56 Chapter 3 From Farmers to Manufacturers 57 future price shocks.The U.S.decision to recognize the People's Republic wan dizzying growth rates through the 1980s.Taiwan's ambitious,hands. of China and drop diplomatic ties with Taipei in 1972 reinforced Taipei's on entrepreneurs seized opportunities created by the development-oriented determination to become more independent.Throughout the 1970s and state to expand the private sector.And by the 1980s,some of the largest pri- 1980s,Taiwan's government actively promoted scientific and technological vate firms were overtaking their state-owned competitors.In 2000,Wang's development,including basic research and industrial application. Formosa Petrochemical Company opened a refinery to compete with the In 1973,the ROC merged three government research institutes to form China Petroleum Corporation;in 2001,the Taiwan legislature passed a bill the Industrial Technology Research Institute(ITRI).ITRI's charge was to de- to privatize the state-owned oil giant. velop new industrial technology and upgrade industrial techniques in the Just as Wang Yung-ching's private venture caught up with its state-owned private sector,and it has been spectacularly successful.In 1976 ITRI used competitor,the service sector eventually overtook manufacturing.Industry's technology licensed from RCA to begin semiconductor research;three years contribution to Taiwan's economy peaked around 1980,when it constituted later,it spun off United Microelectronics (UMC).UMC was Taiwan's first almost half of GDP.Since then,services have grown to occupy about three- semiconductor manufacturer,and it is one of the world's leading makers of fourths of Taiwan's economy.Agriculture-the leading sector just sixty years integrated circuits (IC)today.In 1987 ITRI birthed another IC giant,Tai- ago-now accounts for less than 2 percent of the island's GDP.These changes wan Semiconductor(TSMC).In 1985 it collaborated with Giant Bicycle Inc. were painful for many individual Taiwanese,but the country as a whole to develop carbon-fiber materials that allowed Giant to enter the top ranks benefited from them.Guided by technocrats and powered by the boundless of high-end bicycle manufacturing.Tens of thousands of ITRI "alumni"are energy of its high-achieving entrepreneurs and workers,Taiwan managed to working in Taiwan's industrial firms today. stay ahead of global economic trends through the second half of the twentieth In addition to ITRI,Taipei poured money into scientific research and century.As the economists Hsueh,Hsu,and Perkins put it,"one of the most education at all levels.It developed flagship research institutes,such as Aca- important lessons one can learn from Taiwan's development experience is demia Sinica (home of Nobel prize-winning chemist Lee Yuan-tseh),Na- that rapid growth requires equally rapid changes in approach." tional Taiwan University,Tsinghua University,and technical high schools that prepared huge numbers of workers for skilled industrial work.It built science-based industrial parks to encourage cooperation between scientists SOURCES and manufacturers.The most famous of these is the Hsinchu Science-based Industrial Park,founded in 1980,which houses more than four hundred Taiwan's economy has attracted intense scholarly interest and attention. high-tech companies in industries ranging from telecommunications to op- Some of the most important studies-all of which I rely on heavily in this toelectronics.In all of these endeavors,the ROC government invited private chapter-include Thomas Gold's classic book State and Society in the Taiwan business to participate in making science policy. Miracle;Li-min Hsueh,Chen-kuo Hsu,and Dwight H.Perkins'Industri- The decision to promote strategic industries helped Taiwan's information alization and the State:The Changing Role of the Taiwan Government in the technology industry flourish in the 1980s.At the same time,however,the Economy,1945-1998;Ezra Vogel's The Four Little Dragons;Robert Wade's island's rapid economic growth produced massive trade surpluses and a Governing the Market;and The Key to the Asian Miracle:Making Shared Growth spike in savings.To pacify its trade partners-including the United States- Credible by Jose Edgardo Campos and Hilton L Root. Taiwan followed Japan's lead in the mid 1980s.It dropped protectionist The Dutch description of Taiwan in the 1600s comes from Macabe Ke- trade barriers and allowed its currency to rise in value.These liberalizing liher's history,Out of China:Yu Yonghe's Tales of Formosa;and data about reforms were necessary,but they raised the price of Taiwan's exports.The rice production during the land reform come from Chien-chung Chiu, traditional industries that had moved to Taiwan two decades before-tex- "The Improvement and Production of Rice in Taiwan,"Taizhongqu Nongye tiles,toys,shoes-were sunset industries once again.But this time,the sun Gailiangchang Yanjiu Huibao,no.5,1981.Details about the role of SMEs was setting on Taiwan.For those industries,the next phase of Taiwan's in Taiwan's economy are drawn from Rong-I Wu and Chung-Che Huang's economic miracle would play out in a very different venue:the Chinese report for the Mansfield Foundation,"Entrepreneurship in Taiwan:Turn- mainland ing Point to Restart"(available online at www.mansfieldfdn.org/programs/ One of Formosa Plastics founder Wang Yung-ching's famous aphorisms program_pdfs/ent_taiwan.pdf).Megan Greene's book,The Origins of the was "develop manufacturing don't play money games."His single-minded Developmental State in Taiwan,is an excellent source of information on Tai- focus on manufacturing reflects the attitude and priorities that brought Tai- wan's science and technology policy