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Lecture #399 on Asia

August 3, 1992

The Asian Development Miracle: Taiwan as Model

By

(Archived document, may contain errors)

The Asian Development Miracle: Taiwan -As Model

By Andrew B. Brick There occur, on rare but unique occasions, defining moments in human history. This is one of them. Marxism is de ad. As a scenario, as a prescription, as a roadmap to progress, the model of the command economy is utterly discredited. Not coincidentally, the alternative model-that of fire-marketcapimlism-.@.--is-ascendanL,History,-co;itru.. aMECs extravagent the- y-t o ,Frgncis FqUy_ sis, has by no means ended: it merely is in the process of being recreated. How essential it is, as a consequence, that we understand the complexities-and ambiguities- of the triumphant alternative. Is it-transportable?.Does it work everywh e re?.A. re 'its underlying principles valid for all time? These are crucial questions. Prior even to these questions, however, is one other: What is it? The Asian development model is an exemplar of the entire phenomenon. And the I%ublic of T China on Taiw an (ROC), in particular, often is cited as the model of the model. I he p ose here is to discover what makes the Taiwan model tick.

Keys to Asia's Economic Success As the failed god of the command economy is laid to rest across the globe, something called five-market capitalism is being celebrated. From the formerly Iron Curtain countries to the far- thest reaches of South America and Africa, the capitalist alternative has been declared winner and champion. The world used to have two seriously different wa y s of running an econlomy. Today it has only one. Or does it? To be sure, Eastern Europeans these days regard the idea of the state as guiding hand for an economy more as a sick joke than a serious policy prescription. But ask a Pole what form of capitalis m he favors-the purist "monetarist7' version, the social-market one, br perhaps the Asian-country-as-corporation "miracle" model-and the laughter-quickly subsides. There am details to this transformation that Karl Marx's victims never began to -consider. U n fortunately, the transformation's success depends on the details. The success of Asia's Ti- gers, for instance, makes it easy to gloss over the differences in the way the region s successful governments and people worked to better their condition. Hong Ko n g is the only one of them that -legitimately can claim to be laissez-faire, even though two-fifths'of the terfitory's'housing is -ity-state, is ' of the subsidized by the Crown Colony's government. Singapore, Asia's other c one most statist governments on earth. South Korea, meanwhile, pursued -policies that kept' interest rates low, all the while feeding credit to a handful of wholly Korean, world-scale companies, called chaebol. In contrast, the Republic of China on Taiwan let interest rates risi to high market levels. This brought the island some of the world's highest savings and investment rat@s, an in- dustrial structure built on a multitude of quite small enterprises, and re!atively equal in' comes.

A ndrew B. Brick is Senior Policy Analyst at The Heri tage Foundation's Asian Studies Center. This lecture is derived from presentations at The VVharton School of Business, St. John's College in Annapolis, and Now York University, inter alia, March-July 1992. The author wishes to acknowledge Ambassador Charl es M. Lichenstein for his assistance in preparing this lecture. ISSN 0272-1155. 01992 by The Heritage Foundation.

Despite such cElversity, though, there are certain threads that commonly run through the East Asian development experience. From Seoul to Si ngapore, the Asians have committed them- selves to: of Economic growth through International competitiveness. Relatively resource-poor countries with small domestic markets can survi-ve only if they sell abroad. The Asian development miracle focuses on an d interrelates production, output, and mar- keting. Today, the combined merchandise exports of Hong Kong, the Republic of China on Taiwan, Singapore, and South Korea are double the combined efforts of all the countries in Cen- tral and South-America;-even4 o ugh- the4etter sh-mthe4oorstap-of4heworld's largest single market-the United States. In the quarter-century that began in 1965, East Asia's s6e of gross world product nearly tripled, from 8 percent to 22 percent. Its share of manufactured exports did trip l e, from 8 percent to 24 percent.2 Of Sustaining free markets and private property. To these ends, inflation rates are kept low, real interest rates gently positive, and exchange rates stable. Says Singapore's former prime minister Lee Kuan Yew: "Markets a n d property are the key to an individual's 3wonomic self-interest and in Asia"s successful economies self-interest has been given free rein." w/ Nurturing "buslness-firat" government policies. Government's main duty, the Asian economic miracle seems to ind i cate, is to keep e country competitive. Bureaucrats work for and with businessmen, not against them@ To be s the region's strong governments rarely flinch from taking tough measures to maintain ontrol of their economies. But economic policies are almost a l ways predictable. Business is rarely caught off guard. Exclaimed one Taipei government official in a recent conversation: "What did 0995 you think golf courses were for, playing go This is not to imply, however, that Asia's business-first government initi a tives favo@ patently interventionist policies-commonly known as "industrial policies." The Asian model disparages highly distorted trade regimes and non-market allocations of resources, such as subsidies for gov- ernment-favored projects. Instead, it adva n ces vigorously the notion that economies @ie best kept lean and productive by their exposure to international competition. What distinguishes the task of government in the Asian miracle is the way it, in cooperation with business, adopts poillicies that h o ne a vital sense of competitiveness and allow prices to freely carry economic signals. Relatively equal distribution of Incomes. This is one of the unspoken keys to Asian development: it has allowed enough political maneu- verability to push through unpop ular measures in times of economic crisis, which in Asia means

