The American Role in Taiwan
The American role in Taiwan was central since there was a division among the Nationalist leadership as to the advisability of undertaking radical measures which were perceived by some to pose danger to the KMT state.
Regarding the impetus for reform, Ian Little says that in Taiwan pressure from the US Agency for International Development was one of the “clearest cases in economic history of cause and effect.”
. . . the Americans threatened a reduction in aid should the government not adopt the package, but offered a $20-30 million carrot for prompt implementation.
There were rumors that Chiang Kai-shek thought that being an AID recipient was undesirable, leading to claims that “he supported the reforms because they would enable Taiwan to get off the dole and become self-sufficient.”
The strategy was successful.
Overall growth between 1960 and 1977 averaged 9 to 10 percent per year, and real wages in manufacturing more than doubled. Urbanization also expanded.
At first many of the manufacturing establishments were located in the rapidly urbanizing peripheral areas of Taipei. These locales became the destination for many migrants looking for non-agricultural employment.
Eventually, the infrastructure developed in association with the military in the 1950s and 1960s, successful land reform, and American recommendations for the dispersal of labor-intensive manufacturing facilities meant that employment opportunities were not confined to Taipei.
Export Processing Zones
One of the most successful methods of promoting exports was the establishment of export processing zones outside of the city.
By 1972 two of thes zones — Kaohsiung and Taichung (established in 1965 and 1969 respectively) — employed about 58,000 workers, about half of whom worked in electronics.
These zones were especially attractive to the joint enterprises backed by foreign investors that relied, primarily, on unskilled labor.
The majority of the workers were young females who received wages below the average for all manufacturing in Taiwan.
The establishment of the zones, the rapid expansion of industry in other areas, and the subsequent period of unprecedented economic prosperity led to rapid urbanization both in the growth of large cities and the emergence of smaller ones.
Be sure to read Part I of Economy in Taiwan: 1959-1979.
Other posts on economic development in Taiwan include: