Dr. Shih, Cheng-Feng
Associate Professor/Tamkang University, Taiwan
INTRODUCTION
Over the past three decades, Taiwan has experienced one of
the most remarkable record of economic development -- rapid and
sustained growth and egalitarian income distribution.1 In a
World Bank study, Taiwan is listed as one of the "few exceptions"
that have escaped the gloomy predictions of Kuznets -- the U-
shaped relationship between growth and distribution (Chenery et
al., 1975: p. 285). Right now, Taiwan is not only exporting
manufactured goods, it is also boasting of exporting the so-
called "Taiwan's Experience." How do we explain such an
accomplishment?
While retrospecting Taiwan's developmental path, I shall
endeavor to sort out the major factors contributing to and the
primary constraints underlying Taiwan's economic development,
including the external environment, the colonial legacy, the role
of the state, and ethnic cleavage. At the same time, I will pay
due attention to the political implications under economic
policies and strategies applied. My intellectual belief is not
simply that politics and economics are intertwined, but also that
economics measures are but one means a regime can apply to attain
its political goals -- how to maximize its power and how to stay
in power as long as possible. Before doing these, a brief
discussion of my epistemological, ontological and theoretical
dispositions is in order here.
THEORETICAL CONSIDERATIONS
There is emerging a huge body of literature on the story of
Taiwan's economic success. The unit of analysis includes system,
state, and society. Some even argues that cultural advantages
are central to economic success in East Asia (Hofheinz & Calder,
1982; Kahn, 1979).2 With all the labyrinth, three identifiable
approaches may serve for our research guideline. Proponents of
modernization theory, which adopts the free market principles of
neo-classical economic theories, are enthusiastic in using Taiwan
as a favorable showcase for their approach. On the other hand,
preachers of dependency theories in general deem Taiwan too
aberrant to be duplicated elsewhere, or simply dismiss it too
"anomaly unique unrepresentative" to deserve attention (Gregor &
Chang, 1982: P. 64). Finally, there is a seemingly promising
statist approach that attempts to synthesize dependency theories
with a perspective that emphasizes the role of the state.3
It appears that Taiwan is by no means an "ideal type" of the
Third World country. Still, is it merely a "special case" that,
as some dependentistas have alleged, defies any attempt at
generalizing regularities in the study of economic development,
and the strategies of which can not be replicated elsewhere?
Searching for regularities is definitely one of my epistemolo-
gical commitments. However, I do not think that the task is
probable unless we are able to discern on what conditions Taiwan
has attained its economic development.
Ontologically, I agree with Wendt (1987) that the relation
between the international system (or structure) and the state (or
agent) is dialectical. In other words, while the structure of
the international system confine the activity of the state, the
states as a group may alter the structure of the global system.
Similarly, the relationship between the state and the society is
dialectical too. Theories we have studies so far are only
partially satisfactory.
While modernization theories emphasize the importance of
internal factors, dependency theories focus on the primacy of
external factors. Combining they both, some statists stresses
the mediating role played by the state over the systemic
dictation. Still, by underscoring the primacy of the state over
the society, most statists neglect the external factors. At
best, statism tells us that the state may play an active role
under certain conditions. I believe that a more fruitful
perspective should encompass three tiers: the system, the state,
and the society. While the relationship between the external
factor and the internal factor is dialectical, that between the
state and the society is also dialectical.
In the case of Taiwan, however, there is a hierarchic
relationship among the three. That is, external factors largely
decide the general framework, within which the authoritarian
regime and ethnic cleavages operate, although the NICs as a whole
may challenge the pre-determined structure. It is difficult to
categorize colonial legacy. Although the rule in Taiwan had
historically been colonial, I tend to treat it in the category of
authoritarian regime.
EXTERNAL ENVIRONMENTS
External variables lie in the center of dependency theories.
With all its various versions, it is generally interpreted that
distortion of economic development in the periphery is the result
of its link with the capitalist core. More generally, it is
argued that external variables, whether in the form of the
structure of the capitalist world system or of direct foreign
manipulation, are crucial in determining, if not constraining the
extent of development in the Third World. On the other hand,
modernists also suggest that certain forms of assistance to the
Third World are necessary for them to take-off, especially when
domestic savings are not adequate for investment in the earlier
phases of development.
Taiwan's past experience is no exception. Being an rela-
tively open economy, Taiwan had been engaged in international
trade and welcome foreign investment, though with some restric-
tions. It had also been a major recipient of American aids.
