130 years ago Taiwan was poor while the West Was Rich today Taiwan is just as rich as the West how did Taiwan go from a poor region of China to becoming one of the richest countries in the world chapter 1 Chinese Taiwan Taiwan was conquered by China in 1683 when China conquers a new region they try to convert the local people into more Chinese people similar to what they are doing today in tibat for example Chinese were sent to Taiwan they would marry Taiwanese women and together they would have Chinese babies these Chinese babies grow up marry more Taiwanese people and create even more Chinese babies until Taiwan became Chinese and being part of China meant that Taiwan receiv received Chinese infrastructure canals Terraces and roads were built in order to turn Taiwan into China's sugar and tea Factory but when the Europeans and North Americans created factories with machines China was left behind China had a lot of people and it was easier to hire more workers than it was to build machines and over time those machines became more productive than workers suddenly the mighty Chinese Empire was surpassed by the British Empire the French Empire or the Japanese empire and in 1895 Japan went to war with China and in this war Japan conquered Taiwan this was Japan's first colony Taiwan would be an experiment before they create a colonial Empire but Japanese colonization was very different from European colonization as you might remember from my video on the transatlantic slave trade the Europeans use colonies mostly for resources such as gold sugar or cotton the colonies themselves were usually not allowed to set up their own factories the goal was to make those colonies reliant on manufactured goods from the Homeland so they wouldn't Rebel but Japan wanted to do things differently Japan wanted to turn Taiwan into an extension of the Homeland itself and that man that the Chinese people living in Taiwan now had to become Japanese and that meant an industrialized economy and so in 1895 Taiwan began their development from a poor region to a wealthy region the Empire of Japan had two big problems the first was that because they were industrializing they needed more resources in order to get those resources they decided to take them from other people while Taiwan did not have a lot of resources by today's standards it was enough for a country early in developments such as Japan the second big problem Japan faced was that they couldn't produce enough food for all their people since Japan industrialized its people became healthier healthier people live longer and when a country's people live longer they keep making babies and then the population of that country increases but Japan didn't have a lot of Farmland so it wanted to use Taiwan as a food producer to feed the Japanese people luckily for Japan Taiwan was already a Sugar Factory so Japan decided to improve upon on the agriculture that already existed they built new irrigation systems introduced new and better crops and they constructed railroads to transport all these Goods under Japanese rule Taiwan would remain a largely agricultural economy but a relatively industrialized agricultural economy by the 1930s over half of all the food grown on Taiwan was exported to other parts of the Japanese empire and as a result the Taiwanese people had more money and because of all this new food Taiwanese people had a better diet thus increasing their overall health and a healthy worker is a productive worker so the next thing Japan focused on was creating sewer systems sanitation and health care services next was education all these new systems needed skilled workers to operate them so they set up primary schools high schools and universities to teach Taiwan about the latest Technologies so they could use that knowledge to develop Taiwan further education mainly focused on medicine engineering and science Taiwan soon got electricity and Japan started building factories on the islands such as for cheap textiles and chemicals and when the Japanese empire expanded Taiwan got more customers and with more customers they could grow their industry and what is important here is that the wealth created by these factories didn't just go to the Japanese the local Taiwanese were encouraged to participate in this new industrial economy from the Japanese perspective if the poor Taiwanese people became wealthy Japanese people then they had a more productive economy and throughout the time it was Japanese Colony about 60% of the industrialization was in the hands of Taiwanese people themselves from an economic perspective Taiwan was doing well and by the 1930s Taiwan had become the second richest region in East Asia After Japan itself its economy was growing at around 2% per year which isn't a lot in today's world but for the early 20th century the this was huge though that said Taiwan was of course still a colony and they suffered various crimes against humanity and when Japan joined World War II Taiwan would get more factories to support the war effort but in the end Japan lost the War Chapter 2 Independence as part of Japan's defeat it was forced to hand over their colonies back to their original owners in the case of Taiwan this meant the island was handed over to China when the Chinese government first arrived on Taiwan they had basically no idea how to run the island the Chinese bureaucrats had no experience running an economy as advanced as Taiwan and remember that Japan's education in Taiwan mainly focused on science so when the Japanese left there was almost nobody left who knew anything about politics and after the war all the Japanese officials went back home to Japan if you're curious as to why you need people with a high level of educ a to run a country look at what happened in Taiwan after World War II as a result various important industries began to fail in Taiwan without Japanese Machinery Taiwan couldn't grow enough food without Japanese loans people didn't have money to start new businesses and