Five Lessons for Land Reformers:
The Case of Taiwan
Fred Harrison
[Reprinted from Land & Liberty, May-June,
1980]
The gap between the rich and the poor has been narrowing for the past
quarter century on Taiwan, and the country has prospered greatly under
the influence of a land reform which reflected concepts very similar
to the thoughts of Henry George. Elsewhere in the world, especially in
"third world" countries, the rich-poor gap has been
widening. Two such countries were Iran and Nicaragua where bloody
revolutions occurred during 1979. Several times in Progress and
Poverty, Henry George commented on the likelihood of such uprisings
under conditions of increasing income disparity.
The revolutions in Iran and Nicaragua surprised and shocked many, but
hardly surprised the people who were aware of the widening income
disparity. Considerable force was used to collect taxes from the poor
and this added to the rate of ferment. Furthermore, outside forces
were at work. The U.S.S.R. was busy stirring the revolutionary pot,
and the U.S.A. was supporting the Shah of Iran and the President
(dictator) of Nicaragua because they opposed communism. While history
seldom smiles on such revolutions, conditions sufficiently oppressive
continue to provoke them. Writing on land reform in 1960, Chen Cheng,
then governor of Taiwan, said:
"Hunger and starvation have
always bean with us. Desperate people facing starvation are likely
to take advantage of all opportunities to make trouble and raise the
standard of revolt. Students of Chinese history find that years of
civil commotion arising out of a poor harvest far outnumber the
years of peace. Eight or nine Out of ten such disturbances have been
caused by our failure to find a thorough-going and permanent
solution of the land problem."
Henry George had watched what happened in California in the land boom
days as land barons preempted huge tracts of land; and land was then
virtually the sole means of production. His argument was based on the
need to halt monopolization of economic opportunity, and he proposed a
way to do it.[1] He also studied the Irish
land question and said in no uncertain terms that Irish misery
resulted from grossly unequal access to the means of production, and
not from overpopulation. He began to express his ideas about 1860 in
news stories and editorials, and in 1871 published Our Land and Land
Policy. In 1879, one hundred years ago, he finished refining his ideas
and published Progress and Poverty, which had an international impact
and influenced history as far away as Taiwan.
Few reforms are ever realized exactly as first proposed, and this was
true of the Taiwan land reform. It does not strictly follow Henry
George in form, but it does so in spirit, and few reforms in all
history have worked as dramatically. Land was redistributed within a
free enterprise economy; incomes were brought closer to equality, not
by exterminating the rich but by building up the poor. Very few people
were hurt in the process. What happened in Taiwan resulted ftom the
fusion of Henry George's ideas with the ancient Confucian philosophy
of equality of opportunity, and with the thinking of certain German
land reformers who had also been influenced by Henry George.
Chiang Kai-shek, through the land reform, vigorously carried forward
the ideas of equalization of opportunity common to Henry George and
Dr. Sun Yat-Sun.[2] Farmland reform came
first, designed to vest title in the tillers, as was befitting in a
nation then almost solidly agricultural. Urban land reform came later.
Increment taxes were for some years applied only to urban land but
were extended to all land in 1973. They diverted to social projects
considerable sums which would otherwise have become the private
harvest of land speculators.
Land reform began with rural rent control and moved fast to
distribution of the public domain which the Japanese had unwillingly
bequeathed to the Chinese on retrocession. It included the best rice
land on the west coast. In accordance with Dr. Sun's principle of Ming
Shen, this was sold in five-hectare parcels to the peasant families
who had been tilling it. At the same time, rent control reduced to 37+
per cent of the rice crop the landlords' share on rented farms from 66
per cent or more. The law was enforceable because of the reservoir of
land in the Japanese domain which was offered for sale on long terms.
Terms of repayment were such that the farmer did not have to pay more
than 37+ per cent of his rice crop income. As soon as these laws were
partly digested, the government began to buy land from the landlords
and resell it to the tenants on similar terms so that no farmer had to
pay out more than 37+ per cent.
This affected the local economy more markedly and more rapidly than
even the most optimistic advocates had dared to predict. Dr. Sun had
long since pointed out in the Son Mm Chu-I (the Three Principles of
the People) that industrialization should follow, not precede, the
building up of the internal capacity to consume. The land reform did
just that. Farmers doubled their income when rents came down to 37-1/2
per cent; and, thus encouraged, proved again the truth of Henry
George's statement:
Give a man security that he may
reap and he will sow.
