Li Kwoh-ting (; 28 January 1910 – 31 May 2001) was a Chinese economist and politician best known as the "Father of Taiwan's Economic Miracle" and referred to by the New York Times as the "Godfather of Technology" in Taiwan for his work in transforming Taiwan's economy from an agrarian-based system into one of the world's leading producers of information and telecommunications technology. His career spanned some 40 years, working for the Kuomintang government both before and after its defeat and subsequent retreat to Taiwan. His contributions continue to make him one of the most revered figures in Taiwanese history to this day.
Early life and education Li was born in Nanjing on January 28, 1910, to a family from Wuyuan County, Jiangxi.
Li excelled in mathematics and physics at a young age. At 16 years old, he enrolled at National Central University to study mathematics and physics. After graduating with his Bachelor of Science (B.S.) in physics in 1930, he received a scholarship to pursue doctoral studies in England at the University of Cambridge. He left China for England in 1934 and studied superconductivity at the Cavendish Laboratory under professor Ernest Rutherford.Yu, Tony Fu-Lai (March 2007). "The Architect of Taiwan's Economic Miracle: Evolutionary Economics of Li Kuo-Ting". Global Economic Review. 36.National Central University later renamed Nanjing University in mainland China and reinstated in Taiwan. He was a member of Emmanuel College, Cambridge.
Career Li withdrew from Cambridge and returned to China to support the Chinese war effort when Japan invaded China in 1937. He later fled to Taiwan in July 1948 with the Nationalist Party when the Chinese Communist Party took over China. He became the president of the China Shipbuilding Corporation in Taiwan in 1951 and was appointed as a member of the Industrial Development Commission responsible for the planning and economic development of Taiwan in 1953. In 1959 he became the head of the Industrial Development and Investment Center under the Council for United States Aid.
He held a number of leadership positions in industry and government in Taiwan, including that of economic minister from 1965 to 1969 and finance minister from 1969 to 1976. After 1976 he was appointed "Minister without portfolio" and promoted science and technology in Taiwan. In 1968, he received the Ramon Magsaysay Award for government service. He created a policy that helped attract entrepreneurs in the tech industry and helped fund Taiwan's electronics companies, which led to Taiwan's primacy as a producer of computer parts. Li had a very important role in the creation of TSMC, the world's largest chipmaker in 2023. He also helped build the Hsinchu Science Park, which later became known as Taiwan's Silicon Valley. The park is one of the world's leading centers for semiconductor manufacturing and industrial and computer technology development. As of 2018 more than 500 high-tech companies reside in the park. Li was also a senior adviser to the President of the Republic of China, Chen Shui-bian.
Economic policy In total, Li was a government official for 40 years, 10 of which he spent in mainland China before the Chinese Communist Party won the civil war. Tony Fu-Lai Yu speculates that the time Li spent in China, as well as his science-based university education, greatly influenced his policy-making in Taiwan. Li had no formal training in economics, thus most of his knowledge of economic management was gained from practical experience and working with other economists. Consequently, Yu argues his policy was insulated from popular economic ideology and instead was driven by pragmatism. Li himself also claims that the purpose of his writings is to reveal his policy-making experiences for the future reference of other developing countries, and did not engage in writing about economic, administrative, or political science theory.Li, Kuo-Ting (1995). The Evolution Of Policy Behind Taiwan's Development Success. Singapore: World Scientific.
Yu argues that Li's policy-making can be explained by evolutionary economics. Two Yale economists, Gustav Ranis and John C.H. Fei, wrote the introductory essays to Li's 1995 book The Evolution of Policy Behind Taiwan's Development Success. Therefore, it can be interpreted that Ranis and Fei's views on economic policy are representative of Li's.
Ranis mainly writes on neo-classical growth theory, which claims that a steady economic growth rate can be achieved by correctly balancing the driving forces of labor, capital, and technology. He also writes on the concept of agricultural labor surplus economies which, in freeing up workers and generating agricultural surplus and leading to increased productivity in expanding commercial sectors.
Fei argues that two main types of forces govern policy evolution: objective and subjective. Objective forces are predetermined conditions, encompassing physical environments, external economic conditions, etc. Subjective forces include personal beliefs, economic knowledge, memories, experiences, and "common sense". Fei believes that political beliefs and ideology are the strongest factors in shaping economic policy-making, and thus is an ongoing process. In following with the concept of evolutionary economics, Fei believes that economic policy must change to suit new and ever-changing situations. Therefore, policy should not be static when created and instead evolve and be improved on to adapt to new situations. Li himself claims that the liberalization of the Taiwanese economy was a gradual process rather than an abrupt one following the international popularity of free market thought in the 1960s and 1970s.Li, Kuo-Ting (1988). Economic Transformation of Taiwan ROC. London: Shepheard-Walwyn Publishers.
