JPRI Working Paper No. 47: June 1998
KMT, Inc. Party Capitalism in a Developmental State
by Karl J. Fields

So how does a party get the money? You can collect fees from members, you can solicit donations or you can run businesses. I don't think soliciting donations is a good idea. Once you collect money from business, it's like a poison. It's my view that allowing political parties to run businesses is the best way for democracy, but you have to have some kind of control or restrictions. The difference between the LDP and the KMT is that the KMT holds some enterprises itself, so that it doesn't need too many donations from business.

Xu Lide, Vice Premier of Taiwan. Time (Asian edition), August 23, 1993, p. 22.

Table: KMT, Inc. Firms invested in by the Kuomintang

The world-wide collapse, if not virtual extinction of Leninist socialism by the final decade of the 20th century demonstrated, among other things, at least the relative superiority of capitalist industrial development. It should also have revealed, to all but the most obdurate neoclassical economists and unrepentant convergence theorists, that capitalist development comes in many stripes, colors and shades.

Among the most successful of these varieties have been the capitalist developmental states of East Asia, including in the first tier Japan, Korea and Taiwan. In all three countries, skilled and relatively insulated economic policymakers promoted capitalist economic development through market-conforming intervention and public-private cooperation. However, despite some significant similarities, variations among the three in the extent and nature of both market intervention and cooperation with the private sector have surfaced, particularly in the wake of the 1997 East Asian economic crisis. One of the interesting features of the financial crisis was the fact that Taiwan not only remained virtually unscathed; it was in a position to offer help to some of its less fortunate brethren.

Whereas the elite economic bureaucracies in Korea and Japan have relied on large privately-owned businesses as the handmaidens of development, Taiwan has been ruled by a party-state that owns outright or directly controls huge portions of the nation's economic assets. Estimates of these state and party holdings range as high as 50% of all company assets, with annual turnover earnings of up to 30% of Taiwan's GNP.

At the center of these holdings is what some have termed "KMT, Inc."-- a complex network of Nationalist, i.e., KMT party-owned enterprises (guomindang dangyingshiye). KMT, Inc. has expanded in both size and significance in recent years even as the KMT attempts to transform itself from a quasi-Leninist party claiming to rule all of China under martial law to a voluntary mass-based party competing for electoral support in Taiwan's growing democracy. KMT, Inc. is the product of particular historical and ideological factors peculiar to Taiwan and this assemblage of party-owned enterprises has endowed the KMT regime with particular benefits and burdens. I want to describe briefly these party-owned enterprises, trace their historical development, and examine the various functions and dysfunctions they have performed for the KMT regime.

Although Taiwan, like Korea, has had its own share of problems with corruption scandals and unproductive rent-seeking, its authoritarian one-party regime has avoided Japan's and Korea's political dependence on zaibatsu-type private large enterprises as developmental agents and campaign financiers. By bringing the "commanding heights" of the economy 'in-house' it has solved collective action problems through hierarchy and secured political autonomy and "iron votes" by retaining or capturing its own profit-producing clients. This has also meant that the party curtailed the emergence of large-scale private capital and substituted state-owned and party-owned capital for development, patronage, and regime and campaign financing. History and ideology both shaped and facilitated this strategic response. The KMT is Leninist in organization and still clings to a quasi-socialist Sun Yat-sen ideology. This ideology and organization has allowed the KMT to justify and carry out its proscription of private capital and to assume ownership and management of its own set of industrial enterprises.

However, the dual impact of economic and political liberalization is substantially altering the environment of Taiwan's political economy. An increasingly open and competitive marketplace has compelled the managers of KMT, Inc. to professionalize and rationalize the operations of their firms. The search for legitimate profits both at home and abroad has replaced their previous reliance on monopoly rents in protected markets. KMT, Inc. looks and acts increasingly like the private "related enterprise" (guanxiqiye) conglomerates with which it both competes and participates in joint ventures.

As the KMT competes in an increasingly open political marketplace, its funds have also grown in political significance. The propaganda organs and patronage outlets of KMT, Inc. have declined relative to the party's essential role as a source of campaign funds. This latter role, as well as the other functions of diplomacy and development that KMT, Inc. performs, also highlight that it is much more than just a set of profit-seeking firms. It remains a quasi-public hybrid with multiple opportunities, historical burdens, and motivations that must be analyzed carefully and systematically.