I For more on the Asian development experience, see Robed Wade, Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization (Princeton: Princeton Universit y Pro, 1991); Ezra F. Vogel, The Four Little Dragons: The -Spread ofIndustrialization in East Asia (Cambridge. Harvard University Press, 1991); Dwight H. Perkins, China: Asia's Next Economic Giant? (Seattle: University of Washington Press, 1986). 2 For mo r e, see "Asia's Emerging Economics," The Economist, November 16,199 1. 3 "Lee's Remarks at Constituency Meeting,"' from Straits Times, in Foreign Broadcast Information Service, February 11, IM, p. 13. 4 Wade, op. cit. .5 Conversations in Washington, May. 1 992. th I ure I macro-c

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whenever growth slips below 5 percent a year. Singapore's Lee Kuan Yew frequently p oints to the need, early in the process of economic development, to generate an agricultural surplus that can be used to feed the- industrializa tion of the.towns.6 (Driven to extreme.s, as it was(in Mao. Zedong's Great Leap Forward, this cross-subsidization can impoverish the countryside in favor of an urban proletariat.) For any society's development, Lw notes, this is the period most prone to b e disruptive. of investing in education. Confucius -wrote that "If you plan for a year, plant a seed. If for ten years, plant a tree. If for a hundred years;,.teac-hr4he.;People@-;!'-F-er-a:-Iong-fifnei-his.-ad-mic-e,@was.ignor-cd. At the start of the Meij i era in Japan in 1868, only 15 percent of the Japan's population was literate. Compulsory education was introduced four years later and Japan was on its way to becoming one of the world's most educated societies.7 The obsession rubbed off on its former c o lonies. After the Ko- rean war ended in 1953, for instance, Seoul launched a remarkable drive toward education: almost thr-ee-quarters of the cost of building schools, paying teachers, -buying books, and organiz- ing transport was met by parents, not by g o vernment. Today, some 38 Re rcent of Koreans aged 20 to 24 are likely to go to college, over six times the number in 1965. There are also the intangibles of the Asian development miracle. Throughout the arc of coun- tries that sweeps down from South Korea to Indonesia, there is profound optimism that life will 1 Wang, continue to get better and a readiness to work diligently to ensure that it does Winston general manager of Nan Ya Plastics in Taipei, says this reflects "the coherence of Asian societies, th e ir commitment to common ideas, goals and values, the belief in hard work, frugality, filial piety, and national pride."9 This is East Asia's Confucian cultural explanation. It may be too glib. For one thing, Confucianism as it is now variously described i s @ot unique to Asia; it is almost identical to the Calvinist work ethic identified by Max Weber in 1904 as a pillar of modernization.10 For another thing, Asia's Confucianist manners were toute@ not long ago as the precise reason why the region was backwa r d and poor. One anti-Confucian'Chinese joke from the Mao Zedong days sneered: "If you were born with experience you would have been born eighty years old, or just Confucian."' Another explanation-or, at least, a critically important precondition-is the ex i stence at "take off' in all the Tigers of a stable, benignly authoritarian set of political institutions. South Korean President Roh Tae Woo recently was quoted as observing, "People want democracy and .,,I freedom, but they also want the results authorit a rianism has Then there are the altogether simpler explanations offered by businessmen like Tony Chen, head of a typical clan-conglomerate in Taipei. "What is the difference between rich Asians and other poorer people?" Chen asks rhetorically. "Mat's simpl e. We Asians are generally the greedi- est people on the earth. We Chinese are by nature economic animals, you know. 942