without Japanese doctors they couldn't even run vital Medical Services in short Taiwan had become reliant on Japan and now that it was independent it needed to train its own people to replace the Japanese and everything became worse in 1948 because in 1948 the Chinese government lost the civil war against Communists mainland China would become communist China and Taiwan would become the Republic of China or rooc for short as a result of this loss Taiwan couldn't even rely on support from mainland China anymore and soon the Communists would try to cross the sea and Conquer The Island as well and so the goal of the government became survival somehow Taiwan had to find a way to survive a war against China and Taiwan found two solutions the first was to Ally itself with capitalist nations in their struggle against communism and so they received military support from the USA but most importantly for this video they received money from the USA money which Taiwan desperately needed the second solution was to make Taiwan economically powerful you see even though China had millions of people to fight a war Taiwan had much better technology and if Taiwan could develop a powerful industry then it would be able to produce enough we weapons to prevent a Chinese Invasion after all if Taiwan had tanks jet fighters and warships then China could never beat them with an army of mainly foot soldiers so that leaves the question how could Taiwan get rich they looked at what they had available to them Taiwan has deposits of coal Limestone marble Dolomite and natural gas but it does not have a lot of it the only thing Taiwan had a lot of was farmland and so the first thing they did was on producing more food and for that they needed to train people how to run a large Agriculture and so they sent people to other countries to learn how to farm they took back all the Farmland owned by large Japanese companies and handed them to Taiwanese citizens and they limited how much land a single person was allowed to own the goal of this strategy was to encourage competition you see when a couple of companies own all the Farmland they don't have a lot of competition because they only have a couple of large competitors and when you just have a couple of competitors then it's best to not innovate too much because if you start innovating then your competitor starts innovating too and if your competitor starts innovating then they might do it better than you and then you might go bankrupt so it's best to stay safe and don't do too much Innovation and just make easy money but if you have thousands of small farms then you will have to compete with every other Farm out there and when you have so many competitors there will always be someone trying to innovate so if one farmer for example buys a tractor then they can produce a lot more food other Farmers see this and will buy their own tractor as a result the entire industry is innovating if you want to see a modern example of this look at the shipping industry there are a lot of innovations that they can adopt that will make shipping via the ocean more efficient for example using big data you can create an algorithm which predicts when an engine pot will be broken or not if you repair it early the engine will last a lot longer this technique is already being used in trains trucks and airplanes but the shipping industry is just now starting to get around to it why did they not innovate because the shipping industry is dominated by just three players and they only began adopting these techniques when the governments told them to reduce their CO2 emissions not because of competition chapter three an independent economy by the early 1950s Taiwan already had enough food food for itself and started exporting to other countries again but it's very difficult to get rich just off of selling food after all the computer I use to write this script on costs more than all the food I eat in a year so selling one high-tech product is worth more than hundreds of food items so taiwan's goal became to produce more advanced products which were more profitable but what industries to invest in luckily Taiwan already had some development under Japanese rule they had good agriculture cheap textile Industries and the simple chemical industry these are all good Industries to have but they won't help you to grow your economy after all if you start eating twice as much you don't become twice as productive in fact quite the opposite will happen so producing more food won't help to grow your economy Beyond just selling food but there are a lot of basic industries that will help you create new Industries one of these are basic chemicals which Taiwan already had these chem chicals can be used for anything such as cleaning agents industrial processes or fertilizer Taiwan was growing a lot of food and if you want to grow even more food you need fertilizer so Taiwan created a new company with a super unique name Taiwan fertilizer in 1946 as a result taiwan's agriculture started growing even faster but if you've ever looked at Taiwanese people you will know that they are quite skinny so most of that food was exported abroad Tai one had a cheap textile industry but cheap textiles are cheap while expensive textiles are expensive but more expensive textiles require certain types of chemicals so they once again use their existing chemical industry to upgrade their textile industry and lastly Taiwan had a Light Industry creating simple products and they created new factories making more complex items such as appliances like toasters and cattles after World War II A lot of people were looking to buy these households items to make life easier meaning they had lots of customers many of these large companies were owned by the government they would have to turn a profit but they were controlled by the state however Taiwan encouraged people to set up their own smaller businesses which would buy from these government-owned large businesses for example someone starts