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Bureaucratic Autonomy and the Performance of Financial Reform: A Historical Institutionalist Analysis on Financial Liberalization in Taiwan
Janus-Faced State Autonomy,Financial Reforms,Network-Based Financial Discretion,Organizational Cohesiveness,Check and Balance among Factions,Bureaucratic Independence,Self-Restraining State.,
|Publication Year :||2008|
Why does the financial liberalization in Taiwan tend to engender crises? This thesis is an attempt at providing a coherent explanation by not only establishing a causal relationship between the bureaucratic autonomy and the performance of the financial reform but also by investigating the institutional factors that exert influence on the bureaucratic autonomy.
All bureaucratic systems are confronted with an inherent tension between autonomy and accountability, namely the “Janus-faced State Autonomy”. The strategy that the political and economic actors choose to deal with this intrinsic dilemma determines the performance of financial reforms. Although emphasizing on the organizational cohesiveness of a bureaucratic system strengthens the bureaucratic autonomy of the system, it nevertheless weakens the power of check-and-balance on policymaking and therefore heightens the risk of power abuse. In contrast, laying stress on the internal checking mechanism, which erodes the countervailing power of the bureaucratic system that aims to protect the bureaucrats from the external intervention, may result in policy distortion or penetration by various social interest groups.
Due to the alien nature of the émigré regime and the consequent (sub)ethnic cleavages between the settlers and the locals, the KMT regime, after arriving at Taiwan in 1949, did not hesitate to nationalize the financial system and to exert the despotic coercion power so as to avoid rent-seeking from the societal groups; on the other hand, the regime assigned the bureaucrats from different party factions to critical positions in the financial and banking systems, anticipating that the competition among factions would rule out the possibility of power abuse. This kind of financial governance, which is based on the informal institutional factors such as factionalism and the émigré regime characters, namely “Network-based Financial Discretion(NBFD)”, successfully retained both the organizational cohesiveness and the internal check-and-balance in the bureaucratic system and therefore guaranteed the bureaucratic independence and prudence in the process of financial reforms.
After the end of the Cold War and with the loosening authoritarian rule in Taiwan, the ruling clique of the KMT regime, under the pressure of the political succession struggle, decided to improve the organizational cohesiveness of NBFD. With the Central Committee and Business Management Committee as the pivot, the KMT regime dictated the financial liberalization in 1990s by the “party-bureaucrat-business” trinity. However, while the highly cohesive bureaucratic system enjoyed high independence during the process of financial policymaking, it was haunted by the party-state corruption.
Benefiting from the division within the KMT, DPP unexpectedly came into power in 2000. Without the experiences of running a country and coordinating with the bureaucratic elites, the DPP government widely formed alliances with politicians, business entrepreneurs and scholars outside of the bureaucratic system. Although such kind of coalition strategy brought about the unintentional side effect that recovered the internal check-and-balance of NBFD, the DPP government never made enough effort to devise proper mechanisms to solve the ideological differences, policy disputes and power struggles within the state apparatus. It is the internal conflicts and the inconsistent policies, which compelled the financial bureaucrats not only to be over- self-restraining but also to withdraw from performing the indispensable regulatory capacity required by the financial liberalization, that gave rise to the crises of policy distortion and penetration by external forces during the “Two Rounds of Financial Reforms”.
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