Dependency Theory and Taiwan: Analysis of a Deviant Case

Abstract

The Case of Taiwan represents a challenge to two predictions from dependency theory: that foreign economic penetration leads to slow economic growth and also to heightened inequality. Since the early 1950s Taiwan has received massive foreign aid and investment, but it has also had one of the highest sustained rates of growth in the world, while income inequality on the island has decreased substantially. An examinatin of this deviant case is pursued by consideration of the various mechanisms dependency theorists claim are responsible for the linkage of foreign economic penetration to stagnation and inequality. In the Taiwan case, none of these mechanisms work out as predicated. Instead, a variety of factors-including the nature of the Japanese colonial experience, the emphasis on labor-intensive enterprise, and the absence of an entrenched burgeoisie-created a situation in which both rapid growth and increasing equality could occur. Consideration of Taiwan draws attention to flaws in the arguments of most dependency theorists and suggests a more optimistic picture for at least some developing societies that have to deal with foreign economic penetration.