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• Advisory Statement
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POLS 459 Politics of East Asia

• The Late Developers
• South Korea and Taiwan
• October 30, 2007
• Timothy C. Lim, Ph.D.
• California State University, Los Angeles
• Contact tclim_at_calstatela.edu

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The Late DevelopersTaiwan and South Korea

• The State and Taiwans Economic Development
  Alice Amsden
• Lets begin with a question
• How do Amsden and Kohliassess the relative
  importanceof the colonial period to
  thepost-liberation developmentof Taiwan and
  South Korearespectively?

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The Late DevelopersTaiwan and South Korea

• The State and Taiwans Development
• Key Legacies of Colonial Period
• Commercialization of agriculture
• Land reform/undermined power of large
  landowners
• Relatively heavy investment in peasant
  education
• Creation of industrial base
• Heavy state intervention in economy

Consider why this is important
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The Late DevelopersTaiwan and South Korea

• The State and Taiwans Development
• The Nature of the Guomindang State Some
  Questions

• What is the Guomindang state? Where did it come
  from? What was its main concern?
• How did the Guomindang state differ, if it did,
  from the Korean state immediately following
  liberation from Japanese colonial rule?

• Was the Guomindang state developmental in its
  early years?

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The Late DevelopersTaiwan and South Korea

• The State and Taiwans Development
• The Nature of the Guomindang State More
  Questions
• When the Guomindang regime arrived in Taiwan,
  _____________ was by far the most important
  sector economically
• Why was this sector so important? Why was it
  important for a small, developing economy?

agriculture
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The Late DevelopersTaiwan and South Korea

• The State and Taiwans Development
• The Nature of the Guomindang State
• An early and key action of the Guomindang
  vis-à-vis agriculture was _________ __________,
  which was initiated in 1949 and completed in 1953
• Land reform effectively destroyed the landlord
  class and helped lay the basis for a tremendous
  increase in agricultural production and
  productivity between 1951 and 1960, average net
  real capital outflow from agriculture increase
  10 per annum

land
reform
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The Late DevelopersTaiwan and South Korea

• The State and Taiwans Development Agriculture
• According to Amsden, why was Taiwanese
  agricultural production so strong? Was it due to
  primarily free market policies, to technical
  improvements (i.e., the Green Revolution) or
  something else?
• Of course, Amsden argues it was due primarily to
  a state policy, but it was a policy that was not
  only meant to increase agricultural production,
  but also, and perhaps more importantly, to
  increase the extraction of _________________ for
  other needs in the economy and the state itself

surplus capital
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The Late DevelopersTaiwan and South Korea

• The State and Taiwans Development Agriculture
• What were the primary tools of the states
  agricultural policy?
• The states _____________ on _______________
• Hidden rice taxes
• Provision of credit to farmers on a
  non-discriminatory basis

monopoly
fertilizer
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The Late DevelopersTaiwan and South Korea

• The State and Taiwans Development Agriculture
• In summary, agriculture in Taiwan gave
  industrial capital a labor force, a surplus, and
  foreign exchange. Even during the immediate
  postwar years of economic chaos and a world
  record rate of population growth, agriculture
  manage to produce a food supply sufficient to
  meet the minimum domestic consumption
  requirements as well as a residual for export.
  Good rice harvests have been a major factor
  behind Taiwans stunning price stability

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The Late DevelopersTaiwan and South Korea

• The State and Taiwans Development
• Foreign Aid, Foreign Capital, and State
  Enterprises
• How important was foreign, especially American,
  aid to Taiwans economic development?
• How important has foreign capital--loans andFDI
  (foreign direct investment) been to theTaiwanese
  economy?

In terms of long-run economic growth, the impact
of aid was minor. As for foreign investment,
Taiwan has been very careful. The government
cannot be said to have delivered Taiwan into
foreign hands,either be letting foreign banks
dominatecredit or by letting foreign firms
dominatemanufacturing.
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The Late DevelopersTaiwan and South Korea

• The State and Taiwans Development
• Foreign Aid, Foreign Capital, and State
  Enterprises
• To what extent did the Taiwanese state itself own
  economic enterprises?
• Why has the state been so resistant to divestment?

