Laureate sees ROC's promise

This article was written by Annie Huang and published by the Taiwan Journal on April 27, 2007. It reports that Finn Kydland, 2004 Nobel Laureate in Economics, recently visited Taiwan and participated in an economic forum with domestic officials and businesspeople. Kydland had a generally positive outlook regarding Taiwan's economic growth potential despite challenges presented by China's rise.

Kydland was invited by Taipei-based Chinese-language Economic Daily News and the Chung-hua Institute for Economic Research, a government-sponsored think tank. He is currently professor of economics at the University of California, Santa Barbara.

In his speech, Kydland pointed out that innovation and capital accumulation are the only ways to boost economic growth. The best governments are those that adhere to consistent policies. This can be illustrated by the growth in Ireland's economy since 1990, to which the government's stable taxation system has made a strong contribution.

Kydland suggested that when drawing up policies for Taiwan's economic development, the government should try to avoid inconsistencies, but still reserve room for unpredictable global factors. This is because globalization is a dominant trend, and Taiwan is not outside the international community.

Concerning the "three links" between the two sides of the Taiwan Strait, Kydland admitted that his understanding of politics is limited. However, he thought that any obstacle to trade is unnecessary. He also suggested that the government in Taiwan should lift restriction on transportation and businesses of its citizens.

Some argued that China's growing economy and its magnetic effect has influenced the United States, Japan and some European countries. Due to its geographical closeness with China, Taiwan is the country mostly affected by Chinese competition. Many local industries have moved to China, leading to reduced investment in Taiwan, which further restricts the nation's job opportunities and economic growth.

In response, Kydland pointed out that China is facing a widening wealth gap and has to adjust its policies accordingly. Taiwan should not worry too much over short-term issues. The economy will continue to grow as long as Taiwan sets forth policies that encourage innovation and investment and undertake industrial upgrading. Given that any country's economic growth will become sluggish after maturing, Kydland predicted that Taiwan's current difficulties will be only temporary, and its economy will soon return to rapid growth.