A Political Explanation of Economic Growth: State Survival, Bureaucratic Politics, and Private Enterprises in the Making of Taiwan's Economy, 1950-1985

Article excerpt

A Political Explanation of Economic Growth: State Survival, Bureaucratic Politics, and Private Enterprises in the Making of Taiwan's Economy, 1950-1985, by Yongping Wu. Cambridge: Harvard University Asia Center, 2005. xx + 410 +[xi] pp. US$49.50/£31.95/euro45.60 (hardcover).

Wu Yongping's excellent empirical account is a welcome corrective to common perceptions of how Taiwan achieved its rapid growth rates and became a "tiger" economy. The role of Taiwan's small- and medium-sized private enterprises in creating an export economy on a huge scale is commonly recognized as an important feature of Taiwan's success. However, Wu Yongping questions common perceptions of the Taiwanese developmental state as a robust and determined state bureaucracy creating the right conditions for growth. Instead of economic rationalism in the ministries pursuing aims of economic development, he depicts a militarydominated state where economic development always took a back seat. The overall control of economic decision-making was in the hands of top leaders (Chiang Kai-shek, Chen Cheng and Chiang Ching-kuo), none of whom had economic expertise. The top leaders relied on informal and highly dynamic interaction with leaders of ministries and agencies, who had carved out for themselves roles independent of the major institutions. The differences of opinion between these "strongmen" made sure that no single vision or preference dominated; profound disagreements on economic doctrine and core issues like private ownership of enterprises existed throughout the whole period. Far from presenting a unitary and steadfast view of economic strategy, the policy process was complex and convoluted, relying on the relative persuasive powers of strongmen and the need for top leaders to make decisions in response to specific challenges. Most of the agencies responsible for implementing economic policy were short-lived and unable to establish comprehensive frameworks for directing the economy. Political pressure and the need to create strong links between the KMT and Taiwanese business elites seemed to influence policy-making more than did professional economic judgement.

Wu Yongping's evidence is overwhelming, based on interviews with core actors and his use of outstanding source materials, and his conclusions are spelled out with great clarity: the common presumptions underlying most accounts of Taiwan's economic success do not hold. So, was Taiwan's emergence as a major economic power the result of accidents and bungling? That does not seem to be the case either. While there was no clear design, the overall outcome of the economic decisions was what Wu describes as a three-tier economic system. Large, "upstream", state-owned enterprises together with large, "mid-stream", privately owned enterprises (that received preferential treatment) dominated the domestic markets. The "downstream" small- and medium-sized enterprises were only able to expand in the export markets, and did so very competitively, benefiting from the upstream supply of production factors. …