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May 28, 2017

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Sunflower Movement manifests global trend of income inequality

While the Sunflower Movement has its Taiwan-specific causes — most prominently the anxiety over mainland Chinese influence — the protest and the public discontent it represents are the manifestations of a more global trend of income inequality.

In addition to opening Taiwan's service sector to mainland investors, the controversial Cross-Strait Trade in Services Agreement is more fundamentally an extension of an economic cooperation agreement. Liberalization generally favors businesses with higher competitiveness, which in many cases means those with more capital. Conglomerates mostly fare better than mom-and-pop shops in the globalized economy.

During Taiwan's "economy miracle" from the 1950s to the 1990s, the success of local capitalists were to a substantial degree translated to the improvement in living standards of the Taiwanese majority through increases in workers' income and national wealth. The public, in return, supported pro-business policies that they could see as beneficial to their own interests. The exodus of Taiwanese manufacturers to nations with lower labor costs such as China, combined with Taiwan's sluggishness in building high value-added industries due to its overdependence on low-profit margin high-tech contract manufacturing, resulted in a decade-long income stagnation.

To make matters worse, local capital moves from job-creating investment to the purchase of limited commodities such as real estate, driving up home-prices, just as the rise of populous emerging markets such as mainland China and India drives up food and gas prices. As a result, a generation of people who saw their parents fulfill their dreams of economic independence and home ownership found themselves disfranchised by society. The millennials, Taiwan's best educated generation in terms of college enrollment rates, found themselves underpaid and underemployed. In this light, it would have been a surprise if the younger generation maintained their parents' faith in pro-business and pro-trade policies.

One can tell that income inequality has become a major issue when a book on the statistics and history of world inequality gains blockbuster status. The new book by French economist Thomas Piketty, titled "Capital in the Twenty-First Century," recently received global attention and was compared by prominent pundits as a watershed work. Nobel economics laureate Paul Krugman described it as "the most important economics book of the year — and maybe of the decade."

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