Learning Outcome covered by this assessment:
- Relate Macro-economic concepts to business organizations. Instructions:
- Students are required to read carefully and understand the case provided to prepare a report of 2000 words.
- Proposal submission is in week 9 through Moodle.
- Individual assignment submission is in week 12 through Moodle.
- Read the general instructions given below and strictly follow the instruction in completing the assignment.
TAIWAN'S SUCCESS STORY
Taiwan is one of the four East Asian "tigers," or "mini-dragons," whose dramatic economic successes of recent decades, along with South Korea, Singapore, and Hong Kong, have influenced the way economists think about development. With a population of about 22 million, Taiwan is a mountainous, 14,000-square-mile island off the coast of China. Taiwan's claim to its status as a "development miracle" is as strong as that of any other economy in the world. The island racked up a measured annual economic growth rate averaging close to 8% over more than four decades. Taiwan grew nearly 10% annually in the widely used benchmark 1965-80 periods, higher than any other reported figure. Despite its now high income status, with a per capita income of $13,925 in 2000 at market exchange rates ($22,646 in 2000, at PPP), Taiwan continued to grow, at a rapid rate of 5.7% on average over the 1996-2000 period. Though growth in various countries has occasionally reached rates as high as 14%, and in some regions as high as 25% or more,
Taiwan's average growth performance is the highest ever recorded over such a long stretch of time. In the postwar period, Taiwan has grown from an impoverished annual per capita income of just $100, to the prosperous society it is today. At least as important, Taiwan has achieved universal elementary and middle school education (nine years are mandatory), a healthy population with a life expectancy of 75 years, and an infant mortality rate of only five per thousand. Absolute poverty has been essentially eliminated, there is very little unemployment, and relative inequality is modest even by developed country standards.
Although not yet really a fully developed economy and society, Taiwan has had to adjust to some of the changes that are faced economies that have reached the threshold of high-income status. There has been "hollowing out" of basic manufacturing, as plants have moved to mainland China in search of lower-wage labor. Production that has remained has been forced to rapidly shift to high-tech products and processes, in the face of rising competition in basic industries from other developing countries. There has been continued uncertainty about the island's political future, given poor relations with China, which continues to view Taiwan as a renegade province, but so far the society has adapted. It has also transformed itself into a credibly and competitively democratic polity, with far less corruption and lack of government transparency than either its neighbours' or than some of its own history. Taiwan thus seems to have achieved almost everything we look for in development. This achievement is in dramatic contrast to many other economies.
Paradoxically, but as is often the case in development studies, the problem is not that we have too few explanations for success or failure, but too many. Taiwan's success in particular has been ascribed to many factors. Here are 14 of the major ones: 1) emphasis on education; 2) extensive infrastructure development; 3) early and thorough land reform;
4) very high rates of savings and investment; 5) a mixture of constructive foreign influences and diffusion of commercial ideas from Japan and the United States; 6) effective government industrial planning; 7)the free market's release of human energies and creativity; 8) the 1960s Vietnam War boom; 9)direct American aid-and Taiwan's use of that aid for investment rather than consumption; 10) the work ethic and productive attitudes of the labor force; 11) a long history as an entrepreneurial culture; 12) the initiation of an export-led growth strategy in the midst of the rapidly expanding world economy of the early 1960s; 13) the movement into entrepreneurship of capable local islanders seeking opportunities for advancement, as they were blocked from the political arena; and 14) the survival instinct: the necessity of economic development as a defense against attack from the mainland (the Peoples' Republic of China).
We will be able to dismiss several of these explanations as major factors, but any of just a few of the remaining factors might appear to offer sufficient explanation for Taiwan's success. In this view, the key is to understand the magnified impact of having many development factors operating successfully at the same time. It results from a combination of an interpretation of the literature and a series of on-site visits and interviews with public and private sector leaders in Taiwan.
Land Reforms: Not burdened by close political ties to landlords, the Taiwan government was politically able to implement a thoroughgoing land-to-the-tiller reform program in the 1950s. Landowners received stock in state-owned enterprises in return for transferring land to peasants. This was a major factor in the extremely rapid growth of agricultural productivity in this period-a crucial foundation for later industrialization.
Very high rates of savings and investment: Capital formation has long been deemed crucial to successful development. Developed countries have much higher levels of capital per head than less developed countries, one of the factors enabling developed countries to enjoy higher productivity and incomes. Taiwan's savings rates were among the highest ever recorded, reaching 30 to 40% in the 1950s and 60s. The savings ethic is deeply rooted in Taiwanese culture. Parents teach children the overriding need to save for a rainy day. This cultural pattern is supplemented by public policies that keep real interest rates for savers relatively high and tax free. Interestingly, like fellow tiger South Korea but unlike Singapore, Taiwan has a relatively low foreign capital share in total investment, High savings and investment is an important factor in development, but not a sufficient one.
Tasks
Please submit a work proposal with details on what is expected of each task and assignment completion plan. Proposal should cover major things that are going to be covered in the assignment. Student can use the proposal template attached with this assessment.
Question 1
Explain what is meant by macro-economic indicators and provide a detailed discussion on any four macro-economic indicators selected from the case study.
Question 2
Explain the concept of free market economy and discuss in detail how free market policy helped the organizations in Taiwan? Your answer should explain any three benefits of free market policy with regard to the case study.
Question 3
"Not burdened by close political ties to landlords, the Taiwan government was politically able to implement a thoroughgoing land-to-the-tiller reform program in the 1950s".
It looks like government of Taiwan has positively interfered in economic activities of the country. Discuss the importance of government intervention in economic development of a country. Discuss any four points.