The Globalization Process in Taiwan and Latin America

Francisco Luis Pérez Expósito

Graduate Institute of Latin American Studies, Tamkang University, Taiwan

 

Abstract

The exciting experience of economic development in Taiwan is awakening exceptional interest in Latin America, where scholars and statesmen are introducing strategies for economic development and international participation in the family of nations, suposedly inspired by the Taiwanese model.  However the phenomenon of the social, political, economic, and commercial development in the island of Formosa has cultural ramifications difficult to express in a macroeconomic and political analisis, which only constitutes part of the dynamic aspects of its social global evolution, conditioned by the external basis of external economics which also includes political and cultural traits.  These sociocultural factors of the Taiwanese experience have proven to be conducive to advantageous competition in the international arena.  Let us mention several: the military threat of Mainland China, the diplomatic isolation of the island, tendency to great thrift, the  absorption of new technology, the flexibility of commercial and manufacturing enterprise, the predominance of family owned business, the high spirit of competition in the professions, and the parents` insistence on their children`s education.  Therefore, the Taiwanese experience, together with that of countries culturally and politically closer to Latin America such as the Phillipines, Indonesia, Malaysia, and Southern Europe will be of great help to Latin America in her efforts of globalization.


Introduction

Here we propose a globalization strategy for Latin America based on a modified Taiwanese experience.  Modified in the sense of taking into account culturally and politically closer experiences of other nations.  First of all we analize the Asian experience to unveil its essential elements and to evaluate its applicability to the Latin American reality.  Secondly, we point out relevant factors of the Southeastern Asian and South European  process of globalization.

This topic has attracted the attention of many scholars (i.e. T. Fukuchi and M. Kagami (eds.), Perspectives on the Pacific Basin Economy: A Comparison of Asian and Latin America, Tokio: Institute of Developing Economies and The Asian Clun Foundation, 1990; G. Gereffy and D. Wyman (eds.), Manufacturing Miracles: Patterns of Development in Latin America and East Asia, Princeton: Princeton University Press, 1990, and S. Haggard, Pathways from the Periphery: The Politics of Growth in Newly Industrializing Countries, Ithaca: Cornell University Press, 1990). Some of them, on their analysis of the so called “Asian Miracle”, focus on high investments, others on education and absorption of foreign technology, to explain the amazing rise of seven Asian economies from poverty to the ranks of middle powers in the last seven years; Edgar Campos and Hilton L. Root, in their The Key to the Asian Miracle: Making Shared Growth Credible (Washington: Brookings, 1996), emphasize political conditions. To attained the desired social cooperation, the authoritarian regimes (which governed these countries much of the time) were forced to use persuasion in order to make the public accept their economic strategies and also to mobilize the business sector. They managed to gain political acceptance and legitimacy thanks to a palpable economic growth, which was widely shared, through land reform, public education, and the povision of credit to small enterprises and families. Other specialists take also into account those political factors which show that "in East Asia, in Japan before 1945, just as in Korea, Hong Kong, Taiwan, Singapore, Malaysia, and Thailand, after the WW II, first economy is integrated into the world market, and only after several decades are  the political and cultural systems renewed in the Western sense; while in India and Sri Lanka they follow the same Latin American model of implementing the political and ideological Western model within  an economic policy of self reliance" (M. URRUTIA (ed.), Colombia ante la Economía Mundial, Bogota: TM Editores-Fedesarrollo,  1994, p. 13). This seems to suggest that the  implementation of a Western style democratic system should wait until the country has attained a certain level of economic development and internationalization. This and other political approaches, whatever might be their ideological stand, are nevertheless, partial. They failed to take into account several factors,  such as: a) the incorporation of great part of the population to the process of development and internationalization in Asia; b) the creation of avenues for upward social mobility through education, civil service exams, workers` share in profits, facilitating the establishment of small enterprises, etc.; c) they give to the adquisition of technological expertise; etc.