External factors have in the past influenced Taiwan's path of
economic development in two ways: the capitalist world system
provided Taiwan with a good environment for its ascent; and the
"dependent" relationship with the "benign" United States had
drawn it aids, investment, and the market for its manufacture. I
shall look into how these three types of "dependency" have been
related to Taiwan's development.
Having been defeated by the Chinese Communists on the China
mainland in 1949, the Nationalist (or Kuomintang, thereafter KMT)
government took refuge in Taiwan. After the outbreak of the
Korean War, the bleak KMT regime regained its special relation-
ship with the U.S., because of its stanch anti-communism poli-
tical attitude and Taiwan's new strategic value as a thorn to
China (Shih, 1994). The Seventh Fleet was then deployed in the
Strait of Taiwan, and the American geo-political lines of defense
were extended to Taiwan, which paved the way to integrating
Taiwan, along with such "chosen few" as Japan and South Korea,
with the capitalist world economy (Cumings, 1984: p. 20).
From the period of 1950-1965, Taiwan received huge amounts
of economic and military aids from the U.S., besides military
protection. Without them, the KMT could not have survived its
severe financial crises. Timely U.S. aids thus helped the KMT
consolidating its authority in the earlier 1950s, when the
deficit and runaway inflation made it vulnerable to discontent
from the hostile native Taiwanese. Later on, the aids consti-
tuted about 40% of the gross capital formation, or about 10% of
the gross domestic product, and ranked the fifth in the world in
the American aid per capita (Barrett & Whyte, 1982: pp.1068-70;
Ho, 1978: p. 237).
Given the importance of U.S. aids, the U.S. must have had
considerable leverage on Taiwan's economic policy making and
implementation, especially on the way how the aids were appro-
priated. American advisers would sit in the meeting of Tai-
wanese economic planning agencies, and even possessed the pri-
vilege of veto (Gold, 1986: pp. 68-69) For instance, aids
were strictly appropriated and at one time constituted 74% of
investment in infrastructure. It is also noted that the KMT,
anticipating American aids, had to undertake programs of economic
development as early as 1949 (Gregor, 1981: p. 29). Kahn (1979:
p. 449) also bluntly points out that the purpose of the initial
economic plan was designed to please American advisers.
When import-substitution of primary products had exhausted
the domestic market in the 1960s, the U.S. Agency for Inter-
national Development (USAID) strongly encouraged, or pressed,
the KMT to move into export-promotion in order to shore up its
sluggish economy. Consequently, the KMT was urged to liberalize
its economic policies, such as currency reform, and easing import
and export tariff regulations (Little, 1979: pp. 472-75), which
did greatly contribute to remarkable economic growth rates in
that period.
Then, why had the American influence not led to Taiwan's
dependence, in terms of economic manipulation as suggested by
dependency theories? As Evans (1987: pp. 209-10) rightly points
out, the main purpose of American aids was to strengthen the
ruling apparatus of the KMT in the face of Communist aggression.
Therefore, a self-sustained economy, rather the interests of
American MNCs, was the main concern.
Similar prediction of distorted development as a result of
investment dependency had also been avoided. One possible
explanation is the KMT's traditionally distrust toward foreign
investment, inherited from the Chinese nationalistic ideology
embodied in the so-called "Three Principles of the People."
Accordingly, it had long resisted the temptation to attain
industrialization through international borrowing. Since foreign
direct investment was introduced in the late 1960s, it had never
constituted more than 10% of the gross national product (Amsden,
1979: p. 368). Further, the KMT had been skillful in selecting
sectors open to international capitalists, primarily in sectors
where further exports were expected or where technology transfers
were anticipated. On the other hand, key sectors, such as heavy
industries and banking, had been restricted (Clark, 1987; Amsden,
1979). It was also required that investment be done in the form
of joint ventures.
