Taiwan's Miracle Development: Its Economy over a Century

by

Frank S. T. Hsiao

• LAST MODIFIED: 20 August 2024
• DOI: 10.1093/obo/9780199920082-0219

Introduction

It is well known that, since World War II, Taiwan has achieved two miracles, an “economic miracle” and a “political miracle.” Economically, after Taiwan recovered from the destruction of its industrial agricultural bases, built by the Japanese before the war, and because of the impact of the influx of Chinese refugees from the mainland after 1947, Taiwan went through a government reorganization and economic reconstruction, the phases of sugar and rice primary export promotion, import substitution, and low-tech to high-tech exports promotion periods. It maintained a high growth rate with a low unemployment rate and low income inequality. Politically, Taiwan has transformed itself from one of the worst authoritarian regimes in the world, going through thirty-eight years of martial law and the era of “White Terror” from 1948 to 1987, to one of the most democratic and free countries in the world. Since 1987, the Taiwanese economy has continued growing, and democracy and freedom have been evolving. Unlike dire predictions in some quarters, the democratic turn from 1987 by no means put an end to Taiwan’s economic growth. While Taiwan has faced many economic problems over the years, domestically and internationally (e.g., the two oil crises and expulsion from the UN in the 1970s, and the Asian financial crisis in 1997), Taiwanese economy and society have been able to overcome the obstructions and the threat of recession and continued to survive and thrive. In 1997 the World Bank and the IMF listed Taiwan as an advanced economy, and in the 2010s Taiwan became one of the world’s high-income countries. According to IMF data, in terms of real per capital GDP in PPP, Taiwan surpassed Japan in 2007, the United Kingdom in 2009, France in 2010, and Germany in 2014, and it is poised to catch up with the United States. In 2018, Taiwan produced 72 percent of the world’s IC foundries, 49 percent of the world’s IC packaging and testing (both in value), and, if offshore production is included, 85 percent of the world’s computer motherboards (in value) and 79 percent of the world’s notebook computers (in volume). They were No. 1 to No. 3 in the World. Taiwan is a powerhouse in the world’s high-tech industry today. In this bibliography, Taiwan’s economic development miracle is reviewed. The literature on the political miracle has been ably covered elsewhere by Jonathan Sullivan in the Oxford Biographies article “Taiwan Democracy” Since economy and politics are often closely interwoven, readers are advised to refer to that article. Due to Taiwan’s unique historical background, the references include those in English, Chinese, and Japanese, and many are in edited books. For simplicity, we call the Japanese period (1895–1945) the “prewar period,” and the years after 1945 the “postwar period.”

The “Miracle”

The term “economic miracle” is a loose term for a country or region that had an unusual or stellar economic performance in comparison to other countries, during either a short or long period (Selgar 2010). Taiwan’s stellar economic performance before the 1970s was already noticed and fanned by staunch supporters of the KMT regime like Time, Reader’s Digest, etc. (see Mendel 1970). Taiwan is not alone. Organisation for Economic Co-operation and Development 1979 (p. 6) defined the “newly industrializing countries” (NICs) as countries “whose share in world industrial output and in world exports of manufactures has increased rapidly since the early 1960s and particularly during the 1970s.” Ten NICs were identified. In addition to the four “Asian NICs,” the group included Portugal, Spain, Yugoslavia, and Greece in southern Europe, and Brazil and Mexico in South America. By 1992, only four of the original Asian NICs, along with Spain and Portugal, remained as NICs (World Bank 1992, p. 245). In 1988, during the 14th G7 Summit in Toronto, Canada, the Asian NICs were renamed the “Asian newly industrializing economies” (NIEs), as Taiwan and Hong Kong were not considered countries (Hirakawa and Park 1994). The four had achieved and maintained long-run rapid modern economic growth at a high employment level. Taiwan’s “economic miracle” was formally used by OECD. In 1996, South Korea was admitted to the OECD. Taiwan was unable to follow suit because of international political factors.

At about the same time, World Bank 1993 defined the Asian NIEs as the “Four Tigers” and redefined Indonesia, Malaysia, and Thailand as the NIEs. Along with Japan, the World Bank called these eight economies the “high-performing Asian economies” (HPAEs), “which had a remarkable record of high and sustained economic growth” from 1965 to 1990 and were “seemingly miraculous.” The report then studied “The Making of a Miracle” of these economies. Since then, the term “East Asian miracle” has been used widely. For example, the OECD uses the word “miracle” in its book title in Dessus, et al. 1995. Taiwanese products, especially the high-tech products cited in the Introduction as No. 1 to No. 3 in the world, have been listed in the recent annual editions of the Taiwan Statistical Data Book (TSDB)—see TSDB 2019. Studies of the economic development of Taiwan has become important topics in area studies and development economics. Sugihara 2020 even extends the concept of “miracle” to “East Asian miracle” in world history.

