Reflections

This paper examines the causes of Taiwan's exceptional economic performance, focusing on the influence of organizational and policy choices and how Taiwan's example differs from those of more typical less-developed countries. After briefly citing cultural factors as proposed by his late colleague John Fei, Ranis proceeds to explore the issues of organic nationalism, natural resource endowment, access to foreign capital and other political factors that have produced such economic success. The author demonstrates how Taiwan's unique combination of strong organic nationalism, meager natural resources and limited access to foreign capital helped curb the Extended Dutch Disease phenomenon endemic in LDCs. In addition, the government's non-oscillatory, relatively laissez-faire fiscal and monetary policies, encouragement of technological innovation, plus generous educational, R&D and infrastructural expenditures have contributed to low rates of inflation and high rates of GDP growth. The paper finally suggests a positive correlation between democracy and economic development.