Transforming Taiwanese Economic structure in the 20th Century
Taiwan is the 17th largest global economy, 14th largest exporter and 16th largest importer, and also the third largest economy to be holding foreign exchange reserves, that are more than 180 billion US dollars. In the second half of the 20th century, Taiwan witnessed increased agrarian output because of the land reforms that were initiated, under the Chiang Kai shek’ rule. The 1960s saw a creation of export processing zones with attractive incentives for foreign investors. There was a gradual shift in emphasis from agriculture to technology because of several advantages that Taiwan presented in the international markets, and clearly in the 1990s, Taiwan made strong efforts to liberalize its own economy, in an effort to become part of the World Trade organization (WTO). All these proactive changes have led to making Taiwan a country with one of the highest standards of living.
Taiwan has become part of Asia’s tiger quartet along with South Korea, Singapore and Hong Kong. The gross GDP of Taiwan has witnessed a constant growth and the nation has had one of the fastest growing economies in the past five decades. Taiwan is acknowledged to have witnessed an economic miracle. Today, Taiwan produces the fourth largest amount of hardware globally, and leads production in the semi-conductor industry. Taiwanese products are sold worldwide and are known for their extraordinary quality. Slowly, the Taiwanese government is seen to be promoting a knowledge-based economy and also furthering modernization rigorously in pursuit of transforming the Taiwanese economy into a Silicon island with high value addition capabilities in terms of production.
Before colonization, Taiwan was under the Qing rule, with barely evident governance structures in place and was more a kind of settlement economy. The Taiwanese economy during this period barely had any form of direction or purpose, other than subsistence for its people. However, this changed under the Japanese rule and Taiwan became an agrarian economy and also and open economy as well.
After the Second World War, Taiwan was under the Nationalist regime and turned towards industrialization as a solution for export substitution. The foundations laid during this time went on to serve Taiwan in good stead in the years to come, over a much longer period of time. Taiwan slowly converted itself into providing modern manufacturing systems and is one of the biggest in the information technology products.
All through the course of the twentieth century, Taiwan was regarded more as an exemplary nation, be it as a model colony, or a model duplicate of China, or a model for development. This notion that was held about Taiwan is one that has been approved and admired by both political leaders as well as academicians alike. The idea of Taiwan having experienced an 'economic miracle' garnered extensive currency base in relation to its rather swift and unrelenting economic growth as well as structural revolution post the 1960s. In addition, since the early years of the 1980s, political developments, specifically the evolution of Taiwan as the first Chinese democracy, had dedicated increased attention on the role played by the nation as a model for political transformation in various other parts of the Asian sub-continent.
Regardless of this, most part of the history of Taiwan during the course of the twentieth century has been distinct, and several of the prerequisites of the economic modernization of Taiwan and its political evolution may possibly not be freely replicable in any other part of the world. Taiwan has been extensively revered as the “leading member of the family of East Asian 'miracles'.”
With the progress of time, the East Asian economic downturn has resulted in a reconsideration, making a few observers to shed increased light upon the transient character of this sudden success, and also highlighting the vulnerability of the Taiwanese system to systemic blows caused by 'globalization,' of which Taiwan is in a rather advanced stage.
The economic policies that were seen in the colonial Taiwan were a result of Taiwan being a part of the Japanese empire. However, after the Second World War, the local government had more freedom in policy making. Policies would be effective only when they are in a condition to proactively inspire apt responses from the private sector of the economy. Right through the former century, Taiwan was known to have witnessed an active governmental role in economic modernization, and this was very autonomous and highly effective.
The change in the Kuominting approach towards Taiwan created a much larger political space for implementation of industrialization strategies. The State, in the aftermath of the war, displayed increased interest in becoming industrialized and encouraged the private sector. This attracted investment and shaped the Taiwanese industrial structure, which helped Taiwan in its effort to cope up with globalization and even endure global economic upheavals in a much better fashion, than what it could earlier.
Next was the three-step land reform that was implemented between the years 1949 and 1953 in Taiwan. All the reforms that were implemented in Taiwan predominantly had their roots in the colonial Japan’s land reforms. All these various things together resulted in an unusually equivalent distribution of land and turned out into being highly instrumental and beneficial not just in the promotion of agricultural development in terms of productivity, but also in reallocating revenue in favor of the people belonging to the lower-income groups.
