Taiwan, The Economy

Almost every night the news features at least one story about rising commodity prices. A few extra cents for spinach or milk might not seem earth shattering, but I know how hard my students scrimp and save to get buy. At the school lunch buffet I load up my tray with a bit of everything and am amazed it still costs me less than US$2.50, but I look around at the students. They’re half my age and should be eating twice as much as I am, but they carefully try to keep the cost of their meal to under US$1.50. No wonder they have trouble studying!

A well researched story from CommonWealth magazine adds some complexity to this story.

Its true that, due to increased fuel costs and more expensive imports, the price of some of the staple products used by most consumers have risen dramatically.

In terms of commodity prices, corn, wheat and soybeans have risen 40 percent, 57 percent and 43 percent respectively over the past year. Food prices have risen 23 percent, according to IMF statistics, and the United Nations has warned that there is not enough grain to feed the world

This explains the regular news stories on the evening news. However, put in a wider perspective, inflation isn’t that big a problem for Taiwan.

In fact, although the prices of oil and imported commodities have risen, Taiwan’s price levels are modest when benchmarked against the international community. Fuel prices, for example, are lower than in other Asian countries. And even if prices are on the upswing, the net rise has been mitigated by substitutes found for more expensive imported commodities. Economists and research institutes contend that Taiwan does not have inflation concerns.

Moreover, even though wholesale prices have gone up, tight competition has made it difficult for them to pass those costs on to consumers. The overall consumer price index has only risen slightly.

The real problem, is not rising prices, but falling incomes. Wages are stagnating (“Over the past decade, salary growth has declined, from 4.89 percent in 1997 to an estimated 1.29 percent this year.”), the gap between rich and poor is increasing, and economic growth is lagging behind other countries with similar economies. But even more importantly, for understanding my students at Dong Hwa, there are increasing regional inequalities within Taiwan:

In 2005, average disposable household income in Hualian County ranked fourth lowest among Taiwan’s 23 counties and cities. In 11 of the island’s 23 cities and counties, average household disposable income levels actually fell in 2006 compared to the year before, and the decline was felt in both agricultural and industrial areas.

Needless to say, Aborigines are especially hard hit since they live in agricultural areas and migrate to the industrial areas for work.

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