In the early stages of its development, in the 1950s, Taiwan's economy was closely managed and controlled by the government. After the economy showed signs of rapid growth and continued development, government gradually exerted less control to give the economy free rein.
Government control during the early stages of Taiwan's economy was crucial to the provision of much-needed direction, guidance, and motivation of the population. The government's role included the maintenance of a stable and law-abiding society, strict implementation of their policies, and the formulation of programs to spur national development.
From the 1950s to the 1960s, the government assumed the role of an economic caretaker, exercising control and influence. The government gave support to emerging industries and acted to protect them against external competition. In the 1950s, foreign aid from the United States assisted the development of the textile and milling industries, while export industries tapped the country's limited foreign reserves. During this period, the government also encouraged the growth of Taiwan's domestic automobile industry by shielding it from foreign competition. Citizens wanting to buy foreign-made cars were penalized by a tax equivalent to the price of the imported car itself.
At this stage of Taiwan's economic development, the government demonstrated creativity in its plans to advance economic development. First, it maximized the contribution of state-run enterprises to the national coffers by taking a part of the profits in indirect tax . Second, the government provided incentives for private enterprise to thrive, lowering the price of electricity for industrial use, while increasing the price for commercial use. As intended, this ploy encouraged business into the manufacturing rather than the retail sector.
In the 1970s, the government took the initiative in building necessary infrastructure such as roads, bridges, airports, new cities, highways, and railways. It launched large-scale public investment projects, since dubbed the Ten, Twelve, and Fourteen Major Construction Projects; the Six-Year National Development Plan; and the Twelve Economic Construction Projects.
Because of the government's protection and economic intervention, Taiwan's economy grew by leaps and bounds in just 4 decades. By the 1990s, private enterprise had grown strong and steady and needed little state assistance, although the expectation remains that government will continue to foster a healthy investment environment and move with the times in implementing new regulations. The role of the government, in short, has shifted from that of caretaker to that of teacher. As teacher, it has provided private enterprise with information on economic growth and technology, as well as assistance in training personnel.
Over the years, the government and people of Taiwan have attempted to uphold democratic principles and strengthen the island's political institutions. Political activities, especially elections which appear tainted by corrupt practices (buying votes, peddling influence, or provoking violence) are greeted with outrage. Beginning in the mid-1990s, certain reform-minded politicians campaigned for electoral reform. They tried to strengthen the role of political parties, improve their image, and highlight the importance of issues in elections. They aimed, too, to attract political candidates of a higher caliber, reduce the influence of personal connections and, finally, to combat factionalism (the breaking into smaller, differing factions or groups within a political party).
Taiwan's government is a multi-party democracy based on a constitution created in 1947 and amended in 1992, 1994, 1997, and 1999. The president and vice president are elected on the same ticket by popular vote and serve a 4-year term. The legislative branch consists of a unicameral (single-house) Legislative Yuan with a total of 225 members serving 3-year terms, 168 of whom are elected by popular vote, 41 of whom are elected by proportional vote by party, 8 elected from overseas constituencies based on proportional vote, and 8 elected by popular vote from among the country's aboriginal population, which constitutes 2 percent of the population. There is also a unicameral National Assembly of 300 members, all of whom are elected by proportional representation based on election of the Legislative Yuan and serve 4-year terms.
The year 2000 marked a significant political event in Taiwan when the candidates of the Kuomintang (KMT), Taiwan's ruling party for over 50 years, were defeated by the candidates of the leading opposition party, the 14-year-old Democratic Progressive Party (DPP). Taiwan's highest political office, the presidency, went to the DPP's Chen Shui-bian, the country's tenth president. His running mate, Hsiu-lien Annette Lu, became vice president, marking a victory not only for the DPP but also for the women's movement. Vice President Lu is known to have championed gender equality and women's rights since the beginning of her political career.
In the 2000 national elections, there were 3 major issues aside from the economy on which candidates had to make their attitudes clear to win votes. These were mainland policy, national defense, and foreign relations. Mainland policy dictates whether Taiwan should pursue its independence from mainland China or maintain the status quo. Currently, Taiwan upholds the principle of "one China, two political entities." Under the constitution, Taiwan is referred to as the Republic of China and regards itself as the national government of China, while the People's Republic of China is a political entity that controls mainland China. The issue is a cause of political tension not only for the 2 territories but also for other countries. Mainland China continues to use the threat of political and economic sanctions against those countries willing to recognize Taiwan as a separate country. Due to the scale of China's economic resources, its huge population, and its military capability, the threats are not taken lightly.
The KMT, or Nationalist Party, has the longest running political record in Taiwan. Founded by Dr. Sun Yatsen in 1894, the KMT celebrated its one hundredth anniversary on 24 November 1994. The party is of major significance in Taiwan's history, and was involved in the war against Japanese invaders, struggles against communist rebellion, implementation of the constitution, and the economic development of the island. The KMT enjoys wide support, with a membership of approximately 2.1 million. At the lowest level, members are organized into cells. Moving upwards, there are district, county, and provincial congresses and committees. The highest level includes the National Congress and the Central Committee. With its historic defeat in 2000, KMT's leadership began an evaluation of the party platform, direction, and standing, compared with the other political parties.
The Democratic Progressive Party (DPP) was long the leading opposition party to the KMT. It was established on 28 September 1986 and has approxima tely 200,000 members. Its main policy is in direct opposition to the KMT because it calls for Taiwan's complete independence from mainland China. In recent elections, the more senior officers of DPP have tended to attach less importance to the party's stance on independence in an attempt to attract more voter support. The lack of consensus on this issue has caused some dissent within the party and has resulted in the breaking away of members who are passionate advocates of Taiwanese independence. Several of these dissatisfied DPP members have left the party and, with new recruits, have formed the Taiwan Independence Party and the New Nation Association.
In the 2000 elections, the economic platform espoused by the DPP included the introduction of a progressive tax system, elimination of unemployment, the promotion of balanced development in every sector of the economy, the opening of state-run enterprise to private investment, and protection of the environment against further destruction.
Another opposition party that has emerged is the New Party (NP), formed in August 1993 by a KMT breakaway group composed of 6 Legislative Yuan (a branch of government) members and 1 former lawmaker. Their official statement of resignation from the KMT, as documented in Taiwan's 1999 Yearbook, gave as their reason the "un-democratic practices of the KMT" as well as ideological differences. The New Party has been led by such prominent political personalities as the former finance minister, Wang Chien-shien, and former head of the Environmental Protection Administration, Jaw Shau-kong. The party champions 2 major issues: anti-corruption and social justice. The goal of the NP is to attract those voters who were dissatisfied with the performance of the ruling KMT, but who are opposed to the DPP's support for independence. The NP now claims a registered membership of nearly 68,500.
One of the newest parties to emerge because of Taiwan's ongoing democratization is the People First Party (PFP), established on 31 March 2000 by former Taiwan governor James Soong. The PFP is distinct from the other parties in allowing eligibility for membership at age 16, 2 years younger than the minimum age required by the other parties. James Soong, who was elected as the party's first chairman, ran as an independent in the 2000 presidential elections, but was defeated. The PFP is still in the process of establishing its structure and political base.