Taiwan’s Unsuccessful Transformation

Taiwan’s Unsuccessful Transformation
Photo Credit: Reuters / TPG Images

What you need to know

Are Taiwanese nationalism and democratization to blame for a lackluster economy? This is the main argument of Chu Wan-wen’s ‘Taiwan’s Unsuccessful Transformation: Democratization and Economic Development’.

It’s not controversial to say Taiwan’s economy today isn’t performing well. The “Taiwan Miracle” days of double digit growth have long receded into the past. Meanwhile, the growth that remains is enjoyed by fewer and fewer. Over the last 40 years, the top 10% earners have received a steadily increasing share of the national income, while the share of the bottom 50% has decreased. 

This economic stagnation can be contrasted with achievements in other areas, transitioning from authoritarianism to democracy and realizing progressive social values. The claim that it’s exactly Taiwan’s democratization that lies at the root of its lackluster economy, then, may come as a surprise. This is the main argument in Chu Wan-wen’s Taiwan’s Unsuccessful Transformation: Democratization and Economic Development.

Chu sets the stage by refuting claims that authoritarianism and globalization were the cause of Taiwan’s unsuccessful economic transformation. It’s often claimed that authoritarian states perform better economically, as state economic planners put growth before the needs of the populace. But there are many unsuccessful authoritarian states, and democracies can also have flourishing economies. As for globalization, states similar to Taiwan like Singapore and South Korea also face this issue, yet they both outperform Taiwan.

Democratization and globalization, therefore, cannot in themselves explain Taiwan’s unsuccessful transformation. Instead, one has to look at the specificities of these processes and how governments respond.

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Photo Credit: Reuters / TPG Images
Workers at Pou Chen International Group’s factory in the central Taiwanese city of Changhua glue soles to shoes. 

Chu draws on Chalmers Johnson’s theories of the developmental state to explain what made Taiwan’s economy during the authoritarian period successful. It wasn’t solely the infrastructure built during the Japanese colonial period or postwar U.S. aid that spurred Taiwan’s economic development, Chu claims, as these resources still had to be put to proper use. Instead, success came from Chinese bureaucrats with the experience, vision, and power to implement long-term economic plans. Driven by a strong Chinese nationalism, they carried on a 100-year tradition of trying to save the Chinese nation.

As Taiwanese lacked the know-how to run the industries left by the Japanese, it fell to these Chinese bureaucrats to properly run them. In addition, rather than using U.S. aid to import (semi-)finished products, raw materials were imported. Concentrating on export processing and protecting domestic markets allowed Taiwan to build up light manufacturing industries that could then serve as a basis for developing heavy industries. The economic bureaucrats also set up institutions to research the use of resources and the development of new industries. TSMC’s success, for example, can be traced to this state-sponsored research effort.

When Taiwan’s economy had reached a mature level of industrialization by the 1980s, there were more external and internal demands for economic reform: U.S. demands to curb protectionist policies and domestic demands to open up certain monopolized industries to competition. As the economy gradually opened up, labor, environmental, and other movements also exerted more pressure. With economic development regardless of the social, political and environmental costs no longer tenable, transforming the economy became necessary.

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Photo Credit: Reuters / TPG Images
About 6,000 Taiwanese protesters marched through Taipei on May 29, 1994 against a planned construction of a nuclear power plant near the capital.

Politically, demands for more freedom were made. Martial law was lifted in 1987 and the Democratic Progressive Party (DPP), which had been formally established prior to 1987, was able to take the fight against the Kuomintang (KMT) to the mainstream. But this is where things start to go awry according to Chu. Lacking a strong left, Taiwan’s democratization movement appropriated ethnicity and nationalism as its means of mobilizing the people. The discourse of Taiwanese benshengren having historically been oppressed by the KMT and waishengren from China came to prevail over a politics of class.

With a new social discourse that completely disavowed the KMT’s authoritarian period, it was unthinkable to acknowledge any successes they had in developing Taiwan’s economy. As a result, it also became impossible to acknowledge the developmental state model and the role of industrial policy. Since the democratic movement had no economic program beyond breaking up state (KMT) control, neoliberalism became the most obvious choice due to sharing a distrust of the government.

Since then, economic policies aimed at transforming the economy and meeting the challenges posed by globalization have failed. Without a consensus regarding economic planning, policy could only focus on the short term, leading to an inability to upgrade old or develop new industries or create an environment favorable for investment. The adherents of neoliberal economic thought ensured that where production had not yet moved abroad, government and labor remained powerless. The outcome was stagnating salary growth, worsening income and wealth inequality, and a general breaking down of social welfare.

