The US Congress had passed the Mutual Security Act in 1951,
which was aimed at helping the capitalistic expansion of US private
enterprises, and incorporating Allied countries into a new world eco-
nomic system dominated by the USA. By the end of the 1950s, the
USA was suffering from economic depression and eager to find favor-
able countries where US capital could be invested. It therefore advo-
cated free trade and opened its markets to light-industry foreign
products, which had been abandoned by US firms. Meanwhile, Japan,
which experienced rapid economic growth for more than ten years
after the Korean War, was facing the problem of increasing labor
costs and was ready to move its labor-intensive industries to foreign
countries where cheaper labor was available. Taiwan soon became
Japan’s first choice because of its fifty years of colonial experience on
Taiwan before World War II.
In 1960, the Taiwanese government announced a Nineteen-Point
Reform Program and enacted the Investment Encouragement Law,
which provided a basis for the administration to take a series of
positive actions toward the realization of outward-oriented growth
of the economy. The actions included establishing export-processing
zones, providing enterprises with low-interest productive loans, liber-
alizing restrictions to encourage the import of certain important raw
materials, and remitting taxes and duties for export goods (Lin, 1973 ).
These measures enabled Taiwan to achieve rapid economic develop-
ment. In 1971, Taiwan was expelled from the United Nations, and
Chiang Ching-kuo was appointed prime minister the next year. He
began to initiate the ‘‘Ten Big Construction Projects’’ and developed
capital- and technology-intensive industry. This series of government
actions not only enabled Taiwan to survive the oil crises thereafter,
but also laid the foundations for the economic miracle of the 1980s
(Balassa, 1981 ; Chen, 1979 ; Fei, Ranis, and Kuo, 1979 ; Ho, 1978 ).
The Nationalist government adopted a series of strategies to inter-
vene in economic activities and foster private business for the sake of
national development (Amsden, 1985 ; Gold, 1986 ). Its control over
the economic sphere has been termedpaternal domination(Chang,
1991 )orpaternalism (Pye, 1988 ), and the strategy for economic
development has been labeled state-led outward-looking growth
(Wade, 1988 ). Though the Nationalists maintained an authoritarian
style of domination and insisted on orthodox ideology in politics,
they held an open attitude toward economic affairs. They were able
132 Kwang-kuo Hwang