THE first decade of Nationalist exile on Taiwan produced material results that come close to justifying the claim that the island has become the show window of Asia. Peasants working their rice in gaily colored plastic raincoats, tilling their fields with mechanical rotary hoes, and patronizing village shops that overflow with consumer goods are the outward signs of the good times.

Statistics confirm this visual evidence. Agricultural production is up by more than 50 per cent; industrial output has trebled; school attendance has reached 95 per cent. It is without doubt a singular record of growth under conditions of extraordinary difficulty, including the constant threat of war and invasion. It was facilitated by a vast American military and economic aid program costing nearly $3 billion, but it could not have been achieved without the skill and honesty of a large number of sophisticated and dedicated exiles from the mainland in whose capable hands the aid was efficiently administered.

Today, in this first year of the second decade of Nationalist exile, when external threats are as serious as ever, Taiwan faces a future in which internal physical limitations are in conflict with human needs and slowly awakening political desires. The island is 240 miles long and 90 miles wide at its broadest point, but rugged mountain ranges, with many peaks rising above 10,000 feet, confine the arable areas to a narrow western plain. The soil is rich and the climate benign, but even two or three crops of rice and vegetables a year, the scientific application of fertilizers, and the cultivation of new and better crop strains are no longer sufficient to cope, in terms of food production, with the increasing population, which now totals approximately 11 million.

A typhoon in August, 1959, reduced to bedrock several thousand acres of the island’s best riceproducing land. This disaster, coupled with a drought early this year, revealed somewhat prematurely that Taiwan has become a food deficit area. This was a nasty shock. For, by the importation of 200,000 to 250,000 tons of wheat each year from the United States, the rapidly mounting ascendancy of population over agricultural production had been concealed. Even assuming continued wheat imports in similar quantities, within the next two or three years rice will have to be imported at a cost of roughly a hundred dollars a ton in precious foreign exchange.

The need for industry

This situation will inevitably shape the economic, and probably the political, future of Taiwan. If the burden is not to become insupportable, Taiwan will have to push on rapidly with industrialization. Superficially, the prospects seem bright enough. Hydroelectric power and labor are both cheap. The price of electricity to the consumer is 1.2 cents per kilowatt-hour, compared with 2.5 cents in Hong Kong and 1.5 cents in Japan. A skilled worker earns only $1.25 a day. The island thus possesses the means to underprice its rivals on the U.S. market, and its success in unfinished fabrics is one example of what can be achieved.

Installed power capacity is now only slightly more than 700,000 kilowatts. When all current hydroelectric and thermal power projects are in operation, perhaps by 1963, Taiwan will have an output of 1,250,000 kilowatts. It is questionable, however, whether the power will continue to be available at the existing prices. The rates are calculated to yield a return on evaluation of assets dating back to wartime and pre-war Japanese occupation. And in the great new dams that are appearing in the mountains, nature has been singularly unkind — and costly. Taiwan’s crust is as full of holes as Stilton cheese, and time and again after dams have been built, the water has leaked away through unsuspected cracks and fissures, thereby adding heavily to estimated costs.

The military burden

Although able and efficient General Chen Cheng, the Vice President and Premier, is convinced that the pressing economic needs call for substantial industrial development, Generalissimo Chiang Kai-shek, who is still the absolute ruler, is concerned with economic and political problems only insofar as they are related to military efficiency and planning. There is, therefore, a built-in, if unexpressed, resistance to making Taiwan too self-contained, since self-sufficiency might breed the twin evils of apathy and complacency, thereby sabotaging the doctrine of return to the mainland.

Despite the evident urgency of the economic situation, the government needed constant prodding by U.S. authorities in Taiwan to produce a serious developmental plan. It was published early this year and called for a balanced budget, banking reforms, and the encouragement of foreign capital. Even now, however, most of the plan is still merely in the talking stage. The prospects for a balanced budget are slim. The banking system is not designed to serve foreign investors, and the only foreign bank, which was set up specifically for trade agreement purposes, is Japanese. And finally, foreign investment looks either for security or quick profits, and so far it has seen the prospect of neither in Taiwan.

One obvious economy could be made by cutting the size of the military forces from their current strength of about 630,000. The Army has never looked better than it does today. It is the best-nourished, bestdressed, best-equipped part of the community, but it does contain a rising proportion of overage mainlanders whose retirement would improve the quality of the force.

Any meaningful move in this direction is inhibited by two factors: Chiang’s own sense of loyalty to the men who followed him from the mainland, and the mystique which rejects the reduction of both the Army and the bureaucracy to the point where they would be large enough to embrace only Taiwan within their compass.

