Economic development in Taiwan

Introduction

Over the past 50 years, the economies of East Asia have attracted serious attention because of their rapid growth, which transformed them from relatively poor countries lacking modern technology to economic powerhouses with dynamic export-oriented industries and living standards similar to those in the richest countries of the Western world. Because of their rapid development, they have been referred to as “Asian miracles,” which is justifiable especially if their transition is compared to the experiences of other countries. Initially, many East Asian economies were not very different from underdeveloped African countries in terms of gross domestic product (GDP) per capita, but their phenomenal growth enabled them to surpass the relatively wealthy South American economies and get close to the living standards in Western Europe and North America. Moreover, in only a few decades, East Asian economies experienced a development that took the United States and Western Europe more than 100 years (Ahrens, 99).

Not surprisingly, economists have been analyzing the growth and development in East Asia and looking to identify the factors that might have contributed to this process. This is a very important and worthy exercise for two reasons. First, based on the analysis of the determinants of growth, it is possible to forecast whether current growth patterns of East Asian economies are sustainable in the long run. If the accumulation of physical capital through savings is responsible for their phenomenal growth, then their growth rates will probably slow down in the future. However, if their growth relied on technological innovation, it is likely that they will be able to sustain their rapid growth over the next few decades. Second, a detailed analysis of the East Asian growth experience can provide valuable lessons for other developing countries in terms of policy measures that stimulate growth. The goal of this essay is to provide a review of the economic development in Taiwan.

Background

Taiwan, as an island, relies heavily on international trade for sustaining economic growth, due to geographical limitations, as well as lack of natural resources. In a statistical estimation of the 2008 economic activities of Taiwan, the export trade comprises 63.49 percent of the Gross National Product (GNP). Under the guidance of the national strategy, the semiconductor industry became one of the key industries in Taiwan, over a period of two decades. The success of the integration of the semiconductor supply chain allowed Taiwan to; rapidly grow as a manufacturing giant in consumer electronics, such as personal computers (PCs), liquid crystal display (LCD) panels, cell phones (Akyuz, 36).

Discussion

Demographics and Growth

To be able, to produce goods and services, firms need to employ workers. Therefore, labor is one of the main determinants of aggregate output. Countries with large numbers of people who are able and willing to work (referred to as the labor force) usually also have a high GDP. A high GDP provides countries with a larger pool of financial resources, which can be spent on national defense, allowing them to become regional or even world powers.

However, GDP is ...