Abstract
Scholars have pointed to the period 1958-1962 as the beginning of Taiwan's transition to export-oriented industrialization. Although the Nationalist Party (KMT) had traditionally supported state socialism, the KMT began to oversee economic reforms in the late 1950s, setting Taiwan on the course of export-led growth under a capitalist model. Using archival materials from both the United States and Taiwan, I argue that the reforms resulted from U.S. influence on how the KMT understood the role of economic development in its grand strategy. U.S. arguments succeeded in creating political support at the highest levels of the KMT leadership for a reform-oriented faction in the economic bureaucracy. This finding shows how an aid donor can promote economic reforms even when the recipient is strategically important for the donor: although threats to enforce conditionality may not be credible, the donor can influence the recipient through persuasion.
