KMT's role in Taiwan's economic miracle

Politics Taiwan Politics
1

To what extent do you think the KMT had on Taiwan’s economic development?

  • They played a very important role. Without KMT, Taiwan’s economic miracle would not have materialized
  • Substantial, but not significant
  • Minimal. It was the hard work of the Taiwanese that propelled Taiwan’s economic miracle.
  • It was a combination of sound KMT fiscal and monetary policies, and the hard work of the Taiwanese
  • None. The Japanese should be the ones who should receive the most credit by laying the foundations in the first place.

0 voters

To what extent do you think the KMT had on Taiwan’s economic development from 1950-1987? And what impact do you think the KMT had on the nature of Taiwan’s economic framework today?

I am sure many opinions on this issue will be influenced by current-day politics (party bashing). But from an objective standpoint, do you think Taiwan would have reached “Four Economic Tigers” status without KMT governance?

What long-lasting effect did the land reform program of the 1950’s have on laying the foundations for Taiwan’s transition from an agricultural economy into an industrial one? The way I see it is that small farmers who accumulated land under the program were encouraged to become land-owning entrepreneurs whose wealth grew as land values appreciated over time. It boosted agricultural production because farmers are motivated to work harder on their own land than on rented landlord land.

In contrast to the humiliation and often executions of large landowners on the mainland during the Great Leap Forward, large landowners in Taiwan could keep their land up to a certain limit, but had to sell any portion of their land above that limit to the government. You can call that forced selling, but they did receive compensation in the form of bonds and stock certificates. Later these shares also appreciated, creating entrepreneurial capital for those who sold the shares 5-15 years later.

Taiwan’s economic output is generated mostly by SMEs. What was the KMT’s policy towards SME? Was it a hands-off laissez faire approach to them (let them do whatever they want) or did the KMT actively support/encourage these enterprises? I heard that the KMT mostly supported large state-owned companies.

2

reztrop–this an important and complex topic, and I’d like to see a reasoned discussion of it. Your last two paragraphs are much too polemical for this forum. Please edit them or I will remove them.

[update]

Thanks Rez!

3

cctang:

Were landlords executed in any great numbers during the Great Leap Forward?

4

By the time the KMT came to Taiwan, they knew they had to shape-up or else and got rid of most of the excessively inept bureaucrats. They did manage to put some very bright technocrats in place to help with the development.

They also got

  • 2Bill. in 1962 USD in aid to help subsidize burden the army and other ilk from China. This helped fund the land reform
  • Significant direct investment from Japan & the US (compliments of the cold war to some extent)
  • Access to building infrastructure for the Vietnam war
  • Access to US & Japanese technical support (also compliments of the cold war)
  • Some very good infrastructure from Japan. Although towards the end of the war Japan took most of the industrial items out of Taiwan, they left a highly developed agricultural system, strong civic planning, basic sanitation and disease control and a solid banking system in the form of the post-office bank system.

All of the above did a lot to help the KMT achieve what it did. It might have easily squandered that advantage, but it instead did a very good job of building on it.

5

Naw. This is just self-serving propaganda written by those bright technocrats in later years. What actually happened is that in the 1950s the government went into import substitution. Being Confucian at heart it was inherently control-oriented, and was suspicious of losing control if it opened up. Plus just looked down on business. Finally after series of disasters in late 1950s and under pressure from own technocrats and liberalizing factions, plus enormous pressure from US, KMT opened up economy to exports in 1960. Control was still prominent, and portion of US aid withheld that year because was still not open enough.

It is important to recognize that by 1937 Taiwan was making scads of $$ due to Japanese ag subsidy programs. This raised local incomes to, or in excess of, Japanese per capita incomes. Taiwanese would not recover this level again until some time in the mid 1960s. Hence the “growth” of the 1950s and 1960s looks a lot like “recovery” from some angles. The KMT also massages the numbers by starting in 1950, the absolute lowest point, after the island had been looted by incoming KMT troops and flunkies, and then pauperized by inflation and other KMT economic mismanagement. The use of the lowest level as the comparative figure means that the KMT looks extra good; set 1937 as the base year, and you get no real growth until 1966. It’s all in how you frame the numbers.

