Taiwan distinguishes itself as one of the few non-socialist economies since Japan to rise from the grossest poverty and to enter the world of the developed. As if this were not enough, and if the figures are correct, income distribution has also been far less inequitable in Taiwan than in other poor “market economies.” Both phenomena together have earned Taiwan the title of “economic miracle.”
In seeking an explanation for these phenomena, which are rather miraculous in the context of continued underdevelopment in the rest of the Third World, we have come face to face with two schools of thought: neoclassical and dependency theory. The former, to generalize somewhat, sees the explanation for the Taiwan “miracle” in the application of free market principles. The latter ignores Taiwan altogether, probably because it sees it as a “special case” undeserving attention.
Concerning the popular conception of Taiwan as an economy wherein market forces guide capital accumulation, it is quite true today that government interference does not assume the form it has taken in many other Third World countries, i.e., heavy protection and price “distortion” to facilitate industrialization based on the home market. Nevertheless, it is our contention that both in the past and at present, the state in Taiwan has acted as a key agent in the process of capital accumulation: ...