It’s especially Taiwan’s economic integration with China which reveals the contradictions in the Taiwanese nationalist discourse that has become mainstream. Since the 1990s, Taiwan’s economy has become dependent on China despite attempts by successive governments to keep integration under control, and pro-independence forces don’t have concrete solutions. Yet, the lack of a coherent cross-strait policy only hampers Taiwan’s economic development.

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Photo Credit: Reuters / TPG Images
South Korean students write a protest banner in their own blood on April 8, 1994 during a protest in central Seoul against the Uruguay Round free trade pact, which forced South Korea to open its rice market. 

To drive home the argument, Chu compares Taiwan and South Korea, due to the two nations having a similar history and facing similar challenges. Chu claims that the main reason South Korea’s democratization didn’t lead to an inability to achieve economic growth is that it has a powerful leftwing in society and politics that can hold the government accountable, and that there are no issues surrounding national identity. The result is that even between different people in charge, there remains a consensus regarding the goals of economic development.

For Taiwan, on the other hand, the constant transition of power between the KMT and the DPP makes it impossible to set any long-term economic policy, nor is there a left to protect those without power from getting the shaft as the two parties are too preoccupied with each other, shifting policies out of political expediency. (The most recent example of this would be the KMT and DPP’s reversal on U.S. meat imports, as both parties have supported lifting restrictions while in power, and have opposed U.S. meat imports while in opposition.)

Chu makes a compelling economic argument and raises important questions about many ideas that today are taken for granted. Nonetheless, there are implications to her arguments that aren’t sufficiently addressed.

First, Chu focuses solely on the quantity of economic development while ignoring the quality of it. Here the comparison she makes with South Korea is illustrative. When mentioning South Korea’s high suicide rate, she writes this off as a consequence of globalization. Yet if we take Chu’s argument seriously that it’s not globalization in itself that is responsible for a nation’s (un)successful economic development, we should extend that same attitude towards the issue of suicide in South Korea and ask why this rate is high despite the economy performing well. What good is economic growth when the only way to cope is by making “fuck-it expenses”?

Similarly, South Korea’s lack of conflict over national identity may be one reason why it has a successful national cultural industry, but the success is built on a highly exploitative industry and has brought about the commodification and homogenization of Korean culture.

Second, the absence of a left and ethnic politics becoming dominant in the 1990s didn’t happen out of nowhere. They were the result of KMT oppression. The KMT eliminated leftists in its anti-communist fervor and suppressed any expression of Taiwanese and Chinese identity that did not fit with their official view of Chinese culture. In other words, the flip side of the Chinese nationalism that drove bureaucrats to pursue economic development was the suppression of local expressions of culture, contributing to the rise of a Taiwanese identity.

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Photo Credit: Reuters / TPG Images
Former president Chen Shui-bian with then-Minister of the Mainland Affairs Council Tsai Ing-wen, August 26, 2001.

Chu, instead, blames Taiwanese nationalism for being responsible for ruining Taiwan’s economy, as it challenged the consensus regarding economic goals and identity between people and government. But whatever the limitations and consequences of the Taiwanese nationalism that emerged in the 1990s, it was a response to the KMT’s actions. By only focusing on the successes of the developmental state, Chu risks venturing off into nostalgia for the authoritarian period under which the economy prospered.

Here Chu is most closely aligned with other reactionary forces in Taiwan, on the one hand older deep Blue supporters who most clearly express an R.O.C. nostalgia, and on the other hand the pro-unification left whose class politics deny Taiwanese identity and hide their Chinese nationalism.

This is not to say Chu’s analysis of the causes of Taiwan’s unsuccessful transformation is incorrect. Taiwan’s left has historically been underdeveloped, and the more vocal leftists are often pro-unification, clashing with nativist discourses. Mainstream discourse too often touts progressive social values, yet these are perfectly compatible with neoliberalism and hide the reality of an extremely exploitative work culture, one that not only treats migrant laborers as slaves but also leaves Taiwanese overworked and underpaid.

Perhaps this means that what Taiwan needs is a “radical nativism,” one that accepts Taiwanese subjectivity in all its diverse splendor, but rather than taking its construction as a goal in itself, it asks critical questions about its political contents, especially when the discourse on Taiwanese identity becomes a form of neoliberal identity politics that ignores or conceals issues of class.

Taiwan’s Unsuccessful Transformation: Democratization and Economic Development
by Chu Wan-wen
Linking Publishing,192 pp., January 2020.


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TNL Editor: Bryan Chou, Nicholas Haggerty (@thenewslensintl)

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