Taiwan and Globalization

By Justin

(Editor’s note: At a recent meeting, the question was asked whether globalization has been a good thing for all the people of the world if it just served the very wealthy corporations. More specifically, we addressed the question of whether globalization has worked to raise the living standards of “the East” even if it has meant that jobs and living standards of “the West” get lowered. One of our members, Justin Lin offered some initial observations and then followed up in an email with the following more detailed description of his understanding of his origin nation of Taiwan. Justin’s analysis is both informative and interesting. He has graciously permitted his thoughts to be shared with the group via this post.)

 

Taiwan and globalization

 

While Taiwan's living standards have risen quite dramatically since the 1950s and are, on average, better than the standard in China, even today it is not on par with Canada. In Taiwan, the cost of an average breakfast is around 2 dollars, as a rough sense. Even though our GDP per capita (on PPP basis) is roughly that of Canada's (I was very surprised when learning this), the quality of living through the eyes of Taiwanese that I've met, what's reported in the media, and those of my relatives don't paint a rosy picture.

 

Taiwan has a fairly export driven economy - a major part of its industry focused on assembly, processing. The island is fairly resource poor - partly the function of the size of the island. I lived close to a processing campus/zone and my mom worked there. Goods from various Japanese companies come to Taiwan to be assembled before being shipped to the world market. Taiwan still accounts of a large chunk of the consumer electronics manufacturing output. At one point, something like 80% of the routers are manufactured or assembled by Taiwanese companies. Many of these companies are OEMs, doing the work for other companies behind the scenes. Globalization has vastly benefited Taiwan, as it did Singapore, Hong Kong, and South Korea.

 

But globalization is also a double-edged sword. Taiwan's economy has also suffered a great deal from the rise of China. Taiwan lost its competitiveness in cost of labour to China, and from the lower end, is being squeezed out by the rise of Vietnam and other parts of Asia. From the upper end, Taiwanese companies did not develop the high-end precision manufacturing to compete with German and Japanese companies, does not have the marketing and branding expertise to compete with Apple and Samsung (as an example). I have a friend who works as trade show interpreter for Taiwanese companies and, according to her, the number of Taiwanese companies showing to international trade shows is decreasing across industries.

 

As Taiwanese living standards have moved up and wages rise, those that work in the processing plants are foreign unskilled workers from Vietnam and the Philippines. Taiwanese people have mostly moved on to managerial roles, but some companies have moved manufacturing to China and now even that's a bit too expensive - some have moved to other Asian countries.

 

I left Taiwan after completing grade 8 (it's been 20 years). The formal education system has a militaristic feeling, and back then we were segregated into 3 tiers based on grades, with different expectations from teachers. I was in the second tier, but know some in the first tier or some who are very close to it. They were drilled hard - bars are set on how high their scores need to be (darn close to perfect), and they get beat each time for missing them. Teachers were pressured by parents to keep those standards. But I say all that to say, of all those high performing pupils, I don't know of any who are in a job they really enjoy or felt it was a very good use of their talents and the serious training. The situation isn't much better for the 3rd tier either. They are content, but feel something's missing. The first tier doesn’t understand what was the point of working so hard in their youth.

 

The Taiwanese education system has changed as the cultural norms change in a similar way to the west. Teachers are now barred from physical punishment. Parents, perhaps themselves the victim of strict discipline from before, are vocal about protecting their children. Universities flourished due to deregulation, with the government's goal to let everyone have the chance to go to university if they choose to - this is in much counter to the gruelling days of the university entrance exams. As such, universities mushroomed in numbers. Some colleges are now universities and the number of university graduates rose dramatically, too. Academic inflation set in, employers don't know how to choose between one bachelor degree from another, except the very top schools. Many students then decide to get their master's as a base requirement. The average salary entering the workforce has stagnated, from what I hear.

 

Even though Taiwan's economy is considered advanced now and it became a high tech economy earlier than China (manufacturing LCD panels, etc.), it focused very little on software creation, missing a big piece of the pie. Taiwan is also not part of the WTO and lives under the shadow of China's influence. It makes moving upmarket a bit harder, but I think more importantly, it hindered on the Taiwanese people's imagination. A country that constantly receives visits from leaders of major countries, as one reads about in the press - US president, German chancellor, Japanese prime minister, might feel more internationally relevant. But the sense of imagination is different. I felt the Taiwanese are starved here, too. Globalization has been a blessing and a curse for the Taiwanese. A lot of this is anecdotal and from the media, but I hope it's "directionally correct" in pointing out Taiwan's ills and globalization's role in it. It's a bit complicated. I think globalization is both a cause for trouble, but also its best remedy for prosperity.

