T 50 Chapter 3 From Farmers to Manufacturers 51 Taiwan's innovative economic planners also invented economic process- Shoes,apparel,toys,small appliances,consumer electronics-these were ing zones-industrial parks in which firms were exempt from many taxes the export goods that put Taiwan on the map.Whatever brand name they and regulations.The first EPZ opened in Kaohsiung in 1966.It attracted bore,they were almost always manufactured in small,family-owned facto- strong interest from international investors,especially manufacturers from ries linked together in production networks clustered around dusty village the United States and Japan.Within two years,it had met its targets for in- crossroads.The owners of these factories rarely had engineering degrees or vestment,export value,and employment,prompting the state to construct MBAs;they learned their businesses by working as laborers,machinists,and EPZs in several other cities.Other government policies,including hefty apprentices.Once they'd acquired the skills they wanted,they struck out on spending on education,reinforced Taiwan's export expansion and helped their own,earning them the nickname "black-hand bosses"-entrepreneurs push overall economic growth to an average annual rate of 10 percent in who'd gotten their hands dirty on the way up and weren't squeamish about the 1960s and 1970s. pitching in on the factory floor. Large corporations,many of them state owned,provided a steady supply Generations of Americans grew up with Christmas trees strung with two- of industrial raw materials-energy,plastic,steel,cement-to Taiwan's ex- inch colored-glass light bulbs on heavy wire-a classic "Made in Taiwan" port manufacturers.The export sector,in contrast,was dominated by small product.Glass Christmas lights are as good an example as any of how Tai- and medium-sized enterprises (SMEs).That pattern is another fascinating wan's SMEs kept the world supplied with consumer products.Making the chapter in Taiwan's economic success story.Taiwan's economic divide lights and stringing them on the wire is not a high-tech process;it requires reflected the division in the society between Taiwanese and Mainlanders. coloring,cutting,and shaping glass tubes;inserting filaments and fitting Both the education system and the structures for civil service promotion metal bases to the bulbs;attaching sockets and plugs to coated wire;and were biased in favor of Mainlanders,who were overrepresented in the mili- assembling and packaging the finished strands. tary,government,and state-owned firms.As a side effect,the export-heavy The Taiwanese approach to manufacturing such a product was to break private sector belonged to the Taiwanese. down the production process and have individual firms make each piece: Taiwan's generous investment incentives and low labor costs attracted the metal base,the glass bulb,the wire.To maximize efficiency,factories "sunset"industries from the United States and Japan,where rising labor would set up close together.Taiwan had few zoning or land-use regula- costs and environmental restrictions were driving out many manufacturing tions,so manufacturers were free to locate in rural areas and small towns firms.They also attracted ethnic Chinese investors from around the world. where land and labor were cheap,but reliable transport was never far away; While some foreign companies established subsidiaries in Taiwan,a more in our Christmas light cluster,the glass cutting and wire shops might be on typical pattern was to contract with local firms to produce goods according either side of a banana grove or rice paddy.Any land that wasn't needed for to the foreign company's designs and specifications.This process-known the factory was cultivated,with agriculture supplying a small but reliable as contract manufacturing-allowed Taiwanese firms to build their manu- supplementary income facturing capacity and absorb new technologies and know-how without Firms were family owned,and family members provided much of the la- taking on the burdens of brand building and marketing. bor.When orders were strong,factories ran 24/7,pulling in youngsters and "It's better to be a chicken's head than an ox's ass"-so say Taiwan's en- relatives from the countryside to work.When business was slack,the children trepreneurs.The colorful idiom captures the essence of Taiwan's business concentrated on school,and the relatives returned to farming or trade.Instead culture,and it goes a long way toward explaining why SMEs play such a of paying wages to family members employed in a business,families treated huge role in the island's economy-almost 80 percent of employment and factory profits as collective household income.The "Boss Wife"(laobanniang) 50 percent of exports.The government policies that favored state-owned was a key player in these businesses-serving multiple management func- firms in large-scale and heavy industry limited the growth of private firms tions,and pitching in when necessary on the factory floor.Involving women and ensured a steady supply of industrial inputs.The state's relaxed ap- (and children)in production was nothing new.Whether they were farmers, proach to new business creation reinforced the cultural preference for be- artisans,or merchants,Taiwanese families had long expected all their mem- ing one's own boss.Together these policies allowed Taiwan's small-scale bers to contribute economically.This patriarchal form of corporate organi- manufacturing to become the most vibrant,competitive,and successful in zation predominated into the 1980s,when generational and technological the world. turnover gradually introduced professional management to Taiwan. The "Made in Taiwan"label was as ubiquitous in the 1960s and 1970s as Clustering small firms for joint manufacturing promoted cooperation "Made in China"is today,and it was found on many of the same products. among relatives,schoolmates,and friends.It also promoted flexibility and