ABSTRACT
This chapter describes the initial phase of economic policy; the next analyzes the causes and consequences of the post-1958 period of liberal reform. Taiwan is provincial home to 19 million people of Chinese background. To exploit its labor resources, the government encouraged small-scale, labor-intensive, import-substituting industries that required little capital or skilled labor and could be set up almost overnight. The objectives in early plans were to promote agriculture and initiate industrial production, foster a climate of economic stability, curtail deficits in the balance of payments, and gradually develop a transportation infrastructure. Once inflation was controlled and wartime disruption repaired, the government turned its attention to the development of a coherent economic policy and selected the method of import-substitution industrialization. Under the military and economic crisis conditions that prevailed in the late 1940s and early 1950s, Taiwan’s leaders successfully put the economy on a sound basis, assisted by roughly $1.5 billion in United States aid.