a small farm they need fertilizer so their small privately owned company buys fertilizer from a large state-owned company and there were thousands of these small businesses buying from one large business by controlling the company that everybody buys from the company could steer the economy into the direction they wanted it to go while allowing people to start their own businesses this type of economic system is called State capitalism but all these new Industries needed new workers luckily for Taiwan they had two advantages the First Advantage is that they lost the Chinese Civil War as a result around 1 5 million people fled from China to Taiwan and these 1.5 million people needed a job so they started working in these new Industries the second Advantage was that Taiwan was very fertile when they started using fertilizer and modern Technologies they needed a lot less people to work on a farm for decades the amount of farmers in a population dropped from 56% in 1952 to just 5.1% in 2009 and as Taiwan industrialized it had a steady supply of new workers coming from the countryside moving into the cities looking for work while at the same time the total amount of workers doubled between 1950 and 1970 but to set up factories you don't just need people you need smart people educated people but the Taiwanese had relied on Japan for education so they would send students all over the world to learn at the best universities when they came back they set up new businesses help run the government and work in schools and to make sure as many people as possible actually went to school they set up scholarships for poor people to get educated because a person who is born into a poor family will likely remain poor as an adult no matter how hard a person might try it's usually impossible for them to improve their income if they were not given the tools to do so early in life and so by providing poor people with education you will increase future tax revenue and you decrease the cost of poverty such as a lower crime rate basically investing money into poor people so they stop being poor is one of the best investments a government can make chapter four upgrading the economy by the 1960s taiwan's economy was growing its population was increasing and its level of Education was improving and when your economy does well have lots of new people and they are all quite well educated then you are able to to upgrade your economy to more high-tech products and that is what Taiwan did but what high-tech products should they focus on well they were already producing appliances and appliances are a type of electronics so the government decided to invest in more complex Electronics such as radio electric components or machine parts all these new businesses and electronics needed steel so taian invested in a steel mill and steel is used in almost everything your computer has a steel frame ships have a steel Hall and buildings have a steel Foundation meaning that with access to more steel Taiwan could produce more industry and those Electronics need Plastics and to make Plastics you need to refine oil so they built an oil refinery in the 1970s Taiwan had a lot of small oil fields and used that steel to make oil rigs and when you turn oil into Plastics there are a lot of waste materials these waste materials can be turned into petrochemicals and you need petrochemicals for almost anything from paint to synthetic clothing and it just so happened that Taiwan had a textile industry a textile industry which could produce higher quality clothes using Plastics and petrochemicals these products were more valuable thus making more profit and thus essentially upgrading their economy once again using a giant state-owned company to create smaller private companies but there was one problem Taiwan didn't know how to do any of this and so they asked foreigners to help them developed regions such as Western Europe North America and Japan had much higher salaries with higher salaries comes higher cost and with higher cost comes higher prices Taiwan however had much lower salaries so Taiwanese products were usually cheaper and by now Taiwan had developed enough that it was possible to build modern Industries on the island and so companies either set up a new Factory or move the current factory to Taiwan the government helped this process Along by handing out cheap loans to companies who wanted to upgrade their factories these factories were then protected from competition by putting extra taxes on foreign products that way even if your Taiwanese product was more expensive to produce it would still be cheaper for consumers because it didn't have an extra tax these companies would then grow because they could be sure they always had customers in Taiwan and once they became as efficient as foreign Industries they would begin selling to other countries because Taiwanese wages were lower they would eventually outcompete Western companies with lower prices at that point some of those Western companies start going bankrupt because they simply can't lower their prices even further because of higher wages as a result Taiwan would have less competition and sell to even more people around the world and this was a strategy that would be repeated over and over and over over again with every new major industry Taiwan created this would have two major advantages the first is that by producing more products themselves they didn't have to spend this much money importing goods from abroad and the second is that while Taiwan now produced a lot of low and medium Tech products they didn't have any high-tech Industries like computers by selling more valuable products they had more money left over to buy these high-tech products they needed from other countries during the 1960s Taiwan moved away from agriculture towards industry and the average growth rate reached 9% per year in the 1960s to over 10% in the 1970s and as a result in the' 70s Taiwan had a healthy economy growing at a rapid speed and if