The government has been slow to divest itself of
its holdings for two basicreasons. From the
beginning, public enterprise has served to
consolidatethe power of the Mainlander
bureaucracy. In recent years, publicenterprise
has also allowed the Guomindang to buttress its
ownpower vis-à-vis foreign capital ..The
government did not abandonits traditionally
conservative attitude toward foreign
investmentuntil the export boom of the late
1960s had gotten underway.
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The Late DevelopersTaiwan and South Korea

• The State and Taiwans Development
• Exploiting the World Market
• How important was state intervention in Taiwans
  turn toward EOI and to the success of EOI?
• On this question, it is important to recognize
  that less obvious aspects of state intervention
  exchange-rate distortions, labor repression,
  investments in public education, high savings
  rates, low corporate tax structure, public
  ownership of banking and other industries,
  licensing requirements, and so on
• Remember, too, the arm of the state reaches to
  virtuallyevery firm in Taiwan

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The Late DevelopersTaiwan and South Korea

• The State and Taiwans Development
• Taiwan, then, is more than a case in which the
  essential contribution of state intervention in
  economic development can be observed. It is a
  case that demonstrates the reciprocal interaction
  between the structure of the state apparatus and
  the process of economic growth

End of discussion on Amsden article
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The Late DevelopersTaiwan and South Korea

• The Confucian Entrepreneur?
• Consider the arguments by Cheng and Amsden
  What do they have to say about the role of
  culture in Taiwans economic development? What do
  Lam and Paltiel say in their article?

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The Late DevelopersTaiwan and South Korea

• The Confucian Entrepreneur?
• Lam and Paltiel contend that to understand a
  cultures influence on economic development,
  overly generic conceptions of culture cannot be
  used
• In particular, culture needs to be studied at
  the ______________ level, rather than the
  system-level
• Furthermore, the influence of culture at the
  enterprise level cannot be understood by
  merelylisting a set of characteristics about
  Chinese or Confucian culture

enterprise
What do they mean?
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The Late DevelopersTaiwan and South Korea

• The Confucian Entrepreneur?
• What is Chinese Culture? How do Lam and Paltiel
  answer this question?
• Answer 1 Confucianism is not Chinese culture
  it is only part of this culture
• Answer 2 Chinese culture is made upof both
  dominant (orthodox) andcountercultural
  (heterodox) values inTaiwan, these include
  Taoist, Buddhist, and other subcultures
  together, they create a ___________ culture

populist
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The Late DevelopersTaiwan and South Korea

• The Confucian Entrepreneur?

Dominant Culture
PopulistCulture
HierarchicalLoyalty to rulersObedienceGlorific
ation of Authority
Rejects AuthorityEgalitarianLegitimates
RebellionDespises High Education
Enterprise structure, organization and dynamics
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The Late DevelopersTaiwan and South Korea

• The Confucian Entrepreneur?
• To understand the significance of culturein
  Taiwans economy, attentionmust be paid to the
  interaction ofthe dominant Confucian and
  heterodox cultures
• A salient aspect of this interactionwas the
  resistance to Confucian values, epitomized by
  Sun Wukong, the Monkey King

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The Late DevelopersTaiwan and South Korea

• The Confucian Entrepreneur?
• Resistance to Confucianisms demands for
  conformity, obedience and loyalty helps us
  understand why Taiwans economy is dominated by
  small- and medium-sized firms, rather than huge
  conglomerates (as in Japan and South Korea)
• Firm size is not the only consideration
  Taiwans economy is also characterized by
  hyper-dynamic development and (intellectual)
  piracy

What is the relationship between cultural
resistance to Confucianism, on the one hand, and
hyper-dynamic development and piracy on the
other hand?
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The Late DevelopersTaiwan and South Korea

• The Confucian Entrepreneur?
• The organization of the Taiwanese economy, its
  hyper-dynamic development and the general
  disrespect for intellectual property rights and
  rule of law tells us that Confucianism is not the
  ideology that inspires the mass of entrepreneurs
  in Taiwan
• In short, there is no such thing as a Confucian
  entrepreneur in Taiwan
• Instead, one can argue that most entrepreneurs
  in Taiwan are inspired by the heterodoxy of
  Taoism that calls on them to challenge the
  established order

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The Late DevelopersTaiwan and South Korea

• The Confucian Entrepreneur?
• Smaller firms are able to find substitutes for
  the economic efficiency that large-scale
  enterprises get from economies of scale by
  creating organizational arrangements based on
  personal connections(guanxi)
• Keiretsu-like structures are also
  createdthrough group corporations (jituan
  gong),which is made up of independently owned
  and capitalized small firms

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The Late DevelopersTaiwan and South Korea

• Some Discussion Questions
• Do Lam and Paltiel provide a more convincing
  argument than Cheng? That is, do cultural
  variables seem more important than regime
  dynamics?
• Can the two arguments--one focusing on culture
  and one on politics--be brought together or are
  they mutually exclusive?
• If Lam and Paltiel are right, then what explains
  the differences between Taiwan, on the one hand,
  and South Korea and Japan, on the other hand?
• If Lam and Paltiel are right, should we expect
  to find a similar process in, say, mainland
  China? Why or why not?