Taiwan Today

A visit to the Republic of China at the invitation of the Secretary General of the Council for Interna­tional Economic Cooperation and Development offered an opportunity to inspect important regions of Taiwan and to have discussions with leading person­alities in Taipei and elsewhere. The personal im­pressions confirmed a picture formed in the course of previous studies in the history and problems of develop­ment in Taiwan. This summary presupposes knowledge of Taiwan's general situation.

Taiwan is an example of successful evolutionary development from the traditional agrarian structure. Many implications for economic and social develop­ment elsewhere can be drawn from the island.

It is true that Taiwan has had some special favorable conditions: a farming population experienced in intensive cultivation and irrigation and qualified, active leaders from the mainland. The peculiar postwar situation was correctly analyzed and its possibilities grasped and utilized.

The following experiences in agricultural develop­ment appear to be of general significance:

1. Land tenure has been rightly recognized as a crucial problem in further development. Land reform was carried out effectively, securing for the majority of farmers the rights of property and free disposition and thus creating the necessary precondition for the exercise of initiative on a broad scale.

2. Apparently former landlords have been in­demnified and not turned into hostile reactionaries. Their initiative has been successfully directed into other fields of activity and their abilities utilized in the interest of general economic development.

3. To maintain the traditional family farm system with an average plot of one hectare, more intensive cultivation methods have been successfully introduced. With little capital expenditure, these have considerably raised the productivity per unit of area and labor. Agricultural production has multiplied fourfold over the short period of 15 years on the same arable surface.

The national product in real terms has been in­creased by 185% within these 15 years (1951, US$350 million; 1965, US$999 million). Agriculture has been able to contribute substantially to this general economic development. It has:

- Made possible an increase in per capita consumption of food for a growing population (rate of population growth approximately 3%).

- Contributed to capital formation and through payments connected with land reform (land purchase) has supported industrialization and the development of the infrastructure.

- Supplied a substantial part of exports and thus improved the foreign exchange position (agricultural export 1952=US$114 million, 95% of exports; 1965=US$267 million, 55% of exports).

- Created jobs for many members of the growing population who cannot yet find employment in other occupations and augmented their incomes.

- Subsequently raised the demand of the 50 to 60% of the population employed in agriculture, thus inducing rapid development in other industries.

This is why Taiwan appears to be a classical model of rapid development promoted by mutual benefit for all sectors of the economy and with the participation of the whole population. This example of transforming a society without social friction and, to a large extent, with avoidance of economic and social dualism is wholly different from what we find in other countries where rapid dissolution of traditional structures, growing masses of people without the means of subsistence and the tension of great social differences endanger the process of development.

Taking into account these special advantages, development in Taiwan still offers an outstanding ex­ample of agrarian structural development for other countries. Starting conditions in most developing countries are closer to those existing in Taiwan than in Great Britain and the United States, which are con­sidered exemplary and regarded as models by many international institutions and experts.

In Great Britain the opposite type of land reform, namely one in favor of the landlords, took place at the beginning of the 19th century. The political and social dangers of the resulting massive poverty could only be overcome in a nation which, being the world's lead­ing colonial power of the time, was in a position to offer its people alternatives.

In the United States the large quantity of good soil presents very special conditions for agrarian structural development. There are more than 6 acres of arable surface per head as against approximately 0.15 acres in Taiwan and 0.17 in Japan.

The Russian experiment in agriculture is a bad imitation, as far as agricultural techniques are con­cerned, of the English-American development process and has not achieved substantial economic success. Mechanization has taken up a large amount of capital investment without effecting a remarkable increase in returns. Neither a satisfactory supply of food for the urban population nor participation of the rural popula­tion in economic and social development has been at­tained. Only the ample land supply of almost seven acres per head and small farming on private land - in itself a foreign body in the system - have enabled the U.S.S.R. to escape major famines. Social tension has been suppressed by means of political force. Taiwan, on the contrary, has proved it is possible to increase agricultural production importantly with little mech­anization and little capital investment.

General conditions in many developing countries are comparable to a high degree to those of Taiwan but are strictly different from conditions in Great Britain, the United States or the U.S.S.R. This applies with regard to the scarcity of land (1,420 people per square mile, 0.15 acres of arable surface per head) and an excess of labor. In most countries, as in Tai­wan, agriculture will for some time have the task of supporting and holding the people instead of setting them free for other occupations as is appropriate in later stages of economic development.

