At the turn of the 20th century, Taiwan and Puerto Rico were typical case studies in underdevelopment. Centuries of colonial rule under the Chinese and Spanish Empires left them as dirt-poor agrarian societies with illiterate and malnourished populations (Cabán 2002; Cheng 2001). Yet during the mid 20th century both islands successfully transitioned from agrarian to industrial societies (Amsden 1985; Baumol and Wolff 1996). Yet while Taiwan continued its rapid growth through the end of the 20th century, in Puerto Rico the industrialization process slowed. The goal of this thesis is to answer the following question: Why, despite parallel initial developmental trajectories during the postwar period, did Taiwan and Puerto Rico follow diverging paths from the 1970s onward?
From economic and political perspectives, Taiwan and Puerto Rico are remarkably similar up to the point of their developmental divergence in the 1970s. They are both resource scarce and densely populated tropical islands. They were colonized by empires, the Chinese and the Spanish respectively, and under their rule remained peripheral and underdeveloped economies due to this very lack of natural resources. At the end of the 20th century, as a result of wars, they were ceded to a rising power.[1] In both cases, their new rulers, Japan and the U.S. respectively, established the foundations of a modern state. Subsequently, during the Cold War they became key U.S. allies in its defense against communist expansion. The prior foundation of a working state enabled leaders on both islands to create institutions that would take advantage of a favorable international economy and leverage their heightened geopolitical importance to lead the transition from agrarian to industrial societies. Yet the similarities do not end there. Neither island has ever been truly independent. There has never officially been a nation recognized as Taiwan or Puerto Rico. Yet in spite of this fact, they succeeded were most nations have failed. They industrialized in just a few decades.
In explaining Taiwan and Puerto Rico’s developmental divergence, I take a state-centric approach. I expand on the developmental state literature, particularly the work of Evans (1995), by examining the comparative origins of Taiwan and Puerto Rico’s bureaucracies in order to understand the underlying sources of the success and relative stability of their developmental programs. I argue that the bureaucracy’s relationship to the governing party, from the point of its inception, determines the degree of resilience to political shocks of the state’s developmental capacities. When the bureaucracy’s members have a high degree of institutional independence from the governing party, regardless of regime type, they are capable of designing and implementing a developmental program without being influenced by events affecting political security. However, when the party and bureaucracy become intertwined, events affecting political security, such internal conflicts and turnover, undermined the bureaucracy’s internal cohesion and thus its ability to chart a long-term oriented developmental agenda.
The Taiwanese and Puerto Rican states both possessed many of the key characteristics that state-centric theorists suggest are key to developmental success. Yet in each case the bureaucracy’s relationship with the governing party determined the long-term resilience of the program of state-led development. As I show, both possessed highly capable and professional bureaucracies that forged partnerships between state and society, which led to economic success (Evans 1995). Over time, a strong sense of internal cohesion within the bureaucracy led to the institutionalization of these partnerships in the form of policy networks, which in turn served as channels through which planners could mobilize society (Chu 1989). In the case of Taiwan, the bureaucracy’s institutional independence made these relationships stable over time, in spite of the presence of significant political conflict within the governing party.
However, in Puerto Rico, the bureaucracy had strong ties to the governing party from the point of its inception. During an initial period in which the governing party was both internally cohesive and electorally dominant, the bureaucracy’s internal cohesion enabled planners to forge durable policy networks and guide rapid economic development. Yet, when internal conflicts within the political party and subsequent electoral defeat adversely affected political security, the system’s stability broke down. Bureaucratic cohesion fell apart and, in its absence, the policy networks that had given the state its developmental capacities broke down.
My thesis shows that not only the Taiwanese case, but also that of Puerto Rico during the 1950s and 1960s, illustrates that the state has a crucial role to play in fostering industrialization. In the last decades, governments have gone too far in dismissing the state’s importance in providing both leadership and support services for the nurturing of the private sector. As this thesis shows, state leadership removed the obstacles that impeded Taiwan and Puerto Rico’s transformation from agrarian backwaters into manufacturing based economies. In the absence of a state directed land reform program, neither economy would have possessed the excess supply of low cost labor that permitted rapid light industrialization. Private investment would not have flooded into both economies, creating thousands of manufacturing employments, without key fiscal incentives. In the absence of direct state inducements, neither island would have acquired the necessary technology to engage in industrial upgrading and transition from light to heavy industry.
However, the eventual downfall of state-led development in Puerto Rico, and its continued resilience in Taiwan, reminds us that bureaucrats have to be firmly rooted in the state in order for a long-term program of economic modernization to succeed. Therefore, in regards to Puerto Rico, my findings point to the importance of enhancing the institutional independence of governmental agencies, particularly those guiding economic development, by ensuring that criteria for selection and advancement of officials lie outside the hands of political parties. The absence of public sector autonomy and professional standards governing personnel’s performance, and the lack of continuity in the direction of the state’s agencies, have rendered the island unable to invigorate its private sector with the dynamic energy necessary to mobilize the island’s economy in the 21st century (Lockwood Benet 2012, xii-xiii).
[1] These were respectively the Sino-Japanese War (1894-95) and the Spanish American War (1898).