The dogged determination with which Chiang has resisted all Washington pressure to rationalize his position on the offshore islands, especially on the Quemoy group, where he has a third of his effectives deployed, flows from this mystique. Quemoy grows more heavily fortified and more strongly defended every year. To retreat militarily from the island now would be to retreat politically into the concept of “two Chinas,” which is anathema to Peiping and Taipeh alike. Chiang is therefore determined to stay in the offshore islands and to suppress any political moves in Taiwan that seem likely to foster the two-Chinas heresy.

Mainlanders and Taiwanese

The palliative of rising living standards and the fact that the presence of the mainlanders on Taiwan kept out the Communists served to appease the native-born Taiwanese during the first decade of the Nationalists’ government-in-exile. Chiang ruled by a judicious mixture of police controls and cautious political compromise. It is true that there were tensions and strains in the relationship between the Taiwanese and the much more sophisticated mainlanders, but these were not acute.

Elections have not always been completely honest, but there has been none of the ballot stuffing that precipitated the downfall of Syngman Rhee in Korea. On the contrary, the Kuomintang, in nominating candidates in provincial, county, municipal, city, and township assemblies, has usually been shrewd enough to prefer Taiwanese to mainlanders and potential vote winners to party stalwarts.

The result is that the membership of the provincial assembly is now 90 per cent Taiwanese, and though its decisions are subject to Cabinet review, the realization among influential mainlanders that the Taiwanese will one day hold the balance of power is reflected in the Cabinet’s use of compromise rather than the veto.

On the national scene, the Taiwanese have little voice. Of the 1576 members of the National Assembly, only 26 are Taiwanese. However, there are now two Taiwanese members of the 15-member central standing committee of the Kuomintang, and the present Minister of the Interior, Lien Cheng-tung, is Taiwanese by birth.

Long before events in Korea lowered the political flash point in Taiwan, the Kuomintang was realistic enough to understand that controls needed to be balanced by reforms if the mainlanders and the Taiwanese were ever to establish an identity of purpose — the purpose being, of course, to oppose the Communists and return to the mainland.

In pursuit of this objective, indoctrination begins in the kindergartens and continues through the secondary schools, the universities, and the Army, where Taiwanese youths are required to do a two-year stint. To the extent that Taiwan is genuinely anti-Communist and has no wish to sample Communist rule, the Kuomintang has succeeded, But indoctrination has failed, even among some mainlanders, to prevent a growing consciousness of the need for creating something more than a military base on Taiwan.

The new opposition

This concept is not quite an acceptance of two Chinas, an idea which most Taiwanese seem to reject as too utopian for practical consideration, but it is close enough to have caused the gravest official apprehensions when two mainlanders of some consequence, Lei Chen and Li Wan-chu, joined with a Taiwanese, Kao Yu-chu, in sponsoring a new opposition party.

Two such parties, the Young China Parly and the Democratic Socialist Party, are officially recognized. The new party began life after the elections earlier this year as an “election reform group,”and in this guise conducted a number of public meetings in the major cities. Arguing that the Constitution provided for freedom of assembly and expression, it deliberately flouted the martial law requirement that any gathering of more than seven people should be cleared by the military authorities.

While the authorities publicly expressed indifference to the group’s political activities, many officials privately indicated their concern. In their view, the absence of parliamentary machinery through which the new party might challenge the Kuomintang in the National Assembly did not preclude the use of extraparliamentary methods of the Korean type. Moreover, there was concern with what seems to be a new fearlessness among the Taiwanese, who are increasingly critical about such grievances as taxation without adequate representation.

The public announcement early in September that the new group would henceforth be known as the China Democratic Party precipitated action by the secret police. Lei Chen, a former adviser to Chiang Kai-shek and publisher of the outspoken Free China Fortnightly, was arrested, charged with sedition, and sentenced to ten years. Officially, the charges were not related to the China Democratic Party.

From the Kuomintang point of view, the arrest of mainlander Lei in preference to Taiwanese Kao, who made numerous Kuomintang enemies during his term as mayor of Taipeh, from 1954 to 1957, was expedient and superficially adroit. What the Kuomintang did not appear to grasp, however, was that Lei and the China Democratic Party were only the early rumblings of discontent which, though political in expression, is fundamentally economic in character.

The Nationalists are not yet faced with a major political challenge. For the moment, the largely apolitical Taiwanese, who lack the background of governmental style and procedure to enter the administration at the higher levels, find themselves better off in private life. What they want, and expect, is a continuation of the gratifying upward curve in national income and living standards that marked the first decade of Taiwan’s rule. The Taiwanese are gentler, less revolutionary than the Koreans, but in the threat to their rice bowl there is also a real threat to the Republic of China.