Major Reaction Paper

Richard D. I. Becker

Reaction Notes 09/14/2012

Week 5 Readings

Dr. Kimura

This week’s readings focused on how different states develop their economies through various degrees of government intervention and policies.  The main question to answer is “Why do some state’s economies develop, and some don’t?”  We will try to answer this question by examining the Export Led Growth model that was a successful strategy for Japan, Korea, and Taiwan, albeit in differing degrees.   Specifically, I will try to identify the actions of the state, the government, and society that were instrumental to a successful economy.  

        Alice Amsden discusses how Taiwan started out post World War II as a militaristic regime led by Chiang Kai-Shek (Jiang Jie-Shi) consumed with overthrowing the communist regime of Mao Te Tsung and re-claiming the Chinese Mainland.  The success of their export led growth economy “seduced the military away from its initial orientation and changed its position within the state apparatus…”.^[1]  Amsden starts by crediting the Japanese Colonial government pre-WWII with setting the baseline agricultural system that the Kuomintang would later capitalize on.  The Japanese removed the absentee landlords by giving the land to the tenant landlords and replaced a proportional output tax with a flat tax on land.  Additionally, the Japanese set up state run agricultural associations that subsidized fertilizer and other supplies for the farmers as well as provided education on new farming techniques.  This all combined to dramatically reduce the cost of production, which, for the Japanese would allow Taiwan to cheaply produce food for the domestic Japanese market.  Of course with Japan’s defeat in WWII, they withdrew from Taiwan, and the Kuomintang regime came in fresh off its defeat from the communist regime of Mao Te Tsung.  Amsden theorizes that “the most enduring legacy of the Japanese occupation…was….a relatively well educated population and the building of a foundation for subsequent development.”^[2]

        The Kuomintang furthered Japan’s agriculture reforms by capping farm rental rates, distributing formerly Japanese owned farmland to tenants, and compelling tenant landlords to sell their land directly to the farmers who worked their land under the Land-to-Tiller program.^[3]  They also retained the agricultural associations set up by the Japanese to centrally manage the industry and to continue to push for scientific education and innovation while providing credit to the farmers, thus wiping out the predatory private moneylenders so prevalent before.  In order to finance other industries, the Kuomintang increased the price of inputs (fertilizer) for the farmers and took payment in the form of crops.  This ensured the farmers didn’t consume their surplus while allowing the government to export the crops they paid for fertilizer to raise funds for industrial expansion.^[4]