they wanted to keep that growth Taiwan would have to export more products Taiwan had the industry but not the infrastructure and so first they upgraded their rail system electric trains were better than Co or diesel trains then they built a freeway allowing trucks and cars to travel anywhere a train could not in order to actually export these Goods Taiwan built one airport and two sea ports but a port needs ships and ships need steel so Taiwan built a shipyard and an extra steel mill they built an oil refinery because you need oil for almost anything and lastly Taiwan constructed a nuclear power plant because uranium is relatively easy to get and so switching to nule nuclear power meant the country had to import a lot less energy like oil and gas and of course all these new Industries required new machines a lot of new machines so many machines that Taiwan decided to build their own machines and thus Taiwan created a heavy industry creating the machines that create everything else and the island is perfect for exporting this Machinery you see Heavy industry is heavy and it's difficult to transport heavy things but because taiwwan is a small island it meant that almost everywhere you are you are close to the Sea and once you put heavy things on a ship you can transport it almost anywhere for a very low cost exporting heavy industry became so easy that it accounted for a third of the total exports in 1981 and 82% in 2011 by the end of the 197s Taiwan no longer relied on forign 8 it had become so rich that it could stand on its own it now had enough production that it could buy all the goods from abroad that it needed or just produce it themselves chapter 5 liberalization all these new Industries needed new workers but in the 1980s this became a problem for Taiwan up until this point Taiwan got new workers for their factories from the countryside as agriculture became more efficient fewer people were needed to grow food and so people moved from Farm work to factory work but by the 1980s most people had already moved into the cities and the new workers from the countryside started to run out as a result Taiwan had a very low unemployment and this is a problem to show you why low unemployment is bad let's have a look at history scope as a business in 2022 I decided to hire more people to make more videos eventually I found two amazing animators a researcher and an audio editor and as a result in 2023 we created seven videos compared to just four in 2022 and we're planning to do a total of 10 videos in 2024 but I was only able to hire them because they were looking for a job if they already had a job somewhere else I wouldn't have been able to expand history scope and we would still be making three to four videos per year but thanks to unemployment I was able to expand history scope and because history scope expanded we earned more money and because we earned more money the Dutch economy has grown taiwan's unemployment had been between 2 to 4% for most of its history as an independent country however in the 1980s it ran out of workers and unemployment began reaching 0% so if you wanted to expand your business or start a new one then you had almost nobody to hire but if your business requires at least two people then you can't do it so if Taiwan wanted to create newer and more advanced Industries it would somehow have to find new workers and luckily for Taiwan it found two solutions to this problem the first solution was automation if your company buys machines to do the work of humans then you have to hire fewer humans as a result those humans get fired and if your economy is well organized they will quickly find a new job at a new company the second solution was to Simply close down less efficient older Industries because in the 1980s China opened their economy to the outside world and allowed foreigners to set up factories in China Chinese labor was cheaper than Taiwanese labor and its people much less educated so a lot of companies which hired low-skilled labor moved their factories from Taiwan to China so the old Industries such as basic chemicals cheap textiles and appliances moved out of the country and all those workers now had to look for new jobs while Taiwan was an expensive country for cheap clothing it was a cheap country for expensive components and so countries like Japan were looking for a cheap place to make computer parts for Japanese computers after all if you already used to make radio components it's not that much more difficult to make computer components and so those people who had lost their old jobs found new jobs in more advanced Industries these jobs generally had higher salaries so in the end most people were better off and as a result Taiwan once again upgraded their economy to more technologically advanced products in the 1980s machinery and electrical Goods became the dominant Industries in Taiwan and by 1993 taian would produce half of all monitors motherboards and image scanners in the world but if you want companies to invest in your country and buy your products those companies want to make sure that your country is stable for most of taiwan's History it was a dictatorship with riged elections but dictatorships are famous for being unstable countries so in order for Taiwan to keep being an attractive place for foreign businesses and to appease their own people the government started a large anti-corruption campaign citizens were allowed to access government documents high ranking officials and even the president's own relatives were put in prison and new political parties were allowed to join the government and as part of this process the government decided to sell most of the state-owned companies to private citizens the government hoped that if companies are still focused on making profit there is less corruption than when a government controls a company chapter six computerization Taiwan in the 1990s faced two new major issues the first issue is that Taiwan had been stirring the economy by owning