The timing of investment, or the sequence of industrializa-
tion, should also be taken into account (Evans, 1987; Haggard &
Cheng, 1987). During the turbulent 1950s, Taiwan was less an
attractive place for direct investment. As Clark (1984: 13) has
rightly perceived, when foreign investment eventually grew
important and began to flow in, early import-substitution
industrialization in Taiwan had already been accomplished and
the indigenous entrepreneur was in a better position to find his
own niche than its Latin American counterparts did. Thus,
direct investment in Taiwan and Latin America differed in timing
(or sequence of industrialization), sector open to international
capitalists, nature of investment, and its magnitude. Underlying
these were the less predatory attitude of the U.S and the dis-
trust of the Chiang's toward international investment. 4
To provide for favorable investment terms and political
stability, the KMT did allow foreign capitalists to exploit the
Taiwanese labor.5 Under the Martial Law, which was declared in
1949 and lasted until 1987, collective bargaining buttressed by
strike was absolutely proscribed. Not only foreign capitalists
but also other interest groups located in the cores were involved
in the exploitation process. Zenith, for example, once threa-
tened to switch its investment to other Asian countries if the
proposed Labor Law was passed. There was also pressure from the
lobbyists of American labor organizations who deemed the passage
of the law would increase labor costs in Taiwan and therefore
lower its competitiveness in the market. Lack of genuine union
also prevailed in plants owned by the indigenous entrepreneur.
Trade dependency had been a more serious problem for Taiwan.
Owing to its diplomatic isolation internationally, it was forced
to concentrate its exports to the American market. As Taiwan's
economy is highly vulnerable to economic recession in the U.S.,
it is often said that when the U.S. gets an influenza, Taiwan
will immediately sniffs. Being well aware of the danger of
dependence on the American market, the KMT has reluctantly given
up its "Hallstein Doctrine" -- direct trade with the Soviet bloc
is now allowed and trade with China if via a third party. Still,
Taiwan's market concentration was not qualified as dependency.
Since the bulk of its exports were mainly processed food or
manufactures, rather than raw materials or primary goods, the
terms of trade were not easily manipulated by its trade partners.
Nonetheless, economic growth based on outward-oriented
expansion may not be feasible for all countries at all time.
While Kuo (1983: pp. 176-77) is right in attributing Taiwan's
rapid economic transition to world-wide prosperity in the 1960s,
Kahn (1982: p. 208) doubts such world economic prosperity will
occur again. Moreover, as Western countries are erecting all
protectionist trade barriers to discourage imports from East
Asia, the American economic hegemony and hence the robustness of
the capitalist world system remain to bee seen. Moreover, with
the rapprochement between the U.S. and China, the strategic
importance of Taiwan has been drastically reduce. The American
administration is less willing to compromise on trade issues. In
recent years, some traditionally restricted sectors in Taiwan
have been opened to international capital, such as banking and
insurance. In this regard, the warnings from dependency theories
should not be ignored, at least for any serious long-term
consideration.
External factors generally provide the context in which
national actors arrive at their optimal policies. In the case of
Taiwan, their impacts have not been deterministic so far. Judging
from disparate degrees of economic development accomplished by
countries who have operated within the same milieu, I find that
the periphery is not necessarily rendered passive. The government
may find its niche to the extent permitted by the U.S. for geo-
political consideration. Accordingly, the society is not a
destined loser. Allied with the state, the indigenous capitalist
may outrival the international counterpart as soon as technology
is transferred.
COLONIAL LEGACY
Since Taiwan had been ruled by the Dutch, the Spanish, and
the Japanese colonists, it is generally concluded that Taiwan is
a classic case of colony. For instance, in Gregor's view (1981),
Taiwan is evidently not a "special case" but rather a "model
instance" of dependent development. Accordingly, it is argued,
if dependency theories are valid, there should not have been
economic growth in Taiwan, or the development should be distorted.
It is true that most colonies were dissatisfied with their
exports of primary goods, of which the prices were easily
manipulated by the cores. Similar asymmetric patterns of trade
still prevails in most LDCs, who are frustrated by unfavorable
terms of trade and volatile world prices for these goods.
However, it was not the case in Taiwan during the Japanese
colonization, which lasted from 1895 to 1945. The colonial
government not only provided Taiwan's agriculture with infra-
structure, technology and funds, but also a secured market.
In order to develop Taiwan as the bread basket, and later as
an extended industrial base, the coercive Japanese colonist had
integrated it into the Japanese economy. Massive agricultural
innovations and funds were provided to Taiwanese farmers.
Further, Japanese colonists provided Taiwan with a protected
market for its rice and cane sugar with prices higher than other
areas in Asia (Chang & Myers, 1963: pp. 42-46). It must have
been a paradox for dependency theorists to discover that the
first organized Taiwanese protest was against the release of the
Japanese protection of Taiwanese rice.