The Party

Taiwan's Nationalist Party, whose Chinese-language ideographs are romanized in Taiwan as Kuomintang (KMT), has its roots in the Revive China Society (xingzhonghui), founded by Sun Yat-sen in 1894 as a vehicle for organizing opposition to the ruling Manchu dynasty of China. Sun permanently renamed its successor organization the Nationalist Party in 1919, and in the following year began a four-year reorganization of the party under the tutelage of Lenin's Communist International and along the lines of Lenin's principle of democratic centralism. With Sun's death in 1925, Chiang Kai-shek assumed leadership of the party and then nominal control of China in 1927.

The KMT party-state survived Japan's 1937 invasion of China, but not the civil war waged against the Chinese communists for control of the mainland. Chiang and the KMT were forced to relocate with nearly two million supporters and hangers-on to Taiwan in 1949. The KMT regime ruled over Taiwan's seven million subethnic Taiwanese with an iron fist for over three decades, exerting extensive control over the society and penetrating and dominating all forms of social organization. Authoritarian rule gradually softened during the 1980s and dramatically disintegrated during the 1990s. Major benchmarks in Taiwan's democratic transition include Jiang Jingguo's lifting of martial law in 1987, Li Denghui's election as the first native Taiwanese president in 1990, the democratic election of parliament in 1992, and Li's reelection in a fully democratic contest in 1996.

Organizationally, Taiwan's KMT party-state system was and in many ways remains decidedly Leninist in its democratic centralism within the party and its organizational parallelism between the party and the state. Article 4 of the KMT's 1988 party charter still reads: "In organizational life the individual obeys the organization and the minority obeys the majority. Prior to a decision there is free discussion. After a decision has been made it must be obeyed in full. Thus is realized organized democracy and disciplined liberty."

In its relations with society, the regime adopted an "authoritarian corporatist" approach. Private social organizations were either proscribed or penetrated by party cells, leading one author to dub the party the "Ministry of Social Mobilization and Control." The KMT has also been described as "an elitist party using mass organizations to mobilize support" led by "party cadres . . . socialized as revolutionary vanguards." Historically, party cadres were able to control the education system, labor organizations, mass media and, through the political commissar system, even the military.

Although increasing political liberalization and social pluralism have greatly reduced these functions of mobilization and control, the organization and staffing of the KMT still reflect these earlier missions and the party's revolutionary legacy. The party retains a paid staff of some 4,000, as well as paying for some 1,000 retired party cadres. These salaries, pensions and other benefits are estimated to cost the KMT some US$200 million each year, twenty times the annual expenses of the British Conservative Party. The party spends an additional estimated US$40 million in annual operating expenses and many times that amount annually funding election campaigns at the national, provincial and local levels. In 1996, the KMT had a registered membership of 2.2 million members, out of a total voting age population of 14.3 million The largest opposition party, the Democratic Progressive Party, had a registered membership of roughly 70,000.

The Party and the State

The party not only dominated society, it also controlled the state through party organs located in administrative units at all levels of government and party commissars positioned in military units. For the period of martial law from 1949 to 1987, little distinction was made between party and state interests. Nearly all senior government officials and military officers were also members of the KMT and many held high party office as well, which led to a "constant blurring of the distinction between party and state at the top" (Robert Wade, Governing the Market, p. 236).

The gradual process of political liberalization has begun to sever this linkage, particularly at the mid and lower levels of government administration. At the top, however, the party and state remain tightly linked through Li Denghui who is both president of the Republic of China and chairman of the still-dominant KMT. While party-state linkages have become more tenuous in areas such as foreign affairs (where the party has much less influence on state decisions), the bond remains close in financial and economic policies and in the state- and party-owned business sector, despite increasing pressure to separate the two.

During the nearly 40 years of martial law, virtually all top-level management positions in the state-owned enterprises remained in the hands of loyal party members and the KMT made little distinction between the party and the state in business affairs. Foreign banks lent to businesses run by both on equal terms and multi-national corporations perceived both the state-owned and party-owned enterprises as preferred partners for establishing joint ventures. Even more frequently, party- and state-run enterprises jointly invested in a variety of start-up ventures or assumed ownership of ailing private firms. Political liberalization since the lifting of martial law has increased legislative oversight over the state-owned enterprises, but this oversight has not extended to the party-owned ones, allowing them to continue to operate largely free of public, or political opposition scrutiny and to profit handsomely in many areas.

Although Leninist in organization, the KMT is not, nor was it ever, Leninist or even truly socialist in ideology. Politically, the KMT never endorsed "the principle of proletarian dictatorship or the monopoly of political power by a communist party." Sun Yat-sen's "Three Principles of the People" (sanmin zhuyi) called for democratization after a period of tutelage and the KMT permitted early on in Taiwan genuine local political participation and contestation. This was done in part to co-opt local elites, appease Western demands for democratic government, and as a safety-valve for the politically disgruntled.

Economically, Sun's principle of "People's Livelihood" (minsheng zhuyi) called for limits on the private concentration of capital and the equalization of land tenure, but endorsed neither the ideological means (class struggle) nor ends (utopian communism) of Leninist socialism. The regime that arrived on Taiwan, however, was still smarting from its disastrous relationship with private capital on the Mainland during the Chinese civil war. It was also a transplanted mainlander minority seeking to dominate a subethnic Taiwanese majority. Accordingly, the KMT regime on Taiwan drew on Sun's vague prescriptions to justify both its restrictions on the scope and scale of private (largely Taiwanese) industry and its maintenance and promotion of a substantial state- and party-owned enterprise sector.

Sun Yat-sen wrote that state ownership should be limited to enterprises in strategic sectors such as national defense, natural monopolies and risky investments beyond the reach of private capital. The KMT party-state, however, found itself in the early 1950s with a great deal more productive capacity. When it took control of Taiwan in 1949, the KMT regime inherited all assets and enterprises previously owned by both the Japanese colonial government (sotokufu) and the private Japanese conglomerates (zaibatsu). The defeated regime also brought with it from the Mainland several enterprises that it resurrected on Taiwan under its own auspices. Moreover, many new industries--particularly in the financial and other strategic developmental sectors--were either beyond the reach of the private sector or deemed too politically risky to turn over to private, chiefly Taiwanese, entrepreneurs. These too were established as state- and party-owned and operated firms. Many of these were already, or soon became, state monopolies or oligopolies.

In fact, during the early 1950s, state-owned enterprises accounted for nearly 57% of industrial production, 43% of domestic capital formation and nearly 20% of all civilian employees. This probably constituted a larger share of the industrial output in the hands of the Taiwanese government than in any developing country at the time. Despite substantial privatization efforts over the next four decades, in 1990, the three largest firms measured in terms of sales were all state-owned enterprises and six of the top ten were state-owned enterprises when measured in terms of assets. In 1992, sixty state-owned enterprises still accounted for 15% of aggregate capital.

Less well known, and during the early years largely and understandably indistinguishable from the state-owned and operated firms, were the party-run firms that now comprise KMT, Inc. Although the separation of party and state has forced the KMT to give up most of the sheltered privileges and rents enjoyed by many of its firms, the party has successfully reorganized the party-owned enterprises as "private" firms beyond the inspection and control of both the public and the opposition. This has allowed the party to employ the capacities and profits of these ostensibly private firms in a variety of ways, some decidedly public.

The Party-Owned Conglomerate

The KMT's own recently-published account of the firms owned and/or invested in by the party (published and printed, of course, by a party-owned firm) divides the historical development of the party-owned enterprises into five decade-long phases. During the 1950s, or "Initial Formation" (chuchuang) period, several firms under Nationalist control on the Mainland were salvaged, transferred and reestablished on Taiwan. These included Chiloo Enterprises (munitions, rubber ) and Yutai Corporation (import and export trade). During the 1960s, or "Laying Foundation" (zunji) period, KMT, Inc. was still rather small. Keeping pace with (and perhaps anticipating) government industrial policies, the party developed Jiantai Cement, acquired Jingde Pharmaceuticals, founded Chung Hsing Electric and Machinery, and with state-owned concerns jointly established Taiwan Jianye (land developing).

During the 1970s or "Development" (kuozhan) period, KMT, Inc. began to take off in terms of scope, scale and organizational complexity. The party established a large number of new firms and began to make comprehensive investments in a wide variety of industrial sectors. The two largest of the seven KMT holding companies--Central Investment and Kuang Hua Investment--were established during this period and began investing heavily in areas of particular importance to government industrial policy, particularly petrochemicals (Donglian, Zongmeiheshiyou , Yongjia, and Taiwan Polystyrene) and the financial markets (Chung Hsing Bills Finance).

