Most analyses of Cold War Taiwan cite the importance of the mainlander migration in 1949, emphasizing the managerial and entrepreneurial contributions of many of the exiles.
Mainlander Migration to Taiwan
The migration is usually presented as one of several factors that enabled Taiwan to embark on a development path marked most prominently by strong economic growth. Yet several of the policies ascribed to the migrants were already in place upon their arrival.
In spite of our ability to define Cold War Taiwan as a client state and to look at Taipei as a command and control center for the KMT government in its alliance with the United States, it is important to acknowledge the continuity between postwar economic planning on the mainland beginning in 1943 and economic planning on Taiwan in the early years of the Cold War.
In theory, at least, Nationalist industrial planning draws on the influence of Sun Yat-sen who emphasized the role of central state planning in creating ‘socialism’ in China.
According to this interpretation, during the mainland period, the Nationalists stressed Sun’s commitment to state-planned development of all basic heavy industries and infrastructure and they continued to follow this approach when they relocated to Taiwan.
In fact, many individuals who were originally assigned to Northeast China were sent instead to help restore production in Taiwan after economic prospects were diminished in Manchuria.
Historically, the Chinese focus on heavy industry and infrastructure intensified when Japan seized Manchuria in 1931.
Taiwan Relies on Central Planning
At this time, the Nationalists perceived themselves to be extremely vulnerable to external threat and they increasingly stressed the rapid growth of military-related state capitalism.
Chiang Kai-shek, the military leader who dominated the political scene came to accept this view.
Modern developmental bureaucracies were established to promote a scientifically controlled economy.
These organizations were modeled in some respects on the “apparent achievements of Soviet planning.”
It was believed that central planning was essential for national defense and that it would enable China to retain control over industrial and technological development instead of allowing the country’s economic resources to fall into foreign, provincial or private hands.
It was argued that:
If we can treat wartime plans for the postwar period as evidence of the anticipated direction of Chinese development under Nationalist rule, it becomes clear that the extension of government controls and the growth of the state industrial sector were intended to continue at an even greater pace in peacetime, and to affect areas of the economy that had been largely outside of government control before 1937, including light industry and foreign-owned enterprise.
Whether one talked . . . of ‘following the socialist road,’ or of an economic policy that was . . . ‘close to socialism through not identical,’ there was a broad consensus among Chinese planners on postwar economic direction.
Postwar foreign investment was to be strictly regulated by Chinese planners.
As early as 1944-1945, US industrial and consulting firms were engaged to inspect industries in Manchuria, East China, and Taiwan.
At the same time, several thousand Chinese government engineers were sent to the US for advanced technical training.
Still, American interests did not (at least in the immediate postwar years) determine the Nationalist’s strategic course in industrial policy.
Nothing indicates more clearly the postwar direction of Chinese development than the fact that, despite enormous obstacles such as the onset of civil war, the Soviet industrial plunder of Manchuria, and open American disenchantment with Chinese state planning, Nationalist China maintained its strategic course in industrial policy, continued in the direction of increased economic control, and not only resisted American demands to ‘privatize’ Chinese industry but expanded the state sector and the planned economy at a rapid rate. By August 1947, the NRC’s industrial empire employed ca. 33,000 staff members and 230,000 workers (more than 500,000 if joint ventures are included), and accounted for 67.3% of China’s total industrial capital.
Heavy Industry is Dominant
Once the Nationalists had arrived on Cold War Taiwan, the emphasis on heavy industry and infrastructure was, of course, related to the need to recover and maintain sovereignty through military strength.
The highest priority continued to be defense-related industries which “were to be developed as quickly as possible, as state enterprises according to a planned economy.”
Economic plans made in 1946 — not the 1949 migration — assigned mid-level managers and engineers to 18 NRC-run state corporations and the NRC regional office on Taiwan.
These individuals were in place when the Kuomintang refugee regime arrived to stay in 1949, and provided an important portion of what the economist Simon Kuznets, a former NRC consultant, has called the ‘experience and human capital’ needed for Taiwan’s subsequent progress.
After 1950, the pre-1949 concept of leadership by economic bureaucracy grew stronger.
Planners from the pre-1949 bureaucracy, especially the NRC, formed the core of the Industrial Development Commission, which was founded under the Economic Stabilization Board, and has since become the most powerful policy-making bureau in the Ministry of Economic Affairs, responsible for detailed ‘guidance planning’ of industrial policy. NRC people have also dominated the leadership of the capital-level Council for Economic Planning and Development, which handles a range of economic forecasting and planning, and reviews public-sector investment. It is certainly part of the NRC legacy that until the 1970s, engineers, not economists, dominated these two bodies that together have been called, perhaps too dramatically, Taiwan’s ‘economic general staff.’
Personnel continuity from the mainland period meant that the emphasis on state-led, import-substituting, defense-related, heavy industrial growth dominated Taiwan’s economy until the late 1950s. After this time, however, the US exerted more leverage, pressuring the regime to move away from its emphasis on heavy industry and toward the production of export-oriented products.