Taiwan's China Times editorial article said that the global COVID-19 pandemic has worsened and the impact on economic activities has not been relieved. While the economy is still at a low tide and the visibility of the prospects is also low, the stock markets of many countries have shown a strong upward trend. The Taiwan stock market reached a 30-year high last week, but the debt of governments in various countries has risen sharply. In the future, the world and even Taiwan may have to face a larger income gap and it is more difficult for the government to have the strength to support the lives of the middle and lower classes with the social security system.
The global economy will recession by 3 to 5% this year, and Europe and the United States will recession ranges from 5 to 10%, which is destined to be a negative growth situation. In the past, mainland China, which could maintain a growth rate of more than 6%, will only grow by more than 1% this year. There has been a consensus among all walks of life that this year was the worst year since the Great Depression in the 1930s, and the situation was worse than the global financial tsunami in 2008.
The stock market performance is relatively strong, completely contrary to the old saying that "the stock market is an economic window". After a sharp drop in March and April, the U.S. stock market has now "recovered lost land", and the Nasdaq index, which represents technology stocks, hit a new high; mainland stocks have also risen strongly, with Taiwan stocks rising above 12,000 points. Compared with the financial tsunami period, US stocks fell halved to around 7,000 points, and Taiwan stocks fell from more than 9,000 points below the 4,000 point level. This time the stock market trend is obviously contrary to the economic situation. The reason is that central banks of various countries have issued ultra-low interest rates and even zero interest rates, and at the same time they have also injected a lot of liquidity and funds into the market. Therefore, it is the capital market that drives the stock market.
Monetary easing expands the gap between the rich and the poor
This practice of supporting the market with low interest rates and abundant liquidity funds is the mainstream policy of central banks in recent years. Especially after the financial tsunami, major central banks around the world have lowered interest rates to zero to negative interest rates, and also promoted the so-called QE (quantitative easing). Their thinking is that by supporting the stock market, they can maintain wealth effects and allow enterprises to continue to operate, which will ultimately be beneficial to the economy and the general public (employees).
However, the consequences and sequelae are also very obvious: widening the income gap and worsening class mobility, which triggered the "Occupy Wall Street Movement", and even populist forces in various countries rose. Similar to the United States and Britain's Trump and Johnson became the president and prime minister, and Britain's Brexit was all related to this. The economic recession in the second quarter of this epidemic is as high as double digits, with an unemployment rate exceeding 10%, but the stock market performance is extremely strong. The beneficiaries will be the few people with high assets and high income, and the income gap will further widen.
widening income gap not only poses a challenge to social fairness, but also affects the growth potential of economics. The global economy performed the best, known as the "Golden Age", was from the post-war period to the 1970s, when countries had a small gap in income and high economic growth. But after the 1980s, Reagan, the United States and Mrs. Thatcher, the United Kingdom, came to power, turning the world to low tax rates, small government, and privatization, and liberalization and loosening became popular terms. Reagan reduced the maximum personal tax rate from 70% to 28%, and almost all public businesses in the UK have gone to privatization and privatization.
In the future income gap will worsen
This set of "supply-face school" economic policies is also called "neoliberal" economic thinking. It is not hesitant to use tax cuts and tax benefits to benefit the rich. It believes that the rich will increase investment and consumption after benefiting, so that the poor will also benefit the poor and the whole people will make profits. Some people also call this a "drip economy" (or infiltration economy). After more than 30 years of experimentation, this set of economic policies has had the sequelae of the serious widening of the income gap. After Trump came to power, he promoted a major tax cut. The epidemic has also greatly increased the government's debt, and the income gap in the future will worsen.
Taiwan's income gap is roughly more than 6 times, which has deteriorated 4 or 5 times in the early years according to the five-point classification method. If we look at the "Finance and Taxation Center of the Ministry of Finance", the highest income is compared with the multiple of the lowest income of 5%, which was only 32 times in 1998 and 99 times in 2013, and the problem is even more serious.
After Tsai Ing-wen's government came to power, she said "we should help young people", but many actual policies did the opposite. For example, the tax reform tailored for high income users has significantly reduced the dividend income tax rate, and has issued tax amnesty for overseas wealthy people and Taiwanese businessmen to return to Taiwan, and use the money from the treasury to subsidize corporate investment.During this epidemic, many reliefs proposed by the government have been significantly overwhelmed. Even the four treasures of Formosa Plastics can receive 1.9 billion yuan in poverty alleviation funds. Formosa Plastics is "sorry" to receive it and does not apply.
At the same time, Taiwan’s unemployment rate has risen, and the dilemma of low wages remains unchanged. Last year, the actual salary was still "regressed for 16 years", and the low-paying people are mainly young people; and the high housing prices that once caused a whole generation of young people to suffer, although they have claimed to be the short market in the past five years, the actual housing prices have not dropped much, and now housing prices are ready to move again. Many policies of the Tsai government have activated housing prices intentionally or unintentionally.
In the era of the epidemic, the economy will fall into the "mediocre era", with government debt increasing, income gap widening, and young people in the dilemma of low wages. If the government wants to do something, it should abandon neoliberal thinking and policies, let high incomes pay more taxes, and at the same time suppress housing prices that may rise again. This relief policy has already implied the thinking of negative income tax. Whether to implement a negative income tax system in the future should be evaluated and thought.