During the 1980s or "Transition" (zhuanxing) period, the party established and promoted a number of insurance and other financial service enterprises and invested heavily in engineering, construction and energy resource firms. Also during this period, Kuang Hua Investment Holding Company established an energy resource division, bringing together all of the provincial propane gas companies. Once under military auspices, these monopoly licenses to dispense propane have been lucrative cash cows that the party has been able to disburse to local bosses in exchange for political support.

During the 1990s or "Expansion" (kuozhang) period, KMT, Inc. expanded into the areas of environmental protection (Weiyu huanbao, Weiyu keji, Qingyu huanbao) and added to its stable of engineering, construction, design, and development consulting firms (Fengshui yingzao, Hangu kaifaguwen , Jauling gongchengguwen, Datong jianjujingli, Xingye, Yongchang, Hanxiang), forming in essence a vertically-integrated construction conglomerate within KMT, Inc. In finance and securities, the party established Dahua Securities and Bank Sinopac, and in life insurance, the party established Xinfu Life Insurance (serving both party personnel and the public).

Serving both developmental and diplomatic purposes (as well as making tidy profits), the party also made investments during the 1990s in support of government efforts to promote regional economic cooperation and to establish an Asian-Pacific regional operations center (APROC). In recent years, with the Yue Sheng Chang Holding Co. taking primary responsibility, the party-owned enterprises have initiated investments in Japan, India, Vietnam, Singapore, The Philippines, South Africa, and Australia.

Since economics professor and presidential confidant Liu Taiying became head of the KMT's Party-Owned Enterprise Management Committee in 1993, the party-owned enterprises have also undergone dramatic internal management and organizational changes. Liu has promoted entrepreneurial management, appointed professional managers, strengthened the decision-making powers of boards of directors, established systems of corporate auditing, and hastened the public offering and listing of affiliate companies. He has also formed strategic alliances both among the party-owned enterprises and between the party-owned enterprises and private domestic and foreign capital in an effort to acquire technology and expand economic scope and scale. Increasingly sensitive to public criticism of KMT, Inc.'s privileged past and recognizing the political capital to be gained when perceived as a good corporate citizen, the party-owned enterprises have also been setting aside an increasing proportion of their earnings to reinvest in socially beneficial projects, including hospitals, elderly care centers, and low cost housing for the military and poor (who also happen to be voters).

Once secretive, monopolistic and grossly inefficient, KMT, Inc. since the ending of martial law in 1987, and under the tutelage of the entrepreneurial Liu Taiying and his predecessor Xu Lide, has made dramatic changes. In fact the party-owned enterprises are coming to resemble in many ways Taiwan's private business groups or guanxi qiye with whom they compete and collaborate in both the domestic and international marketplaces. Historically, loyal party cadres presided over and staffed a hodgepodge of propaganda organs, munitions and basic manufacturing firms, and financial, construction and other service enterprises. Many of these firms had monopolistic or oligopolistic privileges in market sectors often reserved exclusively for the party and state. These firms were interconnected primarily by politicized vertical connections to the KMT and secretive, complex, and personalized cross-shareholdings among core members of the party elite.

Today, KMT, Inc. consists of over 150 party-invested enterprises, with the KMT retaining over 50% ownership in roughly one-fourth of them. Given the secrecy of much of their operations, it is not surprising that controversy and confusion surround the net worth of these firms (and the KMT itself). In 1994, the party registered its corporate holdings under the KMT's own name for the first time. This registration listed some NT$36 billion (US$1.44 billion) in assets, but included only the party's own evaluation of the book value of the seven holding companies. By the party's own admission, this figure excluded cash, real estate held by the party's finance committee, and overseas properties often held in the name of local Chinese societies but controlled by the party (Free China Journal, March 11, 1994). Moreover, Liu Taiying has admitted that the actual market value of the KMT's corporate holdings may be three times that of the book value (Far Eastern Economic Review, August 11, 1994).

Other estimates include that of a respected Taiwan business magazine which placed the 1991 book value of the party's assets in its registered corporations at NT$112 billion (US$4.5 billion) and a group of university economists sympathetic to the political opposition who estimate the value at NT$500 billion (US$20 billion). The total assets of firms invested in by the party was valued in 1993 at some NT$900 billion (US$36 billion), although the degree over which the KMT exercises control of these firms varies (China News, September 20, 1993). Another business journal has consistently ranked KMT, Inc. as Taiwan's largest private business conglomerate in terms of assets in its annual rankings and sixth largest in terms of sales. This places KMT, Inc. well within the top 100 of Fortune magazine's global 500 ranking.

