淺談台灣經濟發展史(下a)－Thomas66's Blog

An Overview of Taiwan’s Economic Development (IIIa)

Abstract

At the beginning of the Japanese rule, the colonial government initiated the “Agriculture for Taiwan” policy for developing a modern economy. Based on the principle of "biological colonial management", various kinds of investigations and studies were undertaken. To begin with, the "Taiwan Land Register Regulations" and "Taiwan Land Investigation Regulations" were promulgated in 1898. Then, the "Temporary Taiwan Land Investigation Bureau" was established, making a thorough land survey on Taiwan. The idea of infrastructure constructions started right after Japan occupied Taiwan, and it continued for many years. Among the most fundamental works were: expansion and rebuilding of harbors; railroad construction; rebuilding and extension of highways; communication network construction; public health promotion, etc. Particularly, a north-south railway was built in 1898-1907, and the Keelung and Kaohsiung ports were dredged and rebuilt.

Under the “Agriculture for Taiwan” policy, the colonial government encouraged peasants to develop both rice and sugar industries. The long-time pending problem of arable land double ownership was now dissolved by Taiwan Governor's Office. To pay the compensations to the large landlords, the Taiwan industrial bonds were issued. And a modern land ownership system for reassigning land ownership to the small landlords (or called the “One Lord to a Field” system) was established in Taiwan. In 1901, Taiwan Governor's Office promulgated regulations concerning construction of irrigation facilities for promoting the agriculture, and these were advantageous measures for developing new arable lands. The irrigation work made the agricultural production a great leap forward in Taiwan, and contributed in large tax income increase. In 1922, a new breed of rice (called Ponlai) was innovated in Taiwan, which fit the taste of the Japanese very well. Within only a few years, the Ponlai rice export to Japan rose sharply.

In 1902, Taiwan Governor's Office promulgated the "Regulations for Encouraging Taiwan Sugar Industry,” which should rather be regarded as "preferential treatment" to the Japanese capitalists. Several Japanese enterprises then set up modern-style sugar mills in Taiwan. Manufacturing technique and facilities were modernized, whereby productivity, quality and marketing of sugar were greatly improved. Since then, the consumption of sugar in Japan was supplied with cheap sugar from Taiwan; and substantial savings of foreign exchange were achieved. Within a few years, sugar surpassed tea and rice to become the most important export. In those days, the sugar industry in Taiwan was so prosperous that it was called the "Sugar Industry Imperialism".

Based on the "Taiwan Bank Ordinance," Bank of Taiwan started to operate in September 1899, and the issuance of bank notes in 1904 was a currency revolution to the Taiwanese people, who were accustomed to hard money. In 1919, the construction of Governor's Palace was completed. This building seemed to symbolize the Japanese occupation of Taiwan, had later become the "Presidential Palace" of KMT regime, and continued to overpower the Taiwanese residents to date. Upon equipping elementary, junior and high schools in Taiwan, Japan established Taipei Imperial University (now National Taiwan University) in 1928. This set a good example for colonial modernization, particularly through a thorough educational development, enabling the great Taiwan economic progress later in the 1970s.

The ongoing infrastructure constructions were fulfilled, such as the second phase of Keelung harbor, a highway network expansion, etc. On water irrigation and agricultural development, there were the Kanan irrigation system for the southern plain and the Taoyuan irrigation system for the northern plain, constructed and irrigated over 55.5% of total cultivated land. In addition, hydroelectric power plants in Sun-Moon Lake and Dai-ka River were built, in an attempt to increase electric power needed for the industry. By 1935, a total of 26 hydroelectric power plants and 9 steam power plants were completed and in full operation.

In October 1935, the "Exposition for Commemorating the 40th Anniversary of Taiwan Administration" was held in Taipei. The KMT observation group gave the Japanese rule on Taiwan a storm of praises, upon returning to China. They have shown astonishment and great admiration to the fruitful result of Taiwan administration, like "Taiwan run by Japan for only 40 years, the disparity from China is surprisingly great," "If the Japanese can, why the Chinese cannot,” etc. Under the Japanese rule, the average economic growth in Taiwan was estimated at higher than 2.9% during 1905-40, while that in China was about 0.33% during 1914-31. In 1930, the life span of a newborn baby in Taiwan was about 40 years, while that in China was estimated at less than 25 years. These also showed the fruitful result.