Assure a man of the possession of a
house he wants to build and he will build it. These are the natural
rewards of labor. It is for the sake of reaping that men sow; it is
for the sake of possessing houses that men build.
With the landlords brought to bay and with assured possession, the
farmers began to plant second crops of rice and intervening crops of
vegetables, thus doubling their income a second time. The four-to-one
increase had a multiplier effect throughout the Chinese economy. The
detailed sequence of the economic development is less important than
its impressive totality. Within a decade much of the island was
rehoused. Former adobe structures with thatched roofs and dirt floors
gave way to brick houses with tile roofs and cement floors.
Electricity was extended throughout the countryside: electric fans
spell the difference between comfort and discomfort in such a climate,
and they were an early addition to most country houses. Transportation
went through stages from rusty bicycles to brand-new shiny bicycles to
small motorcycles to automobiles. With each economic change came a new
industry, selling to an indigenous local market bicycles, electric
appliances, and later motorbikes.
Income equalization. For some time the World Bank has been computing
an index of income equality. The process is notoriously imprecise
because of the spongy nature of the input data, but in crude terms it
is revealing. As land reform took a firm hold in Taiwan, the income
per capita of the least affluent fifth of the population increased
relative to the income per capita of the most affluent fifth. The land
reform built the prosperity of the country from the bottom up. This
did not mean that the top was cut down. The top continued to rise, but
the bottom fifth rose so much faster that the gap between them
narrowed.
This is the first great lesson from Taiwan: proper allocation of
resources combined with the diligence of a naturally hard- working
population greatly improves the economic circumstances of the bottom
quintile. It does not totally eliminate poverty, but the general
benefit to the lowest quintile is spectacular. Taiwan is not a unique
example; the same principle was applied, with equally effective
results, in post-war Japan through the land reform of 1946, and very
similar results were achieved in South Korea.
Keeping people busy. The second lesson from Taiwan is related to the
first. At the start the country banned the importation of large
tractors. It recognized that it had surplus human power, limited land,
and a dearth of foreign exchange. The Chinese agricultural experts
reached the correct conclusion that more food could be grown by hand
and water buffalo from a hectare of land than could be produced by
large-scale mechanized farming. This fact has been demonstrated the
world over. Tractors and other farm machinery save man-hours of
labour, but do little else, and a country with a manpower surplus does
not need that.
Countries which imported large machinery accomplished minimal
increases in production, but faced the displacement of tenant farmers.
The availability of farm machinery holds back land tenure reform.
Large landowners can make more money by displacing tenants and
mechanizing, so they like the new arrangement. But displaced farm
tenants have no place to go but to the edges of cities where they
cluster in urban slums and where they have to be fed on the bounty of
those working.
When industrialization was far enough advanced, and a manpower
balance attained, Taiwan began to mechanize farms to release manpower
to industry. The second lesson is not to displace agricultural labour,
until the industrial sector has developed enough to begin to demand
it.
Political gains. The third lesson is political. Asian government is
sufficiently different from American that confusion results when
Chinese try to find adequate words to describe what goes on in America
and Americans find equal or greater trouble in trying to describe the
government of Taiwan. Americans are fond of political cliches and like
to sort systems into tidy categories, appropriately labelled, each to
its own bin. America has been prone to classify the government of
Taiwan as a dictatorship and to criticize the government and also
General Chiang Kai-shek accordingly. The Taiwanese central government
exercises more power over more things than the White House does in
America, although recent American administrations seem to have been
trying hard to catch up. Below the level of central government, Taiwan
is quite democratic.
Taiwan is more democratic than any Chinese government of the mainland
has been within recorded history, and far more democratic than about
100 of the 144 members of the UN. Dictatorships, incidentally, can
have broad popular support, as various powerful monarchs have proved
over the span of history; they can also be feared and tolerated only
because of the force at their command.
The Chinese government on Taiwan earned very broad-based support by
the land reform. The majority of the island's population were
peasants. Asia has a long memory, and the one-time tenant farmers
remember what life was like before land reform. The older generation
has told the younger. This has not altogether erased a lingering
uncertainty on the part of the "old islanders" towards the
newcomers who arrived in a rush around 1950; it has nevertheless left
a very comfortable power base for the island government. The Japanese
and Chinese mentality differ enough to suggest restraint in
generalization, but the same general result followed the land reform
in Japan. The third lesson is: A land reform which upgrades the
economic condition of the peasantry provides an important political
power base for the government that engineers the reform.
