ABSTRACT
Ideally, markets are self-regulating systems kept in balance by the reciprocal actions of supply and demand, Adam Smith’s “invisible hand.” However, historically, powerful interests within or outside the market have distorted its operation. Under mercantilism, states saw in markets a means of obtaining wealth and power, and they intervened in them to gain an advantage. World system and dependency theorists have argued that core developed states have been able to turn their longer history of capital accumulation into hegemonic control over world markets, creating a world economic structure in which the West constitutes the core of dominant firms and markets, supported by a periphery of adjunct firms and markets. Because of the uneven topography of the modern global economy, late-industrializing countries on the periphery cannot rely on the invisible hand of market forces but must depend on the visible hand of their own governments to protect and guide their nascent industries (Amsden 1992). In Taiwan, both the Japanese colonial government (1895–1945) and the Republican government (1946 to the present) were actively involved in shaping the island’s economy to suit their broader economic and political objectives. The Japanese dismantled Taiwan’s regional system of commerce and redirected agricultural surplus in support of an industrializing Japan; however, they stopped short of appropriating small family farms and converting them into large plantations when they met stiff resistance. The Nationalists continued to exert tight control over the agricultural sector, in order to appropriate the necessary funds to set up an industrial infrastructure. With the later growth in the labor-intensive export industry, power accrued within the local realm. Although much credit is given government policy in guiding Taiwan’s postwar development, most of the economic growth in this period can be attributed to private initiative within this realm (Dollar and Sokoloff 1994). In this chapter, I relate how the Japanese and Nationalist states forced Taiwan’s development. I also look at the meteoric rise and fall of the shoe industry, an example of a “third-realm” industry that rose on the back of local society and involved low-level departments in the Ministry of Economic Affairs and semiofficial organizations such as the Taiwan Footwear Manufacturers’ Association (TMFA).
