Rusty Taiwan and Declining America
The 2024 U.S. presidential election is almost settled within the past few weeks. No one is discussing whether Trump or Biden (with Biden announcing his withdrawal today and endorsing his vice president Kamala Harris to replace him) will win, but rather how we should face a world where Trump has risen to power for a second time. Trumpism may seem distant to us, but the current state of America could be a glimpse into Taiwan’s future.
The impact of Trumpism on Taiwan is not just about America’s return to isolationism. Taiwanese politicians should heed the warning signs: our heavy reliance on the semiconductor industry, the real estate sector becoming the “economic engine,” and the slow pace of industrial upgrading. These factors will have severe long-term repercussions, and we are alarmingly indifferent to them.
The Majority Abandoned by Political Elites
From January 2021 to the end of 2023, Biden’s first three years in office saw an average annual real GDP growth rate of around 3.4%. Even after the post-pandemic recovery ended in 2023, GDP still grew by 2.5%. During the same period, the S&P 500 index soared by 23.8%, setting 69 new record highs. These are the impressive growth figures Biden touts. However, a December 15, 2023, report from the U.S. Department of Housing and Urban Development revealed that the number of homeless people in the United States has exceeded 650,000, a record high since the data was first collected in 2007. The U.S. Census Bureau’s December 2022 report indicated that 37.9 million Americans lived in poverty in 2021, with an official poverty rate of 11.6%.
Taiwan’s official numbers remain impressive, with the low-income population decreasing for ten consecutive years, accounting for just 1.25% of the total population in 2022, translating to a poverty rate of less than 1.3%, far lower than most countries. “How can the world keep up with Taiwan?” However, statistics from the Child Welfare League Foundation from 2017 to 2022 show that 11.73% of children inherit poverty, and 230,000 students carry an average student loan of $2,700 per year, meaning they accumulate over $10,000 in student loans over four years.
Even ruling legislators do not think these official numbers are problem-free. DPP legislator Fan Yun pointed out in 2022 that although Taiwan’s poverty line is set at 60% of median disposable income, consistent with many countries, qualifying for “low-income” or “middle-low-income” status involves many additional conditions. Fan Yun exemplified that these stringent and unattainable conditions prevent those in actual poverty from being legally defined as poor.
Wu Yande, the operations manager of the Life Taste Cultural Construction Association, tells this sad story: homeless people on the streets, without household registration or combined family income, are clearly too poor to afford rent but cannot qualify as middle-low-income. According to National Taiwan University sociology associate professor Huang Kexian’s book “Precarious Lives: The Social World and Support Networks of the Homeless,” the number of homeless people in Taiwan, based on recent data and narrower calculations, is about one in 7,700, higher than one in 25,000 in South Korea and one in 32,000 in Japan. In Taipei, the ratio of the homeless population to the total city population in 2020 was one in 4,200, higher than one in 16,000 in Tokyo and one in 10,000 in Seoul. The increasing number of homeless people around Taipei Main Station is evident, stretching from the station to the overpasses. As societal gears turn faster, they are left behind, abandoned on bustling streets.
After eight years of the Tsai Ing-wen administration, you are told that the Taiwan stock market has grown 1.6 times, closing at 21,258.47 points on Tsai’s last day in office on May 17, “dominating the Asian stock market.” Behind this lies the longest-ever intervention by the National Financial Stabilization Fund, allowing speculators to avoid risks. When the stock market was around 14,000 points, the National Financial Stabilization Fund intervened from July 13, 2022, to April 13, 2023, for 275 days and 181 trading days. Historically, the fund only intervened when the market dropped to 8,000 points, but it has now become a tool for politicians to embellish inflation.
Tsai’s administration claims that Taiwan’s economy has shown resilience and steady progress during their tenure. Over the past eight years, Taiwan’s average economic growth was 3.1%, outperforming Singapore, South Korea, and Hong Kong, and achieving the best performance in East Asia, also exceeding the global average growth rate. Per capita GDP surpassed $30,000 in 2020, showcasing Taiwan’s economic achievements. However, most people feel, “What does the stock market breaking 10,000 points have to do with me?” “So what if it breaks 20,000 points?” “Why hasn’t my salary increased despite significant GDP growth?”
Ten years ago, the opposition criticized the ruling Ma Ying-jeou administration for “governing by numbers,” only seeing figures, not people’s feelings. Eight years ago, we chose a change of parties, and eight years later, the only difference is who reports the numbers.
