#? #P[80]&#A*FAmerican^ Studies^ in^ China^ #FKVol.1#FS,^ 1994/_@#a$#P[100] #J[-100] #T3U.S. AID AND TAIWAN'S DEVELOPMENT#+[1]#t #T4ZHANG Jian#t$ #T4Introduction#t For the past four decades, Taiwan has made rapid development in  economy. From 1951 to 1989, its GNP increased 52 times, from#O &#*[-32]‘η#*[32]2.46  billion to _#*[-32]‘η#*[32]128.3 billion; its national income per capita 53 times,  from _#*[-32]‘η#*[32]137 to _#*[-32]‘η#*[32]7,518; its total volume of foreign trade 601 times,  from _#*[-32]‘η#*[32]197 million to _#*[-32]‘η#*[32]118.4 billion. And its FER (Foreign Exchange  Reserve) reached _#*[-32]‘η#*[32]77.4 billion by the end of 1989, ranking next only  to Japan in the world.#+[2]_ By now, Taiwan has joined the rank of  "newly industrialized countries and regions," together with South  Korea, Hong Kong and Singapore (as often called the "Four  Dragonets").$ The economic takeoff and development of Taiwan had been realized  under specific historical background and conditions. A number of  factors both at home and abroad had contributed to it. Among them,  U.S. aid was an essential one, which lasted from the early 50's to the  mid 60's, covering the whole course of its economic takeoff.$ Before the 50's, there existed no significant economic ties between  Taiwan and the U.S.A. The arrival of U.S. aid marked the prelude to  U.S-Taiwan economic relations. It signified the beginning of the  recovery and growing of the close relationship between the U.S. and  the Kuomintang government, which had great influence over the later  evolution and development of this relationship. U.S. aid and the  Mutual Defense Treaty were the two major bonds, linking Taiwan and  America. As to its contribution to Taiwan's economic development, U.S.  aid exerted an enormously deep and wide influence over every field and  facet of Taiwan's economic development. None of its accumulation of  capital, upgrading of industry, introduction of new technology,  exploitation of human resources, and even strategical planning,  steering of policies, were not related to the Aid. Hence, without  examining the role of U.S. aid, Taiwan's economic takeoff and  development cannot be thoroughly explained.$ Bearing all these in mind, this article attempts to give a detailed  and rather complete investigation of the effect and influence of U.S.  aid over Taiwan's economic development, so as to be of help to the  understanding of this very important aspect of U.S.-Taiwan  relationship.$ #M1U.S. Aid and Taiwan's Development#m #M2American Studies in China#m #T4I. General Survey of U.S. Aid#t #FH&The historical background of U.S. aid#FS$ As we have said above, U.S. large-scale economic aid to Taiwan began  in the early 50's, against special historical background.$ In the early days when Kuomintang fled to Taiwan, everything there was  in chaos, and the economic situation was even worse: due to the  destructive consequences of World War II and the civil war, both of  its industry ad agriculture suffered great setbacks, and the economy  was plagued by severe crisis, with the shortage of materials, and even  lack of daily necessities. What's more, the influx of the million Špeople who followed the Kuomintang government to Taiwan made the  already tense material supply even worse, almost to the point of  breakdown. Its foreign exchange reserve nearly ran out and it would  barely import the necessary commodities for subsistence and materials  for production. The finance also ran into great difficulty: the  drastic decrease of revenue and the enormous military expenditure led  to such huge financial deficits that for a certain period of time the  civil and military expenditure had to be met by selling goldstock. #+[3]_ As a result, a galloping inflation followed, the value of Tai  currency plumbed, prices skyrocketed, and the rate of inflation in  1949 reached four digits.#+[4]_ All in all, Taiwan's economy was a  great mess, which made normal operation simply impossible, and the  whole economy was on the verge of collapse.$ The U.S. aid arrived just at this critical juncture, as Yin Zhongrong,  one of the then key economic policymakers of Taiwan commented: "The  timely arrival of the U.S. aid to Taiwan is like cardiac stimulant to  a dying person."#+[5]$ $ &#FHThe evolution of U.S. aid#FS$ U.S. economic aid to Taiwan lasted for fifteen years, from 1951 to  1965. Its evolution went through three stages:$ (1) The stage of gratuitous aid (1951-1956)$ In October 1951, the U.S. congress passed the "Bill of Mutual Safety"  that included the item of economic aid to Taiwan. According to the  bill, the U.S. government began in 1951 its formal, continued and  large-scale economic aid to Taiwan. By 1956, this gratuitous "ordinary  economic aid" reached an overall sum of#O &#*[-32]‘η#*[32]609 million#+[6]_ consisting of the items of defense support, military cooperation aid  and technological coordination.$ The chief function of U.S. aid at this stage was to furnish Taiwan  authority with civil necessities and raw materials for production to  replenish its material supply, curtail inflation, and stabilize its  economic situation.$ (2) The stage of gratuitous aid and loan aid going parallel (1957- 1961)$ With the gradual stabilization of Taiwan's economic situation, the  U.S. aid began to shift to encouraging its economic development. The  concrete measure was the setting-up of the "loan for development."  Starting from 1957, the U.S. added a new item of "loan fund for  development" to the "Amendment to the Bill of Mutual Safety," to help  the recipient countries and regions with loans in various production  and construction projects. In line with this, the former gratuitous  aid to Taiwan was supplemented with a new loan aid. Thus U.S. aid had  entered the stage of gift and loan going side by side. $ It must be pointed out that though the portion of loan in the aid had  increased noticeably, the loan interest rate was low, and the length  of maturity was long, therefore it didn't add much to the financial  burden of Taiwan authorities. The sum U.S. aid at this stage totaled  _#*[-32]‘η#*[32]514 million.#+[7]$ (3) The stage of loan aid (1962-1965)$ In the 60's, the U.S. policy and mode of foreign aid underwent a  shift from the ordinary aid to the aid for development. In accordance  with the change in the general pattern of U.S. foreign aid, loan aid  became the primary form of U.S. aid to Taiwan at this stage. And the Šterms for the development loan and the interest rate also came closer  to those of the world financial market.$ This important change, on the one hand added to the financial burden  of Taiwan authorities, on the other hand, helped to reduce Taiwan's  economic dependence on U.S. aid, to improve Taiwan's own capacity of  accumulation, to speed up its achievement of independence, and hence  to cushion the shake and shock on Taiwan's economy when U.S. aid  terminated.$ This change also fitted in well with the transition from  import-substitute to export-oriented phase of Taiwan's economy. The  chief function of U.S. aid at this stage was to promote the  liberalization and globalization of Taiwan's economy. The amount of  aid in this period came up to _#*[-32]‘η#*[32]322 million.#+[8]$ In May 1964, the U.S. State Department issued a statement announcing  that since Taiwan's economy had already achieved independence, the  U.S. International Development Administration would terminate its  economic aid program to Taiwan by June the following year. June of  1966 saw U.S. aid to Taiwan formally terminated. Nevertheless  after the nominal stop of U.S. aid, "Surplus Agricultural Products Aid  of the 480th Public Law" still continued until 1968.$ $ &#FHTypes of U.S. aid#FS$ From 1951 when U.S. economic aid to Taiwan formally began to 1965 when  it was officially declared closed, the United States provided Taiwan  with various kinds of economic aid totaling#O &#*[-32]‘η#*[32]1,482 million, an annual  average of _#*[-32]‘η#*[32]98 million. (The purchasing power of _#*[-32]‘η#*[32]1 in 1955 equaled  that of _#*[-32]‘η#*[32]3.7 in 1985, according to the calculation of U.S.  #FKStatistical Digest#FS). Of this total, the portion of "ordinary  economic aid" was the largest, amounting to #*[-32]‘η#*[32]1,029 million ( branching into planned and non-planned aid), making up 70% of the  total. The "Surplus Agricultural Products Aid of the 480th Public  Law," was _#*[-32]‘η#*[32]387 million, accounting for 26%; and the "loan fund for  development" was the least, _#*[-32]‘η#*[32]65.8 million, accounting for 4% of the  total.#+[9]$ All the above-said U.S. aid to Taiwan was direct economic aid, i,e.  the aid of material, equipments, technology and labors, etc. furnished  directly by the U.S. government to Taiwan, which could be named as  "primitive U.S. aid." When we refer to U.S. aid, we usually mean  this.$ However, it is important to notice the "derivative aid" as well as the  above-mentioned primitive one when investigating and analyzing the  role of U.S. aid. The derivative aid, which referred to "relative fund  of U.S. aid in Tai currency," derived from the primitive U.S. aid,  that is, the income in Tai currency by selling American aided goods  and materials at Taiwan (for, in line with the provisions of U.S. aid  program, all except or special items of the U.S. aided materials must  be paid with equal value of Tai currency by the recipient units). The  income in Tai currency produced by U.S. aid was deposited in the  special account of the "Central Bank" in Taiwan, and could be employed  and allocated by Taiwan authorities to various aspects of economic  construction under the supervision of the United States. Actually, the  "relative fund in Tai currency" was the second round of use of U.S. Šaid, referred to as "the aid of aid" or "Taiwan's U.S. aid" by some  scholars in Taiwan. It augmented and enhanced the function of U.S.  aid, and attributed to it "the multiplicative effect." This is what we  mustn't overlook in evaluating the contributions of U.S. aid.$ To sum up, the relative fund by U.S. aid in Tai currency which played  key supportive role in Taiwan's economic development, especially in  the major construction projects initiated by Taiwan authorities, was  an inalienable constituent of U.S. aid, a factor not to be ignored.$ #T4II. U.S. Aid and Economic Stability#t "Development in a stable situation" was the basic strategy of economic  development pursued by Taiwan authorities in the early 50's. It is  around this strategy that early U.S. aid operated, which took as its  chief task the stabilization of the economy, and had achieved desired  results.$ $ #FH&Improvement of material supply#FS$ The most pressing task for early U.S. aid was to provide large amounts  of consumer goods and raw materials to resolve the problem of severe  shortage of goods and materials of Taiwan in the early 50's.  According to statistics, throughout the 50's, the imported goods  furnished by U.S. aid constituted over 1/3 of all the imports of  Taiwan, and even as high as 40%-50% before 1957. Among those essential  to people's life such as wheat, cotton, soybean and oil, the imports  through U.S. aid made up 60% of the total, of which wheat 90%, cotton  78%, and soybean 74% respectively.#+[10]_ "From this, we can judge  that heavy import of U.S. aided materials contributed much to the  extrication of Taiwan's predicamental shortage of goods and  materials."#+[11]$ $ &#FHInflation control#FS$ Taiwan faced galloping inflation in the whole of late 40's. The role  of U.S. aid in controling inflation was shown mainly in two aspects.  On the one hand, through provision of goods and materials, to increase  social supply (as discussed above); on the other hand, through the  relative fund in Tai currency derived from U.S. aid, to make up  financial deficits and retrench currency in circulation.$ Let's first look at the role of U.S. aid in making up the financial  deficits. In the early period of its flight to Taiwan, the Kuomintang  government acquired huge financial deficits every year due to its  colossal military expenditure and the drastic drop of revenue. After  the implementation of U.S. aid, the relative fund in Tai currency  originated from U.S. aid added an important revenue to Taiwan  authorities, and enlarged the financial resources under its control.  Before the arrival of U.S. aid, Taiwan's financial deficits was 14%  more than its revenue; after the arrival of U.S. aid, the situation  took a turn for the better, the deficits plumbed to 4.7% in 1951, and  remained below 4% during the aid period.#+[12]$ Another operational mechanism of U.S. aid to control inflation was to  tighten the currency in circulation through the relative fund in Tai  currency which had the automatic functional mechanism of absorbing the  Tai currency and curtailing money supply. When U.S. aid increased, the  retrieved Tai currency by selling the aided materials increased  accordingly. The increased currency, in line with the stipulations,  was deposited in the special account of the Central Bank, thus reduced  the amount of Tai currency in circulation and subsequently eliminated Šthe phenomenon of inflation which was due to the excess of currency in  circulation.$ $ &#FHBalancing international payments#FS$ One of the direct goals of U.S. economic aid to Taiwan was to help  Taiwam "save foreign exchange and seek the balance of international  payment."#+[13]_ And it did remedy Taiwan's unfavorable balance of  trade and ensure its balance of international payment. According to  the statistics of the Central Bank, from 1951 to 1959, Taiwan's  aggregate international payment deficit was _#*[-32]‘η#*[32]886  million, while at  the same time it received _#*[-32]‘η#*[32]927 million from the U.S.#+[14]_ Thus,  U.S. aid not only made up for all of Taiwan's international payment  deficit, but also boosted its foreign exchange reserve (FER). "From  this, we could conclude that without U.S. aid, the economy of Taiwan  would fall into dire straits because of running out of foreign  exchange, not to mention the accomplishment of economic stability and  growth."#+[15]$ #T4III. U.S. Aid and Agricultural Development#t The successful land reform with the subsequent sustained and steady  agricultural growth, was regarded as one of the key elements to the  promotion of Taiwan's economic takeoff, while the effect of U.S. aid  on Taiwan's agricultural development was reflected in its pushing  forward land reform and bringing about the modernization of  agrotechnique.$ Propelling Taiwan to land reform is the chief item of U.S.  agricultural aid to Taiwan. Drawing a bitter lesson from its defeat on  the mainland, the Kuomintang regime at Taiwan took land reform as one  of the two major urgent tasks in the increase of production,  stabilization of society and consolidation of its rule (the other one  being the control of the runaway inflation). This was just in  agreement with the demand of U.S. aid. For the American foreign aid  program usually included helping the recipient countries carry out  land reform, and for those Asian countries and regions including  Taiwan, land reform was one of the most important top priorities of  the Aid.$ Besides furnishing funds, U.S. played a more important role in policy  promotion through direct participation in the formulation of land  reform policies and plans and supervision of their implementation, so  as to influence the orientation of such policies. This policy-steering  mode of aid chimed well with the actual situation of Taiwan at the  time, and proved effective in advancing Taiwan's land reform.$ It was acknowledged that agricultural development depended not only on  the reformation of social conditions, but also on the innovation of  agrotechnique. So while actively spurring the revolution of  agricultural production relations, U.S. aid greatly supported and  helped Taiwan with the innovation of agricultural technology and the  construction of a modern business management system, thus leading  Taiwan's agriculture onto the road of modernization.$ U.S. subsidization of Taiwan's agricultural modernization touched upon  various fields of agrotechnique and involved each link in the  production chain, such as quality improvement, the building of water  conservancy facilities, the production of chemical fertilization, the  prevention and control of plant diseases and elimination of pests, the  mechanization of agriculture, the setup of modern system of commodity Štransportation and sale. And the unified program for agriculture loan  funded by U.S. aid was particularly helpful in propelling Taiwan's  agricultural modernization. Before it, Taiwan's agricultural financial  system was rather incomplete. Since agricultural fund turnover was  slow, seasonal and risky, may commercial banks were reluctant to  provide loans for peasants, thus leading to the scarcity of  agricultural fund, and the inability of the peasants in expanded  reproduction. It was to deal with this problem that the unified loan  program for agriculture was initiated by the Sino-American Joint  Committee for Rural Revival (SAJCRR) in 1960. With the aim of  developing Taiwan's agriculture, this unified loan had certain  favorable features: low interest rate, no mortgage demand and maturity  time corresponding with harvest time. At the same time, the SAJCRR  guided and supervised the proper use of the loan to enhance the  efficiency. The implementation of the unified program for agricultural  loan subsidized by U.S. aid made it possible for the establishment of a modern agricultural financial system for Taiwan,  which guaranteed the money supply necessary to agricultural development, and  sped up the development of agricultural productive force. After  inspecting the implementation of the unified program, the U.S.  officials of the mutual security sub-administration at Taiwan and of  the U.S. aid agency commented: "From a long-term view, its effect on  production growth may match the project of land to the tiller." #+[16]$ #T4IV. U.S. Aid and Industrialization#t Industry is the leading sector in national economy, and  industrialization is considered the core and symbol of economic  modernization. U.S. aid took Taiwan's industrialization as the key to  its economic modernization. Statistics indicates, the aggregate input  of U.S. aid into the industrial field all those years came up to#O &#*[-32]‘η#*[32] 232 million and 5.548 billion yuan of Tai currency. It functioned mainly  through choosing different dominant industrial sectors at different  stages of economic development, then giving it energetic support,  thus promoting the constant restructuring and rejuvenating of Taiwan's  industry, and the gradual but steady transition from traditional  agricultural economy to industrialization.