Pragmatic economics Li argues that there are two types of issues central to analyzing policy evolution. First is the economic impact of a policy, second is causation, or why a certain policy appears and is implemented at a certain time.
Li believes pragmatism should supersede ideology in terms of policy-making:[Policy innovation should be based on] the anticipation of impending problems and conflicts, rather than be purely ideologically motivated . . . The very notion of an evolution of policy suggests that the timing (or timely appearance) of a particular policy is important, and a good policy innovation is one that does not arrive prematurely. Ideological considerations often get in the way of appropriate timing as, for example, with so-called welfare state legislation that the economy simply cannot support. What can almost be called a rejection of ideology lies at the heart of a healthy pragmatism that has guided policymakers in Taiwan and has supported a social consensus for growth and economic liberalization.He argues against ideology-based policy making because it often interferes with the timing of certain policies, and all too often change too quickly. He believes such policy is "motivated by goals considered larger than people's actual well-being," which is a scathing review of ideology-based policy. Rather than ideology, Li believes the economic environment in which policies are made is more important and that policy should not be restricted by the ulterior motives of ideology-based economics.
Policy revision Li's trial and error policy making was made possible by Taiwan's flexible government policy. Li says that it made it possible to abandon or modify ineffective programs and easily create and implement new ones in reaction to new situations.
Li's policies were often influenced by his experiences as part of the Kuomintang in mainland China. Hyperinflation was one of the major reasons that Chiang Kai-shek lost mainland China to the Communist Party, and thus Li abhorred all inflationary finance during his management of Taiwan's economy.
His aversion to relying on inflation is apparent in his claim:Taiwan's experience shows that fiscal reforms (tax legislation) and monetary reforms (moving toward central bank autonomy) are major evolutionary steps taken by a responsible government ... What underlies both reforms is a rejection of the insanity of relying on the printing press to create purchasing power for the government to use in an effort to solve socioeconomic problems.Li indicates that this was the main difference between Taiwan's policy and those in Latin American countries, and that this method of managing the economy led to an overall more responsible government and transparent taxation system. Li claims that during the 1950s–70s, the liberalization of Taiwan's economy was an unintended effect of their new policy, and it wasn't until 1983 that such "externally-oriented growth" was seen as beneficial and the merging of international competition in the domestic market was encouraged. Furthermore, Li says that Taiwan's government was guided at the start with the principle that private property and a market environment which favored private businesses were to be encouraged. Li writes:Other promotional measures taken by the government included improving the investment climate, simplifying administrative procedures ... providing necessary financing through banking institutions, and promoting investment and exports through tax relief and other incentives.This was the framework for Li's Principle of People's Livelihood where the importance of protecting private property for the improvement of socioeconomic activities and establishing a free economy was only superseded by the need to expand state capital. Yu claims that this view falls under what Robert Wade calls the "guided market economy". Li argues that the main problem with other less developed countries (LDCs) was that:The alleged failure of the market in some other LDCs may, in fact, be due precisely to the opposite reason: the failure of political intervention in the market. Although the market structure was far from perfect at the beginning of transition growth in the 1950s, the overall trend has been for a strengthening of the market mechanism—a depoliticizing of the market. Taiwan experience shows that reduced intervention can work.Li argues that without the same willingness in developing countries to support a free market, Taiwan's economic miracles and history are useless to them.
Government's role Li explains that Taiwan's economic development was initially set back by the "scarcity of natural resources, shortages of capital and foreign exchange, technological backwardness, and lack of entrepreneurial skills," however, through the government's direct involvement and encouragement, the infrastructure and incentives needed for private enterprises to flourish, including mitigation of risk, was created:Among the major initiatives have been: the formulation of investment program and the provision of low-interest loans; the establishment of industrial zones, export-processing zones, and the science-based industrial park; Ten Major Development Projects, the Twelve New Development Projects and the Fourteen Key Projects in the 1970s and 1980s. The government also adopted various supplementary fiscal, financial, foreign-exchange, and trade-promotion measures to quicken the pace of industrialization.Taiwan's government made certain to not compete with private enterprises unless absolutely necessary, and the most lucrative investment projects were left for private businesses to take. Many times the government would first conduct feasibility studies before offering low interest loans to private entrepreneurs. Other times the government acted as sole owner of a business before handing it over to private investors.