Taiwan's infrastructures, including irrigation, electricity,
and modern communication system, were initially constructed by
the Japanese to support agriculture. The policy to expand
industry was accelerated in the 1930s for the preparation of war;
and modern factories were set up during that period (Ho, 1978:
pp. 70-79). All these provided for strong foundations for future
industrialization.6
Though Taiwan's economy during that era may have been
dependent on Japan per se, its economic growth rate from 1911 to
1938 was surprisingly more than 4% (Barrett & Whyte, 1982: p.
1071). Indeed, living standards in Taiwan under the Japanese
colonization were "far better" than in Korea and most parts of
China (Ho, 1978: p. 97). Moreover, the welfare of the Taiwanese
peasants in the earlier twentieth century may even have exceeded
that of the Japanese peasants (Ouchi, 1967, as cited in Amsden,
1979: p. 348). As a result, the Japanese were less hated by the
Taiwanese than by the Koreans. I may even argue that Taiwan was
no more a Japanese colony, in terms of extractions, than Iowa is
a colony of the U.S.
Even if Taiwan was a colony, considering Japanese massive
investment and reinvestment, colonization is not necessarily a
zero-sum evil.7 Why had the Japanese been so generous to Taiwan?
Their ultimate purpose of developing Taiwan was to facilitate
their invasion of China and Southeast Asia. Compared with
Western colonists, the Japanese seemed to have taken a long-term
planning to integrate Taiwan as a part of the empire. Therefore,
the Taiwanese were fortunate enough to share some benefits with
their colonizers incidently. In this sense, we may judge
Taiwan's colonial experience was deviant from others'.
THE ROLE OF AN ALIEN REGIME
It is becoming a popular impression that Taiwan's economic
development is the result of the accumulation of a series of
successful strategies, including land reform, agricultural
development, import-substitution, and export-promotion. To make
these strategies work, the argument goes, it demands intricate
coordination of natural endowments, international environments,
and the hard-working people. At the center of these is the
governments that had reigned in Taiwan -- Japan and the KMT
regime (Amsden, 1979; Cumings, 1984; Gold, 1986; Clark, 1987;
Liu, 1987; Huang, 1989).
More generally, it is observed that economic growth in East
Asia has not occurred because of laissez-faire, but because of
the guidance by the governments. In Kahn's view (1979: p. 120),
the kind of government that lies between democratic and totali-
tarian models seems appropriate for development. Cumings (1984)
also suggests that "bureaucratic-authoritarian regimes" can
accumulate power, strengthen central planning, discipline labor,
and change the structure of the society. All these observations
seem to prescribe that authoritarianism is an indispensable evil
for economic development. In all, there is a tendency to collapse
to all these into the all-encompassing term, the state.
The disproportional mammoth government of the KMT was
removed to Taiwan in 1949, which absorbed the Japanese bureau-
cracy and police surveillance in no time. The new regime turned
out to be more authoritarian, if not stronger, than its prede-
cessor: the party, the bureaucracy, and the armed forces were
integrated into a body loyal to one man, Generalissimo Chiang
Kai-shek. In the sacred name of "recovering the mainland," the
KMT, as a numerical minority, was able to justify its absolutist
rule.
As I have argued in my earlier study on statism (Shih, 1993),
it is not clear whether it is the state or other forces that have
really dominated policy-making in Taiwan. I would argue that it
is the party (KMT) that has been the center of power for the past
forty years. As a cliche in Taiwan says, "there is no distinc-
tion among the party, the administrative bureaucracy, and the
military." While all major policies are made in the Central
Standing Committee of the party, the KMT penetrates the society
by installing a parallel apparatus within all major organs of the
society. The political commissar system, borrowed from the former
Soviet Union, had largely contained the power of the military, at
least until the early 1980s.8 While installing a so-called
"Second Personnel Office" in governmental agencies to monitor
internal activity, the KMT made sure that the head of the admini-
stration at all levels was its party member.
It is generally agreed that fundamental to Taiwan's economic
development is the highest priority the government gave to
economic development, as it realized its survival was dependent
on the health of the national economy. The first priority of the
KMT, except for how to defend itself from the Chinese Communist's
invasion, was how to sustain the regime with an economy on the
brink of collapse. As an alien regime, the KMT fully realized
that since its political legitimacy was not founded on popular
sovereignty but on coercion, it had to seek appeasement, if not
loyalty, of the native Taiwanese through economic benefits and
thus to distract them from the appeal of self-rule, or indepen-
dence, and secure its minority rule. As Geertz (1963: p. 213)
suggests, one way to ease tension arising from primordial senti-
ments is to divert discontent elsewhere. Crane (1982: p. 105)
also points out, coercive rule without prosperity is less tenable.