• Dessus, Sébastien, Jia-Dong Shea, and Mau-Shan Shi. Chinese Taipei: The Origins of the Economic “Miracle.” Paris: Development Centre of the Organisation for Economic Co-operation and Development, 1995.

  A research report under the OECD project “Financial System Resource Allocation and Economic Growth.” After presenting an overall view of Taiwan’s economy, the authors introduce five stages of Taiwan’s economic development (ch. 1), and study the growth accounting (ch. 2), determination of total factor productivity (ch. 3), efficiency of growth—public finance (ch. 4), and efficiency of Taiwan’s growth policy—financial sector (ch. 5).

• Hirakawa, Hitoshi 平川均, and Iru Park 朴一, eds. Ajia NIES, tenkanki no Kankoku, Taiwan, Hong Kong, Singapore (アジアNIES, 転換期の 韓国, 台湾, 香港, シンガポール). Kyoto, Japan: Sekai Shisosha, 1994.

  See p. 276. A comprehensive and helpful study of Asian NIES on their industrialization (ch. 1), covering labor (ch. 2), the SMEs in Taiwan and South Korea (ch. 3), weapons production (ch. 5), trade and friction (ch. 5), relation with ASEAN and China (ch. 6), international labor emigration and brain drain (ch. 7), possibility of greater China circle (ch. 8), S. Korea and ODA, the advanced countries (ch. 9), Japan, NIEs, and Asia.

• Mendel, Douglas. The Politics of Formosan Nationalism. Berkeley: University of California Press, 1970.

  See p. 315. A very early book presenting the “Economic Miracle of Formosa through Native Eyes.” (ch. 3). This book can be read with Gold 1986 and Mancall 1964 (both cited under Early Postwar Development: Works in English). It notes that the spread of the word about the Taiwan miracle was fanned by staunch supporters of the KMT in the United States, like Time, Reader’s Digest, and others (pp. 66–67). For Taiwanese view of land reform, see pp. 70–76. For distorted and unfair tax system, voiceless legislature, see pp. 82–84.

• Organisation for Economic Co-operation and Development. The Impact of the Newly Industrializing Countries, on Production and trade in Manufactures. Paris: OECD Secretary-General, 1979.

  See p. 96. This OECD report defines NICs for the first time. It analyzes the growing competition in OECD markets from manufactures exported by dynamic new suppliers. Its main emphasis is on “the consequences of rapid industrialization of the newly industrializing countries (NICs), some inside the OECD area, which have been following outward-looking growth policies.” The term “NICs” has been widely used by the economic and government researchers since 1979.

• Selgar, Bernhard. “Theories of Economic Miracles.” Working Paper. Ordnungspolitische Diskurse 2010–01. OrdnungsPolitisches Portal (OPO), 2010-1.

  See pp. 1–26. The paper discusses the macroeconomic, political-economic, and institutional factors of economic miracles of Germany, Japan, and larger East Asia, Taiwan, Korea, China, etc.

• Sugihara, Kaoru 杉原薫. Sekaishi no naka no Higashi Ajia no kiseki (世界史のなかの 東アジアの奇跡). Nagoya, Japan: Nagoya daigaku shuppankai, 2020.

  See p. 765. A collection of the author’s articles on the topic. The “miracle” moved from Europe to East Asia (Japan, NIEs, ASEAN, China, Southeast Asia countries), having high growth and increased standard of living, breaking the “North-South Problem.” After explaining the meaning of the East Asian miracle, the book explores the East Asian model of development, the rebuilding of the modern world system, the postwar world system, and the East Asian miracle.

• TSDB (Taiwan Statistical Data Book). Council of Economic Planning and Development, Executive Yuan, Republic of China (Taiwan), 2019.

  A small 8x6-inch paperback with time series of “essential economic statistics: covering demographic, economic, social, cultural and physical aspects,” published annually from 1952 to 2020. A very useful and convenient handbook. The contents increased as Taiwan’s economy developed. After 2014, it included National Well-being Indicators. For the “miracle” seekers, Table 4-a, “Products of which Taiwan was among the World’s Largest Producers,” separated onshore and offshore production for every year. Unfortunately, TSDB was discontinued after 2020.

• World Bank. World Development Report. New York: Oxford University Press, 1992.

  One of the best annual reference books for understanding world economic development and economic statistics in the year published. Unfortunately, it does not include statistics on Taiwan, which can be found in TSDB.

• World Bank. The East Asian Miracle—Economic Growth and Public Policy, A World Bank Policy Report. Oxford: Oxford University Press, 1993.

  An influential monograph emphasizing the economic miracle of East and Southeast Asian countries. The study defines the essence of miracle as rapid growth with equity (ch. 1), found the importance of stability and openness (chs. 3, 6), of institution (ch. 4), and of private physical (including foreign) and human capital investments (chs. 5, 7).