Concluding Remarks

國

立 政 治 大 學

‧

N a

tio na

l C h engchi U ni ve rs it y

118

isolation, and the production of knowledge and innovation. However, in recent years the government has been unable to produce the same high growth rates as in the past, which can be seen as a natural process now the economy has reached the levels of a high-income economy (Table 3.4).²²³ This would not be a very serious problem in other countries, however, in Taiwan, where people has grown used to compare their country’s economic performance with that of South Korea, it remains clear that governments since that of Chen Shui-bian have not been able to effectively compete with their Korean counterparts in that regard (Figure 3.4).

What is undeniable is the fact that the independent approach followed by Taiwan has converted the island in one of the main investors in Mainland China and Southeast Asia, and still maintains the country as one with the largest international reserves in the world. Its success during the industrialization process in the island, made the government aware of the need to maintain this approach even after important critical junctures, as the energy crises of the 1970s, and the challenges posed by globalization, including the 1997 AFC. Although a generation of more neoliberal-minded technocrats arrived to the government during the 1980s, policymakers in the island maintained a consensus regarding the importance of state intervention for the maintenance of economic growth and competitiveness. Intervention became more moderate, and private corporations gained a larger voice, however the dynamics imposed by the independent approach have continued working during the first decades of the 21^st century.

3.6. Concluding Remarks

A historical assessment of Taiwan’s industrialization process will let us see how the island was saved from the fate of other countries in Southeast Asia that suffered the effects of European colonialism through its incorporation into the Chinese orbit. After being used as a

223 Taiwan is a country with a high income level, at least measured by the GDP per-capita, in purchasing power parity dollars (PPP). According to the CIA World Factbook Database, the figure for Taiwan in 2017 is $49,500, above developed countries like Germany ($48,200), the United Kingdom ($42,400), Japan ($38,900), and South Korea ($37,900), among many others; online, https://www.cia.gov/library/publications/the-world-factbook/rankorder/2004rank.html#tw

‧

立 政 治 大 學

‧

N a

tio na

l C h engchi U ni ve rs it y

119

large producer of sugar by Dutch colonialists, decades after its first contacts with Portuguese sailors, Taiwan escaped the dangers of becoming a monoculture economy when Zheng Chenggong first, and the Qing authorities later, diversified its production base and deepened the island’s economic links with the provinces in Southern China.²²⁴ Hence, Taiwan entered the 19^th century as a Chinese outpost, being mostly self-sufficient and producing rice, sugar and tea for export to the rest of China. As a part of a backward and late-industrializing nation, Taiwan started to promote its first industrial development under the rule of its first provincial governor, Liu Mingchuan. However, a more sustained development was experienced after its incorporation into the Japanese Empire in 1895. In this sense, Taiwan also escaped the fate of other parts of China, subjected to the turmoil caused by a weak Qing Dynasty, revolution and the chaotic Warlord Era, which provoked even more economic backwardness and poverty in most of the country.

The monopolies created by the Chinese authorities were continued by the Japanese rulers, who used them to boost agriculture production, seeking to convert Taiwan into a provider of commodities, mainly sugar and rice to Japan.²²⁵ Under Japanese rule, the island saw the first industries flourish by the hand of the state, with large Japanese corporations at the top, and a handful of small and medium enterprises owned by the local population. This model would later be replicated after Taiwan became a province of the Republic of China, and later the seat of the Nationalist government retreating from the mainland. The large corporations, once owned by the Japanese zaibatsu and the government, were now possessed by the KMT government. The alliance with the United States also provided a motivation to avoid making the same mistakes as those leading to its defeat in the mainland, besides technical and financial assistance to achieve those ends. Path dependence is evident in the way industrialization in Taiwan took place after WWII, with an autonomous developmental state using the instruments at its disposal to encourage an import-substituting industrialization model first, and later an export-led growth model, keeping some strategic industries under the control of the state, while promoting private sector participation through a myriad of SMEs. This was possible through the control of the financial system, with most of the banks under tight government control. It is in part due to those characteristics, that the

224 Seiji Hishida, op. cit., 270-273.

225 Ronald G. Knapp, “Chinese Frontier Settlement in Taiwan,” in Annals of the Association of American Geographers. 66:1 (March 1976), 43-59.

‧

立 政 治 大 學

‧

N a

tio na

l C h engchi U ni ve rs it y

120

Taiwan’s independent approach to industrialization resulted in a more equal wealth distribution, as compared to other industrialization processes, especially those in Latin America.²²⁶

After the success of the initial stages of industrialization, the developmental state in Taiwan encouraged the development of heavy industry, with mixed results, and later emphasized the need to create more local technology-intensive industries. In the late 1970s and early 1980s, when Mexico was struggling to recover the path to sustained economic growth and was pressured to completely liberalize its economy, the state authorities in Taiwan were confident enough to intervene in the economy in order to promote the development of domestic technology sources. The participation of the state, and its emphasis of letting the industry to act motivated by profit, made the private sector respond positively to those policies. Taiwan was successful in its independent response to the globalization challenges, becoming one of the main producers of semiconductors and other advanced computer technology in the 1990s and 2000s.

With the advent of democratization, the prevalence of the neoliberal credo in international affairs, and the big success of Taiwanese corporations at home and abroad, the state in Taiwan saw its position weakened. However, through its control of finances it was strong enough to be able to dictate the pace of economic liberalization, seeking to open the economy, but trying to minimize its negative effects, in order to make the domestic industries and business more competitive internationally. The critical junctures during those years, particularly the 1997 Asian Financial Crisis, convinced policymakers not to abandon the independent approach, but also made them aware of the future difficulties in case of rejecting some of the ideas behind the integrationist approach. Many sectors were finally liberalized, but others remained relatively protected, and a few were still considered strategic, hence deserving more state support, although with more discrete mechanisms. Technology-intensive industries continued to thrive at the beginning of the 21^st century, and exports remained a large engine of economic growth in Taiwan. As a way to maintain competitiveness, the government allowed companies to invest heavily abroad, making the island one of the main investors in mainland China and some countries in Southeast Asia. It

226 See Gary Gereffi & Donald L. Wyman (eds.), Manufacturing Miracles: Paths of Industrialization in Latin America and East Asia. (Princeton, NJ: Princeton University Press, 1990).

‧

立 政 治 大 學

‧

N a

tio na

l C h engchi U ni ve rs it y

121

was this situation, combined with the deepening of the integrationist approach followed by the Mexican state, which led to many Taiwanese companies to gain interest in investing in Mexico, particularly in technology-intensive industries, as a way to remain competitive globally and have an easier access to its largest consumer market, the United States. The next chapters will reflect further on those issues.

‧

立 政 治 大 學

‧

N a

tio na

l C h engchi U ni ve rs it y

122