$ U.S. aid had undergone three stages in its acceleration of Taiwan's  industrialization process: "Its effect on the development of Taiwan's  industry and trade began with helping resume the production of the  existing factories."#+[17]_ During World War II, Taiwan's industry  was crippled by the strategic bombing of the allied forces. It thus  became the first step of U.S. aid to restore and rebuild Taiwan's  industry. Along with providing capital and equipments, the U.S. aid  agency also adopted another fairly effective strategy, that is, to  furnish raw materials such as raw cotton, wheat, soybean, cow fat  instead of ready-made consumer goods like clothes, flour, soya-bean  oil and soap. Thereby those nonoperational factories lack of raw  materials could resume and develop their production. Consequently, the  supply of consumer goods increased, material shortage was overcome,  productive activities returned to normal and development was on the  way.$ The major task for the second stage was to facilitate the development  of Taiwan's import-substitute industry. By 1953, Taiwan had completed  the recovery and rebuilding of its industry, and began to enforce its Š"four-year plan of economic construction," thus entering the stage of  industrial development. In the first two "four-year-plan" periods,  Taiwan's industry was at the import-substitute stage, and the central  task of U.S. aid was geared to this. Bearing in mind the actual  situation of the island, Taiwan authorities decided on the import- substitute strategy with the production of nondurable as focus, and  the industries of textiles, flour, chemical fertilizer and plastics as  the priority, to which the U.S. aid provided great support.$ The third stage was the transition from import-substitute to export- oriented industry. Into the 60's, to overcome the confines of the  narrow market at home, and exploit adequately its rich human  resources, Taiwan began to shift towards an export-oriented economy.  This was a decisive turn in Taiwan's economic development. From then  on, its economy underwent a metamorphosis from home-market-oriented to  export-oriented, and labor-intensive export industry became the  "engine" of its economic growth. U.S. aid played a key role in this  transformation, which was strikingly reflected in helping develop the  textile industry - Taiwan's leading export-oriented industry.$ The development of Taiwan's textile industry was, to a large extent,  backed by U.S. aid. The short supply of raw cotton had been the  biggest stumbling block in the development of Taiwan's textile  industry while American cotton made it possible to overcome this  problem. With the sure, steady and sustained supply of American cotton  and backed by the huge international market, Taiwan made full use of  its relative advantage, i.e. the rich and cheap human resources to  develop its textile industry into the biggest hard currency earning  industry. Looking back at the growth of the textile industry, some  personages in the economic circles pointed out: "Taiwan's textile  industry can be said to develop from scratch to self-sufficiency, to  having surplus for export and finally to the leading export industry  of the province. Its growth has been inseparable from the supply of  U.S. aided cotton."#+[18]$ #T4V. U.S. Aid and the Construction$ of Infrastructure#t In the Japanese-occupied days, Taiwan's infrastructure had made  certain development, but was greatly damaged during World War II, and  required immediate restoration and reconstruction. To create  prerequisites and necessary conditions for the takeoff and full  development of Taiwan's economy, U.S. aid made infrastructure its key  field of investment. The aggregate U.S. aid input in infrastructure  over the years was _#*[-32]‘η#*[32]189.8 million, 49.7% of the the total in dollars, and  6.7842 billion yuan in Tai currency, 35.4% of the total fund of Tai  currency invested in the economic field.#+[19]_ From this we could  judge what a great importance U.S. aid had attached to infrastructure.$ $ #FH&U.S. aid and power construction#FS$ The power installations of Taiwan were severely crippled in the wartime. Its postwar electric energy production was barely over 1/10 of  that of the prewar period. This inadequacy greatly hampered the  recovery and development of various industries. To meet the urgent  demand economic development made on electricity, Taiwan authorities  formulated an "accelerated power supply exploitation plan," and the  enormous funds required for the fulfillment of this plan mainly  depended on U.S. aid. By 1965 when U.S. aid ended, Taiwan's power  construction had received _#*[-32]‘η#*[32]139.3 million, of U.S. aid and 2.7849 Šbillion yuan of the relative fund in Tai currency. In all, U.S. fund  constituted 3/4 of all the investment at that time in Taiwan's power  construction.#+[20]_ Making use of those U.S. funds, Taiwan built  five large-scale thermal power plants, eight large or medium-sized  hydropower stations, and the accessary power transmission and  commutation projects. Those power installations formed the backbone  network of Taiwan's power industry which made it possible for Taiwan's  power industry to develop in leaps and bounds, and furthermore,  provided sufficient energy sources for the growth of national economy,  displayed its role as the vanguard of national economy.