President Ma Ying-jeou met with the 2008 Nobel Laureate in Economics Professor Paul Krugman at the Presidential Office on the afternoon of May 14. The president extended a warm welcome and appreciation to Dr. Krugman on behalf of the government and people of the ROC (Taiwan).
The president noted that Dr. Krugman over a decade ago predicted the Asian financial crisis. In addition, many people have turned to Dr. Krugman for an effective strategy on how to emerge from the financial tsunami and economic recession that have gripped the world over the past year.
President Ma said that last year after Lehman Brothers in the United States went bankrupt the government here initiated a policy of fully insuring all bank deposits, thereby helping to maintain liquidity in the banking system. However, Taiwan's exports then began to be seriously impacted by the economic downturn in the United States and Europe. As many factors are out of Taiwan's control, the government's response measures are unable to address all of the problems. Therefore, the president said that he would like to take advantage of this opportunity to ask Dr. Krugman his views on the matter and hopes to understand what other measures the government can adopt.
President Ma commented that exports comprise 64% of Taiwan's GDP. At a time when export markets are contracting, Taiwan's economic growth is being dealt a significant blow. While the government has referred to suggestions made by Dr. Krugman and has adopted expansionary fiscal policies and largely increased investment in infrastructure projects, the full effects of these initiatives have yet to be felt. The president also noted that the government adopted a short-term measure to stimulate consumption by issuing spending vouchers to the public. President Ma expressed his concern as to when the US economy will begin to recover, and asked what measures should be adopted by emerging Asian countries--which are heavily reliant on the US and European markets--to mitigate the impact of weak demand from overseas if the purchasing power in the US and European markets does not recover to levels seen in the past.
The president remarked that Taiwan's stock market has chalked up an impressive performance over the past several months. While the slowdown in exports and industrial production is waning and the increase in unemployment is slowing, the situation is still far from ideal. He said he looks forward to asking Dr. Krugman his advice on these issues.
Dr. Krugman expressed his appreciation to President Ma for taking time out of his busy schedule to meet with him. He also said this visit to Taiwan is a learning trip for him and that he hopes to hear a wide range of opinions while he is here. He said that he participated in the 2009 International Economic and Financial Forum in the morning and was able to interact with the economists present there. Dr. Krugman said the contribution and function of economists is to provide suggestions at appropriate times to avoid repeating past mistakes that would lead to disaster. In dealing with the current financial tsunami, for example, Dr. Krugman said that if we can avoid bad decisions, then a repeat of the Great Depression of the 1930s will not occur.