The Dynastic Impulse: An Hypothesis Regarding Taiwan’s Rapid Post-War Growth

Abstract

This paper advances the hypothesis that Taiwan's successful post-war economic development stems mainly from a combination of (1) a cultural trait that was more common among the Chinese of the era of high growth than of other cultures (2) the special conditions that existed on Taiwan when Chiang Kai Shek and his Nationalist Party took command in 1949, and (3) of the policies subsequently followed by the Taiwan government. The paper discusses the role of private property and free enterprise under the special cultural circumstance where, roughly speaking, each head of household aims to build a dynasty for his or her temporarily extended family. The dynastic impulse drives the heads of household to work hard, to save, and, under the special conditions that exist in Taiwan, to produce human capital. The combination makes for an environment in which entrepreneurship can thrive. However, for this to occur, the government must promote private property and free enterprise, among other things. The paper presents hypotheses about how the particular policies that were adopted facilitated the household production of wealth and therefore provided a catalyst for the dynastic impulse. Besides discussing the creation and maintenance of a private property system and free enterprise, the paper also discusses monetary stability, infrastructure building, privatization, international trade liberalization, taxes, and human capital promotion.