Taiwan beats the odds
Company size is often seen as a sign of stability and continued prosperity. Some economic miracles witnessed in recent years have one thing in common – powerful state enterprises and monopolies. In the book The Age of Extraction by Tim Wu, the author argues that an unbalanced economy relying on monopolies and state enterprises will only create a serfdom.
“A final short example of a nation overcoming a very unpromising start comes from Asia and the island nation of Taiwan. As with the others, Taiwan was not -circa 1945- a likely prospect for balanced economic development. It had been a Japanese colony and was left, after the war, with a shattered infrastructure and a new government (from Nationalist China) that, at least at first, had opted to maintain the colonial economic structure. But facing pressure from the United States (which feared a communist uprising), the Taiwanese government pursued aggressive land reform-by one estimate, more than one million Taiwanese families gained property rights under the land reform program. Later, as opposed to building up the colonial firms into industrial national champions, Taiwan instead gave broad license for entrepreneurialism and small production, the so-called lao-ban (small boss) economy. While Taiwan has a few well-known firms (like TSMC, the Taiwan Semiconductor Manufacturing Company), its small and medium business sector dominates the economy, making up 97 percent of business and employing nearly 80 per-cent of the workforce.
Taiwan-whose per capita GDP now exceeds Japan’s, is among the strongest demonstrations of the fact that a country can grow rapidly without enduring enormous disparities in wealth and income. As economist John Fei and coauthors write in Growth with Equity: The Taiwan Case: “Two of Taiwan’s achieve-ments in the years after 1953 are particularly notable: extremely rapid rates of economic growth were accompanied by improve-ments in the family distribution of income; [while] unemployment, or under-employment, was virtually eliminated.” The idea that growth cannot happen without enriching a narrow class is a self-perpetuating myth.”
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