American resources were critically important to Taipei’s early Cold War economic and military restructuring.
Over the period 1949-1967, total US assistance amounted to $4.2 billion.
Per capita, Taiwan received US $425 for each civilian over the 1949-1967 timeframe.
During this period, Taiwan’s army of 600,000 soldiers was one of the world’s largest, again on a per capita basis.
US monetary disbursements provided needed foreign exchange and, importantly, since most assistance was allocated for military purposes, domestic expenditures to support the country’s heavy military burden were greatly reduced. This enabled the government to focus its indigenous resources on inflation control, capital formation, and economic development.
Other Cold War support was also forthcoming.
Taiwan became the largest recipient of major arms in the Far East.
Deliveries included $0.5 billion in grants from excess weapons stocks.
In sum, virtually every idea and implementation formula devised for the distribution of US military assistance was applied in the Taiwan case, and the level of aid is unique by international standards.
It is impossible to discount the role that US aid played in the economic stabilization of Taipei’s economy.
When large-scale American aid to the island resumed in 1950, Taipei’s economy was on the verge of collapse and inflation was high.
Economic assistance was targeted to meet short-term requirements by supplying much need commodities and petroleum. Aid was designed to provide relief, ease inflation, and permit the repair of essential industrial machinery. Its goal was to alleviate economic distress
so that military forces would not have to be diverted from defense of Taiwan against a possible Communist assault.
US military assistance reduced the government’s need to shift resources from economic to military uses.
Overall, American economic aid obligations averaged about $100 million a year during the 1951-1965 period, contrasting with roughly $165 million a year for military aid furnished during the same period.
Of the total economic aid given to Taiwan over the 15 year period 1951-1965, almost two-thirds was related to the maintenance of the armed forces.
This assistance was considered economic aid rather than part of the Military Assistance Program since the funds were used to replace money diverted from the economy to keep military strength at a certain level. This included financing the import of commodities on a continuing basis, military construction, and provisions and material directly consumed by the armed forces.
US aid played a major role in building dual use infrastructure, freeing local currency for developmental purposes and “defraying military support costs which would otherwise have diverted from capital formation.”