The use of generic data might be misleading in the analysis of the Asian experience, without relating them to the actual sociocultural setup. For example, talking about the rates of saving capital, we should indicate who are those who are saving. In Taiwan saving is widespred throughout the whole social strata, while in Latin America saving is done by those in a high social strata. In Taiwan the economic growth is being constantly distributed and is at par with the rate of saving among those who manage to put aside part of their income, which is the greater part of the population. This has made possible widespread participation in the national growth of the economy.

The Taiwanese Sociocultural Background

It is not easy to summarize in few words the rich Taiwanese experience of internationalization. The incorporation of a country to the world economy is closely related to its sociocultural background, and its political and economic development.

The sociocultural characteristics of Taiwan are,  among others, the following:

a)   Taiwan is a greatly urbanized society with high participation of women in the work place;

b)   The family unit is very closely knitted and it constitutes the basic economic agent;

c)   Taiwanese, like other Asians, “do not believe in the extreme form of individualism practised in the West, they of course feeel that each individual is important. However, they feel strongly that each individual is not an isolated being, but rather that he or she is a member of an extended family, clan, neighbourhood, community and nation. Asians believe that wahatever they do or say, they must keep in mind the interests of others, particularly their extended families. Unlike in the Western society, where the individual often puts his interests above all others, in the Asian society, the individual tries to balance his interests with those of family and society” (M.S. Dobbs-Higginson, Asia Pacific. Its Role in the New World Disorder, London: Mandarin, 1994, p. 460).

d)   The professional and educational environment are permeated by a strong competition;

e)   The society is not religious in the Western sense;

f)    People do not show much interest in events which are not related to their inmediate interest or experience, and do not considered worthwhile undertaking activities to change an environment outside of their control;

g)   Taiwanese lack a hierarchical tradition based on blood lineage, or on racial differentiation (although there has been, and there is still, certain tension between the people who came with the KMT in 1949 from Mainland China and the Taiwanese, properly speaking);

h)   In Taiwan there is a quite homogeneous culture and general ideology; and the society is not ideologically fragmented;

i)     Taiwanese give top priority to their professional advancement;

j)     The Taiwan State has limited its own power not to frontally opposed the private interests of citizens; deploys a paternalistic and moralistic propaganda; uses clientelistic cooptation;

k)   The main political data are not rights or theoretical principles, but the satisfaction of people´s demands, and the acknowledgement of an equilibrium of power among the different social interest groups; East Asian concept of Law differs greatly from that of Latin America. In East Asia, the Law is supposed to reflect an equilibrium of power, interests, and demands, not inmutable or superior principles. This does mean that in East Asia there is no Law or that it is applied with laxitude. People accept the existence of harsh punishment for the infrigement of those laws the authority has warned it will enforce. But in many areas, the authority allows the existence of a massive infrigement of the law—illegal companies,  marginal economy, etc. This lack of “principalism” gives East Asia a high degree of flexibility, and much space for reaching compromises, which in general are case-oriented, nor principle-oriented. The absence of religion, in the Western sense, contrbutes also to Taiwan´s low degree of ideological confrontation

l)     Consensus making and persuation are the two most important political tools. The philosophy of making Government,business and employees work cooperatively, and the ability to forge national consensus, “is one of the secrets of the so-called Asian development miracle” &M.S. Dobbs-Higginson, op. cit., p. 461);

m)  The present Taiwan is the result of the Japanese colonization on the one hand, and of the entry of the KMT party leaders and military in 1949. The coming of the KMT goverment push the Taiwanese to look for success in the business and manufacturing sector;

n)   People considered economic success as the only way to feel secure;

o)   There is widespread belief in the importance of education and professional training for success, and unlike in other countries this trust in education is shared by all strata of society. Taiwanese parents will make considerable sacrifices to help their children obtain an education and excel in school;

p)   There is a predominance of familiy owned businesses and a spirit of great commercial flexibility;

q)   The government fosters low risk economic policies determined to establish national self sufficiency by means of internal savings and development of technological, administrative and manufacturing know-how.

Taiwan´s incorporation to the world economy

       Taiwanese  economic and trade internationalization has been  an imperative taking into account a) the size of the area and population of the island-state, and b) the fact that its KMT government is the heir of a defeated party in  China`s Civil War. But this apparent  weakness have been managed so successfully that, in spite of its lack of natural resources, and under the military and political threat of Mailand China, Taiwan today enjoys a considerable degree of international strengh and autonomy. What is the secret recipe of this extraordinary story from rags to riches? Can the Taiwanese Experience shed light to uncover the errors in some Latin American strategies of internationalization? Can the Taiwanese model be transplanted to Latin America?

      The Taiwanese internationalization has been directed at self-strengthening , through capital and technology accumulation; and has been made possible thanks to the concerted efforts of Governement, entrepeneurs and workers, in an unprecedented social pact based on a) an unequal, but wide distribution of national resources, b) the opening of new avenues for upward social mobility and c) the perceived threat of military intimidation by Mailand China.

      Taiwan, as the rest of the East Asian newly indutrialized countries (NICs) have been uniquely successful in using export-oriented industrialization as a route to continous industrial upgrading and integrated national development. A major reason for this positive outcome is that exports in East Asia have been spearheaded by local private firms, who have used their linkages with foreign buyers to pioneer original equipment manufacturing and original brand-named manufacturing export roles (Cfr. Gary Gereffi, “Global Production Systems and Third World Development”, in Barbara Stallings (ed.), Global Change, Regional Response, New York: Cambridge University Press, 1995).

Unlike the East Asian NICs, however, Latin American countries lack a solid, autonomous domestic base for generating and accumulating national capital for investment in locally driven export-oriented development. The Latin American State –before and after structural adjustment—is quite different from the supporting East Asian state. This state has devised a pro-business development strategy while assuring workers and farmers a minimum welbeing, and also avenues for professional upgrading (at least for the offsprings of the present workers and farmers). For example, Taiwan protects its farmers through relatively high domestic prices, and import restrictions; and also shelters its workers fostering the creation of enough jobs.

           On the other hand, Latin America adopted an alternative arrangement: integrated international production, where transnational corporations play a key role. In this strategy, the most important challenge is to secure the most profitable niches in the global production chains, and use this to upgrade domestic management, technology, and manufacturing. But, most of the times, Latin America has only receive maquila. They offer certain advantages: they generate much needed jobs and foreign currency. But it is not evident that the maquila can be consideres as the first stage of modern industrialization. The control of production and distribution rests in the hands of foreign retailers and manufacturers. Moreover, the maquiladora industries offer few backward linkages with the local economy which might spur wider economic development. The East Asian newly indutrialized countries (NICs) have been uniquely successful in using export-oriented industrialization as a route to continous industrial upgrading and integrated national development. A major reason for this positive outcome is that exports in East Asia have been spearheaded by local private firms, who have used their linkages with foreign buyers to pioneer original equipment manufacturing and original brand-named manufacturing export roles (Cfr. Gary Gereffi, “Global Production Systems and Third World Development”, in Barbara Stallings (ed.), Global Change, Regional Response (New York: Cambridge University Press, 1995)).

      Taiwan entered the world arena by the hand of the USA and Japan -- the USA bought great part of its exports and was a key source of political support, while Japan provided much needed marketing and manufacturing experience. The international economic environment of the 70´s and 80´s were quite favorable for the expansion of an industrial development which was export oriented. Taiwan took advantage of that golden opportunity with a  most dynamic entrepeneurship,  well trained technicians, a dilligent and disciplined work force, and the help of Japanese marketing nets, and overseas Chinese contacts. This was possible by the linking of many small industries together with a modern infrastructure of roads, telecommunications, and ports. But all these factors are only the backdrop where the "miracle" takes place: the real force behind this extraordinary development was the creation of a system of self-strengthening,  increased autonomy, and continual upgrading using domestic capital and most of the human resources available. This was not the mere industrialization of an export-oriented economy, but the creation of a self-induced upgrading economic strategy. Taiwan wanted to control not only manufacturing, but also technology, marketing, finance, and transport and communications. The disparate social and economic consequences of industrial growth in the Latin American and East Asian NICs over the last few decades show the uniqueness of this phenomenom.

