Thursday, 13 August 2009

Contra State Sponsored Central Banking


The articles this week by Crystal Hsu and Joyce Huang on the interest rate bill making its’ way through the legislature are commendable for not marginalising the objections to this irresponsible piece of legislation.

I sincerely hope that the free-market side of such political conflicts will continue to feature in the reporting of Ms Hsu and Ms Huang.

Yet it simply isn’t enough.

The current crisis concerns more than merely credit. It is a crisis of politicial economy resulting from the expansion of the State into more and more areas of society during the 20th Century. Monetary policy and the establishment of central banks have been at the centre of this, and it is therefore vitally important that the argument is put for their complete abolition.

Without a central bank, Taiwan would be in a unique position to allow the establishment of a free banking system in which a number of competing, commodity or asset based currencies could be established. Without State interference in the establishment of a market in banking services, the people of Taiwan would enjoy greater price stability and economic growth.

However, the vital corollary to the establishment of a free banking system is the wholesale reduction of the welfare state. The government of Taiwan simply cannot continue to take up 30% or more of GDP – it is simply outrageous. The existence of the central bank and its’ borrowing and lending activities is a key aspect of this Statist drag on Taiwanese society, but there are others whose importance cannot be minimized.

To begin with, I should like to see editorials in your publication putting the argument for the abolition of State funding for education, and for the abolition of the National Health Insurance scheme. Together, these two areas of Taiwan’s welfare state represent a colossal defrauding of the people of Taiwan.

There are far too many Universities in Taiwan. When every potential recruit to a business has a University degree, the market value of those degrees drops to something close to zero – and yet parents regularly get into debt for these useless emblems of status.

The National Health Insurance scheme insures continued employment for poorly performing healthcare practioners and continued profits for pharmaceutical companies both of whom are made immune from the discipline and cheaper prices of free market competition.

The argument for the free-market instead of the State, which is also the argument for civil society instead of political cannibalism, must be made on many fronts concommitantly. Free-market reform of monetary policy is of central structural importance, but free-markets in education and healthcare are vital for the pursuit of values that are felt daily by the people in Taiwan. Without free-market alternatives, civil society in Taiwan is doomed to a future of war and privation.

Yours sincerely,

Michael Fagan

(Sent: Saturday March 21st 2009. Unpublished by the Taipei Times)