MMW 6 Final Paper

MMW 6 Final Paper - Cheng 1 Chris Cheng Monday Section, Cat...

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Cheng 1 Chris Cheng Monday Section, Cat Gmuca Final Paper: MMW 6 Summer Session 2008 28 August 2008 Economic Development in Taiwan At the end of World War II, all Taiwan represented was a former colony of Japan. After the Japanese had surrendered and stopped the occupation of Taiwan in 1945, the island came under the control of the Chinese Nationalist party Kuomintang. In 1949, the Chinese Nationalists, having lost the civil war in Mainland China to the communists, moved their government to Taiwan, and brought with them several million refugees into an already war torn land. Taiwan’s status at this point in time could not have pointed towards rapid economic development and industrialization. However, in less than 20 years from 1960, Taiwan’s economy went from being compared to Zaire to being comparable to that of a well developed nation in Europe (Morris 1). Taiwan’s economic growth in the post World War II era was remarkable, and this tremendous economic growth was achieved in a short period of time compared to the development of other developed nations. What was the main factor for this tremendous growth in Taiwan’s economy? The main reason for Taiwan’s transformation into an international economic power is the policies and interventions that the Taiwanese government put in place when Taiwan was a developing nation. It was due to economic policies established by the Taiwanese government that the monetary value in Taiwan was able to be kept stable. In many developing states, inflation, the issue of the price of goods being too high, is an obstacle in the nation’s development. During the final years of the Second World War, Taiwan was bombed by allied forces since at the time it
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Cheng 2 was Japanese territory. This halted any production in Taiwan, and caused severe inflation (Kuo 46). Several years after the Japanese retreated from Taiwan, the population of the land was expanded immensely by the sudden influx of Chinese nationalists relocating their government to Taiwan (Li 55), leading to even higher levels of inflation. At this point, several policies were put forward by the government to address the problem of inflation and to stabilize the prices of goods. One major policy put forward was the New Taiwan Dollar monetary reform in 1949. This reset the value of the currency in Taiwan at a ratio of 40,000 to 1 when comparing the old currency to the new, and linked it with the U.S. Dollar to a ratio of 1 to 5 (Kuo 46). Although other factors slightly devalued the currency, this reform in reestablishing the monetary system was a key to stopping inflation. Another method the government used to stabilized prices of goods in Taiwan was the interest rate policy put forward. This policy focused on getting people to deposit more money into the Taiwanese bank, in order to have less money in circulation and more money in the control of the government. The interest rate policy was characterized with the high interest rate in bank deposits (Kuo 47). Initially, the interest rate was set so high that one would more than
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MMW 6 Final Paper - Cheng 1 Chris Cheng Monday Section, Cat...

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