6 "A Map Up Here in the Mind," The Economist, June 29,1991, p. 16. 7 John W. Dower, ed., Origins of the Modern Japanese State: Selecte d Writing ofE.H. Norman (New York:- Pantheon Books, 1975), pp. 118-156. 8 "Korea," in Financial Times Survey, May 29,1992, Section III, p. 1. 9 Sw. "A Traditional Chinese Approach to Mainland China-Taiwan Relations," in Roger A. Brooks, ed., U.S. Policy i n Asia: The Challengesfor 1990, Heritage Lecture No. 233, June 22, 1989, p. 117. 10 Max Weber, The Protestant Work Ethic and the Spirit of Capitalism (Loondon: 0. Allen and Unwin, Ltd., 1904). I I By Karen Elliott House in The Wall Street Journal, July 71, 1992. 12 Conversations in southern China, October 199 1.

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Taiwan's Economic Boom as a Model Few people better. Mustrate..the. raw enthusiasm for the marketplace than the Chines6 on Tai- wan. Some twenty million people on an island the -size of New -Hampshirehave realiz@A staggering levels of economic growth. In 1 950, the year Chiang Kai-shek's Nationalists fled mainland China for "tempormy" exile on the island of Taiwan, the incomes of Taiwanese and mainland Chinese were much the same. Four decades later, Taiwan's per capita Gross National Product (GNP) dwarfs th a t of the mainland. Annual income per person, in a society with few ex- tremes of wealth and poverty, is today $8,813 (and on the mainland, $350). Five years ago it was just over $5,000 and a decade ago just over $3,000. By the year 2000,- the average RdC c itizen will be richer'thin most'Nd* Zeilanders and 6at6hin 'v . 'fast with ift6it-Australians. The island 9 UP I has not experienced a decline in its Gross Domestic Product (GDP) in 40 years. Taipei's foreign- exchange reserves are over $83.2 billion, the largest in the world. They rose by $10 biilion in the last year, are expected to rise by another $10-billion-this year., and could-reach $100.billion-by 1993. What is more, Taiwan has grown in ways that have spread the benefits to just about everyone. In 1 952, the income of the best-off 20 percent of households was fifteen times the income of the lowest 20 percent; by 1980, the multiple was only 4.2. The equivalent-in America that year was 7.5, in Sweden 5.6, and in Japan 4.4. For much of the last two deca d es Taiwan has been one of the world's most egalitarian societies, as well as one of the half-dozen fastest-growing. 13 These numbers reflect an immense increase in human well-being. A child bom in the ROC in 1990 can expect to live 74 years, only a year l e ss than an American or a German, and fifteen years longer than an ROC citizen bom in 1952. In 1988, the Chinese on Taiwan ingested 50 per- cent more calories a day than they had 35 years earlier. Today, there is at least one television in every household, one motorcycle for every three people, and one car for every eight. The average ROC youngster, moreover, is twice as likely to go to the university as his (or her) British peer. There are 42 universities and 76 polytechnics on the island which, among them , I , graduate some 37,000 engineers and 136,000 technicians annually. One in every four candi- dates for electrical engineering doctorates in American universities is from the ROC. Monumental Growth. There are a variety of factors frequently cited to acco u nt for Taiwan's monumental growth. These include: early 20th century colonization by Japan that left behind the trappings of a modem infrastructure; generous American military and economic assistance- over $4 billion alone in security assistance-in the po s t-World War U era; a lingering Confucian work ethic; and an authoritarian political tradition that effectively dampened social welfare con- cems, or enabled them to be deferred, in light of an abiding security threat.15 But as significant as these factors surely are, perhaps the most decisive element in Taiwan's economic growth is the fact that the island has taken full advantage of the opportuniti6s fi-ee world trade has offered. Taiwan never embraced popular post-World War H developirient plans that advo cated import substitution and economic self-sufficiency. The ROC chose instead to con- centrate on boosting exports.

1 3 For more on Taiwan's economic development, see, Lawrence J. Lau, ed., Models ofDevelopnwnt (San Fnmcisco: The Institute for Contemporary Studies, 1986). 14 "Asia's Emerging Societies," op. cit. 15 James C. Hsiung, et al., eds., The Taiwan Experience 1950-1980 (New York: The American Association for Chinese Studies, 198 1).