$ $ &#FHU.S. aid and transportation#FS$ The semi-paralysis state of Taiwan's transportation facilities, along  with its inconvenient geographic conditions (2/3 of its lands are of  steep mountains), made the project of transportation construction  formidable and costly, which Taiwan's finance and material at that  time couldn't afford. The timely arrival of U.S. aid just satisfied  this demand.$ Transportation was the lifeline of national economy. U.S. aid put  various transportation undertakings as priority projects. U.S. aid for  transportation construction over the years had been#O &#*[-32]‘η#*[32]32.6 million and  3.54 billion yuan of Tai currency, 23.4% of the total investment in  transportation, with 39.1% in railway, 23.3% in road, 36.6% in civil  aviation, and 16.1% in water transport.#+[21]_ U.S. aid helped to  complete the "renewal plan" of railway construction, accomplish the  target of dieselization of motive power, metalization of vehicles,  electrification of signals, and mechanization of track maintenance,  and embark on the way to modernization of railway transport. The  achievement on highway construction was even more noticeable. Under  the support of U.S. aid, arterial highways were built, including the  Eastern highway, Western highway, Trans-island highway, McArthur road,  Estate route, and bridges of Xi Lou, Taipei, Huajiang were  constructed, thus forming a complete road network over the whole  island. In water transport, the three badly ruined deep-water ports of  Jilong, Gaoxiong and Hualian were repaired and extended, boats and  ships were bought and built on a large scale to expand the ocean  shipping capacity. The civil aviation, with American aided materials,  rebuilt the airline company, expanded the airports, improved flying  facilities and increased the flying mileage by 100 times.#+[22]$ To sum up, under the support and help of U.S. aid, the severely  damaged transportation system of Taiwan recovered quickly, and on the  basis of this, developed speedily, and formed a fairly complete  modernized system of transportation including sea, land and air, and  with the railways and highways as the mainstay.$ $ &#FHU.S. aid and telecommunications#FS$ Telecommunication service charged with the task of transmitting  information was no less vital than transportation to modern economic  development. At the time when Taiwan asked for U.S. aid, its  telecommunications was extremely weak: there were less than ten  thousand intra-city telephones, only 273 trunk lines, far from  satisfying the need of modernization.#+[23]_ To improve this  situation, Taiwan Telecommunications Bureau instituted two "four-year  plan." However, the implementation of the plans would require gigantic Šsum of capital, and furthermore, all equipments and apparatus needed  had to be imported which demanded a good deal of foreign exchange.  Taiwan's financial capacity simply couldn't cope with all this. So it  became both necessary and plausible to apply for U.S. aid. From 1954  to 1967, the amount of U.S. aid received by Taiwan Telecom Bureau was  0.459 billion yuan in Tai currency, 17.6% of the total investment by  the bureau.#+[24]_ Besides, U.S. aid also subsidized Taiwan's  technical staff to study and investigate abroad in the hope of  familiarizing them with and keeping them abreast of the latest  development of international telecom-technique.$ To sum up, the inflow of abundant U.S. aid had played an important  role in the recovery and development of Taiwan's infrastructure,  eliminated the bottleneck of its economic takeoff, and provided a  solid foundation and external condition for the growth of national  economy. Power, transportation and telecommunications became vanguard  industries, stimulations and buttressing the development of the  national economy.$ #T4VI. U.S. Aid and Personnel Assets#t Not only material assets influence economic development, so do  personnel assets, i.e. the training and education of personnel  necessary for modernization. This often overlooked factor was attached  great importance in U.S. aid to Taiwan during the 50's, and was an important component of the aid.$ Proceeding from the actual state of development of Taiwan's economy,  U.S. aid for personnel assets focused on vocational education, which  was regarded as the most imperative of Taiwan's need for human assets  and urgent for its economic development.$ The first field that received help from U.S. aid was agricultural  vocational education. In order to foster technical staff and new-type  peasants necessary for modern agriculture, Taiwan began in 1954 to  implement "Agricultural Vocational Education Program" under the aegis  of U.S. aid. "The Sino-U.S. Joint Committee for Rural Renaissance" and  the U.S. aid agency successively selected 25 farm schools and used  U.S. aided fund to train teachers, replenish teaching facilities, and  improve conditions for field practice. By the early 60's, the  number of farm schools of Taiwan had reached 39, and the number of  students graduated from them amounted to 5,000 per year, #+[25]_ which fully satisfied the need of agriculture for skilled  personnel and provided reliable guarantee of human assets for the  modernization of agriculture.