      Countries are incorporated into the global economy through agricultural and industrial production, exchange of services, and trade and finantial transactions. Taiwanñ´s involvement in these networks is and has been quite different from that of Latin America. Paraguay, even during the Stroessner`s regime, implemented an export oriented policy, and opened its doors to foreign capital and investment; but, the exported commodities were basically agricultural, low value added goods, subject to the fluctuations of world market prices. The relative prosperity of Paraguay seems to indicate the superiority of this model over the inward oriented ISI model; but, this kind of international incorporation  lacks the ability to move toward the high-value-added niches in the global production hierarchy, and to  create a surplus to distribute among the local workers and employees. The production of primary goods tends to become more profitable only with the expansion of the area under exploitation, or with modernization and a lesser number of workers. The ability to improve the economic status of workers has hinged around 1) the continual upgrading of production, which has created a surplus to be distributed, 2) a shared-profits scheme, and 3) the workers` participation in investments through their savings.

      Cuba`s incorporation to the international economy has been also dependent on the export of agricultural products, a now defunct special arrangement with the former USSR, and is presently relying on tourism. This kind of incorporation is more likely to generate foreign currency, but there is the danger that the most lucrative end of the tourist industry lie in foreign hands: only through local investment, administrative and service upgrading, can a tourist oriented economy generate enough surplus to distribute among the people.

      Whereas Latin America and the Caribbean remain a region exporting primarily raw-materials, Taiwan, and East Asia in general, has moved  away from  agricultural and mineral production and toward manufactured exports in a strategy of continuous industrial upgrading since the greatest creation of surplus in manufacturing lies in the  production of advanced goods. This economic policy is very much related to three sociocultural Taiwanese traits: 1) the competitive spirit, forged in its special system of education; 2) the priority of professional development over all other personal targets; and 3) the great importance attached to education, above all in business and technology.

Latin American patterns of consumtion are also very different from that of Taiwan. In the first place, the strong cultural identity of Taiwan has placed, and still places in a lower degree, a very strong barrier to the import of foreign consumption goods. Taiwanese like their style of life, their products, and this makes difficult the introduction of foreign products in the market. But in Latin America, there is a strong demand of foreign products, and a tendency to borrow for consumption –spending money before having earned it. This cultural trait palyed without any doubt a important role in the  Foreign Debt Crisis. In East Asia, borrowed foreign capital has not been used in consumption, but in capital goods or infrastructure.

Latin American clientelistic governments are also quite different from that of East Asia. In Latin America, governments have created links to certain businesses, local or foreign,  and has given them unfair advantages in their competition with the rest of the national and international businesses. In East Asia, the government has created these links only with its suppliers and  the public works sectors. Here, the levels of clientelism and corruption are very similar (now, things are changing for the better). Thus, the Latin American, when the State has intervene in the market has distorted the free competition of enterprises in all areas; while, in East Asia, in general, this negative effect has been more limited. Besides, most of the Latin American earnings related with corrption have been placed abroad, while in East Asia have been generally funnelled into the local economy.

           Latin American´s experience with globalization in the 1980´s and 1990´s has several problematic features. First, Latin America´s exports are  heavily concentrated in primary products, and traditional manufacturing industries. Second, the region continues to be characterized by profound national and regional economic asymmetries, wasting valuable human resources marginalized from the process of production. Thirdly, Latin American countries have an extremely polarized social and political environment. The negative results of the populist experiences shows the difficulties in creating the conditions for a workable social and economic pact.  This ethnic, social, economic, and political fragmentation of Latin America weakens its ability to undertake cooperative efforts.  In the East Asian consensus making model, the parties accept the actual distribution of power and demands, but the one prevailing dos not override the basic demands of the rest –they favour cooperation over confrontation. In the fourth place, Latin American countries also lack a solid, development-oriented educational system able to create a force of highly skilled managers, professionals, and workers. Without this basic human resource, it is difficult to absorb new technologies, and to occupy the most profitable niches in the global market. Taiwan´s educational system, with its highly demanding and competitive primary and secondary education, and its preference for technical and market-oriented courses in the universities, has played an important role in shaping the social and professional characteristics of its people. The Taiwanese spirit of competition , so needed for market-driven development. Is forged during primary and secondary level of education. The Taiwanese enterprising spirit is not only a cultural trait, but a skill developed through family education and extracurricular activities: children help parents in their small businesses, students are responsible for several maintenance and cleaning tasks in their schools, etc. Taiwan has attained a remarkable high average  of practical education, without extreme differences. This is not possible without giving priority to basic and vocational education, and to those courses most likely to help economic development. Of course, there is widespread belief in the importance of education and professional training for success, and unlike in other countries this trust in education is shared by all strata of society. Taiwanese parents will make considerable sacrifices to help their children obtain an education and excel in school; Fith, Latin America governments patterns of relation with the business sector differ greatly from that of  East Asia.