The America we see is the cash-rich Wall Street in New York, the tech-savvy Silicon Valley, and the star-studded Hollywood. But how much do we know about the rest of America? In the completely capitalist and trade-liberalized system created by political elites, factories began moving to Mexico, China, Vietnam, and other third-world countries in the 1980s, seeking cheaper capital and labor. The blue-collar class lost everything in this game. Were they not hardworking enough? Were they too lazy? Too stupid? Or did they simply have no access to avenues for self-improvement?
Influenced by the First and Second Industrial Revolutions, the education system at the time emphasized standardization and was shaped by factory owners’ demands for a disciplined and uniform workforce. This led to education designed to train obedient and punctual workers. The education philosophy at the time emphasized the virtues of hard work, discipline, and respect for authority. These values were crucial for shaping a labor force that could contribute to industrial society’s economic growth. Moral education in schools often included the importance of diligence and the benefits of a stable, hardworking life. They were taught that a skill could support them and that pursuing a stable salary was worthwhile. However, in the face of greater interests, the elites living in opulence chose to abandon them. Middle-aged “hillbillies” lost their jobs, while political elites in far-off Washington and business elites immersed in Wall Street’s stench didn’t care about their voices, let alone provide them with job retraining opportunities. Cold-blooded Social Darwinism tells you, “Survival of the fittest, elimination of the unfit.”
Trump’s chosen running mate, J.D. Vance, grew up in such an environment. Vance is relatively lucky; despite being born into a family plagued by alcoholism, violence, and drug problems, he turned his life around after joining the military, attended Ohio State University, and even Yale Law School, becoming a venture capitalist in Silicon Valley. However, most people from the Rust Belt are not so fortunate, with “hereditary poverty” playing out repeatedly.
Isn’t Taiwan similar? When the government puts all its efforts into the semiconductor industry, our society is divided into the tech elites in Hsinchu Science Park and the general public struggling with a monthly salary of $1,000 to $1,300. The world sees the glamorous TSMC, but how many Taiwanese have nothing to do with these three letters? Forty years ago, under U.S. pressure, Japan signed the U.S.-Japan Semiconductor Agreement, limiting Japanese semiconductor exports to the U.S. and expanding U.S. semiconductor market share in Japan. Subsequently, South Korea seized the opportunity, establishing the Korea Advanced Institute of Science and Technology in the 1970s and 1980s, developing semiconductors with national strength. To avoid falling behind in this crucial field, the Chiang Ching-kuo government established TSMC in 1987. Thirty years after the global demand for advanced process chips surged, we are reaping the rewards. However, what kind of future have the governments post-democratization planned for us in the next 40 years? Are we truly prepared for life 40 years from now?
The Disappearing Middle Class
In 2006, the American middle class faced a crisis of disappearance. At that time, surveys showed that the number of people with moderate incomes, earning $25,000 to $75,000 annually, was decreasing yearly, while both those earning less than $25,000 and more than $75,000 were increasing, creating an “M-shaped society.” Nearly 20 years later, the collapse of the middle class has become a global phenomenon, and Taiwan is no exception.
According to Pew Research Center senior researcher analysis, the proportion of middle-income families has significantly declined, from about 60% in 1970 to just 50% in 2010, continuing to decrease since then. Of the 10% decrease in middle-income households, a higher proportion moved to higher-income brackets. More and more Americans (29%) are classified as “ALICE families” (Asset Limited, Income Constrained, Employed), who have stable jobs but limited assets and income, struggling to make ends meet without qualifying for subsidies.
Brookings Institution John L. Thornton China Center director Cheng Li noted that the proportion of the American middle class has plummeted from 70% in the 1970s to less than 50% today. Li said studies show that only the top 20% of income earners have benefited from globalization, while the remaining 80% have seen no significant income growth since the 1980s.
Born in China and residing in the U.S., economic sociologist He Qinglian analyzed the Trump phenomenon in 2016. She stated that in the 1950s and 60s, middle-income American families typically had the husband working and the wife as a homemaker, raising three children. The husband’s income alone was sufficient to buy a house, own two cars, and still have money for vacations. Nowadays, for a median-income family of three to four people, purchasing a $200,000 house requires a down payment of $20,000 to $40,000 and monthly payments of about $1,400 for the mortgage, property tax, and insurance. Additionally, monthly expenses for food, clothing, and services are about $1,200, with car loan payments of $700 per month. If they need to pay for their health insurance, it costs about $4,000 to $5,000 annually, leaving almost no money for vacations. In the past, America prided itself on a middle-class-dominated social structure that contributed to social stability, promoted consumption, and stimulated economic development. However, the current shrinking middle class has become an unavoidable issue. In the face of ineffective or indifferent political elites, their anger will be placed on extremist candidates.