$ Compared with agricultural vocational education, industrial vocational  education in Taiwan was even weaker. After entering the stage of  industrialization, Taiwan had a crying need for a multitude of  elementary and intermediate technicians and skilled workers. In the  light of this, U.S. aid agency took an active part in funding  industrial vocational education. Important items included: choosing  eight high schools of industrial vocational education in Xinzhu,  Taizhong, etc. as pilot schools to adopt the "single unit teaching  method" popular among American training schools, and to replenish the  equipments for field practice, enabling the students to do as much  practical work as possible in order to be proficient in the vocational  skills; to train the teachers of those schools in rotation during the  summer holidays to improve their teaching abilities; to select  exemplary teachers to go to U.S. to investigate, and receive its  latest production technology and teaching methods to keep in step with Šworld trends. Under the help of U.S. aid industrial vocational  education of Taiwan made fast progress, and formed a fairly integrated  system, and brought out large number of elementary and intermediate- level technical personnel and skilled workers: from 1955 to 1967, the  number of students graduated each year rose from 1,086 to 9,877, an  increase of almost ten times,#+[26]_ and basically satisfied the  demand of the industrialization of Taiwan.$ Besides its emphasis on vocational education, U.S. aid also offered  assistance to the general education of Taiwan and to the training and  international exchange of advanced scientific and technological  personnel. For instance, the national program of nine-year compulsory  education received 0.68 billion yuan of new Tai currency and was thus  able to be successfully carried out, and for promoting the training  and international exchange of advanced scientific and technological  personnel, from 1951 to 1971, over 3,000 people were subsidized to  study, do research, investigate and receive training abroad under the  item of "technical aid."#+[27]$ Taiwan was deficient in both capital and natural resources, the only  favorable factor for its development was the possession of sufficient  high-quality human resources capable of meeting the demands of  modernization construction. From the above analysis, one could see  U.S. aid had played an important role in bringing about this favorable  factor. The input in personnel assets by U.S. aid, "though  comparatives smaller than other items, its effect and result, however,  were lasting, and had a profound impact on the cultivation and  exploitation of human resources."#+[28]$ #T4VII. A Comprehensive Appraisal of the Role of U.S. Aid#t By now, we have made a study of U.S. aid in specific industries of  Taiwan's economy. Based on the analysis of the industrial structure,  the following is an conclusive evaluation of the role of U.S. aid from  the angle of general economic development.$ $ &#FHU.S. aid and the accumulation of capital#FS$ Capital is regarded as the key productive factor in modern economic  development. Based on his investigation of the modernization process  of the world's leading countries, Roster, a famous economist, proposed  that the prerequisite for the takeoff of traditional economy was that  the capital accumulation rate must reach 10% so as to guarantee  sufficient fund for the fast and sustained development of the national  economy. However, capital is just what the underdeveloped countries  are most wanting.$ Taiwan was in a predicament when receiving U.S. aid. On the one hand,  due to low national income and the limited private deposits, its  capital accumulation rate in the 1950's was below 10%, and over 90% of  the national income went to immediate consumption.#+[29]_ As a  result, the capital available on the island was far from being  adequate to meet the need for investment; On the other hand, because  of the limited export capacity and low rate of foreign currency  earning, there was a severe shortage of foreign exchange, unable to  meet the needs for the importation of materials, equipments and  technology, and the annual international payment deficit was over _#*[-32]‘η#*[32]0.1  billion.#+[30]_ This "devil-and-deep-sea" situation greatly  hindered Taiwan's takeoff and growth.$ U.S. aid came to the rescue at this critical moment. The large inflow  of U.S. aid and its derived relative fund made up the island's Šshortage of capital resulting from inadequate deposits. According to  statistics, U.S. aid fund composed 1/3 of the sum of Taiwan's capital,  and even more than 40% in the 50's.#+[31]_ It not only  compensated the island's investment deficiency, but also provided a  large part of much-needed foreign currency capital. From 1951 to 1965,  U.S. aid made up for 80% of Taiwan's international payment deficit,  and among the imported goods, those paid with U.S. aid constituted  30%.#+[32]_ American scholar, Bad-shan, he commented on this: "In  the 50's, Taiwan suffered from lack of foreign exchange, U.S.  dollars filled up this gap, stimulated a quick growth of the economy,  and further brought into full play other factors of the economy." #+[33]$ Nevertheless, it must be further pointed out that U.S. aid's  contribution to Taiwan's capital accumulation during its process of  industrialization, was not confined to its heavy proportion in the  total investment, but it had an "evocative effect," i.e. the input of  U.S. aid would evoke more civil investment. In line with the specific  stipulation of U.S. aid, private enterprises of Taiwan should invest a  commensurate sum when applying for U.S. aid. In this way, while  utilizing U.S. aid investment, the private enterprises naturally  increased their own investment. Meanwhile, the flow of U.S. aid into  infrastructure and public utilities improved the environment for  investment, thus created an external effect favorable to the growth of  private investment. According to the calculation of Neil Jacoby, the  coefficient of evoking investment by U.S. aid was 2,#+[34]_ i.e.  one dollar of U.S. aid investment could encourage two dollars of  private investment from Taiwan. Thus, the effect of the investment by  U.S. aid on the economic construction of Taiwan doubled, far exceeding  its original value.$ $&#FHU.S. aid and Taiwan's economic development strategy#FS$ The role of U.S. aid in Taiwan's economic development not only found  its expression in the material form such as capital and goods, but  also in policy orientation, that is, through the form of information,  such as policy advice, guideline proposal, consulation on principles,  project formulation, it influenced and controlled the orientation of  the economic policies and developmental strategies of Taiwan. The  former could be considered as tangible influence while the later  intangible influence. With regard to the effect on Taiwan's economical  development, the intangible influence was no less than the tangible.  Or it is possible to say, the role of policy-orientation was even more  profound and lasting.$ Proceeding from its fundamental principle which insisted that the aid  recipient region should adopt effective self-assistance policy, and  with a purpose of enhancing the efficiency of the aid, U.S. aid agency  paid close attention to the economic policies and development  strategies of those regions, and considered them more important than  the construction of concrete projects. Therefore, with the weight of  aid, the U.S. agency took an active part and played decisive role in  the steering and formulation of certain key policies and strategies,  such as the peaceful land reform plan, economic stabilization  principle, anti-inflation strategy, four-year plan of economic  construction, the equal development of agriculture and industry,  privatization of state enterprises, the fixing of unified exchange  rate, the development of export-oriented economy, the reform of the  financial and taxation systems. In consequence, Taiwan's economy Šembarked on a healthy track, and avoided big detours. To conclude, the  fast, steady and sustained development of Taiwan's economy was to a  large extent attributed to the success of the development strategies,  which in turn, were largely the result of U.S. aid's policy-steering.$ $&#FHQuantitative analysis and international comparison of the effect of  U.S. aid#FS$ The huge effect of U.S. aid on Taiwan's economic development is widely  acknowledged. However, it needs further study as to how to appraise  precisely this effect, or to make a quantitative analysis of it.$ Among the various models of quantitative analysis, the "Aidless Growth  Model" by Neil Jacoby, is an authoritative one with considerable influence, much quoted by scholars. It provides some valuable reference  for evaluating the importance of U.S. aid. Jacoby maintains that to  appraise the effect of U.S. aid on Taiwan's economic growth, one  effective method is to construct a mock model of Taiwan's economic  growth without U.S. aid so as to conjecture the possible economic  situation in 1964, then by comparison with reality, to illustrate the  importance of U.S. aid.#+[35]$ Proceeding from this analysis and based on the "Harold-Doma" model  often adopted in Western analysis of economic growth, Jacoby works out  his "aidless growth model." According to the calculation of this  model, U.S. aid doubles the growth rate of Taiwan's GNP, and  quadruples its per capita national income. Without U.S. aid, the  growth rate of GNP would have been 3.5% (actually 7.6%), the GNP of  1964 would have been only 58% of the actual figure and the 1964 target  could only be reached in 1980, and the actual national income per  capita could only #^reached#^ _by 1995.#+[36]_ In other words, U.S. aid  advances the living standard of Taiwan by thirty years.$ Due to the imperfect structure of the model and variable errors, the  calculation of Jacoby's model is not in total agreement with reality,  and certain data and conclusions are open to disagreement. However it  in the main demonstrates the quantitative relationship between U.S.  aid and the growth rate of Taiwan's economy, and provides strong  evidence to the decisive role of U.S. aid in Taiwan's economic  growth.$ To be more illustrative, a horizontal comparison between the  achievements of Taiwan in using U.S. aid and those of other recipient  regions would be helpful.$ According to the sources of U.S. International Development  Administration, Thailand, the Philippines, South Korea and Turkey also  received large sums of U.S. aid in the 50's and 60's and their  economic developmental stages, scopes of economy, levels of production  and political system were similar to those of Taiwan. With regard to  the achievements in applying U.S. aid, Taiwan ranked first in both  growth rates of GNP and per capita national income among the five  countries and regions. As to the input-output ratio (i.e. the  increased GNP by one-dollar aid), Taiwan was next only to Thailand;  nevertheless, if taking into account its ponderous military burden,  Taiwan would still take the lead,#+[37]_ thus, regarded as "the  most successful among the various regions making use of U.S. aid. #+[38]_ A U.S. aid official declared proudly "from the above  analysis of the achievements of Taiwan's economy, one can perceive the  proper use of the aid by our government has been fruitful, where lies  the major evidence to the argument that Taiwan is the most successful  model among the developing countries in applying U.S. aid." #+[39]$ $&#FHThe internal and external factors which affect the functioning of ŠU.S. aid#FS$ So far we have discussed the role and effect of U.S. aid on Taiwan's  economic development. Finally, we are going to go over briefly why  U.S. aid have played such an important role, or, in other words, what  are the factors both in Taiwan and abroad which have influenced the  functioning of U.S. aid.$ #FHThe postwar global economic development provided a favorable  international environment for Taiwan to make use of U.S. aid to score  economic growth#FS. After World War II, under the spur of a new  technological revolution, world economy underwent unprecedented  development. Seizing this opportunity, the developed countries  completed the upgrading and renewing of their industrial structure.  Labor-intensive industries began to shift to the developing countries,  which offered favorable opportunities and conditions for these  countries to realize economic modernization with labor-intensive  export-oriented industries as leading industries. Under this  advantageous situation and with the support of U.S. aid, Taiwan  devoted great efforts to developing its labor-intensive export- oriented industries with textile industry as the mainstay. With  export-oriented industries as the engine Taiwan realized its economic  takeoff. Thus, it is well-grounded to assert that the takeoff and  swift development of Taiwan's economy is not only indebted to the  timely arrival of U.S. aid, but also to the favorable world economic  environment.$ #FHThe rigid operational procedure and strict system of supervision  and check-up were the forceful guarantee of the appropriate employment  of U.S. aid#FS. In the days when the Kuomintang government reigned in  the mainland, there had been disgusting records of serious corruption,  fraudulence, embezzlement and abuse in the use of U.S. aid. To avoid  the repetition of these malpractices in Taiwan, and ensure the proper  use of the aid, U.S. aid agency formulated a set of rigid operational  procedure and strict system of supervision and check-up, including the  application, ratification, implementation, evaluation and auditing of  U.S. aid. Though some officials of Taiwan had complained about this  rigid check-up, slow provision, and inconvenient disposal of U.S. aid,  and regarded this checking system as the defect of U.S. aid, it was  those strict rules and regulations that effectively guaranteed the  rational and valid employment of the aid, and avoided the resurfacing  of the former vices.$ #FHThe realistic economical policies and development strategies  adopted by the Taiwan authorities reinforced the implementation of  U.S. aid.#FS_ The root cause of the vastly different results achieved  by U.S. aid recipient countries and regions lay in whether those  countries and regions had coordinated with proper policies and  development strategies, which were the internal cause and foundation  for the success of U.S. aid. In the light of this, the Taiwan  authorities formulated a series of effective policies and strategies,  such as "development through stability," "fostering industry with  agriculture" and "advancing agriculture through industry," "the  import-substitute strategy with the production of nondurable consumer  goods as focus," "the export-oriented strategy with labor-intensive  industry as the mainstay," "priority development of infrastructure and  emphasis on human resources exploitation," most of which were geared  to the actual situation of each stage of Taiwan's economical  development, and were in conformity with the objective economic law, Šand in coordination with the operation of U.S. aid. Those practical,  far-sighted economic policies and development strategies were where  Taiwan surpassed other recipient regions. And it was on the basis of  this internal cause that U.S. aid had achieved successful results in  Taiwan while it failed on the mainland.$ $ #T4NOTES#t $ ##[D1J100P80] _#+[1]_In this essay, "Republic of China," "China," and  "our government" in the quoted resources from Taiwan or the U.S. all  refer to Taiwan Kuomintang government. And U.S. aid discussed here  alludes to the economic aid only, excluding military aid.$ _#+[2]_Based on the Statistical Institute of Taiwan  Political University, 1986, #FKApplied Encyclopedic Yearbook#FS; and  the statistical figures of Taiwan's economy in 1989 by the Statistical  Bureau of the "Executive Yuan" of Taiwan.$ _#+[3]_Zhao Jichang, #FKThe Application of U.S. aid#FS,  Taiwan Lianjing Publishing Business Inc., 1985, p.6.$ _#+[4]_Pan Zhiqi, #FKAnalysis of Taiwan's Inflation During  the Early Period of Guangfu (Recovery)#FS, Taiwan Lianjing Publishing  Business Inc., 1980, p.27.$ _#+[5]_Qin Xiaoyi, #FKThe History of Economic  Development#FS, Taiwan Modern China Press, 1983, p.1094.$ _#+[6]_"Taiwan Statistical Data Book, 1977," the  Economic Planning Committee of the "Executive Yuan" of Taiwan, p.219.$ _#+[7]_#FKIbid#FS.$ _#+[8]_#FKIbid#FS.$ _#+[9]_#FKIbid#FS.$ _#+[10]_Zhao Jichang, #FKThe Application of U.S. Aid#FS, 1985, pp.45- 6.$ _#+[11]_#FKIbid#FS.$ _#+[12]_"Economic Strategies and the Application of U.S. Aid" in  #FKLectures on Mt. #^Yangming#^#FS, Taiwan National Defense Institute  economic corpus, article 11, chap. 6.3.$ _#+[13]_Yin Zhongrong, "The Trends and Situation of U.S. Economic Aid  to China," in #FKLectures on Mt. Yangming#FS, p.211.$ _#+[14]_Ye Mingfeng, "Foreign Trade and Payment of Taiwan During the  Period of U.S. Aid," in #FKEconomy and Finance Monthly#FS, Vo1.18 (7),  pp.14-20.$ _#+[15]_#FKIbid#FS.$ _#+[16]_"Prefect to #FKThe Notes of the Conference of the Agriculture  Loan Program Committee,"#FS_ Taiwan Rural Renaissance Committee,  August 1974.$ _#+[17]_Zhao Jichang, #FKThe Application of U.S. Aid#FS, 1985, p.89.$ _#+[18]_#FKIbid#FS., p.11.$ _#+[19]_#FKIbid#FS., p.144.$ _#+[20]_#FKIbid#FS., p.21, p.223.$ _#+[21]_#FKIbid#FS., pp.164-5.$ _#+[22]_#FKIbid#FS., pp.164-83.$ _#+[23]_#FKIbid#FS., p.171.$ _#+[24]_#FKIbid#FS., p.173.$ _#+[25]_"Retrospect on the Education Program of U.S. Aid," Taiwan  Economic Cooperation Committee, March 1964.$ _#+[26]_#FKIbid#FS.$ Š_#+[27]_"Taiwan Statistical Data Book, 1977," the Economic  Planning Committee of the "Executive Yuan" of Taiwan, p.219.$ _#+[28]_Zhao Jichang, #FKThe Application of U.S. Aid#FS, p.29.$ _#+[29]_Duan Chengpu (ed.), #FKThe Postwar Economy of  Taiwan#FS, China Social Sciences Publishing House, 1989, p.161.$ _#+[30]_Ye Mingfeng, "Foreign Trade and Payments of Taiwan During the  Period of U.S. Aid," in #FKEconomy and Finance Monthly#FS, Vol. 18(7),  p.14-20.$ _#+[31]_He Baoshan, #FKThe Economic Development of Taiwan#FS,  Shanghai Translation Publishing House, 1981, p.271.$ _#+[32]_#FKIbid#FS., p.129.$ _#+[33]_#FKIbid#FS., pp.128-9.$ _#+[34]_Neil Jacoby, #FKU.S. Aid to Taiwan#FS, New York, 1966, pp.150- 62.$ _#+[35]_The reason for Jacoby's choice of 1964 is that at the time he  wrote the book, Taiwan only had statistics up to 1964, New York,  pp.150-62.$ _#+[36]_Neil Jacoby, #FKU.S. aid to Taiwan#FS, New York, 1966, pp.150-62.$ _#+[37]_#FKIbid#FS.$ _#+[38]_Zhao Jichang, #FKThe Application of U.S. Aid#FS, 1985, p.1.$ _#+[39]_#FKIbid#FS., p.260.$#E