ABSTRACT
Most existing research suggests that high military spending tends to have a deleterious effect on a country’s economic growth, export competitiveness, and capital formation, whereas a large military establishment tends to promote social welfare and income equality. At the same time, rapid economic growth has been found to undermine political stability and exacerbate social frustration. Taiwan presents an interesting deviant case to these cross-national generalizations about the relationships among defense burden, economic performance, and social welfare. It has historically borne a heavy defense burden in both dollars and manpower. Yet its economy has achieved one of the world’s fastest and most sustained growths in the past four decades, and its successful export drive has made it the world’s second largest holder of foreign reserves. Moreover, the island’s rapid economic growth has taken place in a context of general political stability and, until the 1980s, increasing income equality. It has also brought about major improvements in physical quality of life, so that Taiwan has now reached the standards of advanced Western countries in this respect.