some of the largest businesses on the island if you sell those companies you have no control over them anymore and how are you going to steer the economy without that control the second issue was that in the 1990s Taiwan had almost caught up with developed countries up until the '90s Taiwan could simply copy the things that worked in rich countries but when Taiwan caught up they had nothing left to copy anymore and they now had to discover on their own what was the best way forward and these two issues could be solved with one solution company alliances companies would be forced to work together to invent a new product which none of them could make on their own a good example of this is the Taiwan new power PC Consortium established in 1993 they included various computer companies both from Taiwan as well as abroad Taiwan had already been producing computer parts such as motherboards microchips and computer screens but it did not have its own fully assembled PC that it could sell so this group was given the task of creating a PC that was able to compete with the computers created in Japan Europe and North America 2 years later they completed that task all the companies that had worked together in the alliance received a patent to this product and they were all allowed to start selling them and improve upon this design the first Taiwanese made computer would be the foundation for future research some companies focused on faster processes some on better computer storage others on better graphic cards each company would focus on improving a different part of the computer until by the 21st century they were each selling completely different types of computers or computer components with so many different computers the companies had lots of competition between them which in turn forced them to invent even more Advanced Computers this strategy of company alliances creating a standard product which each company could improve upon was so incredibly successful that by the 2020s Taiwan had Advanced so much in the field of computers that it's able to create the most advanced computer chips in the world this strategy was repeated over and over and over again in Taiwan it became so popular that special science Parks were created where experts could come together to create the products of the future and while countries like South Korea China or the USA have large companies like Samsung tensent or IBM which do this type of research taiwwan on the other hand has a lot of companies working together and improving upon the designs they made together this allows people to share more knowledge and as rule of acquisition number 74 clearly states knowledge equals profit the more knowledge you have the more profit you can make so when multiple large companies work together they generally gain more knowledge than if one giant company does all the research on their own and so Taiwan is able to compete with countries with much larger economies than its own by simply being Smarter with how they organize their economy to give a few examples of this in 2011 Taiwan became the number one supplier of motherboards notebook computers tablet computers personal navig ation devices electric wheelchairs and mobility scooters but in order to sell so many products to so many countries you need to have good relationships with foreigners but until the 1990s Taiwanese people were simply not allowed to leave the country the government feared that the people who were educated would move to a much richer country and get a better paying job there they also fear that if people live in a free country and come back to Taiwan they might want those freedoms in their own country so the government put restrictions on who was allowed to leave the country but by the 1990s Taiwan was no longer a poor country and its elections were becoming free there simply wasn't much reason for a Taiwanese person to flee the country anymore and in the '90s they traveled all over the world going where no Taiwanese was allowed to go before some went as tourists some as workers and some went as students but most of them eventually come back to Taiwan and they bring all the knowledge and experience they got from foreign countries back home and because Taiwan relies heavily on small and medium Enterprises a lot of people would start their own companies using that foreign knowledge and foreign ways of doing business these Taiwanese companies that were created using foreign knowledge were incredibly popular with foreign customers to give you an example let's say you become an adult in Taiwan and decide to study in Italy after 4 years of living among Italians you have adopted some Italian mannerisms you have learned Italian culture you have watched my video on Italian unification and you have learned how Italians do business then they go back to Taiwan and decide to start their own company unfortunately you have a lot of competition so you need to find something unique you can do to stand out and one of these things you know well are Italians so you decide to start selling Taiwanese products to Italian customers using all your knowledge about Italy to make your products as appealing to Italians as possible now imagine thousands of people returning to Taiwan every year from all over the world in other countries this would be an advantage but not that big of an advantage to show you why let's look at a similar country South Korea a few years ago I made a video about the modern history of Korea in it I talked about Koreans undergoing the same process they go abroad learn new things come home and use that knowledge in Korean businesses a good example of this is South Korean media such as K-pop and kramas they are incredibly popular and were created by people using knowledge and experience from Hollywood to create music and movies that appeal to Western audiences but in a country like South Korea the economy relies a lot more on large companies like Samsung and a large company simply isn't flexible enough to make