ABSTRACT
In 1987, martial law rule was finally suspended after being in force for 38 years, thereby enabling Taiwan to enjoy a democratic political system and a subsequent successful transition to full democracy. Nevertheless, despise its success in the political realm, Taiwan’s economic performance has experienced a significant slowdown over the past two decades. Ironically, this is a sharp contrast to its previous rapid economic growth, or the so-called economic miracle during the martial law era. As such, it raises an interesting question on whether a democratic system is good for promoting economic growth in Taiwan or in newly industrialising economies (NIEs) as a whole.
To explore this interesting question more comprehensively, this chapter examines and compares how democracy has affected economic growth among the four Asian NIEs, namely, Singapore, South Korea, Hong Kong and Taiwan. These four Asian economies have all experienced different political transitions with different degrees of populism while experiencing rapid economic growth during different stages of development.
The income variable used in this study is proxied by log GDP per capita adjusted by purchasing power parity (PPP). We would like to explore how it will be affected by the different degrees of populism in each economy. As for the populism variable, we use the inverse of ‘the degree of freedom of the mass media’ as its proxy. In our empirical model, both the populism variable and its squared term are included so as to fully capture its possible impact on income growth. Because of data availability considerations, we focus on the period 1990–2013.
Our empirical results indicate that for Taiwan and Hong Kong, populism has initially had a positive impact on GDP, but this impact has become negative in the later stages of development. Populism is found to have had a negative impact on Korea’s GDP growth. Nevertheless, it has had no significant impact on Singapore’s GDP growth. Based on the previously mentioned study, it is concluded that the development of democracy and the development of the economy may not necessarily be complementary to each other. An excessive prevalence of populism in an economy may adversely affect its economic performance, a finding that is particularly significant for Taiwan and Hong Kong, two typical Chinese societies.
