Ever since the Taiwan stock market began its dizzying climb three years ago, the question of when it would collapse loomed over investors like a shadow. When it was commonly recognized that prices were overheated, yet the number of firms and investors was constantly expanding, that shadow became even more ominous. People who were hooked on the game only wanted to earn a little bit more and get out in time, while those who had managed to steer clear only hoped that the market would fall while the country's economic system could still handle it.
This March the long-foreseen outcome finally occurred--after reaching a historic high of 12,682 points, the market index began a steady tumble, dropping by some 80 percent as of mid-October. Stockholders, who make up one sixth of the Taiwan populace, had their dreams of "getting rick quick" suddenly shattered, and the air was filled with moans of sorrow and cries for help.
Strapped for funds, many businesses cut back operations and close down. Some investors held onto their stocks hoping for the day when prices would recover, while others took a beating and sold the house and car. High-powered stockbrokers who had switched careers to join investment firms when the market was hot faced heavy cuts in income, layoffs and mountains of debt.
These individual and corporate reactions, like the tolling of lugubrious bells, drowned cut other sounds, including the voice of reason, which considered the rise and fall of the market in terms of the nation's interests as a whole.
"From an individual perspective, the market crash means difficulties and even elimination for some companies, of course, but from an overall point of view, the benefits outweigh the costs," points out Yeh Wan-an, vice chairman of the Council for Economic Planning and Development.
The first benefit is the stemming of worsening inequalities in income distribution. An even distribution of wealth was one of the most prized features of Taiwan's economic miracle, but the prevalence of "money games" in recent years has widened the gap between rich and poor, with the ratio between the total income earned by the top 20 percent of the population and that earned by the bottom 20 percent increasing from 4.69︰1 in 1987 to 4.94︰1 in 1989. The halt that the stock market collapse put to the fever for using money to make money will prevent the worsening of income disparity.
Next, this is a golden chance to improve the soundness of the market. The stock market is an important channel for capital-raising and finance. The first generation of Taiwan entrepreneurs built up their businesses from scratch with solid, conservative management, while the second generation stresses financial management, diversified operations, banking and securities. That is a normal development, but the nation's stock market was too unsound and susceptible to speculation so that with quick profits to be made, some entrepreneurs became caught up in it to the neglect of their own businesses.
"The government should take advantage of the economic slowdown over the next couple of years to overhaul the stock market and set up proper regulation," suggests Norman Yin, chairman of the department of banking at National Chengchi University. He says that overhauling the stock market when prices are high could easily cause a backlash from investors, but to do so now is like a corporation's improving its organization during a recession to prepare itself for the next upswing in the economy.
Even more importantly, the stock market no longer entices crowds of onlookers. Executives have returned to their long-neglected firms, office workers have gone back to their desks and workers to their factories. People seem to have awakened from their wild dreams of instant riches and returned to their senses again. A few of them may still cling to fantasies that the market will set a new high the next time around, but the majority of those who were intoxicated by stock market successes in the past have recalled the old Chinese adage, "You reap just at much as you till."
"During the boom, the stock market could create profits of a month or half a year in a single day, which destroyed the faith of the business sector in making money the old-fashioned way, by earning it," a business spokesperson notes, adding that only with the "Taiwan spirit" in the fore can there be another economic miracle.
Avoiding the ups and downs of the stock market, quite a few companies stuck to what they knew best and developed new products and increased their competitiveness at a time when the NT dollar appreciated, wages rose and workers became harder and harder to find, and they are the ones who have come out the real winners.
"Taiwan is undergoing a challenge to its entire economic environment, but our exports have grown rather than declined. Is that something we could have done if every company had been playing the stock market?" Caspar Shih, president of China Productivity Center, feels it is highly unfair of the media, both at home and abroad, to have created the impression of a nation of gamblers by focusing so much attention on the stock market.
Indeed, even as stock market fever has become a thing of the past, many people on this island have been toiling away quietly at their work. This issue's cover story, "New Life for Native Farm Animals," reports on a project for the preservation of native farm animal breeds that has been going on for three years and is just now showing results.
The Taiwan spirit of diligence, hard work and adaptation to change is the motive power behind economic growth, the force to see us through hard times and our hope for creating a new wave of successes in the future. And the rise or decline of that spirit is more worthy of attention than the ups or downs of the stock market.
[Picture Caption]
Copy editor Elaine Chen (first on left) and contributing editor Theresa Sung (second on left) interview business bigwig Koo Chen-fu and listen to his "prescriptions for an ailing stock market." (photo by Huang Lili)
(Right) For our stories on "New Life for Native Farm Animals," Sinorama reporters trekked to animal research and breeding stations around the island. Staff writer Ventine Tsai (first on left) here visits the propagation station in Hualien. (photo by Vincent Chang)