Transnational corporations during the Cold War period concentrated on three categories of manufactured products from Taiwan and other less developed countries.
The first category (much smaller than the other two) was made up of capital or technology intensive goods including chemicals, iron and steel, light engineering goods, machinery, and transport equipment. In this area, the initial technology was usually provided by the transnational firm.
The second category included simple labor intensive products like clothing and miscellaneous light manufactures — sporting goods, travel goods, furniture, wigs, and plastic products. Here, a division of labor emerged between production done by local industrialists and global marketing done by foreigners. Production of these products was largely in the hands of domestic entrepreneurs or firms, but transnational buying groups played an important role in promoting at least some of the exports.
The clothing sector was particularly important in the Taipei case since it had been upgraded in the early 1950s under the tutelage of US advisers intent on assuring the production of high quality military uniforms.
In the apparel end of textiles, sales to mass marketers, such as K-mart, and subcontracting for foreign brand names, such as Arrow and Jantzen, accounted for a substantial part of production.
J.C. Penney, Montgomery Ward, and Sears Roebuck were also large buyers.
Exports as a percentage of textile production expanded rapidly: 19.6% in 1961; 25.6% in 1966; 38.9% in 1969; and 80% in 1982.
Taiwan’s leading sector, locally owned, thus became export-dependent, with much of the actual marketing and know-how controlled by foreigners.
The third category, products of footloose industries, involved the evolution of extremely specialized labor intensive processes for manufacturing, including assembly operations. The electronics industry which, at first, produced semi-conductors, tuners, valves, and related components was by far the most important in this sphere. These industries were highly capital as well as technology intensive, embodying the latest technical developments.
By 1972, Hong Kong, Taiwan, South Korea, and Singapore accounted for nearly half the total manufactured products from the entire less developed world.
These countries, known as the four little tigers, had been observed to have extremely close political ties with the home countries of transnational firms, especially the US and Great Britain. Still, it has been argued that they should not be treated as special cases. Rather, they are said to reflect the two basic factors which influenced the location decisions of transnational firms, political stability and labor “docility.”
In the context of the times, political stability implied that the risks of nationalization or confiscation of assets were reduced to a minimum, and labor docility implied a strict control over trade unions, reducing the possibility of industrial disputes, enabling firms to dismiss workers for the purpose of maintaining discipline, and allowing a cutback in employment in case of recession.
In the case of Taipei, political stability and labor docility were often facilitated through repressive action. Typical statements of multinational executives emphasize the importance of both. Regarding location decisions, one businessman stated:
We won’t go into that country until the government gets the unions in line.
We wanted a site where we could have the US Navy between us and Mainland China.
Thus, contrary to the argument that particular countries weren’t special cases, it is possible to argue that compared to other countries in the developing world, a country like Taiwan did have special qualities.
As we have seen, the militarization of Taipei under the KMT government, including the continuing imposition of martial law, assured both domestic political stability and labor docility. These repressive policies were actively supported by the US government.
The presence of US military forces as a consequence of the Cold War conflict ensured that the island was secure from external adversaries.
The presence of the US Seventh Fleet in the Gulf of Tonkin meant that goods, people, and money could flow safely to and from Taipei.
Militarization meant that the conditions necessary for successful economic development were indeed in place. Thus the degree of intervention risk was considered minor compared to that of most less developing countries including Algeria, Brazil, and Liberia.
By 1971, 200 American businesses were operating in Taiwan, the majority of them in Taipei, and foreign firms were responsible for at least 20% of the country’s manufactured exports.
For more information on Taiwan’s economic development, check out our earlier posts: