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The Taiwanese Way

Taiwan's recent election was a referendum on its past — and a battle for its future.

On January 16, Taiwan held its sixth presidential and eighth parliamentary plebiscite since political liberalization in the early 1990s. Tsai Ing-wen’s Democratic Progressive Party (DPP) won an overwhelming victory, vaulting Tsai to the presidency and giving the opposition party its first parliamentary majority.

The rout wasn’t surprising. Pre-election polls showed deep dissatisfaction among voters. Many saw the election as an opportunity to punish the Nationalist Party (KMT). A fifth of KMT supporters stayed home, and young voters turned their backs on the party entirely. Twenty-somethings not only went to the polls at higher rates, they voted nine to one against the KMT.

The party’s dramatic loss is, in part, the upshot of recent developments. After recapturing the presidency in 2008, the KMT tried to kickstart the economy by hitching the island’s export sector to China, which continued to grow despite the global downturn. In 2010, Taiwan signed the Economic Cooperation Framework Agreement with China and the two countries began to liberalize cross-straits trade. Capital outflows to the mainland grew rapidly and China overtook the US as Taiwan’s premier market.

Today, the countries’ economic futures are linked tighter than ever. Yet growth has remained elusive for Taiwan, whose export-dependent economy has been in a funk since 2012. At the end of last year Taiwan’s economy actually shrank. Young people have been hit particularly hard, experiencing significantly higher unemployment than their counterparts in neighboring countries.

For a party that prides itself on its history of economic management, appearing to surrender the island’s precarious political autonomy while failing to deliver expansion proved disastrous.

But while the KMT’s economic record since 2012 is certainly disappointing in a country long accustomed to high growth rates, it doesn’t entirely explain the party’s stunning defeat or the recent electoral shake-up. There are bigger changes afoot in Taiwan.

The Sunflower Movement

Taiwan is a young and brash democracy, marked both by deep ethnic and class cleavages — a place where brawling on the legislative floor is par for the course, and political partisanship often spills onto the streets. Yet even by Taiwan’s overheated standards, the political temperature ran high in the run-up to the country’s recent elections.

In early 2014, the KMT tried to push through a new China trade deal that would liberalize services between the two economies in the strategic areas of banking, telecommunications, health care, tourism, and media. The move backfired.

Negotiated behind closed doors, its details concealed from the populace, the Cross Straits Service Trade Agreement (CSSTA) faced mounting public skepticism. When the opposition DPP tried to physically block the agreement from coming to the floor for discussion, KMT lawmakers declared debate over and announced the trade deal was ready for a house vote.

Disgusted by the parliamentary chicanery, a group of college students occupied the legislative chamber that night. News of the action quickly spread, and supporters took to the streets. Activists and the DPP mobilized their supporters, bringing an estimated half a million to a March 30 rally.

The fightback led to a political stalemate and the trade deal was put on the back burner. But in the process a new youth movement was born — the Sunflowers.

Though at first energized by anger over the trade agreement and lack of political transparency, the Sunflowers have since taken up other left causes. They have joined the struggle for the rights of the LBGT community, migrant workers, and the island’s indigenous population, as well as long-standing campaigns against nuclear power and land-grabbing under the guise of urban renewal.

Sunflowers have also stayed active in electoral politics, finding a home in the DPP or in one of the minor parties that make up its Pan-Green Coalition. Others have joined formations to the DPP’s left, including the environmentalist Green Party (formed in the 1990s) and the recently founded Social Democratic Party and pro-independence Free Taiwan Party.

The most electorally successful of these nascent parties is the New Power Party — founded a year ago on a reformist program, it received worldwide attention when founder and heavy-metal guitarist Freddy Lim won one of five NPP seats.

Despite the insurgence of new blood, Taiwan’s left remains small, divided, and fragmented. It has been largely unsuccessful at the polls.

The China Question

Whatever their political goals or leanings, it’s fair to say that what most animates the Sunflower generation — and the population generally — is the specter of China.

The People’s Republic of China (PRC) claims sovereignty over Taiwan, even though the small nation operates under its own legal constitution and its government acts autonomously. In decades past, Taiwan’s political independence was secured by Cold War alliances with the US, Japan, and South Korea.

But China’s great transformation, first into capitalism’s workshop and then into its banker, has reconfigured the region’s balance of power. China wants to draw the island deeper into its orbit and bind Taiwan’s economy to its own by encouraging cross-straits investment and trade.

But Taiwanese — particularly those in the Sunflower generation — are resistant. They fear that economic integration with China will cost the tiny island its hard-won civil protections, erode democratic institutions, prevent further political liberalization, and undermine cultural autonomy.

These are not new concerns, to be sure. Taiwanese have been growing apart from China for decades. Since the early 1990s (the earliest figures on record) the share of self-described “Chinese” on the island has fallen from one quarter to about 3 percent. 60 percent of the population identifies only as “Taiwanese” (up from roughly 17 percent), and nearly a third see themselves as “Taiwanese-Chinese” (culturally Chinese, yet nationally Taiwanese). 25 percent of Taiwan residents desire national independence, while less than 2 percent want to unify with the mainland.

But these shifts have done little to change Taiwan’s precarious position in the international system. While its year-by-year trade with the rest of the world regularly exceeds its GDP, and its foreign exchange reserves rank fifth in the world, it has no international standing; its data are absent from UN and WTO reports; and despite its mountains of cash, the nation is not a member of the World Bank. Lacking de jure standing, the country’s de facto autonomy is part Cold War relic and part decoction of a declining US hegemony.

This uncertainty adds fuel to battles over identity and stokes partisanship. The two main political camps agree on the pragmatic need to maintain the current status vis à vis China, but they are divided over the question of nationhood.

On one side, the KMT and its Pan-Blue Coalition remain tethered to the idea of the Republic of China. Culturally oriented toward Chinese civilization, their vision of the future could be described as Sinic cosmopolitanism. Indeed, those who view Chineseness as integral to their sense of self are the KMT’s staunchest supporters, and include both mainlanders — people whose parents and grandparents arrived with Chiang Kai-shek in 1949 — and longtime islanders who have come to identify as culturally Chinese.

On the other side, the DPP and the Pan-Greens are heirs to the opposition to Chiang Kai-shek’s dictatorship and the mainland clique that ran the state between 1945 and 1988, when Taiwan’s president Chiang Ching-kuo (son of Chiang Kai-shek) died.

The Pan-Greens champion an independent, sovereign nation wholly separate from China — nationhood on Taiwanese terms. The Pan-Greens include hidebound nativists who thoroughly reject all things Chinese, but also cosmopolitan mainlanders and native Taiwanese for whom the period of democratization has set the island politically apart from the mainland.

While ethnic and class cleavages abut, they do not determine party affiliation — the country’s long history of political patronage and clientelism, as well as its course of development, has drawn and re-drawn the political map. In this respect, Taiwan’s recent political turmoil is not reducible to economic troubles; it also rooted in the island’s turbulent past.

The Nationalist Period

A Chinese settler-colony turned Japanese colony turned Nationalist war front, Taiwan’s ethnic and political identities have come and gone in quick succession. The island of three million, most from Fujian province, was transferred to Japan in 1895, after which the governors-general worked diligently to construct a model colony. By the 1930s, Taiwan’s GDP was the fastest growing in Asia, and its levels of health and literacy far surpassed the mainland’s.

The island’s status as a model colony was short-lived, however. Chiang Kai-shek’s Nationalist forces began arriving in 1945, and four years later two million disheveled mainlanders — fleeing the victorious Communists — decamped on a population of sixteen. As the Chinese Communist Party declared the founding of the People’s Republic in Beijing, Chiang’s rump state settled into the colonial buildings that lined Taipei’s modern boulevards.

Viewing the entire population as suspect, the Nationalists were quick to suppress local aspirations. Left-wing politics were immediately prohibited, and the new government set about aggressively de-Nipponizing the population; it eradicated the pro-Japanese comprador class, expropriated Japanese properties, shunned Japanese-educated Taiwanese, and banned Japanese culture products. Mandarin-language schooling became mandatory in the new heavily Sinic curriculum, which extolled Confucian virtues and Chinese nationalism.

As the Cold War got under way, the island was brought under the US strategic umbrella. The US government initially held Chiang in low regard, and even considered assassinating him. But the Korean War restored the Nationalists’ currency, and the ruling KMT was subsequently given generous assistance and domestic latitude provided it agree to: have its foreign policy and military planning okayed by Washington, implement land reform to undercut rural sympathy for communism, and abandon its statist approach to the economy.

With Washington’s backing, Chiang’s paternalist and authoritarian urges had free rein. He suspended the constitution and placed the island under martial law. He restored party discipline and tightened his grip over the state apparatus.

Chiang also leveraged his new political muscle — against the recommendations of US economic advisors — to secure state control of defense and key downstream industries (petroleum, steel, shipbuilding, and machine-making), major trade enterprises, and the banks.

From these heights, the general’s cabinet implemented a blended economic model. Ever the nationalists, they ignored Taiwan’s comparative advantage in labor-intensive manufacturing. Seeking rapid industrialization, they distributed investment across a broad front of industries that included labor-intensive as well as import-dependent producer and capital goods. Shunning mainstream economic ideas about appropriate levels of technology and pricing, technocrats accelerated the pace of accumulation and expansion by allowing fledgling manufacturers to squeeze out greater profits behind tariff walls.

GDP growth rates beat world-historical records during the sixties and seventies, and in the 1980s, Chiang Ching-kuo deftly moved the island into higher-tech and higher-value-added products while incrementally offshoring aging production to low-wage Southeast Asia and China. By the early 1990s, Taiwan’s foreign exchange holdings topped $100 billion, and its citizens had achieved middle-income status.

Even as the KMT and its business allies grew enormously wealthy, and the party built a business empire that is today worth a billion dollars, benefits flowed to working Taiwanese. Between the sixties and the eighties Taiwan had an income distribution comparable to the Scandinavian countries.

And when the economy was liberalized in the 1990s, the KMT bucked neoliberal trends and responded to increasing popular unrest with worker-friendly measures. Modest government insurance for the elderly and unemployed was introduced, workplace safety regulations were tightened, the cost of labor was allowed to rise, and a world-class single-payer health insurance program was inaugurated.

The Taiwanese like to attribute this success to their hard work and thrift, but the island’s spectacular record had more to do with authoritarian politics and the KMT’s neo-mercantilist policies — divined and implemented by a close-knit cadre of hardnosed party technocrats — than any personal virtues.

Yet Taiwan’s success came at a high price. In 1947, the Nationalist army killed thirty thousand unarmed civilians who rose up following a brutal crackdown on a peaceful street demonstration, and the suppression of local aspirations continued apace during the years of martial law. Independent political parties were prohibited, independent labor unions were broken, the press was closely monitored and censored, and a web of informants kept the security forces abreast of developments on university campuses at home and abroad.

Two hundred thousand suspected leftists, communists, independence seekers, or simply those desiring greater political openness were arrested during the decades of martial law. An unknown number of political opponents were executed, and high-profile assassinations of overseas dissidents frightened Taiwanese into silence.

Chiang justified the terror by citing the ongoing civil war, the risk of Communist invasion, and the need to placate capital, both foreign and domestic. On the Taiwanese side, many grudgingly accepted the implicit deal of rising incomes for political acquiescence.

But the compromise was never absolute. Just as the success of KMT economic policies will continue to determine Taiwan’s developmental path for some time to come, so too have its past domination of the government, the bureaucracy, and key industries — and its relegation of the bulk of Taiwanese to wage work, farming, and lower managerial positions — sowed the seeds of ethnic and class resentment that will continue to shape politics and fuel the DPP base.

Democratization

Discontent has been slow-growing, however. Despite the many grievances against it, the KMT secured a solid parliamentary majority from 1992 to 2016 and convincingly won three of six open presidential elections. The party’s long electoral legs are due to its reputation as an effective manager of growth, its successful nurturing of Taiwanese-owned businesses, and its political organization.

Beginning in the early 1960s, the KMT recruited Taiwanese into the bourgeoisie, issuing industry start-up licenses and providing ongoing financial and political assistance. In the late sixties, the party recruited ambitious and talented young Taiwanese to replace the growing number of greying mainlanders.

At the same time, the KMT bolstered its patronage, leveraging its vast business assets, its control over state and local budgets, and a growing web of power brokers to purchase support with cash and contracts.

By the 1992 elections, Taiwanese filled the ranks of business owners, KMT party membership was 70 percent Taiwanese, and some party bosses openly boasted of running a political machine rivaling that of the older Daley’s in Chicago.

Nevertheless, the surge in work stoppages and anti-pollution demonstrations that followed the end of martial law in 1987 signaled changes to the political equation. As street activism gave birth to new social movements, leaders and the rank-and-file members of labor unions, farmer associations, and anti-pollution groups found a natural home in the newly established DPP.

Founded by journalists, civil rights lawyers, former political prisoners, and politicians who had previously run under the dangwai (outside the KMT) label, the DPP quickly became a catch-all reformist party with a simple platform of democratization and ethnic justice for Taiwanese. Though united in its anti-KMT zeal, it offered no rupture with the economic past in its quest to integrate itself politically and win support from the native bourgeoisie.

The KMT did not sit idly by as the DPP harvested the rewards of popular desire for democratization. Under the leadership of Lee Teng-hui (a native Taiwanese, born under Japanese colonial rule), the party’s own reformist wing came to the fore and, running on a platform of sound economic management and social liberalization, Teng easily won the 1996 presidential election.

The KMT would likely have won again in 2000, but it split, sending off its more conservative secretary general, James Soong, to run as an independent. As a result, the DPP’s Chen Shubian, a founding member of the party, squeaked to victory.

Though downplayed during the campaign, Chen’s reputation as a lawyer who defended anti-KMT activists and proponents of Taiwan independence appealed to nativists and those fed up with the KMT. As Taipei mayor in the 1990s, he renamed the boulevard leading from the presidential palace “Ketagalan,” after the aborigines once native to the Taipei basin, and changed Taipei Park to “February 28 Park,” in memory of the 1947 massacres.

Chen continued these “nativization” policies during his presidency, demoting classical Chinese culture in the school curricula and creating an Institute for Taiwanese History at the prestigious Academia Sinica. “Taiwan” was added to the national passport, images and statues of Chiang Kai-shek were removed from public spaces, and a new museum of the aboriginal peoples was built opposite the National Palace Museum — the world’s premier repository of Sinic civilization.

Chen’s populism was red meat to a core constituency of the DPP base, but it could hardly be called radical. And even though the DPP’s reform agenda had broader appeal — stretching across ethnic and class lines, netting support from workers, farmers, students, and white collar professionals — it floundered as the KMT sought to co-opt elements of it.

Chen failed to deliver on a promise to stop a new nuclear power plant, proposed raising tuition (and then retreated after student protests), and buckled under business opposition to popular calls to shorten the work week. Chen did place former activists in ministerial positions at the Environmental Protection Administration, the Labor Affairs Council, and the Council of Indigenous People, but these were relatively inconsequential moves in a government long-dominated by the ministries of Economic Affairs and Finance.

In the 2000 election, DPP party leadership adopted a centrist stance, hoping that its existing Pan-Green Coalition would mollify its base (nativists, leftists, social activists, and the working class), while it reached out to more conservative voters. Signaling his political orientation, Chen’s 2000 inaugural speech openly praised the Third Way politics of Bill Clinton and Tony Blair.

But the DPP’s move to the center took the wind out of the grassroots movements that had not only backed the party but had helped push the KMT to democratize the island in the early 1990s. By the next election, Chen was under attack from angry constituents, including environmentalists furious over a massive highway construction scheme that threatened the sensitive mountain ecology east of Taipei. Set to lose his reelection bid, Chen was saved by a bizarre attempt on his life. He won by a mere thirty thousand votes, and the shooter was never caught.

But Chen’s second term quickly unraveled. His wife and son-in-law were indicted for insider trading, influence peddling, and corruption. Chen refused to resign, even though term limits prevented a third run, and he consequently dragged the DPP through a grueling media war that crippled its nominee. Meanwhile, the KMT machine shifted into high gear, and the island’s political moderates fell in line to elect the un-charismatic Ma Ying-jeou by a wide margin.

The unfolding prosecution of Chen and his family for corruption (Chen was indicted, tried, and sentenced to prison for embezzling more than $6 million), coupled with stronger export growth in the wake of China’s 2008–9 $500 billion stimulus program, all but guaranteed Ma a victory in the 2012 election.

Rightward Drift

After 2008, the DPP struggled to rebuild its reputation. With a dependable base among hardcore nativists and a section of the increasingly bureaucratized unions, it sought out votes from the 40 percent of the electorate with no party affiliation. In particular, it reached out to the multi-ethnic and more cosmopolitan white-collar voters concentrated in Taipei and high-tech Taoyuan.

To appeal to these segments of the population, the DPP has worked diligently to cast itself as a responsible centrist party that understands the needs of business, can get things done, and looks out for people’s welfare.

The party’s platform (vapidly titled “The Taiwan Dream”) calls for enhancing national defense, improving economic competitiveness, encouraging sustainability, fostering multiculturalism and inclusion, and uniting the citizenry. On the key question of the economy, Tsai and the DPP offer centrist nostrums that appeal to business and much of the professional class.

In the recent campaign, the party proposed boosting economic competitiveness by rewarding innovation and efficiency and promoting cutting-edge industries. Talk of tech hubs, green growth, upgrading education, nurturing the “creative” economy, and enhancing flexibility abounded. And on cross-straits relations, Tsai emphasized the need for stability. She avoided all talk of independence and doggedly stuck to her position of “maintaining the status quo.”

All of this, of course, is the usual Third Way draught, touting strength in areas traditionally seen as the monopoly of the Right — management of the economy and national defense — while promising goodwill to all.

Untainted by any close association with Chen Shuibian, Tsai Ing-wen had the perfect resumé to recast the DPP as Taiwan’s centrist party. Tsai is a foreign-trained technocrat who, like the early engineers of the Taiwan Miracle, is committed to meeting the needs of capital (her father is one of Taiwan’s wealthiest property developers). She has a PhD in law from the London School of Economics and in the 1990s worked in the Ministry of Economic Affairs as a consultant on trade matters, was a negotiator in GATT and WTO talks, and managed relations with the PRC as director of the Mainland Affairs Council.

A consummate bureaucrat, Tsai only joined the DPP in 2004 and ran for a seat in parliament the same year. She worked her way up the ranks and, though she lost to Ma in 2012 (and stepped down temporarily as DPP party chair), she was back in the limelight by the time the Sunflower movement took off and has skillfully cultivated the public’s trust since.

During the campaign, Tsai focused on attacking the KMT’s mismanagement of the economy, its cozy relationship to big business, its penchant for secrecy and authoritarianism, and its lack of empathy for ordinary citizens.

Tsai read the tea leaves correctly. Exit polls suggest the election was primarily a referendum on these very issues: three-quarters of voters wanted the government to prioritize the economy and unemployment (food safety, political transparency, and constitutional reforms were runners up). When all was said and done, the DPP kept the nativist base in line and made deep inroads among independents and KMT voters.

Committed Neoliberals

At first glance, the future appears to favor the DPP and its Pan-Green Coalition. Not only did young voters reject the KMT (only one in five identifies as pro-KMT), but the party’s candidate received the fewest votes of any major party nominee in Taiwan’s electoral history.

But the KMT has bounced back before (just as the DPP did from the Chen debacle), and it continues to benefit from the support of business (sections of which remain skeptical of the DPP) and can draw on its well-oiled party machinery. There is also every reason to believe the electorate will turn against the DPP if it fails to deliver economic growth and stability in the straits.

As such, there is little doubt about Tsai’s desire to consolidate her party’s position by advocating political reforms that would weaken the KMT. One obvious target is the latter’s business assets. But Tsai could also propose changing the constitution to allow public referenda, removing references to the mainland from the constitution, and subjecting international trade pacts to open legislative debate.

The bigger question, though, is whether the DPP can deliver economic expansion while preserving Taiwan’s independence. Ordinary Taiwanese are wary of the large capital outflows to China that, coupled with significant tax reductions at home, point to a state that bends too easily to business interests and is willing to sacrifice jobs and political autonomy for profits. The question is whether the DPP can deliver something different.

So far, rather than address this situation head-on, the DPP has assiduously avoided any whiff of class politics. Instead, it appeals to populist tendencies — especially among ethnic Taiwanese. It blames stagnant wages and stubborn unemployment on China and the KMT’s pro-China policies.

The shelf life of this strategy is likely to be significantly shortened by the serious pressures facing the country today. After the global financial crisis, Taiwan’s businesses deepened their dependency on mainland consumers, who rode the wave of Beijing’s massive stimulus even as other major capitalist economies stalled, while almost a million Taiwanese have moved to China to work.

But now that China is struggling under collapsing asset prices, it is far from clear where Taiwan’s exporters will turn next. The bursting of the Chinese bubble comes at a time when the remaining BRIC economies are (at best) stagnating, Europe remains committed to austerity, Prime Minister Shinzō Abe’s stimulus is no longer reaping rewards in Japan, and US assets look increasingly tarnished.

Against this backdrop, both the DPP and the KMT urgently want Taiwan to sign onto the Trans-Pacific Partnership. Negotiated entirely in secret without China’s participation, the TTP promises signatories “comprehensive market access,” or the full dismantling of trade barriers. Joining would undoubtedly give neighboring nations a greater stake in the current arrangement in the Taiwan straits, with trade and investment facilitating interdependence between member states.

But a new round of liberalization won’t fix Taiwan’s slow growth, rising income inequality, inflated housing prices, ecological degradation, or high youth unemployment.

Globally, the restructuring of trade inaugurated in the 1980s has greatly favored the 1 percent, leaving financially strapped governments less capable of delivering benefits to their populations. Taiwan is no exception: real wage growth has stagnated since 2000, and inequality has spiked.

Meanwhile, each period of economic expansion in the last twenty years has ballooned on a new trench of asset inflation — the tech bubble, the housing bubble, and now the bond bubble — so there is every reason to believe that the turbulence of the recent past will only continue, if not worsen.

And China is not going away, no matter how hard its upcoming landing. Preservation of the Taiwan straits status quo will continue to hinge on the state of US power and its level of engagement in Asia. That is why both the DPP and the KMT eagerly greeted Obama’s 2012 pivot to Asia, and both parties have signaled their hope for an enlarged US military presence in the region. Indeed, since the KMT began steering Taiwan closer to China, the DPP has become the loudest cheerleader of American power.

In the brewing storm, Tsai will no doubt seek shelter within the TTP and take cover behind the American leviathan.

There is certainly much to celebrate in the KMT’s defeat. The DPP’s victory offers an opening for needed political reforms as well as greater protections for domestic and foreign workers, women, the elderly, the unemployed, and ethnic and gender minorities.

However, a progressive agenda will face stiff opposition from the Pan-Blue right and large sections of Taiwanese capital, whose support the DPP is committed to securing. Manufacturers will threaten to offshore jobs rather than accept strengthened labor laws and higher wages. Bankers and other sections of the service sector will appeal to TPP rules to enhance efficiencies at home. Real-estate developers won’t willingly moderate housing prices. And, as always, corporations and the wealthy will reject calls for higher taxes to cover better social services in the face of a profit squeeze.

Committed to centrism, the DPP’s instinct will be to temper, moderate, and even hamstring deep social reforms, devoting its energy instead to crippling the KMT by revising the constitution, making changes to administrative law, and investigating party assets.

To the extent that the Left remains attached to the DPP, its capacity to act in the interest of workers, farmers, and minorities will be constrained accordingly. To set the agenda, the Left will have to rebuild the alliance of workers and anti-pollution activists that won impressive victories in the 1980s, and embrace new left-wing constituencies.

It will have to set aside for now the heated question of independence and nationhood (where it has the least power to effect change) and focus on transforming the workplace and social life.

And most urgently, it must get ready for the economic roller-coaster ahead. Because without pressure from the streets, Tsai will simply respond to the coming economic trials with the same tired neoliberal policies.