The politics of financial development in Taiwan

This dissertation is written in the tradition of the latest resurgence in economic sociology. It intends to contribute to this literature by examining the political embeddedness of financial development in an East Asian newly industrializing country. I have tried to chart a position between free markets and state control of the financial system as against Taiwan's postwar experience. This effort helps to lay the groundwork for an economic sociology of finance that will broaden our understandings of the variety of ways in which the financial system can be organized with different kinds of consequences.; For many years, the discussion of the role of financial development in economic growth has been centered on the debate over "financial liberalization" versus "financial repression" in the implementation of financial policies in developing countries. The central argument of this dissertation is that neither free market nor central planning principles could adequately explain the making and unmaking of financial policies in developing countries. I will argue that what is missing from the previous analyses on the enactment of financial repression in developing countries is precisely the specific mechanism of the political embeddedness of financial development which this study tries to uncover: (1) legal framework of the state; (2) international context; (3) financial system as a social contract; (4) the interplay between politics and economy.; After a review of the existing theoretical frameworks in the first two chapters, I will examine Taiwan's postwar financial development to test the validity of the neoclassical diagnostics of the financial repression in developing countries. Chapter three will deal with the mobilization of savings in Taiwan. The allocation of savings in Taiwan will be analyzed in chapter four. I will then focus on the issue of economic adjustment in relation to Taiwan's financial reform in chapter five. The concluding chapter will summarize the theoretical and empirical findings of the previous chapters and make a few remarks on the implications of the Taiwanese case for the literature.