As J.D. Vance stated at the Republican National Convention, “Biden’s support for NAFTA sent countless good jobs to Mexico; Biden’s trade deals with China took away American middle-class jobs.” Whether it’s 100% accurate or not, it reflects the current sentiment of the American middle class, and Vance is merely voicing it.
Taiwan faces a similar situation, with the wealth gap soaring from 16.8 times 30 years ago to 66.9 times today. In recent years, severe inflation will inevitably alter the middle-class standard. The middle class must cope with household expenses, limited capacity to increase revenue through more clients, limited income growth, and the erosion of assets due to uncontrollable incidents. The middle class will soon face an unavoidable collapse, turning into a survival battle for individual families.
Limited Land and Booming Real Estate: The Start of Economic Decline
During elections, candidates love to propose various housing policies, such as housing subsidies and mortgage incentives, to attract young voters. However, the housing market continues to heat up, with prices rising. According to actual transaction data, the new “Youth Housing Loan Program” introduced by the DPP government resulted in an average residential price increase of over 5% across the seven major cities within nine months, with Hsinchu County and City seeing the highest increase of 11.2%, raising the average price per ping by $1,100, and total price increasing from $46,000 to $51,000, an increase of $5,000.
If buying a house is unaffordable, renting should be possible. However, data from the Directorate-General of Budget, Accounting and Statistics in early May showed that the rent increase of 2.34% was the highest in 15 months, contributing positively to the CPI increase. Reasons include higher living costs for landlords, rising residential maintenance costs, and higher interest rates, increasing housing holding costs.
In Taiwan, landlords have low responsibilities, and real estate almost always retains or increases in value. Combined with the traditional East Asian cultural view of “owning property” as a life goal, people like to “hoard houses.” By the end of 2022, Taiwan’s home ownership rate was as high as 84.6%. In contrast, in advanced democratic countries like Germany, the national home ownership rate is about 43%, already lower than the world average of about 60%. In Berlin, the home ownership rate is only 15%, with 85% of residents choosing to rent. In Germany, landlords have many obligations, including not being able to arbitrarily raise rents, with increases allowed only when rent is lower than similar properties, and not exceeding 20% over three years. Moreover, once tenants settle in and pay rent on time, landlords cannot evict them without cause. If tenants find that the residence needs repairs, they should notify the landlord, who must then carry out the repairs. If the landlord fails to do so, the tenant can repair and request reimbursement or deduct the cost from the rent.
In Singapore, where land is also scarce, the real estate environment is shaped by government policies, land ownership structures, and programs ensuring affordable and accessible housing for citizens. About 80% of Singapore residents live in public housing managed by the Housing & Development Board (HDB). The HDB provides housing that meets basic living needs for low-income families. Additionally, Singapore’s unique housing governance structure includes the Central Provident Fund (CPF) mechanism and the robust implementation of the Land Acquisition Act, allowing the government to acquire land for public purposes to ensure land use aligns with national interests. In land-scarce Singapore, all land is state-owned, with the government leasing land to individuals and entities, including freehold and leasehold properties, most residential properties being leasehold (typically 99 years). Furthermore, Singapore implements a tiered progressive tax system on property transactions and income to curb speculative demand.
After the late 1990s Asian financial crisis, Singapore’s economy entered a period of strong growth. In 2000, Singapore’s economy grew by 9.9%, driven by the electronics industry and a global demand rebound. Manufacturing, wholesale and retail trade, and services significantly contributed to this growth. The government actively promoted diversification into high-value-added industries such as biotechnology and financial services to reduce reliance on traditional manufacturing risks. Even during the 2008 financial crisis, Singapore’s economy quickly rebounded, achieving 15.2% growth in 2010 due to strong exports and a resilient financial sector. In contrast, Taiwan’s economy has stagnated since 2000 due to domestic and international factors, including declining global demand for electronic products, increased competition from low-cost manufacturing centers in China and Southeast Asia, and over-reliance on a single industry.
Beyond housing justice issues, the economic foundation built on real estate speculation will backfire under declining birth rates, as China’s current situation demonstrates. After the CCP established its regime in Beijing in 1949, it nationalized land and implemented a planned economy. It wasn’t until the 1980s, under Deng Xiaoping, that economic reforms began, including real estate and land speculation. In 2003, the Chinese State Council declared that “real estate has become a pillar industry of the national economy,” propelling the real estate market into high gear, with prices continually rising. By 2020, the value added by China’s real estate industry reached a historical peak of 7.5 trillion yuan, about $1 trillion. If viewed as an economy, China’s real estate sector is roughly equivalent to the GDP of Mexico or Indonesia, ranking around 15th globally. However, by mid-2022, developers’ debt defaults, starting with Country Garden, triggered a series of unfinished building incidents, severely impacting the Chinese economy to this day.
