[updated Dec 20, 2011]
1.4 Economic growth
In the early 1950s, the KMT implemented a major land reform. Land reforms are notoriously difficult, because landowners usually have sufficient power to block them. However, the landowning elite had been suppressed by the White Terror and did not dare resist, and the KMT, as an outside force, did not include any Taiwanese landowners. As a result, one of the most comprehensive land reforms in the world was possible. The KMT at first simply reduced rents, but eventually they confiscated large tracts of land from landlords and allowed the tenants to purchase it at reasonable rates. Landlords were compensated with stocks in a few new state-run corporations, but most landlords did not understand the world of securities and sold their stocks for pennies on the dollar. This served to further emasculate the traditional Taiwanese elite class. More importantly, the land reform created a very large class of landowning farmers who would form the foundation of the future middle class.
In the early and mid-1950s, the KMT followed a policy of import substitution. In 1957, they changed to an export-led strategy. The economic miracle ensued. By 1970, more people worked in industry than in agriculture and by the late 1980s and early 1990s labor costs had risen enough that Taiwan started moving its manufacturing base to China.
High growth rates started while CKS was in power and continued through the Lee Teng-hui years, but many people associate the economic miracle with CCK and his regime. If there had been no economic miracle during the authoritarian era, the KMT might not have been able to retain power when democratization arrived. However, when democratic elections were finally held, many Taiwanese voters did not want to expel the party that had produced the economic miracle.
According to the IMF (and Wikipedia), in 2010 Taiwan had the 24th largest economy in the world, just larger than Norway and Iran and just smaller than Saudi Arabia and Sweden. In nominal terms, Taiwan’s per capita GDP is not too impressive at $18,558, roughly equivalent to the Czech Republic. However, prices in Taiwan tend to be low (with the notable exception of real estate), and Taiwan’s PPP is quite high. In fact, if you go by PPP, Taiwan’s per capita income of $35604 is
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