Making Money uncovers the eventful history of Taiwan's small and medium-sized firms (often called “enterprises” and shortened to SMEs) from 1965 to the present while offering provocative sociological hypotheses about the evolution of global capitalism over the past half century. Part one follows the spectacular rise of the export industry and its peculiar integration with Japanese and American “big buyers,” resulting in a dynamic of “demand-led industrialization.” Part two follows the same Taiwan entrepreneurs to mainland China, analyzing the role of Taiwan capital in the Chinese economic boom. Overall, it is an excellent work.

Gary G. Hamilton and Cheng-shu Kao challenge the existing “developmental state theory” framework that dominates most studies on East Asia (p. 13). Such literature has stressed the role of state administrative guidance, bristling at the suggestion, voiced in the World Bank's 1993 report, that East Asia constituted a “miracle” of free market growth. Although Taiwan's economy was characterized by protectionist policies, state monopolies, and national support for large firms such as Formosa Plastics, scholars have also recognized that such measures mostly shaped the domestic sphere. Internationally, Taiwan's exports were driven by the SMEs that operated in relative freedom (no single definition of “small” is given, but we learn that 90 percent of Taiwanese firms employed fewer than fifty people). It is the experience of these private firms that Hamilton and Kao uncover through more than eight hundred interviews conducted over thirty years. To my mind, Hamilton and Kao are perhaps too strident in their rejection of “developmental state theory,” and a more nuanced analysis of the interplay between private and state activity could enhance their arguments. Nevertheless, they have produced a highly readable and valuable account of Taiwanese industry through the eyes of its entrepreneurial class.

Two background chapters describe postwar changes in Taiwan and the North Atlantic world, whose markets came to rely upon consumer goods from Asia. The most useful chapters are 3 and 5, which introduce the concept of “demand-led industrialization.” For much of the twentieth century, business historians presumed that capitalism would naturally reward larger vertically integrated firms, manufacturers that could dominate the marketplace. The classic examples were Alfred Chandler's studies on conglomerates such as American Tobacco and Standard Oil. Taiwan's integration into global markets, however, represented a reverse movement. As small firms responded to contract orders from Japan and the United States, the supply chain remained decentralized. For instance, when the baseball factory Ta Yang signed an order with a Japanese buyer, it partnered with local leather and cork suppliers to coordinate a network for the supply and assembly of component parts. Each firm remained independent, only manufacturing when it received a contract from the buyer, which then sold the baseballs under its own name. The same network structure underlay the production of other globally recognizable brands in the personal computer (Dell and Gateway), bicycle (Schwinn), and athletic footwear (Adidas, Reebok, Nike) industries. Such networks retained the flexibility to expand, contract, and shift to new products more efficiently than their large, vertically integrated counterparts, explaining Taiwan's competitive successes.

Part two explores how such principles contributed to the ongoing boom in China. Chapter 6, a background chapter, describes how the Plaza Accords reduced the competitiveness of East Asian economies, encouraging Taiwanese and Hong Kong industrialists to open new factories in the Pearl River delta and near Shanghai. This chapter is followed by several case studies, with special attention given to the consumer electronics industries (chapters 7 and 9). Hamilton and Kao claim that Taiwan entrepreneurs thrived precisely because they remained flexible and responsive to global fashions. They make the valuable methodological point that no economic “miracle” is ever truly national in nature, and China is no exception: the majority of its export industries are owned by foreign capital, mainly from the Four Asian Tiger economies plus Japan. As with that earlier generation, China's boom is best conceptualized as a product of broader global activity.

Many readers will recognize in these themes of flexibility and just-in-time delivery an older literature on the so-called Japanese lean manufacturing model made famous by studies on the Toyota system. It is a bit disorienting, then, to read Hamilton and Kao sing the praises of Taiwan's industries in comparison with those of Japan and South Korea, even as they borrow concepts from the study of those other countries. At times, it appears that the Taiwanese firms’ differentia specifica is their small size and lack of vertical integration, but after moving to China, Taiwanese firms such as Pou Chen footwear began opening massive campus-sized operations and integrating component industries (yitiao long) in a manner analogous to the Japanese keiretsu. Just how different were these? Indeed, the book plays up the theme of Taiwan's uniqueness, raising other examples mainly to posit what Charles Tilly called “individualizing comparisons.”1

A fundamental tension in the book's analysis, then, is between Hamilton and Kao's attempt to explain Taiwan's particular trajectory versus the general sociological theory they seek to substantiate, namely, the book's eponymous concept of “making money,” a modified version of Max Weber's “capitalist spirit.” Hamilton and Kao confess they can only define this spirit in basic terms, as the rational, calculative pursuit of profit and wealth. They could provide more temporal and spatial depth to the concept, lest they tempt comparisons with the naturalized homo economicus of neoliberalism. The reader is unsure how far back in time, and how geographically widespread, this “economic way of life” extends. For instance, if “making money” explains the rise of Taiwan industry, was that spirit lacking in Japan and South Korea? If not, then how useful is this minimalist Weberian framing for their story in the end? Such questions are not meant to challenge Hamilton and Kao's claims but instead to help sharpen their arguments about the specificity of Taiwan and the generalizability of their case analysis.

This book could have benefited from more editing, especially in the Romanization of Mandarin terms. Further, Hamilton and Kao's story is a celebratory one that noticeably downplays uncomfortable topics surrounding the rise of Taiwan's industries, for instance, labor disputes, mainland-Taiwanese tensions (the authors sometimes refer to Taiwan as part of “Chinese” culture and other times not), and the gender dynamics of family and factory production explored by others. It would be a valuable exercise to integrate those stories with the analysis of Making Money. Nevertheless, this work succeeds on its own terms, as an economic sociology and history from the perspective of Taiwan's business classes. Its clear argumentation and vivid case studies will prove invaluable for both classroom teaching and future research.



Charles Tilly ,
Big Structures, Large Processes, Huge Comparisons
New York
Russell Sage Foundation