As for getting rid of the excessively inept bureaucrats, that too is a fantasy of the pro-KMT writing of the 60s, 70s and 80s. The inept bureacrats stayed right on.

[quote]They also got

  • 2Bill. in 1962 USD in aid to help subsidize burden the army and other ilk from China. This helped fund the land reform [/quote]

This is all wrong. They got $1.5 billion in econ aid over the life of the program (50-65). The land reform was carried out from 1950-53, not 1962.

[quote]- Significant direct investment from Japan & the US (compliments of the cold war to some extent)

  • Access to building infrastructure for the Vietnam war [/quote]

Yes, Vietnam war was vital to Taiwan’s growth, especially cement industries, among others.

No, it was the KMT that did the looting, not the Japanese. Kerr has a good account of it in Formosa Betrayed.

“strong civic planning.” What do you mean?

Vorkosigan

Nonsense. The KMT was a like a passenger who happened to be on a speeding subway train. He could wreck it by throwing the emergency stop, but other than that, he had no control over the speed or direction of the train. The KMT simply parasitized on the powerful Taiwan SME sector, which was driven by export networks of Taiwanese/Chinese in the US and elsewhere, and kept the money from getting out of control by pegging it to the US$. The closest answer to the truth is probably (3) above.

6

What about the “It was overwhelmingly the result of US aid, and came about in spite of, not because of, the KMT” option?

7

Hogwash. The stock they got was notoriously useless, and the companies failed. Landowers were by and large wiped out by the KMT, who wanted to destroy local elites who might have formed a political opposition – which they did, as dispossessed landlords were one source of later opposition to the KMT rule.

Sandman has it right. The great factor was US aid. Had the US not aided Taiwan, and had the US not kept its market open, there would be no miracle. The argument you can make for the KMT is that the US would not have opened so much, and stayed so open, had Taiwan not been our “Free China” intended as a Cold War example to the world.

Vorkosigan

8

You’ll have the excuse the extremely abridged email - I left lots of detail out.

[quote]Elegua wrote:
By the time the KMT came to Taiwan, they knew they had to shape-up or else and got rid of most of the excessively inept bureaucrats. They did manage to put some very bright technocrats in place to help with the development.

Naw. This is just self-serving propaganda written by those bright technocrats in later years. What actually happened is that in the 1950s the government went into import substitution. Being Confucian at heart it was inherently control-oriented, and was suspicious of losing control if it opened up. Plus just looked down on business. Finally after series of disasters in late 1950s and under pressure from own technocrats and liberalizing factions, plus enormous pressure from US, KMT opened up economy to exports in 1960. Control was still prominent, and portion of US aid withheld that year because was still not open enough.

It is important to recognize that by 1937 Taiwan was making scads of $$ due to Japanese ag subsidy programs. This raised local incomes to, or in excess of, Japanese per capita incomes. Taiwanese would not recover this level again until some time in the mid 1960s. Hence the “growth” of the 1950s and 1960s looks a lot like “recovery” from some angles. The KMT also massages the numbers by starting in 1950, the absolute lowest point, after the island had been looted by incoming KMT troops and flunkies, and then pauperized by inflation and other KMT economic mismanagement. The use of the lowest level as the comparative figure means that the KMT looks extra good; set 1937 as the base year, and you get no real growth until 1966. It’s all in how you frame the numbers.

As for getting rid of the excessively inept bureaucrats, that too is a fantasy of the pro-KMT writing of the 60s, 70s and 80s. The inept bureacrats stayed right on.
[/quote]

I didn’t say the KMT was without corruption - but it did eliminate the corruption and incompetence on the scale that it was in China. Much less out-and-out looting. I’m also ignoring the fact that a lot these folk were essentially bought off. You also can’t compare the 1937 number becuase as that time Taiwan was integrated into the Japanese economy.

