January 4, 2007 at 4:40 am | Posted in Asia, Books, Economics, Financial, Globalization, History | Leave a comment









A Political Explanation of Economic Growth

State Survival, Bureaucratic Politics, and Private Enterprises in the Making of Taiwan’s Economy, 1950-1985.


Yongping Wu

Taiwan is a classic case of export-led industrialization. But unlike South Korea and Japan, where large firms have been the major exporters, before the late 1980s Taiwan’s successful exporters were overwhelmingly small- and medium-sized enterprises (SMEs). The SMEs became the engine of the entire economy, yet for many years the state virtually ignored the SMEs and their role as exporters.

What factors account for the success of the SMEs and their benign neglect by the state? The key was a strict division of labor: state and large private enterprises jointly monopolized the domestic market. This gave the SMEs a free run in export markets. How did this industrial structure come into being? The author argues that it was an unintended consequence of the state’s policy toward the private sector and its political strategies for managing societal forces. Indeed, Taiwan’s unique industrial structure was shaped by both the witting and the unwitting interactions of the state and the private sector.

Moreover, as the author shows, this industrial policy was a product of the internal politics of the economic bureaucracy, and the formulation and implementation of economic policy hinged on mechanisms for solving differences within the state.

Comment: Yongping Wu in his A Political Explanation of Economic Growth, mentions James Meade’s “Planning and the Price Mechanism” as a kind of bible for early Taiwanese economic planners.

Planning and the Price Mechanism: The Liberal-Socialist Solution

by James Edward Meade. 132 pgs.

Publication details

Contributors: James Edward Meade

Publisher: Macmillan
Place of Publication: New York

Publication Year: 1949

Prices & Economic Policy,
Table of contents

Chapter I. The Problem Stated
(a) The Case for State Control and Planning (p. ),
(b) Planning without Prices (p. ), (c) The Controlled Use of the Money and Price Mechanism (p.).
Chapter II. The Control of Inflation and Deflation
(a) The Evils of Inflation and Deflation (p. ),
(b) The Problem of Estimation (p. ),
(c) Methods of Control over Total National Expenditure (p. ).
(i) The Timing of Public Expenditure (p. ),
(ii) Fiscal Policy (p. ),
(iii) The Blocking of Liquid Assets (p. ),
(iv) The Rate of Interest (p. ),
(d) The Danger of Overdoing It (p. ).
Chapter III. The Distribution of Income and Property
(a) The Present Problem (p. ),
(b) Incentives and the Progressive Taxation of Earnings (p. ),
(c) The Food Subsidies and the National Minimum (p. ),
(d) Lady Rhys Williams’ Rationalization of Income Redistribution (p. ),
(e) Equality of Opportunity (p. ),
(i) Education and the Movement to Better-paid Jobs (p. ),
(ii) Inheritance (p. ),
(iii) The Capital Levy (p. ).
Chapter IV. The Problem of Monopoly
(a) The Promotion of Competition (p. ),
(b) The Sphere for Socialization (p. ),
(c) The Trade Unions and Wages Policy (p. ).
Chapter V. Financial Policy and the Balance of Payments
(a) The Control of Internal Demand (p. ),
(b) The Control of External Capital Movements (p. ),
(i) Exchange Control (p. ),
(ii) Domestic and Foreign Rates of Interest (p. ),
(c) Trade Controls versus Exchange Rate Adjustment (p. ),
(i) Quantitative Import Restrictions (p. ),
(ii) Adjustments of Exchange Rates (p. ),
(d) Conditions necessary for the International Working of the Price Mechanism (p. ).
Appendix I. The Arithmetic of the Amalgamation of National Insurance, Children’s Allowances, Food Subsidies and Income Tax.
Appendix II. The International Monetary Fund, the International Trade Organization and the United Kingdom Balance, of Payments.

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