[Reading Club] "Taiwan's Unsuccessful Transformation: Democratization and Economic Development" - Qu Wanwen (author)

The author begins by reviewing the mixed legacy of the Japanese colonial era to Taiwan. The legacy of infrastructure and human resources cannot offset the threats posed by a “colonial economy” reliant on commodity exports and food imports, a lack of resources such as key human resources such as technical management, and a traditional landed economy. Fortunately, Japan, as a defeated country, could no longer dominate Taiwan's economy. The United States also provides US aid, provides export markets and tolerates policies such as trade protection and export subsidies.

The author discusses the developmental state model after the Nationalist government moved to Taiwan. In this model, an independent and effective economic development agency is firstly set up, with the Economic Development Association as the planning department and the Ministry of Economic Affairs as the executive department responsible for industrial policy. It has a lean and competent economic bureaucratic team, backed by the talent of the ACC. These bureaucrats have a national spirit and a sense of crisis to save the nation and survive, and take economic development as their career aspiration. By improving the investment and business environment, referring to the experience of other countries and their own reality, they design a blueprint for the development of the industry forward-looking, and use the power of the government to promote the development of emerging industries and guide industrial upgrading under the conditions of a market economy. It designs different policies according to the characteristics of different industries at different stages. It is not controlled by individual and existing interest groups, and takes into account the overall economic development and future prospects. This was true of the textile industry in the 1950s, the petrochemical and steel industries in the 1960s, and the emerging electronic technology industry in the 1970s. For example, Li Guoding and others often express concerns such as "where will Taiwan's emerging industries be in 20 years' time?" There is clearly a bit of an over-idealization of the technocratic and economic development model of that era in the author's argument, and the actual situation is probably more complicated. Contradictions within the economy and technocratic bureaucracy, nepotism and related transactions have always existed. There are also failures in industrial policy.

In the 1980s, Taiwan began to face the pressure of transformation of its economic development model. Problems such as dependence on exports, increased consumer demand, excess savings, and lack of urban land planning began to appear. After the Plaza Accord, the United States also proposed exchange rate appreciation, trade and investment liberalization to Taiwan. and other requirements. The democratization of the 1990s initiated a complete transformation of Taiwan's developmental state model and presented four challenges to the new model: 1. How to expand the goals of economic policy to include new considerations such as environmental protection and labor; 2. How to reconcile elections The impact of competition on the "consensus that prioritizes overall development interests"; 3. Propose a new development narrative that adapts to trends; 4. Deal with political and economic relations with mainland China.

However, Taiwan's democratization revolves around ethnic groups and extends to cross-strait relations. Its discussion completely denies the era of authoritarianism, establishes moral legitimacy among young people, the role of the Kuomintang regime in economic development is not affirmed, economic growth is attributed to other factors, and its development experience is not accepted. "Party-state capitalism" was proposed, which emphasized the Kuomintang's monopoly of privileges, and that party-run and state-run undertakings hindered the private economy. Although this theory ignores the fact that Taiwan's private economy is gradually growing and accounts for a very high proportion, it can be accepted by the public (PS China is now also called "state capitalism"). There are no specific economic goals in Taiwan's new nationalist discourse, and the idea of decoupling from mainland China's economy is far removed from Taiwan's economic reality. In electoral politics, the interests of the "forward-looking whole" in the future world are not represented in reality. Such democratization has had the following impacts on the transformation of Taiwan's economic development model:

1. When the objectives of economic policy are expanded, coordination and integration between different objectives cannot be achieved. The new situation requires more comprehensive coordination and planning of economic development goals from a higher level. However, in reality, policies are often revised randomly under the established goals of political leaders. Insufficient consideration. The rice wine tax turmoil, nuclear waste storage and waste and energy policies are all its manifestations.
2. Election competition erodes consensus on overall development interests. Economic policy has become short-term, slogan and kitsch. Political officials are frequently replaced, and the average tenure of economy ministers has dropped from 5-6 years to 1.4 years. The strict lines between economic development and political rewards began to blur in the early years. Local factions entered the center, affecting the economic development previously dominated by the center. Regional subsidies are based on votes. Industrial policy either fails or does not exist. There is a large amount of excess saving capital sitting idle and investment scarce. Funds are mostly given to existing industries. The massive reduction in taxes on the wealthy attracts capital, but drives up the prices of houses and other assets, and capital continues to flow out.
3. Neoliberalism, characterized by small government and non-intervention, became the mainstream economic development discourse. Policies rarely appear in public discussions. The Economic Construction Association gradually lost its function, and even government functions were outsourced. The tax reform has reduced the ratio of tax revenue to GDP to an already low 12.3% (the OECD international average is 34.3%). Both the government's fiscal deficit and the income distribution of the people have deteriorated. The authors note the possible concealment problems of using household income and expenditure surveys, and use Piketty to estimate the tax situation, which shows a worse wealth inequality situation. Weak investment has made it difficult for workers to grow in real wages. Partisanship has divided the labor movement, and political competition has reduced the state's ability to discipline capital. In the end everything fuels populism again.
4. Political goals in cross-strait relations conflict with economic realities. The economic rise of mainland China has an irresistible attraction for Taiwanese capital, while Taiwan's obstructive policies have limited effect, and Taiwan's economic dependence on mainland China has become increasingly high. Attempts to prevent technology outflow have failed except for the semiconductor industry. The Sino-US trade war and technology war also prove that mainland China is still economically difficult to be replaced by Southeast Asia. Taiwan's FTA coverage is very low, and the coverage part is mainly ECFA with mainland China.

The authors compare the effectiveness of South Korea and Taiwan in transforming their economic development models. It is pointed out that South Korea outperforms Taiwan in areas such as economic development consensus, economic growth, income distribution and wage growth, investment and industrial policy, and social movement. It shows that its democratization has a more positive impact on the transformation of the economic development model than Taiwan.

The author's future suggestions in the book are relatively limited, and he only proposes to look at Taiwan's past development experience with an attitude of "transcendence" rather than "denial", to recover Taiwan's left-wing politics, and to seek cross-strait reconciliation and response. During the exchange activities, the author also put forward suggestions for establishing policy consensus, developing consensus on ideas, improving the quality of public policy discussions, rebuilding industrial policy and bureaucratic professionalism, and pragmatically handling cross-strait relations. Perhaps the limited content of the author's suggestion shows the difficulty of change.

This book is short in length, the text is simple, the content and discussion are not complicated, and it also provides some convincing information. It is recommended for everyone to read. But on the other hand, it must also be understood that the author's statement is only the words of one family. His views on the developmental state model are a bit too ideal and beautiful in my opinion. Moreover, whether some past industrial policy experiences are applicable to the present requires more consideration. Some scholars point out:

"For industries based on innovation, the pursuit and creation of cutting-edge technologies that do not yet exist in the market are the basis of their competitiveness. Therefore, it is difficult for manufacturers to directly obtain the required knowledge and technology from the market, and the state bureaucracy does not have enough In this case, it is difficult for the state apparatus to play a leading role in this industry. At most, it can only play the role of a regulator or an industrial midwife, constructing an environment conducive to knowledge and the basis or platform for the growth of technological innovation, assisting and gradually letting enterprises take the lead in industrial innovation activities. Therefore, whether a development-oriented country gradually transforms into a country type that triggers innovation is far more important than leading development through intervention. (1) "

(1) Chen Congyuan, & Wang Zhenhuan. (2009). Taiwan's biotech pharmaceutical industry: development, innovation and constraints. Taiwan Sociology Journal , (43), 159-208.