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After extensive land reforms had been carried out, Taipei insti tuted such measures as fiscal in- centives and low-tariff export zones to launch an export offensive in those branches of industry' where the comparative advantage of low labor costs could be exploited to the maximum. The government in Taipei, moreover, p e rmitted prices to be determined freely by the market and pur- sued polices, unique in those days, of letting interest rates rise to high market levels. "More than any other policy:' remarked ROC economist Hou Chi-ming at a June 1990 Heritage Foundation co n ference, "this basic policy choice about credit brought Taiwan the world's highest savings and investment rates." Indeed, only once in the last twenty years has Taiwan not saved more than it invested.16 Benefitting the'Little Guy.The policies also'helped c reate on Taiwan a business environment dominated by small, lightly-indebted firms. Unlike other Asian economic dyliamds, Korea in par- ticular, where governments kept interest rates below market rates and encouraged capital-intensive methods of production that spawned huge firms, Taiwan's economic polices en- gendered the growth of relatively tiny, equity-based companies. By one unofficial government 17 reckoning, more than four-fifths of the ROC's firms in 1981 had fewer than twenty employees. "The little guy has been the principal beneficiary of the island's economic growth:' one trade of- 18 ficial told The Heritage Foundation. It is these little guys, chasing the profit motive, that have come to embody the Taiwan miracle. On the surface, the typical ROC company probably would seem odd to a Wharton Business School professor. Usually dominated-and guided-by one man, its strategy seems to center on quick trading profits, rather than long-term commercial objective;. There also appears to be little or no cohe s ion among the several parts of the overall operation. I In reality, though, blood literally binds the business. The patriarch sits in Taipei, attending to the family's finances, exploiting personal relationships-in Chinese called guanxi-to further busines s objectives. Number-One Son runs the factory in Taichung and makes fiequent trips through Hong Kong to mainland China's Fujian Province-ROC citizens are proscribed from conducting business directly with their mainland Chinese brethren-to oversee the famil y 's new- est investment: a production facility on ten acres of land rented from the municipal Chinese government for 35 cents a year on a seventy-year lease. Locals work the assembly lines at a tenth the going rate in Taipei. Number-Two son, meanwhile, has recently graduated from the Univer- sity of Southern California and now works for an American firm in Silicon Valley as a kind of benign industrial Spy. 20 The company's interests and reach are as global as their network of connections extend. Ances- tors from the same province, village, or"clan in mainland China who long ago moved abroad are nurtured and exploited to churn out products quickly and cheaply. This Chinese diaspora identi- fies business opportunities across the world and is self-perpetuating: As long aa there exists a family there almost certainly will be a new generation of tycoons on the make.

16 Remarks by Dr. Hou Chi-ming in Andrew B. Brick, ed., The Washington-TalpeiRelationship, Heritage Lecture No. 269, p. 46. 17 Conversations at the ROC 's Council for Economic Planning and DevelopmenL January 1991. 18 Conversations in Taipei, January 1991. 19 S. Gordon Redding, The Spirit of Chinese Capitalism (New York: Walter de Gruyter Press, 1990). 20 Ibid. 21 Ibid.

