Can Taiwan survive a depression?

Ma is following the worldwide Keynesian approach in an attempt to get Taiwan out of its economic woes. But the economy differs from country to country, and there's no guarantee that a strategy that works in one will work in another. The United Kingdom coped with the Great Depression differently, for instance. Its coalition National Government was forced to abandon the gold standard, which it said was indispensable for economic survival and to which the United States continued to adhere for two more years. Ironically, the failure to keep the gold standard helped the British economy. The value of the pound fell about a third in relation with other currencies which thus reduced the price of British exports and made it easier to find customers for them.

The National Government adopted no massive program of public works construction to create employment and stimulate demand as did most other industrial countries. John Maynard Keynes, the celebrated British economist, demanded the government to organize or plan economic development in vain. It belatedly provided, in 1934, token help for particularly distressed areas; it tried to persuade industrialists to locate factories in them and spent small amounts of money to subsidize training centers and other services. In addition, it encouraged private schemes of “rationalization” to reduce production in the most afflicted industries.

The Great Depression in Great Britain ended shortly before the German invasion of Poland in 1939 to begin World War II, and a basic shift took place in the British economy, away from the export-oriented heavy industries in the north to a variety of light manufacturing industries and service trades in metropolitan London and nearby counties. Unemployment in these sectors which served the domestic market was less. The middle class grew in numbers, while the cheapness of the industrial raw materials and food which Britain imported contributed to an economic revival in the mid-1930s. The prices for meat, grain, and cotton fell even more than did those for the industrial goods which Britain sold. A relatively small volume of exports would pay for a large quantity of imports.

Japan was among the first to recover thanks to its heavy investment in war industries, while unemployment was removed as a problem after the Mukden Incident of 1931, albeit it led the land of the rising sun to build an empire in Asia soon to be lost in the Second World War. So did Adolph Hitler's Nazi Germany. Moreover, the Keynesian strategy did not work all the wonders it promised in the United States.

Instead of blindly following the global trend, Taiwan should develop the way that besds fit it to survive its impending great depression.

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