The raunchy reality. The fourth lesson is different, and has
sometimes been called the raunchy reality of land reform. The
landlords of Taiwan included the Japanese Land Company and a number of
ethnic Chinese, "old islanders," who had been active
Japanese collaborators, The Japanese deserved the unpopularity they
earned in Taiwan during their 50-year occupation and few Chinese tears
were shed over the acquisition of the Japanese public domain, The
collaborators had acted like traditional Asian landlords, They gave
only verbal leases, terminable at their pleasure. The rent was
nominally about two thirds of the crop, but the landlords, at least
the larger ones, employed estate agents who extracted from the local
farmers whatever they could, paid enough to the landlord to keep him
reasonably happy and pocketed the balance until the shifting of the
economic sand forced a landlord to sell, and the agent could buy his
way into the land-owning class, The small "village"
landlord, usually an ex-farmer or a farmer's widow, generally did not
use an estate agent but dealt with the tenants in an atmosphere of
mutual respect. The "big" landlord was an object of village
obloquy; the "village" landlord was an object of village
sympathy.
Most of the land was owned by "big" landlords and the
reform process involved their removal. In Japan they were bought out
in yen which promptly declined in value through inflation leaving many
of them stranded, too old to go back to work and unable to live on the
pittance inflation left them. In Taiwan, the landlords were
compensated in New Taiwan (NT) dollars, but the compensation contracts
were tied to a commodity base. The annual payment was computed in
terms of the number of NT dollars required to buy a certain quantity
of rice or sweet potatoes. This made the payment reasonably inflation
proof.
Collectively landlords invariably oppose land reforms. At the very
least it involves change, and change is always traumatic. To many the
prospect suggests the loss of financial position and social prestige;
they just cannot see beyond the first step. Landlords in Taiwan and
Japan were no exception to this rule. Some ex4andiords from Taiwan
still rail against the indignities heaped upon them by the government
and find some sympathetic ears in the US.
In the Philippines, the Senate, also landlord-dominated, blocked
reform which the House had approved, until about the time Marcos
declared martial law, disbanded Parliament, and pushed land reform
dictatorially. In Thailand the entrenched nobility and other
landowners have blocked a really effective land reform, although lower
echelons of government keep talking about it. In Nicaragua and San
Salvador, the land was owned by a handful of friends and relations of
the dictators, and the peasants were left to fester at the bottom of
the pile. The fourth lesson from Taiwan is: Land reform must be
imposed on the landowners by a central government strong enough to do
it.
The follow-through. In a country that needs a land reform the
peasantry usually depend on their landlords for credit to buy seed and
fertilizer, do other banking transactions and handle much of the
marketing. The landlords function in all these capacities. They are
often the rice millers, the bankers, and the local suppliers of
whatever is needed to make a crop. They also often are the sole
marketing vehicle. If this situation is not changed, the tenants
quickly come back under their influence and the landlords wind up
owning the land again in a short time.
In Taiwan, a system of cooperatives had developed in Japanese times
as a semi-underground movement. The cooperatives were bankers of a
sort, hiding wealth from the Japanese and providing other clandestine
services, and they developed strength and peasant confidence. When the
land reform took place, the cooperatives emerged and became the
dominant factor in supply, marketing, and local banking. They have
never enjoyed an exclusive monopoly; farmers can buy and sell from and
to whomsoever they wish, but the cooperatives generally offer the "best
deal." This has been a significant factor in making the land
reform "stick."
The tax system must also be designed so that the farmers are not
taxed out of their holdings. Rural taxes in Taiwan are almost entirely
on land and are kept at a level which encourages the farmers, and does
not in any way discourage them.
The fifth lesson is: To make a land reform "stick,"
marketing, supply, and credit facilities must be supplied so that the
farmers are not driven back into the clutches of the former landlords.
REFERENCES
1.
Our Land and land Policy advocated
that Federal Land grants should be restricted to bona fide farmer
settlers. Railroad land not yet distributed should he recaptured for
the benefit of the public. California's possessory laws should not
protect large holdings of dubious title, several of which were based
on rather shadowy Mexican land grants. Great aggregations of land
should be taxed at full value, like small holdings. There should be a
heavy inheritance tax. Financially weak persons should have some
exemption from the land tax.
2. See Chen Cheng, Land Reform in Taiwan,
China Publishing Co., Taiwan, 1961. Chapter lit an excellent summary
of the Chinese land reform background. The balance of the book is an
equally excellent description of the land reform, 1950 to about 1960.
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