 

China and prosperity

 

I think during the discussion, a gentleman (Elias is his name?) made the point that China had lifted up 300 million out of poverty, and is quick on the rise to be number one in the world, that India is also on the quick rise trajectory, and that China is on track to overtake the US in GDP terms, and China is likely going to dominate the world in place of the US.

 

That could be true, but I think it may be helpful to add some footnotes on China. It has roughly 4 times the population to the US, so if it is only 25% as productive as a nation, its total GDP will surpass that of the US. (According to the World Bank, in 2015, the USA per capita in ppp terms is roughly 56,115.7, while China's is 14,450). It's quite likely that China will reach that goal, but it wouldn't necessarily mean its citizens have the same standard of living as in the US.

 

I tend to be a bit uneasy with future projections. China was growing very quickly (double digit growth rate in GDP terms) since the 80's, but it has slowed. This is to be expected as hyper growth occurs as a matter of "catching up" to advanced economies, driven largely by government and private sector infrastructure projects - roads, houses, power generators. As China gets wealthier it is having to focus less on economic spending driven mostly by infrastructure and more on an economy driven by its residents' consumption and the need to create value based on R&D rather than capitalizing on existing methods around the world. Therefore, its growth should slow and track closer to that of advanced economies.

 

As the economy slows, the government is finding it harder to escape problems that citizens have been asking for but were willing to disregard due to the focus on economic growth - corruption, air pollution, pay iniquity, inequality between urban and rural development, and last but not least, some form of self determination politically. The issues in Hong Kong, Tibet, and Taiwan come up from time to time also. These were easier to brush aside during fast growing economic times, but are resurfacing now.

 

In addition, the time to choose the next leader of China is also coming this year, but the process by which the leadership is chosen is both opaque and fraught. The downfall of Bo Xilai and his followers a few years ago is an example of this. The men were charged on the basis for corruption and Bo was sentenced to life imprisonment. Left wing media, critical of this move by the party, were shut down. The event's timing and Bo's position as a possible contender to Xi Jinping had many suspect this is Xi's way of consolidating power, and so far it seems Xi continues to consolidate power. It is unclear what his intent for this influence is, but his contention with the strong Maoist movement continues. In addition, it's unclear that China has rid itself of the Bad Emperor problem, too.

 

Daron Acemoğlu, in his book "Why Nations Fail," argues that an open market system tends to work well with an inclusive political system (the democratic system with market economy is an example), and that co-existing systems where one encourages open competition and inclusiveness while the others do not are not tenable. Communist countries that embrace market economies tend to open up politically over time. China has been very clever in its way of allowing privatization of the economy while maintaining an authoritarian state, but this is another point of tension. As the Chinese people grow into habit of determining their own economic fate, setting prices, and amassing economic influence, it remains to be seen if they will be equally willing to be barred from exercising more influence in the political system.

 

All of the above adds to the uncertainty of China's rise. I do believe they have much opportunity for growth and are slated for it, but I am not sure it would be as smooth or as quick as some may project. As well, I think it's important to understand that when China's economy has grown larger than the US, it may have less to do with living standards than sheer size of the population.

 

One indicator of greatness of a nation or any region is immigration flow (this idea comes from Amy Chua's "Day of Empire"). History has seen many examples where the "success" of a region corresponds with the infusion of smart and ambitious immigrants. To my knowledge, China hasn't been the destination of such immigrants that want to make China their home. The “Chinese Dream” does not inspire them. I would be more assured of China's greatness should this occur.

 

Counter intuitiveness

 

This is a very rough idea I have and it's really still being formed. But it keeps coming back to me so I thought to write it down. Please feel free to poke holes in it and help me improve on it.

 

It seems to me that the modern life, especially urban life, feels increasingly counterintuitive. Or perhaps I should say it doesn't feel intuitive, and a lot of our view of the world comes from tuition - education and being told what to do and what not to do.

 

When there were a few slow cars, driving was fairly intuitive - you'd basically check your surroundings before crossings. There were no traffic lights, signs, and few traffic laws. There were little paved roads and you could mostly stop wherever you'd like. Driving in a modern city isn't so. Stopping anywhere on the side of a busy street is a hazard for all. Different traffic norms emerge depending on the locale, too. I drive a bit differently in Toronto than in Waterloo. Driving tests get more stringent each year as more and more take to the road, including immigrants who bring their habits to cities.