Taiwan therefore has valuable experience to offer to many nations for the evolutionary development of small-scale farming as a starting base for harmonious development of the whole economy. The same could be said of Japan for similar reasons.

Agriculture is still the prevailing gainful occupa­tion (1965, 2 million persons employed or 54%) and will have to continue contributing substantially to eco­nomic growth.

A central problem of economic policy in years to come will be how to procure employment for those leaving school. Their number is expected to be 160,­000 a year due to the elevated birth rates of the past. On no account, even supposing the most favorable con­ditions of economic growth, can employment in non­agricultural industries be found for all of them (1965 persons employed = 449,000, 12%). Agriculture is confronted with the necessity of having to employ as many hands as possible and to support others.

This double task makes unavoidable a certain degree of conflict between the aims of agricultural policy:

- Employment for a large number of people.

- Further modernizing of agriculture and increase of incomes.

As a high level of return has already been at­tained, future rates must be expected to decline. This aggravates the situation. It scarcely will be possible to raise production much more by intensive cultivation.

In analogy to what happened in Europe some decades ago, agricultural development in Taiwan is now approaching the final stage of the first phase of development during which production can be raised mainly by biological improvement and additional im­provement and additional employment of labor. Agri­cultural policy in the second phase has to face a wider range of problems and try for solutions in different ways, mainly by:

- Structural changes in production and farm management.

- Structural improvements in marketing and cooperatives.

- Connection with the general policy for the regional economic structure.

A major shift in employment so as to reduce the agricultural labor force will not be feasible for the next 10 to 20 years because not until then will the smaller rate of population growth have an effect and will non­agricultural industries be able to offer employment. Once these developments occur, a structural change in the rural economy will accompany the diminishing of agricultural employment. To prepare for harmonious development of rural districts and for the maintenance of a well-balanced society at a time when major changes of agricultural structure are going to occur, agricultural policy and regional economic policy ought to begin to take in hand the problems of this third phase of agrarian development.

These considerations lead to the issue of orientation of agricultural policy. Many of the problems in­volved have already been examined and discussed or embarked upon by the authorities. A short survey will be given here:

A. Agricultural production

Production targets and structure will have to be re-examined from the following points of view:

1. Additional production of commodities for which rising home demand may be anticipated. In 1965 more than US$50 million worth of grains and pulses were imported. Especially high rates of con­sumption increase are expected with regard to food of animal origin. Substitution for imports of agricultural products, therefore, is growing in importance for the country's foreign trade and the balance of payments.

2. Decreased production of exports when market prospects are unfavorable. Especially for sugar and bananas, hitherto the mainstay of exports (1964, sugar 29.2%, bananas 7.2% of total exports), the world market prognosis is not very auspicious. The world market price for sugar is extremely low and the rising production in many countries is going to create increas­ing supply pressure. As to bananas, the competitors of Taiwan enjoy much shorter transport distances to the European market.

3. A wider range of diversification complementary to rice cultivation. A promising start has been in the cultivation of intermediate crops.

4. Integration of cattle farming into existing rice farms. Possibility of keeping stock for milk and meat instead of maintaining draught cattle that are go­ing to be replaced by tractors should be explored. The introduction of more fodder plants may help achieve this end. From the angle of farm economics, there is no objection to small units of one or two cows. Labor will be sufficient on most farms to look after them. Dairying facilities ought to be augmented. So far they exist in only a few parts of the country.

5. Extension of dry farming. A reduction in the exploitation of bush forest must be anticipated. Fuel is coming increasingly from other sources (oil, electric current, etc.). Investigation of systematic and intensive fodder cultivation for dairy farming has started. The feasibility of cultivating more food grain and pulses as well as working out suitable systems of crop rotation for dry farming are worthy of study.

By combining these measures, an approach could be made to diversification and to increasing food pro­duction and quality without really restricting rice production.

B. Marketing and cooperatives

Part of the rice crop is subject to deliveries re­quired under state regulations. Marketing is mostly concentrated on rice. At the same time, the real property tax, loans and fertilizers can be paid in rice, which is treated as legal tender in kind. Apart from this there are special processing industries and pur­chasing organizations for a small number of products, including sugar, pineapple, other fruits and milk. But these are confined to a small range of activity and only a few farmers can get into contact with them. Some other products are marketed in a traditional way within narrow local markets and by primitive means of trans­portation (push carts, bicycles, etc.).

The desirable diversification of agricultural produc­tion can succeed only if proper marketing facilities are available everywhere. The farmer must feel certain of being able to sell the whole of his produce instead of being partly dependent on uneconomical local retail business.

