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Abstract
This article compares the economic management of two architects of Asian economic miracles, namely, Li Kuo-Ting of Taiwan and John Cowperthwaite of Hong Kong. It reveals that two financial ministers showed drastically different management styles. Li Kuo-Ting of Taiwan took on a ‘directive’ approach while John Cowperthwaite of Hong Kong relied on the free market in resource allocation. However, both economies achieved impressive economic growth during the post-war period. This comparison reveals that there are many paths to economic development. Furthermore, common ground in economic management of two governments is worth mentioning. Both Taiwan and Hong Kong demonstrated themselves as a competent government. Both governments were good learners and took on a pragmatic approach in economic management. Finally, their economic policies, be ‘directive’ or ‘facilitative’, showed respect to private businesses. In both economies, governments relied on private enterprises to promote economic dynamics. Hence, this article concludes that it would be fruitful to investigate different ways in which governments and markets are interrelated and how governments and private businesses can cooperate to achieve economic growth.
Acknowledgements
Some parts of this article (on Li Kuo-Ting) were presented at seminars held by the Department of International Business, Asia University (Taiwan) on 28 October 2005 and the Department of Economics, Feng Chia University (Taiwan) on 3 November 2005, respectively. I thank Paul Chao, Teresa Chen, Grace Tsai and Wey Wang for their comments on my writing on Li Kuo-Ting. I also thank the anonymous referee(s) of this journal for their constructive comments. I am grateful to Diana Kwan for proofreading this article.
Notes
1. In a seminal study on Taiwan's economic development, Wade (Citation1990) cited Li's works 6 times. None of the citations discusses Li's biography and thinking. For biographical information regarding Yin, see note 7.
2. Sir Philip Haddon-Cave was the Financial Secretary of Hong Kong from 1971 to 1981. He adopted ‘positive non-interventionism’ as the government's chief principle during the period when he was in charge of the economic policy of the Hong Kong government. He was subsequently appointed the Chief Secretary, in which post he served from 1981 to 1985. http://en.wikipedia.org/wiki/Charles_Philip_Haddon-Cave [Accessed 24 August 2008].
3. Also known as Li Kuo-Ting or K.T. Li.
4. In this article, following the Chinese convention, the last name of Li Kuo-Ting is put at the front, before the first name. All other names follow the western convention.
5. Li Kuo-Ting is well known in Taiwan. Several research or information centres have been set up and devoted to the study of Li. The National Central University Library and the Institute of Modern History (Academia Sinica) have set up special archives to collect his information and photographs. The K.T. Institute for Information Industry (Taiwan) constructs a memorable website for Li. The Li Foundation for Development of Science and Technology has set up the Li Kuo-Ting fund to promote the development of science and technology in Taiwan.
6. Yin Chung-Jung came to Taiwan when mainland China was taken over by the Communists. In 1954, he became the Minister of Economic Affairs and the Director of Central Trust of China. Yin's economic policy was heavily influenced by Professor S.C. Tsiang. Yin's work is said to lay the foundation for Taiwan's economic recovery in the 1950s (Wou Citation1992, p. 164).
7. When Li was responsible for major macroeconomic policies between 1963 and 1973, Taiwan's gross national product and industrial production grew at an average rate of 10.1% and 18.5%, respectively (Economic Planning Council Citation1976, p. 2; Li Citation1995, p. 346).
8. The Constitution of the Republic of China is based on Dr. Sun Yat-Sen's Three Principles of the People: Nationalism, Democracy and People's Livelihood. The Principle of Nationalism includes not only equal treatment and sovereign international status for the country, but also equality among all ethnic groups in the nation. The Principle of Democracy assures every individual the right to political and civil liberties. The Principle of People's Livelihood states that the powers granted to the government must ultimately serve the welfare of the people by building a strong and prosperous economy and a fair and just society; http://www.teto.or.id/wonderful/govern.htm [Accessed 30 July 2011].
9. Patrick Crozier regards Cowperthwaite as ‘the father of Hong Kong's economic boom’; http://www.croziervision.com/index.php/pct/archives/2006/01/ [Accessed 24 August 2008].
10. Materials based on http://en-cowperthwaite.blogspot.com/2007/01/financial-secretary-period.html [Accessed 17 December 2007].
11. Sir Philip Haddon-Cave succeeded him as the Financial Secretary. Following largely the legacy of Cowperthwaite, Hong Kong has further emerged as a major financial centre in the Asia–Pacific Region. Between 1986 and 1991, the city economy was still growing in real terms at an average annual rate of 6.5% (Chau Citation1993, p. 31). In 1997, the year when Hong Kong's sovereignty was handed over to China, the gross domestic product (GDP) of Hong Kong reached HK$742,582 million. In 2002, the per capita GDP at current market prices amounted to HK$187,282. After more than three decades of rapid growth, Hong Kong has emerged as one of the richest economies in Asia (Chau Citation1993, p. 1).
12. For a review of explanations of the early economic success of Hong Kong, see Yu (Citation1997, pp. 3–6).
13. Jardine Matheson & Co., founded by James Matheson and William Jardine in 1832, remains one of the most influential ‘hongs’ (firms) in Hong Kong.
14. Yu (Citation1997, p. 161) differentiated government policy in economic development into directive and facilitative.
15. For example, Friedman (Citation2006) said, ‘Cowperthwaite, who died on 21 January this year, was so famously laissez-faire that he refused to collect economic statistics for fear this would only give government officials an excuse for more meddling.’
16. According to Haddon-Cave, positive non-interventionism ‘involves taking the view that it is normally futile and damaging to the growth rate of an economy, particularly an open economy, for the Government to attempt to plan the allocation of resources available to the private sector and to frustrate the operation of market forces’. Furthermore, in Haddon-Cave's view, the word ‘positive’ means that the government carefully considers each possible intervention to examine ‘where the advantage’ lies, although usually it will come to the conclusion that the intervention is harmful rather than beneficial; http://en.wikipedia.org/wiki/Positive_non-interventionism [Accessed 2 October 2008].
17. Unless otherwise stated, all citations on Cowperthwaite's thinking or speeches are obtained from Lion Lock Institute (2007).
18. Fiscal deficits occur in years 1959–1960; 1974–1975; 1982–1982; 1983–1984; 1995–1996; and 1998–1999.
19. http://www.britsattheirbest.com/archives/003336.php [Accessed 3 August 2011].
20. In particular, Chan and Clark (Citation1992, p. 79) wrote ‘Chiang Kai-Shek and many KMT leaders realized the need for reform in the wake of their humiliation on the mainland (China).’
21. Therefore, we are willing to accept a democratic system at the cost of voting and rent-seeking.
22. I thank the anonymous referee of this journal to bring out this point to me.
23. http://forums.scout.com/mb.aspx?S=7&F=1405&T=6067307&P=1 [Accessed 8 July 2010].
24. The conflict ended with the announcement of a partial amnesty for minor corruptions committed before 1977; http://hub.hku.hk/bitstream/10722/28423/1/FullText.pdf [Accessed 3 August 2011].