 

There are other examples of additional cognitive load. In the last few decades, lifetime job security has become scarcer. People would have to worry about job switching more. Company pension plans are becoming scarcer, and employees now have to make additional choices about where to invest their money and how to plan for retirement. They'll need to keep up with the trends in rising life expectancy, financial markets.

 

Add to this the distrust in institutions (churches, governments, financial institutions, news organizations), and the rise in individualism with technologies that empower the individual (the internet and PC) yet at the same time bring unfiltered multifaceted viewpoints without guidance, and lack of transcendent ideals (say, fight for liberty in the world wars), and the market economy driven specialization, I've a sense that the burden on an individual is greater, or at least compared to my parents' time and place of growing up. I've not found a good way to articulate it, but it seems with all this cognitive burden while being ever disconnected from the community results in loneliness (perhaps as seen from the rise in mental illness), discontent, and further divide.

 

I think my idea of this ill is similar to what Yuval Harari calls the problem of "disembodiment". When we can't navigate the world through some level of intuition and by engaging in all senses, it feels a little bit un-grounded, and little by little, I think it chips away at a sense of self efficacy and makes the world feel more uncertain, and when one is fearful of loss of one's way of life (financial or cultural), it becomes harder to see commonality with another, and easier to create a divide. This does concern me quite a bit, but I've not been able to learn enough about it or articulate it well yet. Please excuse my very rough thoughts - I welcome your feedback.

 

(Editor note: Here are some links to sources that have informed some of the above analysis, as provided by the author.)

 

China's contentious leadership selection process:

http://www.scmp.com/news/china/policies-politics/article/2063097/why-chinas-communists-struggle-succession-planning

 

One of the article's from a special report on China:

http://www.economist.com/news/special-report/21600797-2030-chinese-cities-will-be-home-about-1-billion-people-getting-urban-china-work

 

Labour unrest in China:

http://globalriskinsights.com/2016/03/china-faces-rising-risks-from-labor-unrest/

 

 

(Editor note: The section below was cut out of the original piece to improve flow. However, it does include important points as well.)

 

Tech's inherent tendencies in driving inequality

 

Digital technologies have some tendencies, as I understand, that exacerbates inequality.

 

Music, words, once digitized, can be kept at very low cost, and copied and transmitted at negligible cost. What used to be mere vibrations in air and almost as ephemeral now has a permanent record (ha!). One used to need local musicians to hear music, but no more. In classical music especially, when orchestras around the world play the same piece, why listen to any other orchestra but the best, like the New York or Berlin Philharmonic? Or for that matter, pop stars that sing popular songs.

 

The rise of search engines also adds to this phenomenon. Most people when shopping on Amazon or searching on Google looks at only the few top results. Being the first place has huge payout. The second place, much less so. The expansion of the marketplace coupled with still finite human attention adds to the "winner takes all" phenomenon.

 

Search engine and fake news

 

I think it's also interesting that Google has become the de facto editor of our web. Through people searching for news on Google and Facebook, technology companies that had their business model set on monetizing attention without journalistic ethos are curating our worldview, themselves under market forces. It makes me slightly uneasy. I think journalism is still very much necessary, but to compete with Google's business model of "free" can be challenging.

 

The public's attention was on TV and Newspapers, but has been shifting. Almost all companies have their own website, and marketing on Google is fairly simple. The online advertisement business model is different, and newspapers find it hard to sustain theirs as ad dollars shift away from them. I wonder if part of the fake news phenomenon is driven by the news organization's instinct to survive - without "spicy" content to grab a consumer's attention, they might not be around to serve up the news. (I saw Page One - a documentary about the New York Times' transformation - a sad but interesting look at the change. The Times is one of the more capable and in some ways, more progressive newsprint organizations)

 

(Editor note: Here is a source provided by the author for this section.)

 

On digital technologies favouring "winner takes all", I read "The Second Machine Age" by Erik Brynjolfsson and Andrew Mcafee:

https://www.amazon.ca/Second-Machine-Age-Prosperity-Technologies/dp/0393239357/ref=sr_1_1?ie=UTF8&qid=1490323838&sr=8-1&keywords=second+machine+age

Write a comment

Comments: 2
  • #1

    Justin (Sunday, 23 April 2017 22:56)

    Thanks Tess for the great editorial work and making sense out of my incoherence. I appreciate it very much. : )

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