Interlocking Global Business Systems: The Restructuring of Industries, Economies and Capital Markets

By Edward B. Flowers; Thomas P. Chen et al. | Go to book overview

INTRODUCTION: THE POLITICAL BACKGROUND

Since the lifting of martial law in 1987, Taiwan's private sector economy has continually responded to the economic incentives presented by its larger neighbor on the other side of the Taiwan Straits. Commonalties of language and culture explain part of the attraction, but complementarity of resource base and output mix play an equally important role. Taiwan's capital- and technology-intensive economy of high wages and limited natural resources meets almost its exact opposite a mere couple hundred kilometers to the west. It is no surprise then that the incentive for economic interaction with mainland China is so strong and so independent of the political arguments for continued separation. Indeed, if some form of reunification is to be achieved in the long run, economic forces will probably play a more important role than military might. Recent history has shown that intimidation tactics create resentment and alienation at the grass roots level, but successful cooperation through trade and investment only creates the desire for more and deeper cooperation in the future.

The contradictions between political and economic interests aggravate existing fault lines in Taiwanese society. The 1996 election results revealed clearly that a strong majority of voters prefer continued de facto independence from mainland China. Indeed, the platforms of the three major political parties in Taiwan differed only in the degree of homage paid to a long-run concept of theoretical unification--in an ideal future world where the basic sources of institutional conflict between the two societies had all been somehow resolved in Taiwan's favor. All parties agreed that for the foreseeable future no such set of circumstances was likely to evolve and none proposed that any specific element of sovereign control was to be ceded to mainland Chinese authorities.

In fact, however, an important element of control was already slipping away. More and more Taiwanese incomes were becoming dependent, directly or indirectly, on commercial relationships which the mainland Chinese government was free to modify or curtail at will. Of course, all voluntary, cooperative economic relationships are beneficial to both sides. The mainland Chinese government probably could not break or constrain its economic relations with Taiwan without inflicting an equal or greater hardship upon its own people. Nevertheless, the fact that the mainland China is much larger than Taiwan means that it commits a much lower percentage of its total resources to the relationship. This proportionality factor, combined with the mainland Chinese government's relative lack of accountability for any mass hardship which a rupture might cause, means that the ruling party in China has good reason to believe that it can ride out the consequences of curtailing its economic involvement with Taiwan, particularly if a patriotic motive can be appealed to. The Taiwanese leadership, having adopted all of the vulnerabilities and risks which attend regularly scheduled elections, is unlikely to want to be tested in a similar fashion. In political bargaining, the threat point of broken economic contacts favors mainland China more and more, the more intensive those contacts become.

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