Once recognizing the imperative of economic development, the KMT
was accordingly forced to adopt a series of economic policies to
serve the aim of holding on to power.
Furthermore, the KMT, as avowed true believer of "Three
Principles of the People," was by no means fervent adherent to
laissez-faire. Therefore, key sectors of the economy had been
tightly under state control, such as steel, auto, petroleum, and
banking, in order to avoid the "defect" of Western capitalistic
economy, that is, monopoly, which may in turn challenge its
political control. Thus, it had in the past steadfastly refused
to allow, for instance, American investment in insurance business
even under severe pressure. We may argue that past experience
and, to a less degree, commitment to ideology, may play a very
important part in preventing external manipulation.
Nevertheless, the role of the government was confined to
promoting favorable conditions for entrepreneurial activities,
which was deemed by the private sector as much too conservative
and passive. The conservatism was due to its past experience in
the mainland, where it was not only defeated militarily, but also
economically by skyrocketing inflation. Thus, the basic economic
guide-line had been "progress in stability," implying that
economic stability, thereby political stability, outweighed
economic growth.
ETHNIC CLEAVAGE
Although statists point out the necessity to examine the
relationship between the state and social forces, their focus is
largely on the dominant class. Except Evans (1987) and
Rueschemeyer and Evans (1985) and, to a less degree, Haggard
(1986), most statists tend to neglect how ethnic cleavages may
have affected state autonomy. Whether in the form of a strong
state, an authoritarian regime, or a vanguard party, power
politics in Taiwan may be better understood from the vantage
point of ethnic pluralism. In the guise of state interests,
policy-making had been largely determined by such urgent
questions as how to survive the regime and nourish it in an
isolated island. Since the KMT regime had been sustained by
loyalty of Mainlander emigrants from the beginning, how to
further interests of this ethnic group was crucial. Thus, while
the KMT may have been deemed as a Mainlander party, the newly
established Democratic Progressive Party was largely deemed to
represent the native Taiwanese.9
However, ethnic cleavage is rarely considered as an
important factor in explaining political development in Taiwan,
let alone economic development.10 One major reason for the
neglect is the failure to recognize that there is any ethnic
differentiation at all, which is understandable since most people
in Taiwan are descendants of Han-Chinese immigrants (except some
aborigines of Malay-Polynesian origins) and thus share similar,
if not the same, cultural characteristics. However, as Zolberg
(1968: p. 626) perceives, two groups belonging to the same
cultural unit ethnographically may magnify their few differences
into distinctive political differences.
According to their different degrees of attachment to the
island and their distinct historical experiences, the population
may be divided into two ethnic groups: 15% are the politically
dominant Mainlanders, who fled to Taiwan after 1949, and 85% are
the subordinate native Taiwanese, whose ancestors sailed to this
island centuries ago.11 Linguistic differences constitute the
basis of ethnic solidarity: while the Mainlanders use Mandarin,
the Taiwanese use either Hoklo Taiwanese or Hakka Taiwanese,12
which are mutually unintelligible. Linguistic differentiation
would play any important role as a criterion of group solidarity
only after the February Incident in 1947.
Conflict theories, in a broad sense, are useful in explain-
ing the development in Taiwan in so far as the major function of
the central authority is interpreted as to use monopoly of power
to preserve unequal distribution of political resources between
two ethnic groups. For example, there had never been any general
election between 1949 and 1991, and those representatives elected
had been guaranteed their tenure until the "recovery" of the
mainland. Consequently, the Taiwanese could never win any bill
in the Legislature Yuan even though they were numerically
majority. The frustration of the Taiwanese was particularly
significant among those who served in the government agencies
and felt they upward mobility had been thwarted as all major
positions are retained for the Mainlanders.13
At first glance, the economic explanation is less feasible
here, however, since the subjugated ethnic group as a whole
possessed an economic advantage somehow. Scholars generally
agree that the far-reaching land reforms, undertaken in the
period of 1949-1953, could not have succeeded if the KMT had not
been an "alien" regime (Ho, 1978; Kahn, 1979). With fresh memory
of the white terror after the February Uprisings, landlords
complied without any resistance.14 Except for economic consi-
deration, another intention underlying the KMT's determination
to launch land reforms was to destroy the power bases of the
embryo land-owning Taiwanese middle class, who had led the 1947
uprisings against the KMT rule.
