ECONOMIC AFFAIRS by Jeffry Babb News Weekly
Taiwan leads the way with the knowledge economy
, February 28, 2015
When I began studying economics in the early 1970s, a country’s “resources” were things like minerals and crops. With the rise of Japan, which has very little in the way of these sorts of physical resources, it became clear that this definition was inadequate.
Japan, a resource-poor country, was rapidly overtaking Australia, a resource-rich economy. Japan’s economy was based on manufacturing. It imported raw materials, added value to them, then exported the finished products. “Value-adding” was the key to the Japanese economy’s success.
Taiwan is a small island, half the size of Tasmania, with a population of 23 million, about the same as Australia’s. By the early 1980s, it had grown to become the workshop of the world.
While Taiwan is small, it is not a tiny speck like Singapore or Hong Kong. The initial step in its economic transformation from peasant society to knowledge-based economy was centred upon improving agricultural productivity and on the further processing of agricultural raw materials. Older News Weekly readers may recall the canned asparagus from Taiwan that was the centrepiece of many a ladies’ luncheon during the 1960s and ’70s.
By the later 1990s, across the Taiwan Strait, a formidable new competitor was emerging. Paramount leader Deng Xiaoping toured south China, epicentre of the country’s emerging export juggernaut, and proclaimed that “to get rich is glorious”. Many of mainland China’s new export-oriented factories were managed by entrepreneurs from Taiwan. By this time, Taiwan was quite ruthlessly closing down the textile, clothing, footwear and other labour-intensive industries by which it had pulled itself up by its own bootstraps.
We should always remember that Taiwan is a Confucian society. Such societies, which include South Korea, Japan, Hong Kong and Singapore, value knowledge and harmony. Confucius’ birthday is celebrated every year in Taiwan as Teachers’ Day with special ceremonies. Teachers in Taiwan are well paid and respected. Significantly, the People’s Republic of China calls its propaganda organs Confucius Institutes. They have misappropriated the term Confucius, because communism does not resemble Confucianism in the slightest.
Confucius himself was not a religious leader, but a philosopher. He saw himself as an adviser to rulers, with his teachings based on ethical behaviour, veneration of tradition, respect for knowledge and justice. He lived in the late 5th and early 4th centuries BC. His aim was to establish the Great Commonwealth, based on peace and harmony.
The two great dynasties, the Han Dynasty (206BC-220AD) and the Tang Dynasty (618-907AD) epitomised the Confucian ideal.
Taiwan is, in ideological and religious terms, the least modernised of the Confucian societies. Deities such as Matsu, the Taoist and Buddhist goddess of the sea, are widely venerated with annual ceremonies. It seems logical then that the Confucian tradition should constitute the philosophical structure of Taiwan’s system of governance and economy.
When I first went to Taiwan in 1980, it seemed that every second university graduate was going to the United States to study, and almost always to study computer programming and electronic engineering. It seemed that they never came back.
However, in the long term, many of them did return, and they formed the intellectual core of Taiwan’s information and communications technology industry. What they brought back with them was knowledge, and that knowledge became the foundation of Taiwan’s knowledge economy.
Now, Taiwan is the first among Asian economies in using knowledge-based industries to drive economic growth, according to the “Innovative Asia: Advancing the Knowledge-based Economy” report released late last year by the Asian Development Bank (ADB).
According to the report, Taiwan ranks first in information and communications infrastructure, number two in education and innovation, and third in economic incentive. The ADB says that a knowledge-based economy is the key to prosperity and social transformation, as it helps drive economic growth through innovation, social equity and inclusion.
Taiwan is in an isolated position. Some industries, such as steel, have been fostered through strategic necessity. Various other industries, such as power-generation, are frequently teetering on the brink of insolvency due to the violent public reaction to even the hint of a tariff increase.
Taipower is the sole power-generator on the island, and nuclear power, which supplies a substantial proportion of the island’s power, is always controversial.
Taiwan’s young people study hard. Basic education is very good, and the competition to get into top universities, such as National Taiwan University, is intense. Young people soon realise that their best shot at getting somewhere in life is through a good education. Parents demand outstanding results from their children.
Wages for young unskilled people are pitifully low and prospects for progression are limited. The intensity of study on occasion creates mental problems for students. Small wonder that young people often think that they have done the hard work by getting into university, then, upon being admitted, feel it is time to kick back and relax.
The ADB is proposing institutional reform, regulatory easing and more trade liberalisation in order to further promote economic growth. Taiwan knows it must make use of its most abundant resource: the intelligence and skills that are already inside its people’s heads.
Jeffry Babb is a Melbourne-based writer, who for many years worked as a journalist in Taiwan.