[quote]Finally after series of disasters in late 1950s and under pressure from own technocrats and liberalizing factions, plus enormous pressure from US, KMT opened up economy to exports in 1960. Control was still prominent, and portion of US aid withheld that year because was still not open enough.
[/quote]

Notice how I did mention US arm twisting. That said, there is nothing wrong with import substitution as a development policy as long as the goal is to ultimately liberalize the economy. I would argue that Taiwan is a good example of how you do that slowly and successfully. You should also hope that your lucky enough like Taiwan to have such a productive agriculture (thanks to the Japanese again) that it can absorb your excess labor.

I may be off a little on the year as it’s been 10+ years since I wrote my thesis. The year when the ‘aid’ stopped flowing and how much depends upon what you are including in the basket of ‘aid’. The number I am quoting includes some military aid as the demands for resources of the military would have been highly inflationary without it. Also, I did not say that land reform occured in 1962. But, the key item is that without the economic support there would have been little funds to support land reform. Taiwan is an unusual example of successful land reform and there is a lot of evidence that land owners transferred what they got into indistrial assets (anectodally parts of my Taiwanese family did)

The KMT did looting, but in terms of industrial capacity, much of it had been dismantled during the war.

In terms of town and city planning, in terms of developing agricultural lands, and in terms of infrastructure planning.

But my point is that there are many other countries out there that got significant US economic support and started out with favorable economic advantages, but through serious mis-management and despite US arm twisting, they blew it. The KMT, while corrupt and abusive, managed to keep thing to a dull enough roar to pull it off. So, in my mind, they succeeded for 5 reasons:

  1. Japanese development
  2. US aid
  3. The trauma of losing China
  4. The cold war
  5. Not fucking up

Not F***ing up may sound easy, but there are plenty of examples

9

Don’t forget that creating a new coin also ruined a lot of local people (the exchange ratio was only on favor of the KMT people itself).
Also, how much did the KMT spent in keeping their own people occupied? How much money was not badly spent in corruption or in building CKS palaces? How much of this money could have gone into developping the infrastructures???
Although the west of the country is developped in terms of infrastructures, a trip to the east will quickly reveal you the other side of Taiwan. How long did it take to make a Highway to the east? Or maybe they just wanted to put themselves close to China, so it would be easier to move away…
How much time will it take to make a convenient Mass Transport System to the International Airport?

10

Which palaces are these?

11

all his houses, no?

I heard he had a lot of them biult around Taiwan…

12

Chiang had 27 residences around Taiwan–mainly in mountain resorts like Yangmingshan and Lushan. They are actually quite modest–usually wooden Japanese houses. They were not ‘palaces’ like Sadaam Hussein built and I don’'t actually think they cost all that much. Chiang, despite his many faults, led a rather ascetic life in Taiwan—no air conditioning, simple furniture etc. I don’t think that this was a major drain on Taiwan’s economy.

A very interesting documentary about the residences (xingguang 行館) was shown on public TV a couple years ago. It was the first time Chiang was ever directly criticized on TV. There is a bit more information about the documentary here

See, isn’t it fun to share what we know instead of flaming each other for being blue or green?

13

Huh. That’s just exactly the kind of rabid TI-er nonsense I’d expect from a rampant green apologist.

14

I resent that. I am rampant and rabid!

15

The KMT implemented a strict credit-lending policy to ensure that credit offered by state-owned banks are directed to industries that are worth the investment. Small enterprises are more likely than large enterprises to fail. So credit was lended mostly to export-driven manufacturing industries that propelled Taiwan’s growth during the 60’s and 70’s.

16

Making such comparisons is patently disingenuous.

Taiwan was a major grain basket for the empire. Much of Taiwan’s agricultural and industrial output pre-1945 was for the purpose of feeding Japan and Japan’s war machine.

