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159 It is clearly in Taiwan’s interest to keep cross-Strait relations in the paradigm of mutual persuasion and out of the paradigm of power asymmetry . One way of doing so is to consolidate the gains of Ma’s first term and seize opportunities where they exist; that will help foster the PRC’s confidence that someday it will achieve its fundamental objective (“Keep hope alive,”to quote Jesse Jackson). But more seems to be needed in order to strengthen its position in the realms of economics, security, politics, and the U.S. relationship. Such efforts would be beneficial for their own sake, but they would also strengthen the island’s self-confidence, which is probably the greatest point of potential vulnerability as the island contemplates the “shadow of the future” cast by a more powerful China.1 To be sure, the social and political context for a program of self-strengthening is not especially favorable. A predominantly middle-class society, Taiwan has serious points of weakness, many of which are products of its very success in social and economic development. The island’s population will peak relatively soon, so an increasing share of old people will depend on a declining share of working-age people to support them—from a ratio of 7 working–age people to 1 older person in 2010 to a ratio of 3.2 to 1 in 2026.2 Income inequality is trending upward. In 1998, the highest quintile’s average disposable household income was 5.51 times that of the lowest; in 2008, it was 6.05 times. The unemployment rate was higher in the first decade of the 2000s (around 4–5 percent) than it was in the 1990s (1–3 percent).3 The central government budget has been basically flat over the last few years, and although Taiwan’s public debt as a percentage of GDP is relatively low in comparison 8 What Taiwan Might Do to Help Itself 160 What Taiwan Might Do to Help Itself with that of many countries (only about 35 percent in 2011), government debt per capita continues to grow (US$7,453 in early 2012).4 Compounding these problems, the Ma administration reduced taxes on corporations to facilitate their competitiveness, but it has yet to offset the revenue loss and promote fairness by closing tax loopholes. One observer commented: The loophole-ridden system has resulted in reductions in spending on national public works projects and education, contributing to a vicious cycle of national weakening, sluggish economic growth, and a widening wealth gap. The tax system has become the chief culprit in the wholesale theft of Taiwan’s future.5 Whether the political system will summon the will to increase taxes to meet the inevitable demands for increased social welfare spending is an open question . Compensating for China’s growing military power will create a separate set of budgetary demands.6 I confess to some degree of reluctance in offering “advice” to Taiwan on how it might cope with its predicament. On the one hand, I do feel strongly that the leaders and the people of the island can better meet the challenge of China if they remedy or mitigate what I regard as points of weakness. On the other hand, I am a citizen of the United States, not of Taiwan, and there are limits to the liberties that any outsider should take in making suggestions. The choices are really for the leaders and people of Taiwan to make. Moreover, there is value in drawing their own conclusions instead of relying on what foreigners tell them to do. So a tentative approach is in order. Preparing for Political and Security Talks Even though the near-term prognosis for political and security talks may be low, it would still be worth Taiwan’s while, as a precautionary measure, to prepare for them. Obviously, Taiwan would be much more willing to enter political talks if Beijing were willing to accept the 1992 consensus as their basis, but Hu Jintao has signaled that the premise will be the one-China principle as Beijing defines it, something that Taipei so far has refused to accept.7 So the impasse persists, in part because of a fundamental disagreement over the Republic of China. If mutually acceptable progress is to occur on these issues and if China is to stay in the mode of mutual persuasion,then the two sides will have to work harder to close the conceptual gap between...

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