According to data from the Directorate-General of Budget, Accounting and Statistics and the Central Bank, by the end of August 2022, Taiwan’s mortgage, renovation, and construction loans related to the housing market totaled $390 billion, accounting for over 50% of Taiwan’s GDP. If China constructed its economic boom post-reform through real estate, how can Taiwan ignore this lesson? However, the government leads the housing speculation by selling state-owned land.
Taiwan’s local governments, aiming to generate more tax revenue, began auctioning state-owned land, claiming it was to balance finances. In 2021, total land transaction value reached a record high, with 20% coming from government land sales. According to Business Weekly, 13 out of 22 counties and cities joined the public land auction, covering over 80% of Taiwan’s population, including all six major cities.
When the Minister of the Interior myopically promotes “real estate as the economic locomotive,” emphasizing that the real estate economy drives upstream industries like sand, glass, steel, and cement, as well as downstream industries like decoration, furniture, and real estate sales, and even claims that Taiwan’s “mountain range of national security” includes not just TSMC but also real estate, how can Taiwan achieve industrial upgrading? How can it have forward-looking future planning? When young and middle-aged people only aim for the unattainable goal of homeownership in their limited time, how can they devote time and energy to entrepreneurship, creativity, and exploring various future life and emerging business models?
AI Replacing Repetitive Jobs from the Industrial Revolution
The Occupational Safety and Health Administration recently reported that the number of food delivery workers in Taiwan tripled from 45,000 in 2019 to 145,000 in 2022. The average age of food delivery workers in Taiwan is 26, with about 70% working full-time, earning an average monthly salary of $1,300. This compares favorably to the starting salary of less than $930 for college graduates, making food delivery an attractive option.
In a sluggish industrial upgrading environment with low wages, young people need to find ways to cope with high inflation. In Taiwan, about 86.1% of delivery workers choose this job primarily to earn more income. The gig economy offers a quick way to make money, appealing to young people seeking immediate financial returns. The gig economy is often promoted as offering workers “freedom” and “flexibility,” allowing them to arrange their work hours and workload independently, a major attraction for young people. Some young workers are drawn to the gig economy because it provides a way to escape traditional employment constraints. They do not want to be bound by fixed working hours and seek a lifestyle where they control their time better. It’s not just young people; middle-aged unemployed individuals also turn to this low-cost industry to sustain their family life.
However, such jobs are inevitably doomed to be replaced in the age of artificial intelligence. Studies show that delivery work, including courier services, is one of the jobs most likely to be automated, with a 94% chance of being replaced by AI technologies in the future. This is because unmanned vehicles and drones can perform delivery tasks without human intervention. AI is transforming logistics and delivery services by optimizing routes, managing orders, and even automating customer interactions. Companies are increasingly investing in AI-driven systems to enhance efficiency and reduce operational costs, which may lead to reduced demand for human delivery workers.
A few years ago, the ride-sharing economy brought Uber to Taiwan, sparking significant backlash from the traditional taxi industry. Uber’s advanced algorithm technology matches vehicles in real-time, allows drivers and passengers to rate each other, and includes real-time positioning systems, collectively maintaining the riding experience and environment while offering greater safety assurance. Moreover, the original idea of ride-sharing was for regular car owners to give rides to passengers with similar routes during their commutes, with passengers sharing some costs, achieving a win-win situation. Due to consumer demand for more convenient and higher-quality services, they are more inclined to use emerging service platforms like Uber. The traditional taxi industry, which operates under a license and quota system requiring additional exams and certifications, felt pressured by this market shift and considered the new industry “unfair.”
Meanwhile, across the strait, China is already changing the transportation landscape. Apollo Go and Pony.ai are gradually launching trial operations in 20 cities, including Beijing, Shanghai, Chongqing, Jinan, and Wuhan. Their common feature is driverless technology. Driverless technology will change not only the taxi market but also the car rental market. In the future, these two markets will merge, and people will no longer need to get licenses, buy cars, or hire drivers. They need only pay for a subscription through an app to get on the road. Wuhan plans to deploy 10,000 driverless Apollo Go vehicles by the end of 2025. On the Pacific coast of the U.S., Cruise has been operating in San Francisco for seven months and started trial operations in Los Angeles this spring, attracting over 50,000 registered users. Despite the technology not being fully mature and existing related concerns, this is the foreseeable future.
We are at a critical crossroads leading to two paths. Do we want to be like Singapore, where everyone’s wealth increases and AI-era challenges are embraced with constant innovation? Or will we divide the nation into two blocks, with the majority living in the same inability to keep up with changing times, placing their anger on populism, as seen in a declining America?