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Undergirding Taiwan's Success Today, Taiwan's firms are seizing small but lucrative niche markets that give the island crucial commercial flexibility, making it capable of responding to market changes-indeed, allowing companies to enter and leave businesses with speed and ease-that is without parallel in Asia. Centering their corporate efforts on the development of such high-tech, highly specialized prod- ucts as computer software or sophisticated electronics, these companies will largely define Taiwan's place in the world economy in t h e next decade. Indeed, many of the ROC's companies define the international business standard right now. Taipei's Microtech International makes.the c'ommunications equipment on George Bush's motor- boat. Sony, Sharp Electronics, and International Business Machines all have research and development centers in Taipei to pick local brains. Taiwan's biggest technology leader is Acer Computer, -launched in 1976 by Stan Shih, four ffiends, and $25,000 in savings. A decade later, Acer introduced the world's secon d 32-bit per- sonal computer. America's Compaq marketed the first Today, Acer's sales top $1 billion and the company has alliances with Texas Instruments, Daimler Benz, and Smith Corona. Acer is the Tai- wan development model's model company. 22 This is so because Acer illustrates how leading-edge industries, like the computer-hardware in- dustry where the ROC is the world's sixth largest, thrive on the island. As pessimists on Taiwan lament its puny marketing punch, low levels of research and development ( R &D)-about one percent of the ROC's GNP-and the tendency of the island's small firms to go abroad rather than upscale, Acer continues to grow and, with it, so does the island's economic miracle. To be sure, some of the pessimists' fears are not without sub s tance. ROC makers of shoes and textiles, for instance, are happier sending their factories to mainland China and Malaysia than up- grading them at home. They do so because the costs of producing on Taiwan have risen to prohibitive levels-it is cheaper to m ove the factory abroad than to invest in automation at home. As a result, Taiwan has had a net loss of manufacturing jobs in recent years, totaling 325,000 alone between 1986 and 1989. Even Acer Computer has offshore manufacturing plants in Holland and Ma l aysia. S_, But Competitive. But the future is nowhere as bleak as such numbers would seem to indicate. The relatively small size of Taiwan's firms has not significantly disadvantaged them in competition with American, Japanese, or Korean giants. Acer's ch i ef executive Stan Shih, in fact, claims that the company's relatively small size produces real benefits: a generally solid in- frastructure, low overhead, and an inherently tight network of local suppliers. Acer has marketing and production links with Ame r ican companies. The company paid $94 million just last year to buy Altos Incorporated, a Silicon Valley firm, to improve its U.S. distribution. And with the backing of the government in Taipei, Shih recently founded Brand International Promo- tion Associa t ion. With luck, Acer's brand-name will be recognized worldwide within ten years and the tag "made in Taiwan" will become a symbol of quality. The argument that Taiwan has a problem with research and development, moreover, fails to ac- count for the "busin e ss-firse, priority of the ROC government and the remarkable talent in Taiwan's labor pool. One of Acer Company's principal strengths, for instance, is its reservoir of 800-plus engineers, many of whom have been trained in American universities. And in rec ent

22 Information on Acer is culled from duce sources: Conversations with company officials in TaipeL January 1991; Larry P. Vasco, nTaiwan's ComputerWhiz Goes Global," Bifflon Magazine, July 1989, p. 22.; and ft Econondst survey on "AsWs Emerging Econom ies." op. cit.

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years Taipei has moved to vigorously promote lagging R&D. It has offered tax breaks for certain strategic industries, developed a successful science park to act as a magnet for high-tech compa- nies, and established several -quasi-publi c-research institutions to-encourage-commercial applications of technology. Chief among these is the Industrial Research Institute, with a budget of $180 million a year and over 4,000 employees.23

Sustaining the Miracle The ROC's biggest challenges in the future may be to avoid choking on its success, both liter- ally and figuratively. The challenges are instructive; behind them lie flaws common to the East Asian dev'elopmeni model. ' . .-.. . . . - I The first problem is that growth has overwhelmed the i n frastructure. Some 500 new cars pour onto Taipei's streets every day, where they immediately add to interminable traffiqjams. By one estimate, Taipei's streets are ten times more congested than those of Los Angeles.' Few govern- ments in Asia had the effr o ntery-or the foresight-to ask for taxes to develop the trinsport system before their economies began doubling. As a result they are confronted with r6ads that are choked and people who are always late. Taipei seeks to tackle this problem with an ambition t hat strains belief. Over the next six years it plans to spend some $302 billion on 775 projects that will range from superhighway's to high- speed trains, new airports to upgraded ports, nuclear-power plants to public libraries. The purported amount of sp e nding represents about two-thirds of estimated infrastructure spending for all of Asia outside of Japan over the next decade. 25 Even so, as the Economist majazine com- ments "the doubts [about Taiwan's infrastructure plans] concern not so much the money, as the will.' 46 Environmental Problems. If the problems of infrastructure threaten to hold future growth hostage to improvements in Taiwan's physical condition, problems in the environment threaten the ROC's future political stability. Like most of Asia, Taiwan proves that it can be infinitely cheaper to prevent pollution from coming out of the industrial smokestack in the first place than cleaning it up once it has. Factories across the island cheerfully pour untreated effluerit into riv- ers and belch t o xif, fumes into the air. Of the country's 20 million people, only 600,OdO are served by sewers.27 Taiwan's largest company, Formosa Plastics, tried for years to build another naphtha cracker-a major petroleum plant and polluter-in-waiting-on the island, o n ly to con- front constant popular opposition. I And this is the key. Although industrial development surely has done worse damage to the en- vironment in Russia and Eastern Europe, the resulting mess was tolerated because of communist coercion. In incipie n t democracies, the story is different. History here seems to suggest that peo- ple will tolerate horrendous living conditions as long as they feel their lot is improving. But the tolerance is finite. As the nation grows richer, and a middle class takes ho l d, the voter's grow more environmentally aware and the consensus for continuing economic growth becoines more difficult to reach. The lesson for democracies is thus clear: Make development as clea@ as possi- ble from the outset. It is economically cheaper and politically more palatable.

