicated, and only the masterly defense by Prime Minister Robert Walpole in the Commons’ investigation saved it.
Doesn’t it sound familiar? How about the Great Depression? The stock market crash on October 29, 1929 marked the end of the prosperity of the United States after the First World War. Stock prices plummeted, the losses from 1929-31 were estimated at $50 billion. The worst depression spread to other parts of the world. The Great Depression, that followed, reached its nadir in 1932-33 after Franklin D. Roosevelt had started his New Deal. It did not really end until 1939-40 when the United States began to rearm because of World War II Adolf Hitler’s Nazi Germany started by invading Poland while imperial Japan was trying to bring China into submission by force. (Incidentally, the two countries were the first to recover from the Great Depression by spending an incredible amount of money on military buildup.) Unemployment came to an end only after the United States went to war in 1941, but the American stock market had to wait until five years after the war in 1950 to regain the height of the prices it had before the 1929 crash.
Taiwan survived the Great Depression almost unscathed, because its “foreign trade” was with its colonial master Japan, which did remarkably well to end the unprecedented economic downturn spiral. Taiwan survived the Asian Financial Crisis of 1997, again almost unscathed, thanks chiefly to its near-absence of foreign debt. The current crisis, touched off in fact by the U.S. subprime crunch a year ago and re-precipitated by the sale of Merrill Lynch and the fall of Lehman Brothers last week, is going to grip Taiwan in an unrelenting vise for years to come.
Nobody doubts the Kuomintang administration has been more than well forewarned. Vice President Vincent Siew has been given an extra job of “advising” Premier Liu Chao-schiuan’s Cabinet – perhaps the best qualified in Taiwan – on economic and financial affairs. Some of its members are veterans of the 1997 crisis, but the economy has its own life. Tinkering by economists cannot bring a collapsing economy back to robust life. Vincent Siew, or anybody else for that matter, can crack that hard nut. Of course, the downturn will bottom out, but the question is how long it takes before that bottoming out comes.
It took the mighty United States two decades – and a world war – to get back to the prosperity it enjoyed before the Great Depression. Japan and Germany recovered earlier, but they resorted to militarism for the recovery. Taiwan isn’t capable of emulating them. Besides, it’s an island economy, the mainstay being foreign trade. When the world is suffering from the global depression, Taiwan’s foreign trade will further shrink, if not wither. A closer economic integration with Mainland China will be of help, but the Chinese mainland itself will have an increasingly hard time to survive the crisis of 2008, while President Ma Ying-jeou’s government is trying to shun a rapprochement between Taipei and Beijing which alone paves the way for that relationship.
The remedies the administration is prescribing for Taiwan’s economic woes are Keynesian. It wants more public spending to stimulate domestic demand just as President Roosevelt tried to save the American economy from the Great Depression. There are two stumbling blocks to recovery through public spending. Taiwan, with an unbearable public debt now, can’t raise enough money for the spending it needs. Roosevelt could; Ma Ying-jeou can’t. Foreign direct investment in Taiwan, which has been dwindling fast, will dry up, albeit Mainland China might plough more money into the island, if the rapprochement were in place. With the environment of investment as it is, no one can hope for ample domestic investment. The tunnel of economic hardship is very dark and long, and nobody sees any light at its end.
Don’t get me wrong. I’m not predicting Taiwan’s economic meltdown. I just want to say no matter what the government may do and how hard it may try, the economy will continue to go down in years ahead. The people have to be braced for much worse to come, bite the bullet, and hope the worst would be over at an earliest possible date.
（本文刊載於97.09.22 China Post第4版，本文代表作者個人意見）
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