Taiwan: Land Reform, Food Security and Industrialization

Fellow blogger Jego, in a comment to my previous entry, shares his thoughts on food security and industrialization:

"Personally, I think we shouldve gone for food security first, self-sufficiency in food, before we tried to industrialize. But it might be too late now. We've been caught up in the globalization / industrialization whirlwind, hence those problems you enumerated. We're importing rice! That is a travesty, imo. Taiwan can feed itself, export food, and industrialize. They had their priorities straight. We might have to abandon primary production and industrialize just to keep up. Our farmers will be left out in the cold if they dont adjust to the new realities."

I have a slightly different conception of food security and i also wouldn't exactly frame it as a choice between food security and industrialization. Since Jego mentioned Taiwan, it would be instructive to see how they approached these matters of food security, agricultural productivity and industrialization.

Amsden(1985) pointed out (in The State and Taiwan's Economic Development*) that upon arriving in Taiwan, security was also foremost in the minds of the Chang Kai Shek's Chinese Nationalist Military:

"When Taiwan was occupied by the vanquished Nationalist government in 1949, the Goumindang (the Nationalist Party) was obsessed with one objective: military build-up in order to retake the Mainland."

One other major security concern was the potential for the Taiwanese peasantry to rise up against their new rulers just as Mao's peasants did in the Mainland:

"The potential threat of an impoverished peasantry had been driven home to the Nationalists on the Mainland, and they were concerned with restructuring agriculture accordingly."

This provided one of the leading motivations to Land Reform, which was implemented from 1949 to 1953:

"Agriculture was reformed in three stages.

• First, farm rent was limited to a maximum of 37.5 percent of the total main crop yield.
• Second,public land formerly owned by Japanese Nationals was distributed on easy terms, with preference given to the tenant claimants.
• Third,landlords were obliged to divest themselves of their holdings above a minimal size and to sell out to their tenants under the Land-to-the-Tiller Act...Landlords were given land bonds in kind and stocks in public enterprise in exchange for compulsory divestiture of their holdings.

Some landlords profited from their stock ownership and became successful industrialists. The landlord class, however, sank into social oblivion..." [IMHO, which on its own, is a favorable development]

Land Reform was followed by rapid agricultural growth which in turn provided capital to drive industrial growth:

"The years 1953-1968 witnessed annual growth rates in agricultural output that were impressive by any standard. Equally impressive was the spillover effect on industry...Whereas net real capital outflow from agriculture increased at a rate of 3.8 percent annually between 1911 and 1940, it rose on average by 10 percent annually between 1951 and 1960."

Amsden emphasizes that this spillover effect was not due to market forces left on their own, but was in fact, a deliberate strategy of exploiting the farmers by the State:

"...The fertilizer monopoly was the key to extracting surplus from agriculture. Fertilizer was bartered for rice, and the barter ratio was highly unfavorable to farmers. The price that Taiwanese farmers paid for 100 kilograms of ammonium sulfate in 1964-65 was higher by almost 40 percent than the price that Japanese, Dutch, Belgian, American, or Indian farmers paid..."

The above combination of policies resulted in food security, capital and market demand that drove industrialization.

• "Even during the immediate postwar years of economic chaos and a world record rate of population growth, agriculture managed to produce a food supply sufficient to meet minimum domestic consumption requirements as well as residual for export...
• Agriculture also managed to provide an important source of demand for Taiwan's industrial output, particularly chemicals and tools, and a mass market for consumption goods.
• The agrarian structure provided a degree of political stability sufficient to draw the most timid of foreign firms to the island."

The prosperity in the countryside also had an indirect effect on the welfare of the industrial workers:

"Agriculture has even been sufficiently productive to set a floor on industrial wages. Factory women who returned home to the farm during the sharp depression of 1974-75 subsequently refused to return to wage employment at prevailing rates."

Eventually, however, as it grew more prosperous and less focused on retaking the Mainland, Taiwan gave up on the idea of food security:

"Taiwan ceased being self-sufficient in basic foodstuffs because it was more profitable to specialize in cash crops for export."

Whenever, i hear the term food security, what i envision is emergency stocks of canned goods, noodles and grains (along with water supplies) hidden in caves or underground. Other than that, i think the best form of food security under non-emergency situations would be the ability to source food from our trading partners. Instead of food security, the main reason for wanting rapid increases in agricultural productivity would be that it supports and complements industrial growth.

*As found in George T. Crane and Abla Amawi's (editors), The Theoretical Evolution of International Political Economy: A Reader, 1991, 1997, Oxford Press Inc.