That sort of comparative income level was not going to last no matter who was in charge post-war. The Japanese empire was running on slave labor, stolen resources, colonized markets, and war-time needs in its so-called Greater East Asian Co-Prosperity Sphere. That economic model collapsed when Japan lost, as well it should.

Taiwanese collaborators should be happy they weren’t tried for war crimes as Japanese or asked to share in war reparations. You can’t have it both ways.

soas.ac.uk/taiwanstudiesfile … epaper.pdf

17

Zeugmite, if Taiwan was a major grain basket for the Japanese Empire, that explains why the agriculture was well developped. In to some extent, this helped a lot the development of the KMT government, as the basic supply of food for the country was generated inside. I wonder if the japanese didn’t develop the agricultural system, how long would the KMT had a swift rulling.

One cannot argue that the KMT had a important role in the last 50 years of the taiwanese history and development. But the same can be applied to many other industrial dictatorships around the world (Hitler, Franco (see en.wikipedia.org/wiki/Spanish_Miracle)). You can get many common things between them. However, the development in Taiwan was basically only in the western part, as you can check by the lack of infrastrucures in the eastern part of the Island.

Another truth - Another proof of the lack of infrastructural investment of the KMT government is the railway system - between 1943 and 1970, not a single km of track was opened to the public.

18

[quote=“mr_boogie”]
Another truth - Another proof of the lack of infrastructural investment of the KMT government is the railway system - between 1943 and 1970, not a single km of track was opened to the public.[/quote]

Oh, yes, in the early 1970s international shipping orgs threatened to boycott the island because the infrastructure issue had become such a problem.

Vorkosigan

19

[quote=“Vorkosigan”][quote=“mr_boogie”]
Another truth - Another proof of the lack of infrastructural investment of the KMT government is the railway system - between 1943 and 1970, not a single km of track was opened to the public.[/quote]

Oh, yes, in the early 1970s international shipping orgs threatened to boycott the island because the infrastructure issue had become such a problem.

Vorkosigan[/quote]

All true. And don’t forget how they screwed the farmers with the exchange of rice for fertilizer, or how the local (KMT) gov. abused things like the grainge for personal benefit. Also, don’t pretend that the land reform was actually fair - the prices padi for land was pennies on the dollar.

But one major reason the infrastructure was getting outgrown was the economic growth. In terms of rail; the Japanese left a decent system in place. The last major piece was the connector to TaiDong. This was a major project that took years to complete. I would question whether it is even economically meaningful to complete. As for infrastructure in the East - it’s just not that important realtive to the West.

And, if you want to talk about dictatorships, there is an example much closer to home than Hitler or Franco - Korea - However, I would hardly put the KMT at the same league as Franco & Hitler.

So, did they do as great a job as they might have you believe? No. But they did do a good job at the macro-level.

20

[quote=“Vorkosigan”][quote=“mr_boogie”]
Another truth - Another proof of the lack of infrastructural investment of the KMT government is the railway system - between 1943 and 1970, not a single km of track was opened to the public.[/quote]

Oh, yes, in the early 1970s international shipping orgs threatened to boycott the island because the infrastructure issue had become such a problem.

Vorkosigan[/quote]

All true. And don’t forget how they screwed the farmers with the exchange of rice for fertilizer, or how the local (KMT) gov. abused things like the grainge for personal benefit. Also, don’t pretend that the land reform was actually fair - the prices padi for land was pennies on the dollar.

But one major reason the infrastructure was getting outgrown was the economic growth. In terms of rail; the Japanese left a decent system in place. The last major piece was the connector to TaiDong. This was a major project that took years to complete. I would question whether it is even economically meaningful to complete. As for infrastructure in the East - it’s just not that important realtive to the West.

And, if you want to talk about dictatorships, there is an example much closer to home than Hitler or Franco - Korea - However, I would hardly put the KMT at the same league as Franco & Hitler.

So, did they do as great a job as they might have you believe? No. But they did do a good job at the macro-level.