The farmers' associations already represent the basic model of sales and purchasing cooperatives which in Europe have proved indispensable instruments for individual small-scale farming. It may well be possible to extend their range of activity, up to now largely limited to the handling of rice and fertilizer, and turn them into multipurpose associations which look after the sale of all sorts of products and the purchase of the most important means of production and to link them up with the credit system.

Creating special organizations for the sale of single products seems feasible only where cultivation is con­centrated and there is a considerable output. But as a consequence of the desirable diversification of agri­cultural production in Taiwan, the location of certain crops may not be easily defined. Products such as milk, meat and fruits will be produced additionally in small quantities over large regions. They can be made profi­table only by collecting and processing and marketing them in a rational way. All-round associations probably offer the most economical solution.

To improve farmers' incomes and the consumers' supply, rationalized marketing is at least as important as increased production. It is not advisable, on the other hand, to create a sales monopoly at the outset. Some competition between private traders and associa­tions has proved very wholesome for agriculture as well as for consumers in Europe.

Investigation of the policy of prices and taxes is connected with market problems. During a brief stay in Taiwan, it has not been possible to go into this. However, a general knowledge of the problems involved permits the suggestion that there is need for a price policy which will improve farmers' incomes. All accounts available (including the national product) undervalue the farmer's income, because income in kind (food and housing) is underrated and working hours are overrated (even the 'Green Report' of the Federal Republic of Germany arrives at too low a result as regards agricultural incomes).

On the other hand, it must be stressed that low prices and high taxes may lead to stagnation of produc­tion because they tend to slow down the drive for more intensive and ample production. Farmers' payments connected with land reform in Taiwan have not only contributed to overall economic capital formation but also have proved a most efficient incentive to modernize and raise agricultural production. Apparently the situa­tion has changed considerably since these payments ceased. Future price and tax policies will have to take into account the questions of how to offer agriculture an incentive to go on exploiting every opportunity to raise production and how much capital it will be able to contribute to the national economy.

C. Regional structural policy under overall economic aspects

Variations in population density in Taiwan are as yet mostly determined by agriculture and its require­ments. Once industrialization is started, there will be other determining influences and that is what neces­sitates structural policy.

Up to now the industrial development of the country has centered in Taipei and Kaohsiung and their environs. This concentration of economic activity and population leads to danger of economic and social dualism with ensuing economic burdens and social tension.

The government is aware of this tendency and is trying to foster new locations of industry in other parts of the country. It is true that excessive rural population is making for urban centers. But the inflow may grow substantially as soon as, in a later stage of development, agriculture needs less labor. If economic centers in what are now rural districts have not been established by then, there might occur a very dangerous dislocation of people, emptying traditionally inhabited regions and excessively concentrating population in a few places.

Decentralized economic development is especially important for the future of agriculture. This accounts for the deep interest in the government's endeavor to create new industrial locations in regions which are still weak economically. For the development of modern, efficient farming, regional markets and employment of­fered nearby are vital.

Central markets with adequate purchasing power in the neighborhood of agricultural districts become more important to farmers as more diversified high quality foods (fruits, meat, eggs, dairy products) come into increasing demand in lieu of staple products. Here, too, farmers become more dependent on public and private services of every kind (trades, crafts, tech­nical services, transportation) with their progressive modernization. But these tertiary industries will not thrive on agriculture alone. Experience has taught that they require the population density and purchas­ing power of secondary industry.

Agriculture itself is going to be interested in em­ployment in other economic sectors. Even if every effort is made to exploit farms more intensively, ra­tionalization and mechanization will lower the demand for labor. Some members of the family are going to look for other occupations. Maybe during certain periods even the farmers themselves will find time for employment outside agriculture. Experience in Europe has shown that this potential labor force can be mo­bilized and put to work for increasing the overall national product more easily if jobs are available at a reasonable distance. If this is not the case, people are compelled to emigrate to remote regions and to loosen their family ties. Either an undesirable immobility of labor or precipitous dissolution of the social structure ensues.

In the long run and for economic and social rea­sons, agriculture needs other economic groups and professions in the neighborhood so as to be able to participate fully in the progress of civilization. In some European countries this central problem has been recognized too late, i.e., when stagnation of development or even depopulation has already taken place. Although in Taiwan it is still the task of agriculture to absorb people and offer them employment, economic policy must be concerned with tomorrow's problems and an appropriate regional structural policy.