Since the Taiwanese had few opportunities for advancement
to higher political or military position, business happened to
be the only field available to them. As long as they did not
attempt to challenge the KMT's political legitimacy, the KMT had
no reason to suppress their economic activities. And the
Taiwanese keenly received the message and complied tacitly until
the second half of the 1970s, when they began to ask for power-
sharing.
It must be curious why the KMT had not supported a Main-
lander capitalist class. The fact is that it did try but without
success. In its early attempt at import-substitution, the KMT
started with the development of the Mainlander textile industry.
It was only after the insistence of American advisers that it
reluctantly lessened its discriminatory economic policy. Again,
it was Mainlander capitalists that gained immediately from the
trade liberalization (Gold, 1986). The auto industry has long
been monopolized by a Mainlander family close to the Chiang
family (Arnold, 1989). While most Chinese capitalists fled to
Hong Kong rather than to Taiwan, those Mainlanders fleeing to the
island were mainly staffed in the armed forces, administrative
agencies, state-run enterprises, or the education system, and
were better taken care by the government.15 With the "iron bowl"
in hand, they thus had little interest in the private sector.16
Cardoso (1973) explains the underdevelopment of the Third
World in terms of the cooperation of the local elite class and
international capitalists. Why had there been less evidence of
the alliance between the Taiwanese and foreign capitalists? For
one thing, it was the Mainlanders rather than the Taiwanese that
control political and military power, which impeded the coopera-
tion. Secondly, as we observed earlier, there had been few
Mainlander capitalists in the earlier stages of economic develop-
ment to form such an alliance as found in Latin America. There-
fore, power distribution based on ethnic cleavage had precluded
the cooperation between the local elite and the international
capitalist.17 Similarly, the KMT's success in suppressing the
labor movement in the past was largely due to the fact that few
Mainlanders were in the labor force.
Past development in Taiwan had demonstrated a certain degree
of ethnic division-of-labor, with the Mainlanders dominating
political power, and the Taiwanese cultivating economic acti-
vities. However, the pattern was not worked out through con-
sociational arrangement. Rather, it was determined by the Main-
lander elites, who judged that political control buttressed was
most crucial to the survival of their own ethnic group.
CONCLUSIONS
Taiwan was lucky enough to be chosen as a client state of
the U.S. in the 1950s because of its strategic status. Its
survival was actually made possible by the out-break of the
Korean war. It also took advantage of economic booming as a
result of the Vietnam war. Over the years, Taiwan, in the wake
of Japan, took the precious chance to harness the product cycle
to start its industrialization at a time when the international
economy was booming.
However, since Taiwan's economic growth was based on exports
of manufacture, its economy was vulnerable to international
economic recession and, recently, protectionism. With the
decline of Taiwan's strategic importance, the American adminis-
tration was less willing to challenge pressure from American
economic interests. The forced open-door policy in the service
industry was but one importance indicator. Thus, the advice of
dependency theories deserves attention.
In terms of political power, Taiwan was a classical case of
colony. But we can not deny the fact that the Japanese legacy
did pave the way for Taiwan's economic development later on,
especially in terms of investment in infrastructures and in
agricultural modernization. Thus, Taiwan's colonial experience
seems to be most extraordinary among all.
The existence of an authoritarian government had been of
ambivalent values. As alien regimes, both the Japanese colonists
and the KMT were in a better position to implement the economic
policies they deemed indispensable for their survival, especially
for the latter. During the Chiang's reign, Although the KMT may
have been insulated from demands of the indigenous Taiwanese, but
it failed to insulated itself from the Mainlander group.
The role of ethnic cleavage in development thus could not be
overestimated. When the subordinate Taiwanese were gaining
economic power, their demand for more political participation
were bound to increase. Therefore, the original tacit compromise
of power-sharing could no longer endure the challenge of the
Taiwanese, especially those who had never experienced white
terror in the 1940s. Equally important was the growing awareness
among the Mainlanders of the importance of participating in
economy. If they had succeeded in forming a coalition with the
technocrat and the military, the further alliance with interna-
tional capitalists would have been possible, since few of them
were in the labor forces.
