Introduction
“Inflation” is the only word that can be used to describe the global economy in 2022. As can be seen from the “CPI growth for Taiwan and other major countries” chart, the CPIs for Taiwan and other major global economies have risen steadily since 2021. In actuality, CPIs had already risen by around 2% in 2016, were suppressed due to impacts on the consumption economy from COVID-19, and have now risen again and become a core issue for the global economy.
Source: Directorate-General of Budget, Accounting and Statistics, Executive Yuan, https://www.stat.gov.tw//News_Content.aspx?n=2668&s=230044
Although this round of inflation is a global phenomenon, mainly stemming from increased demand, supply shortages, and rising energy prices in the post-pandemic era (*Note 1), and is not a phenomenon limited to one country alone, in terms of public livelihoods, both central and local governments have to handle the pressures brought about by rising prices while also responding to possible public grievances. This is particularly true of local governments, who come into direct contact with public’s first-line responses related to business development and livelihoods.
Using “Smart Power” to Create Continued Service Advantages
Obviously, both central and local governments have their own policy tools. For example, the central government can utilize the central bank to adjust monetary policy in response to economic changes, while local governments have response plans in place to help businesses and the public overcome challenges. However, it is necessary to exert policy influences and not simply roll out policies to see actual results.
Influence can be categorized as hard power, soft power, and smart power. This article will discuss smart power and describe how it can be applied to impacts from economic policies. The term “smart power” was coined by Joseph Nye, a visiting professor at the Kennedy School of Government at Harvard University, in contrast to hard power (relatively coercive policy tools such as military or economic policies) and soft power (which involves shaping influence through culture and creativity). Smart power refers to an integration of hard power and soft power based on different scenarios to form effective strategies. The methods for integrating hard power and soft power depends on each leader’s grasp of different challenging situations (*Note 2).
Inflation is a wide-ranging issue that can only be resolved over long periods of time. For both government and corporate decision-making, the first thing to understand is that one cannot rely on practical strategies or capital investments alone to obtain results. It is also important to be attentive of communication methods and policy designs, to create an environment where “users are supporters,” to see impacts which are naturally more significant.
On the other hand, smart power also emphasizes policy precision. Apart from investing manpower and budgets in policies, what is more important is adjusting practices according to different conditions, so that each unit of policy costs can exert precise influence. The same is true in terms of public livelihoods. It is not enough to blindly invest in subsidies; there is also a need to optimize industrial structures to form effective business policies to create a win-win situation for the two main goals of “policy aims” and “business development.”
Taoyuan City Actively Guides Transformations of Stores and Stalls to Enhance Market Competitiveness in Response to Changes in Public Lifestyles and Demands
After the pandemic, the government actively invested in resources to guide transformations in stores and stalls in response to changes in public lifestyles. Taking the Taoyuan City Government as an example, a renovation plan for stores in business districts was initiated long before the pandemic, which actually helped local stores enhance customer experiences and also garnered favorable reviews from stores faced with difficult market challenges in the post-pandemic and post-inflation era. Starting in 2020, the Department of Economic Development initiated the three-star “Friendly Store Certification” system, which has now accumulated more than 100 high-quality stores. In 2022, 48 stores were certified. It is hoped that promotion of this certification system can allow consumers to find “language-friendly,” “entry-friendly,” “technology-friendly,” “user-friendly,” “friendly dining options,” and “environment-friendly” stores using simple labels and certifications, making for better consumer experiences while also stimulating the willingness of stores to transform and enhance service quality. (*Note 3)
By starting from the key points of consumption motivation, data collection, evaluation, decision-making, customer satisfaction, and sharing, which make up the “customer journey,” the system is not only beneficial for store transformations, but also effectively improves customer perceptions. Digital transformation strategies can also be seen through the Taoyuan City Government’s 2022 “Best Taoyuan Stalls” competition, which used training courses to guide traditional markets in establishing online purchasing platforms, logistics platforms, and digital payment channels. Mobile and electronic payment tools, digital e-commerce or logistics platforms, social media, online activities, and brand images were also included in the judging process (*Note 4).
Additionally, the Taoyuan Department of Economic Development launched the “Stall Renovation Plan” in 2019 to help stalls face future consumers and challenges. Stall needs were divided into basic and advanced levels, and the government provided guidance and suggestions for stalls over different stages, from design of marketing materials, stall experiences, product design, to brand positioning (*Note 5).
Taoyuan’s Innovative “Double Voucher Program” Strategy for Effective Revitalization
Apart from improved infrastructure, markets also require revitalization. In line with the central government’s revitalization policies, Taoyuan intensified its revitalization efforts by utilizing creative designs and strengthening market efficiency. The best example of this was the “Double Voucher Program.” Lottery winners could exchange the quintuple stimulus vouchers distributed by the central government for double vouchers with twice the value, thereby doubling the capacity of the quintuple stimulus vouchers. The public were enthusiastic in their participation, and the first wave of registrations exceeded 1.19 million (*Note 6).
Due to the outstanding results of this program, Taoyuan City launched a follow-up program “10X Happiness for 10,000 People,” a program where people could use their US$6.5 quintuple stimulus vouchers to enter a sweepstakes event for “Double Vouchers” worth US$65. This program attracted an additional 970,000 registrations. More than 2 million people participated in this activity, and the vouchers were converted into local consumption in Taoyuan, thereby creating business opportunities (*Note 7).
Apart from stimulating consumption, revitalization mechanisms also need to be effective for businesses. Therefore, the reimbursement mechanism for the “double vouchers” differed from previous vouchers. On the one hand, the number of exchange channels were increased to encompass 76 farmer and fishery associations and 93 post offices in Taoyuan, and vouchers could be directly converted to cash for amounts under US$651 at specific channels. These mechanisms generated almost US$6.5 million of business opportunities locally (*Note 8).
Faced with the challenges of inflation, the policy tools of both central and local governments inevitably have their limits. However, “effective policies” use “smart power” to ensure effective investment of government resources in public policies, thereby gaining the trust of businesses and the general public, which is the most important infrastructure for meeting future challenges.