Another highly debatable aspect that has a pivotal role to play in the discussion related to Taiwan’s economic development is that of the inputs that reached Taiwan from the mainland. A few believed that the gold shipment that arrived in Taiwan in the year 1949 had aided dramatically in the stabilization of its economy, while a few others contended that the financial support offered by the United States, coupled with the policy of high interest rate was what helped in the Taiwanese economy to gain stability.
There was also a considerably inflow of technical professionals into Taiwan during this period. In addition to all these, the influx of more than 1.5 million immigrants from various parts of the world who filled both the civil as well as the military service employment positions in Taiwan resulted in a demand-pull inflationary scenario in the economy.
Of particular interest in the discussion of the success of Taiwan’s economic development and stability is the aid that the United States offered, which essentially had three different and highly constructive indicators to the Taiwanese economy.
The first of these three positive impacts that the aid offered by the United States had upon the economy of Taiwan was that it helped in breaking down the formerly present development deficit through a budget support.
The second positive impact was that, the aide received from the United States resulted in a very supportive announcement that was made in the year 1961, according to which the United States, while backing the popular Nineteen-Point Economic and Financial Reform Program by way of an excessively enhanced lending policy, economic aid on the other hand would be concluded by the year 1965. The last and the final effect was the institution of a structure that has its foundation in the Joint Commission on Rural Reconstruction (JCRR) as well as on the farmers' associations, as it is aimed to serve as an extremely beneficial framework for promoting economic democracy in the background of regionalized decision-making, the institution and expansion of rural credit opportunities, and finally the spreading of technological advancement in agriculture as well as also the rural non-agriculture sector.
The financial support received from the United States, the geopolitical alliances that Taiwan had with the Western nations, as well as the divide between the sub-ethnic groups of people living in Taiwan have all had significant effects on the development of the indigenous private sector of the Taiwanese economy.
Taiwan’s move to explore export markets during the 1960 resulted in its economy to soar, which had otherwise recovered from the damage caused by war as early as in the late 1950s itself. This policy to explore export markets was followed by another policy aimed at industrial deepening that was introduced in the 1970s and yet another one that focused on diversification and industrial upgradation, which was introduced during the 1980s.
In each of the episodes of the above listed policies that the Taiwanese government introduced, perceived economic downturn was seen as the common rationale for the elite policy makers to have devised and implemented such economic policies. Yet, regardless of so many new policies having been introduced, the direction of the market as well as the economic structure, the pattern of ownership, and the industrial composition experienced hardly any change as a result of such policies.
Using the lessons learnt from the agency of economic support of the United States, the Taiwanese technocrats identified the maximum number of market opportunities and also implemented schemes that predominantly conformed to the market incentives to nurture industrial entrepreneurship within Taiwan. In addition, the same group of technocrats even worked towards steering the course of the overall economic development of the nation.
The approach taken towards foreign capital in Taiwan is less nationalist when compared to the cases of Korea and Japan, and the same had thus been less troublesome for the Taiwanese economy at large, with specific relevance to the acceptance of globalization. The fin de siècle crisis, which had tried testing the robustness of several developmental models of the Asian sub-continent had concluded Taiwan being a powerful economy that has successfully stood this test of time and had turned out into an exemplary model for other economies to replicate.
Works Cited
Information Division, Taipei Economic and Cultural Office. Taiwan's Economy. 2006. Web. 04 April 2016. <http://www.asianinfo.org/asianinfo/taiwan/pro-economy.htm>.
Ranis, Gustav. "Taiwan's success and vulnerability: Lessons for the 21st Century." Greene, Robert Ash and 1. Megan. Taiwan in the 21st Century. London: Routledge, 2007. 37-53. Web. 04 April 2016. <http://www.econ.yale.edu/~granis/papers/Taiwans-success.pdf>.
Tun-jen, Cheng. "Transforming Taiwan's Economic Structure in the 20th Century." The China Quarterly 165 (2001): 19-36. Web. 04 April 2016. <http://www.jstor.org/stable/3451104?seq=1#page_scan_tab_contents>.
