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ECONOMY IN TAIWAN: 1959-1979

September 10, 2012 by Lisa Reynolds Wolfe

Economy of Taiwan

As the 1950s drew to a close, the economy in Taiwan was on the brink of tremendous change.

The technocrats in Taipei’s economic bureaucracy were gaining the upper hand in their association with the military, largely because of changing dynamics in the relationship between the United States and the Nationalist regime.

Taipei’s fate was still situated squarely in the battle against communism in Asia. However, at US urging, the battlefield was shifting from one dominated by military strategy to one dominated by economics.

Economic reform was undertaken at America’s insistence in 1960-61, and soon American multinational firms arrived in Taipei.

By the mid 1950s, American advisers felt that the economy in Taiwan was poised to enter a period of sustained, rapid development.

American advisers felt that Taipei’s economy had recovered from its post World War II instability. While the US Congress still considered assistance to the island “defense support,” in 1958 it began to provide aid geared toward the stimulation of economic development.

From 1958 through 1961, US advisers and the KMT government worked out a package of reforms designed to speed economic growth and “push Taiwan toward ‘graduation’ from foreign aid.”

In 1960, the Agency for International Development (AID) made clear its intention of phasing its Taiwan program out of existence.

During this period, economic policy shifted from an emphasis on inward looking import substitution to outward looking export promotion. In large part this was due to pressure from American officials who argued that the government regulation and control associated with import substitution made the economy inefficient, slowing economic development.

Many of the existing regulations were restrictions that had been established to deal with the threat of war and the impact of inflation. They had not been re-evaluated as the dangers subsided.

At US urging, in 1959, the government began removing controls and promoting new programs to encourage the exports which were now thought to be critical to the success of Taiwan’s industrialization efforts.

A Nineteen Point Program of Economic and Financial Reform liberalized controls on trade and industry, promoted overseas marketing, and created a business climate that would stimulate local and foreign investment. It also lessened military expenditures.

For more information on Taiwan’s economic development, check out these posts:

US Investment in Cold War Taiwan

Economy in Taiwan 1959-1979 (Part II)

Filed Under: Taiwan

About Lisa Reynolds Wolfe

Widely published, Lisa holds a Ph.D. in Politics from New York University and a Master of Science in Policy Analysis and Public Management from the State University of New York at Stony Brook. Areas of particular interest and expertise include Cold War Studies, sustainable development, heritage, and the environment.

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A Cold War historian, Lisa holds a Ph.D. in Politics from New York University and a MS in Policy Analysis and Public Management from SUNY Stony Brook.

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