Prior to the Pacific War in the late 1930s, Japan had already prepared to invade the British, French and Dutch colonies in Southeast Asia; that’s to say, Japan was ready for the "Southward March." The economic policy of “Agriculture for Taiwan” was then shifted to “Industry for Taiwan” (and agriculture for Southeast Asia). In November 1936, Japan set up the "Taiwan Colonization Company" by Imperial Order. It was a semi-government company organized in line with national policy. The capital was increased repeatedly as war expanded. Eventually, the Company was developed to be a big business with 32 subsidiaries and investments in Taiwan as well as various places in Southern China and Southeast Asia under Japanese occupation.

Up to 1937, industrialization in Taiwan was limited to agricultural processing. Since Sino-Japanese War and Pacific War, Taiwan became the “supply base for the southern operation." Munitions-related industries were developed in an astonishing speed. Modern industries such as steel, chemistry, textile, metal, and machinery became very active. By 1939, industrial products exceeded the agricultural products, equivalent to 45.9% of GNP. Since then, industrial production had never run below the agricultural production, and by March 1944, total industrial production reached a highest record in the history. However, it then suffered a sharp decline due to damage from bombing by American forces. And as war expanded, Taiwanese had for the first time experienced severe control of food and shortage of supply.

When the KMT regime took over Taiwan in 1945, the economic disaster worsened mainly because of the civil war between KMT and CCP in China, in addition to KMT administrator’s misgovernment in Taiwan. There soon came the critical situation. Among the problems, multiplying inflation was the most dreadful: the prices rose as much as ten thousand times during 1945-50. On June 15, 1949, the KMT regime cut off China and Taiwan currency relations, and took decisive action in issuing a new denomination of New Taiwan Dollar, which exchanged at one to 40,000 existing Taiwan Dollars. Later in 1949, the KMT Chiang authority fled from China to Taiwan. KMT government officials, soldiers and Chiang’s other followers, more than 1 million in number, had moved into Taiwan, hence Taiwan's economy was further brought to bay by the sudden population increase.

Main public and private Japanese industries that had been requisitioned then became public industries under national or provincial control by the KMT regime; especially part of the Japanese property had been stolen as the KMT party assets, which eventually made the KMT the richest political party in the world and left a longstanding issue unresolved to date. Since 1951, the U.S. had been providing military and economic aids to Taiwan and continued for 15 year (totaling approximately 1.5 billion dollars,) so the inflation tension was eased. Owing to the "windfall" from occupying Taiwan, the KMT “government in exile” acquired tremendous amount of lands and properties. Also because Taiwan Strait was "neutralized" due to Korean War, Taiwan's relationship with China was severed, and Taiwan was freed from the restraint of the impoverished Chinese economy.

Strategically, with the outstanding infrastructure "inheritances" succeeded from Japan, diligent Taiwan residents under the KMT authoritarian rule should work “economic miracles” while in a world filled with business opportunities. In the early stage upon moving to Taiwan, the KMT regime carried out three land reforms (that is, "375 Farm Rent Reduction," "Public Land Disposition" and "Land for the Tiller" programs) with little or no resistance from the landlords. The authoritarian rule was nearly perfected. In order to secure provisions for KMT followers, and at the same time, shift the losses from inflation to the farmers, land tax was paid in kind. Also a system of unequal bartering chemical fertilizer for rice crop was introduced. Exploitation of the farmers was as such.

Since 1960s, development of Taiwan economy was transformed from import substitution to export orientation; by the last half of 1970s, Taiwan had already become the standard bearer of Asian NIEs (or Four Asian Tigers), leading Korea, Hong Kong, and Singapore. Following the so-called “economic miracle,” Taiwan had achieved its GDP per capita of $10,000 in 1992; but as 18 years past, the figure has never grown to $20,000, and now ranked last among four tigers. Why? It’s because of the China factor. “Westward march" has made Taiwan economy lose its competitiveness – a lesson never been learned from the Taiwan history. And the upcoming so-called ECFA will get it worsened. Currently, Taiwan’s economy faces a serious crisis.