The KMT manages its interests in its invested firms through seven holding companies owned outright by the party and directly controlled by the KMT's Party-Owned Enterprise Management Committee, of which Liu Taiying is chairman. This committee is one of the twelve standing committees of the KMT's all-powerful Central Standing Committee. The horizontal breadth and vertical integration of KMT, Inc. is readily apparent. Member firms are involved in everything from steel, plastics, and electronics to insurance, banking, and construction. They make computer chips and table fans, and produce both Peking opera programs and slick campaign videos. KMT, Inc. is, in many ways, the functional equivalent of the Japanese keiretsu or kigyo shudan, the Korean chaebol, or Taiwan's private enterprise groups or guanxiqiye. KMT, Inc. does more, however, than simply perform the role of a profit-seeking enterprise.

Functions of KMT, Inc.

The KMT's party-owned enterprises have performed a variety of functions and endowed the regime and party with a particular set of benefits and burdens. Each of these functions could have been performed by other institutions, and in fact typically are in other societies. In Japan and elsewhere, large private capital is the predominant source of party funds and the primary venue for patronage appointments through the institutional arrangement known as the "descent from [bureaucratic] heaven" (amakudari). In many developing but still capitalist countries (such as Singapore, Indonesia and even Taiwan), state-owned enterprises serve as developmental agents for promoting strategic industrial policies and controlling the market. But then most nation-states--unlike Taiwan-- enjoy full diplomatic relations with other members of the international community and can rely on governmental envoys (rather than business enterprises with discreet ties to the regime) to carry out diplomatic functions. Political parties in other countries (including Malaysia, Zaire, and South Africa) have chosen party-owned enterprises to perform some of these very same functions, but with different results. In the case of Taiwan, while KMT, Inc. has facilitated both Taiwan's economic growth and democratic transformation, it has probably also hampered Taiwan's prospects for both full market liberalization and democratic consolidation.

Profit Sources (lirun)

Even without subscribing to a Marxist analysis of capitalism, few analysts would disagree that successful political parties in capitalist democracies must bow to the "special interests" of private capital in exchange for funds for political campaigns, recruitment and other operating costs. Such exchange is part and parcel of the democratic process. In Taiwan, however, the KMT opted to internalize a significant portion of these financial resources, with distinct trade-offs.

In fact, profit is the primary and increasingly important function of KMT, Inc. With total assets valued at US$42 billion, it is undoubtedly the richest party in the world. These assets include over US$25 billion in property both in Taiwan and abroad, and income is generated both in the form of rents (the building that housed the national headquarters for the rival Democratic Progressive Party in Taipei was in fact a KMT-owned property) and sales. In addition, profits from KMT, Inc.'s productive enterprises were valued at US$500 million in 1996. These profits include monopoly rents from government contracts. Historically, Taiwan's military and governmental offices purchased everything from medicine and gunpowder to cement and air conditioners exclusively from party-owned enterprises. Many strategic and lucrative sectors of the financial industry were also initially reserved for state and party-owned enterprises, and party-owned enterprises have reaped huge windfalls in the insurance, trust and securities markets.

While many party-owned enterprises were set up in name of development, they became over time embarrassing monopolies as Taiwan's economy liberalized. Since 1987, financial liberalization and opposition whistle-blowing have compelled management to rationalize many party-owned firms, making many of them genuinely competitive in the open market and forcing other inefficient ones into bankruptcy. Critics still claim that party-owned enterprises exert unfair influence and retain undue privilege in the marketplace.

Party profits are used to fund the salaries, pensions and other benefits for full-time party employees. They also fund increasingly costly political campaigns. As in the rest of Asia, these campaigns are highly personal and outrageously expensive and are estimated to be more expensive than in either Japan or Korea, because Taiwan retains a voting system of having single, non-transferable votes in multi-member constituency districts. Candidates for national and even local offices can spend over US$1 million for a single political campaign, with a significant portion of these expenses coming from party coffers.

Patronage Outlets (chouyong)

Because of the KMT's status as a transplanted minority regime, mainlander officials and other party personnel who remained loyal to the KMT and served it well were provided with both employment opportunities and generous retirement pensions and perquisites. In addition, the factionalized nature of the KMT and the electoral system has meant that the KMT has had to broker among rival KMT candidates in determining who will ultimately receive the party's endorsement. One way the KMT has been able to winnow the field of candidates has been to offer sinecures in party-owned enterprises in exchange for candidates' willingness to bow out of the race and swing their support to the party's choice.