23 "Taiwan and Korea," The Economist, July 14,1990, p. 19. 24 Conversations with ROC Environmental Protection Agency officials, January 1991. 25 Julia Leung, "Taiwan Spending Plan Is Clouded by Disputes," The Asian Wall St reet Journal Weekly, April 20, 1992, p. 1. 26 "Asia's Emerging Societies," op. cit. p. 15. 27 Conversations with ROC Environmental Protection Agency officials, Taipei, January 199 1.

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Prindt ive Financial SYstem. Taiwan's final problem is one it shares with the rest of the region's most dynamic economies. To be bluntly precise, the island has a primitive financial sys- tem. It is -ironic that this should be so. Energetic, -entrepreneurial, vi b rant little Taiwan has been an economic over-achiever for more than two decades. It is wen past the vague and coy fine that separates "developing" countries from "newly industrializing" ones. Yet hyperactive financial policies are squandering its economic potential. The financial problem may partially be cultural. "Chinese seem to hate debt," one banker re- cently told The Heritage Foundation. 28 To be sure, Taiwan's financial regulators have been implacably anti-debt at home and mercantilist -abroad. Unti l recently, it was a criminal offense to bounce a check in-taiwan. Even today, government bank-5-'aire ans .wem--ble't6'the'R0C national legislature for writing off any loan, no matter how small." The predictable consequence of such caution is that lending policies am prohibitive. Medium- and long-term loans are rarely granted against cash-flow; lenders almost always demand security worth at least twice the face value of the loan. Until 1990, the only way a small- or medium- sized ROC company could secure n e eded loans for expansion was to play Taipei's fevered stock market, which resembles a high-stakes casino more than anything else. On at least one day in early 1990, turnover on the Taipei market was greater than that on the Tokyo and New York stock exchan g es combined. The dangers of such underdeveloped financial systems is that continued economic growth de- pends on the efficient channelling of savings toward development. Taiwan grew rich through working hard in small family businesses, making everything f r om handbags to sports shoes. In the 1960s, Taiwan started making cheap umbrellas; within a year it was the largest umbrella ex- porter in the world. But the ROC has advanced beyond such cottage industries-raising money from the family no longer produces t h e goods of the future. Instead, the continuation of the Tai- wan miracle depends on its ability to shift to capital- and knowledge-intensive businesses, to turn jeans-makers into precision engineers. And that requires the kind of money and advice that com es with professionally-managed corporations dealing in open financial markets.

Conclusion Perhaps the most stunning aspect of East Asia's development is the speed with which it has been accomplished. Within a single generation, the material conditions of f ife, even for the blue- collar worker, have been remarkably advanced. Assuming that Asia's, super-competitive economies keep growing two to three times faster than the world's older economies, there likely will be a shift of economic power away from Europ e and North America to the Western Pacific by the middle of the 21 st century. I The speed of this transformation is apparently what makes the region so attractive as a-model for development. "How can you not be amazed at a place that intends to spend seve r al hundred billion dollars to build their infrastructure," one Polish official, in Taipei on a buying mission, re- marked in conversations late last year. "For us, these Chinese are doubly intriguing because their economic culture flourished when the dead weight of tradition was lifted.',30

2 8 Conversations in Washington, May 1992. 29 "Sitting on Billions," The Economist, March 14, 1992, p. 97. 30 Discussions in Taipei, October 1991.

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Growing Interest. Indeed, the fact that Chinese entrepreneurs endured centuries of oppressive government authority commends them all the more as a model for development. There is a grow-. ing, though understandably discreet, interest among some Eastern Europeans-and Chinese communists as weU!-in Taipei's experience in makin g the transition from an authoritarian sys- tem, in which bureaucrats held sway over the economy, to a more five-wheeling, less hidebound system. Taipei's ruling Kuomintang, while anti-communist, for years built its power on Leninist principles of dictator s hip and party organization-which also, to be sure, is part of that "dead- weight of tradition" from which the miracle flowed. The irony, however, that nations fleeing communist insanity would now turn to the ROC as a model to transform themselves into a m arket economy appears lost these days in official Taipei. It seems the island, like the rest of East Asia, is too busy making money to notice such things.

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