their products designed specifically for each market Samsung makes products that can sell to anyone all over the world they don't produce a robot vacuum cleaner specifically designed to appeal to Muslim customers for example but Taiwan is different Taiwan has lots of small and medium businesses instead of giant companies and the smaller your business is the more you have to focus on specific customers that's because a large company has a lot more resources than you to give an example let's say I would start my dream job of making sweet sweet delicious chocolate if my chocolate looks very similar to a Twix then I am never going to be able to compete with them they simply have too many resources for me to even get close to level of quality but if I made a highly specific snack designed specifically to appeal to one group of people then I will be able to compete a lot better after all Twix isn't going to change their whole formula just because I took a few customers away from them and this same process has happened in Taiwan except Taiwan relies on small and medium Enterprises meaning they have a lot more of these types of companies selling highly specific products to a specific Market Market this strategy made taiwan's economy incredibly flexible because imagine organically grown chocolate became popular all of a sudden a large company would have to change all their machines and all their factories to make a slightly different formula but if I bake them at my own home then changing the formula is easy so while large companies can make products at a lower price small businesses can easily change and by focusing an economy around such small businesses Taiwan has created an incredibly flexible economy that can easily adapt to Major crises the 1997 Asian financial crisis the 2008 Great Recession and the 2020 pandemic were a lot less bad for Taiwan than they were for other countries going through the same crisis so if you do business with Taiwan you can be assured that no matter how bad the crisis gets Taiwan will always be a good place to do business as a result anyone in the world wants to be taiwan's business partner and thus Taiwan has more customers chapter 7 doing the same different things Taiwan never has enough customers their economy relies on export meaning their economy can only grow if more foreigners buy Taiwanese Goods but Taiwan needed more export more money more customers so in the 21st century Taiwan would adopt two new strategies the first strategy is trade agreements Taiwan in the 21st century produces some of the best computer products in the world while also having a lot of small businesses specifically targeting certain countries in order to improve this trade countries can sign a trade agreement in this agreement they usually lower taxes on goods from that country or make the rules regarding trade with that particular country a lot easier and the easier it is to trade the easier it is to find new customers the second solution was to Simply make new customers Taiwan in the 21st century was once again looking to upgrade their industry and this time towards the high-tech products we know and love today such as microchips once again Taiwan needed more workers and once again Taiwan decided to close down old Industries and move those workers into newer and more profitable Industries but this time those companies would not go to China because in the 21st century China openly talked about conquering Taiwan by moving Taiwanese factories to China they would only help their enemy to grow stronger so Taiwan instead looked at other countries and right next to them were a bunch of poor countries who wanted to get rich just like Taiwan had done countries like Vietnam the Philippines and Indonesia opened Taiwanese factories and the workers in these countries demand lower wages and as a result a product made in Indonesia is almost always cheaper than the same product made in Taiwan and just as Taiwan used to make electronic parts and sell them to places like Japan to turn into finished products in the 21st century was southeast Asia which made electronic parts to sell them to Taiwan such as for example Vietnam making hard drives and then in the end Taiwan turns them into finish products such as computers and sells them across the world but those Vietnamese Philippine and Indonesian workers now had a job in a factory which earned them more money than most other jobs in their countries and when people earn more money they spend more money they might to pick a random example decide to buy a computer a computer with computer chips made in Taiwan and as a result Taiwan now has extra customers while also having lower prices and in the future I can assure you that this trend will continue because this is what Taiwan has been doing for almost a century now Taiwan develops an industry and invests in its own future when the country is ready it upgrades that industry eventually Taiwan runs out of customers and decide to close down old Industries and simply move them to other countries while Taiwan focuses on newer and more advanced Industries a process that Taiwan has perfected over the last 80 years the strategy worked so well that between 1952 and 2011 Taiwanese workers have become a lot more productive going from producing just around $213 us worth of goods per year to over $20,000 worth of products in 2011 while the overall economy Rose from just 1.7 billion to 466 billion and so Taiwan had finally become a rich country and poor countries today often look at Taiwan to see how they can improve their own economy and this is why Taiwan is so rich if you enjoyed this video then please leave a like it really helps to show this video to more people and leave a comment discussing this topic or let us know other subjects you'd like us to cover we're always looking for new videos so let us know and of course subscribe if you want to see more history videos we upload almost every month now this was Avery from history scope thank you for watching