As for equity, I must caution the reliability of data
collected. For one thing, the base year chosen matters. Data
collected in the early 1950s have least reliability. Also, the
sample was said to be nonrepresentative. Furthermore, income
transfers as a result of hidden payments for those on the state
payroll, such as free housing or rent support, food subsidy,
discount for utility and tuition, to name a few, are not included
for calculation (Gates, 1979: pp. 384-86).
If income distribution had been more egalitarian, it is
certainly not the case in the 1980s. More and more evidence
shows that the society was witnessing the emergence of class
stratification. While the labor and the farmer were questioning
when they could have their fair share in the process of economic
development,18 and the middle class was complaining that their
real income is lowering. Again, I suggest we take a longer time
frame to judge Taiwan's accomplishment.
A word of normative value is in order here. People of
Taiwan and other NICs were under widespread political oppression
while they were achieving "economic miracles." As the case of
Taiwan had illustrated, its political development was far behind
its economic accomplishment. The Taiwanese have had ambivalent
feeling toward both the Japanese and the KMT authoritarian
regimes: they were forced to comply with the alien rulers'
policies and two times they shared benefits with them. It would
require value judgement as to whether self-determination or
butter-and-bread is more important.
Finally, we are not convinced that political development,
measured by participation and democratization, can be substituted
for economic development. It is also doubtful whether economic
growth may lead to political development.
ENDNOTES
1. It is cautioned that data collected by the state-run
statistic agency may not be so reliable as they appear, although
the statistic system had long been well developed by the Japanese
colonial government. For one thing, it is well known among
economists in Taiwan that the data are always "adjusted" so that
they look fit the trend. Secondly, we must discern what the base
year is. Usually, the data compiled immediately after the war
until the beginning of the 1950s have less reliability. I shall
discuss degree of equity later.
2. This ethnocentric view, though shared by some Western
scholars, fails to explain why there is also emerging economic
booming in some ASEAN countries, such as Thailand, Malaysia,and
Indonesia. Of course, proponents of this perspective would
further point out the presence of overseas Chinese in those
countries. Since there is no way to pin down such a character, I
shall leave aside its consideration.
3. Since I have devoted a separate study on the utility of
this approach elsewhere, I shall minimize its discussion here
unless necessary.
4. This picture has changed significantly in the 1980s,
especially after Chiang Ching-kuo's pass away. For one thing,
Chiang, trained in the Soviet Union, had less trust in the US
than those technocrats educated in this country. Further, facing
mounting protectionism, Taiwan has to compromise in exchange for
continued access to the American market.
5. It is generally recognized that MNCs are comparatively
more benign than indigenous ones in terms of welfare programs.
6. In reality, some later projects to shore up domestic
economy through public spending in the aftermath of the oil
crisis in the early 1970s were based on former Japanese planning
(e.g. Taichung Harbor).
7. Even until now, some Taiwanese still possess a romantic
illusion: if Taiwan were still part of the Japanese Empire, they
would have shared the prosperity and pride that the Japanese
enjoy, as described in Vogel's Japan as Number One (1979).
8. In his old days, in order to neutralize the powerful Gen.
Wan Shen, Chiang Ching-kuo almost dismantled the political
commissar system by allowing professional soldiers to take over
this monitoring responsibility.
9. For latest development, see Shih (1993a).
10. Exceptions are Gates (1981) and Wu (1989).
11. The dichotomy is only one of the three dimensions of
ethnic relations among the four ethnic groups in Taiwan. The
other two dimensions are Han-Chinese vs. Aborigines, and Hoklo
vs. Hakka.
12. These are essentially two southern dialects of Chinese.
13. Although President Lee Teng-hui is a native Taiwanese,
he was hand-picked by late Chiang, rather than being elected in
the popular election. His real power remains to be seen in the
coming presidential election scheduled in 1995.
14. There were accounts of incidents when landlords were
summoned to the office of land-reform coordination. While they
were asked to sign the contract renouncing their land by Mainland
officers, hand guns were displayed on the table.
15. These categories are usually called as a "military-
civilian servant-education" group. The government has thus far
consistently offered those in the sectors at least 5% wage raise
annually, even in economic recession.
16. Their interest did not arise until the demise of Chiang
in the 1970s, when they were disillusioned that returning to the
mainland was hopeless.
17. Nevertheless, as we notice more and more retired
generals are staffed in state-run enterprises, caution must be
made against premature prediction for the future.
18. A farmer demonstration in 1988 turned into the most
violent incident since 1947.
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