The Experiences of Southeast Asia and Southern Europe

The Phillipines show a type of development based on the export of electronic products manufactured in a political and social environment as polarized as that existing in Latin America. There, as in the Western Hemisphere, the Western political (democratic) system was established before reaching economic liberalization and development. The Filipino Chinese economic elite is playing an important role, but not absolute, in a process of growth based on tourism, and export of labour, and the “maquila” of high valued goods. This way, in the Phillipines, the people´s participation in economic growth has increased; but the final outcome of this strategy remains yet to be seen.

In Malaysia the economic elite of Chinese origin has surrendered political influence to the native Bumiputras, reaching a very interesting social pact. By attracting foreign industry to their EZP, they have been able to absorb new tecnhologies and management methods. Malaysia is also fostering South to South cooperation and interaction, and have invested abroad. Thus, the Malysian experience shows a successful pact between business and people, the use of foreign investment to upgrade the national technological ability, and the creation of international companies investing abroad.

Southern Europe, of marginal development in relation to the Core Industrialized Countries of that Continent, is a good example for Latin America of a uneven partnership with more powerful neighbours, and a successful management of the tourism industry to boost economic development.Latin America cannot based its incorporation to the international economy only on the export of manufactured goods due to the competition of the already established East Asian economies. Latin America should prioritize as East Asia the upgrading of technology. It should also develop the tourism and entertaiment industries, and take advantage of the expansion of communications and informatization to create more service oriented industries. There is no reason why Latin America should not develop a powerfull music, TV and film industry.

The Caribbean countries have already certain experience in the tourism industry, and in the banking services. Tourist trade, like  the “maquila”, in spite of its many limitations, can temporarily diminish the high unemployment rate in most of Latin America; but, if it is not used as a stepping stone to achieve a higher development, they will be detrimental to the Latin American economy and society.

Conclusion

The experience of Taiwan as well as that of Southeast Asia and Soutern Europe highlights the importance of several factors:

a)   The importance of having a wide distribution of income before and during economic growth to facilitate social pacts, political stability, and to incorporate as many people as possible to the direct task of development;

b)   The protection from foreign competition of low income and vulnerable social sectors, while the State should not use its power to protect crony industries or to take an active part in manufacturing;

c)   In the process of industrialization, the modernization of agriculture, and the development of industries related should be given special importance;

d)   The creation of employment should have priority over the salary levels;

e)   The search for cultural and coyuntural elements which can helped to reach social consensus, to eliminate excessive social and political fragmentation;

f)    The opening of avenues for upward social mobility (Through equal and real opportunity to education at  vocational and basic level, through fairness in the civil employment, through fiscal incentives for small savers, though easily adquired loans to begin small business, etc.);

g)   The creation of a economic environment where though work the population at large can have access to a minimum of wellbeing;

h)   The linking and coordination of the government and the private sector to implement an outwardly oriented strategy for development driven by the primary sectors and the industries related, tourism, services, and by small and mid size business connected to manufacturing nets as subcontractors;

i)     The transference of tecnology and investments to less developed countries in the region;

j)     The fast development of means of communication and nets of information;

k)   The adoption of economic policies that minimize risk and are gradual and moderate;

l)     The creation of fiscal and other kinds of incentives for domestic savings;

m)  The moderate use of foreign loans and investments to upgrade the technological and administrative national knowhow.