Hsu, Jinn-yuh

Abstract
In this paper, I aim to explain the puzzle of why economic integration leads to political separation in a cross-Strait exchange. Being a political economist heavily influenced by Marxist tenets, I argue two things here. First, the base structure, or the economy, is an indispensable element of the politics of cross-Strait integration. More importantly, I argue that the effect of economic integration is an issue of class-based analysis and, accordingly, the struggle between class alliances in varied sub-national regions. In fact, the prevailing model of cross-Strait economic integration resulted in both social and regional polarization in both Taiwan and China. Only a small number of people and regions benefit, and most of the rest, the people and regions, suffer. The arch criminal of the injustice was the zoning techniques, used as common practice in spatial selective disclosure in neo-liberal discourse on both sides of the Strait to attract inward investments. Finally, I argue that the solution to the cross-Strait reconciliation resides in fixing the state’s failure. On the one hand, it has to allow the right hand of the state (capital accumulation) to function. Instead of subsidizing capital to stop it from sneaking to China, the state should render the implementation of globalization strategies easy for the capital. On the other hand, the state should design an institutional mechanism to render the trickle-down effect, both socially and geographically, possible and effective. Rather than following neo-liberal discourse and preferential policies to serve big businesses, the cross-Strait integration should take care of the interests of small and medium sized firms and obsolete regions with taxation and redistribution policies. Only by doing this can a sound and just economic integration infrastructure be expected for cross-Strait reconciliation. The real political reconciliation should be built on a class-cum-region base.