The KMT has also been very successful at capturing local political machines by awarding lucrative party-owned construction and other types of contracts and local monopolies (such as natural gas delivery) to local party bosses. These patronage awards explain much of the KMT's continuing electoral strength at the local level even as it begins to falter at the national level.

Finally, Chiang Kai-shek brought with him over a million Nationalist troops from the Chinese Mainland in the late 1940s, most of whom left behind family, friends and--to the extent they had any--property. Faced with the task of employing and appeasing these effectively banished and potentially restive soldiers, a number of firms within KMT, Inc. were reserved exclusively for retired military personnel. Anxious to retain what used to be called the "iron" vote of these mainland veterans, KMT, Inc. is now investing in retirement condominiums and villages for their benefit. These investments will likely earn profits, votes, and good will for the KMT simultaneously.

Propaganda Organs (wenxuan)

Until 1987, the private sector was largely, and new entrants were completely, banned from participating in the audio, video and print media. At the same time, the KMT's radio and television holdings gave the party more control of both newspapers and the airwaves than the government itself. This "cultural" sector of KMT, Inc. has been hit hard by the liberalization of the media over the past decade. The fact that the KMT remains invested in newspaper, radio, television and cable companies despite mounting losses demonstrates that functions beyond profit are at work. KMT, Inc. also retains an important role in selling Taiwan abroad, employing the services of foreign consulting and public relations firms and distributing glossy print, video and even Internet information on Taiwan.

Developmental Agents (kaifa)

KMT, Inc. has invested in a trade and development center in Tokyo to promote products made in Taiwan, particularly the products of Taiwan's host of small- and medium-sized industries. Similarly, party-owned enterprises have been the vanguard of President Lee Denghui's "go south" initiative in encouraging investments in Southeast Asia (and away from an over reliance on foreign investment in the Chinese mainland). In fact, KMT enterprises were the first to return to (communist) Vietnam after all of Taiwan's investments were run out of South Vietnam following the fall of Saigon in 1975.

KMT, Inc. has also been a primary and relatively savvy investor in a wide variety of high-risk investments and strategic joint ventures in areas that the private sector was unwilling to support and where legislative opposition stymied the participation of state-owned enterprises.

Market Regulators (shichang kongzhi)

The disastrous consequences of inflation on the Chinese mainland in the 1940s and the link between these events and the Nationalists' loss to the Chinese Communists has instilled in KMT officials an almost irrational fear of inflation and led to the institutionalization of conservative fiscal programs in Taiwan. It is no coincidence that party-owned enterprises were granted the first (and typically exclusive) rights to offer new financial instruments and were often charged with the financing, control and monitoring of newly created financial markets. Although KMT, Inc. has lost its monopoly in many of these sectors, the financial firms owned and operated by the party remain its most profitable enterprises.

Diplomatic Envoys (waijiao)

In the absence of official diplomatic relations with all of its major trading partners and strategic allies (and for that matter, with most countries in the world), the KMT party-state has had to rely on corporate emissaries to carry out many of its foreign policy objectives. Although the party and government are largely separated now, the party has not given up its habit of utilizing its own stable of firms to carry out strategic goals. KMT, Inc. has been linked to campaigns to seek a seat for Taiwan in the United Nations, to lay the groundwork for President Lee Denghui's controversial visit to Cornell University--his alma mater--in 1995, and even allegedly to offer donations to the Democratic National Committee for the Clinton campaign.

Despite its unique historical origin and remarkably successful evolution, the experience of KMT, Inc. has broad comparative relevance. The post-Leninist regimes of Eastern Europe, the People's Liberation Army in China, and a host of other post-Cold War political agents have found themselves with valuable financial assets in increasingly liberal and capitalist settings. Apparatchiks in several of these countries may have lost their ideological justification for political monopoly and social ownership of the means of production, but they now find themselves in positions where they can anticipate and in many cases shape policies and position themselves either personally or institutionally to hold on to party assets.

As long as the KMT remains in power, KMT, Inc. and its many functions will persist. And like the proverbial five-hundred pound gorilla, even if the KMT loses control of the legislature or presidency, the party and its huge assets will not go away. Nor are these assets likely to be nationalized, despite the hopes of opposition politicians who rightly claim that KMT, Inc. gives the party a huge and unfair comparative advantage in electoral contests. The KMT has been very adept at converting old assets into new assets in an increasingly pluralist and democratic game. The party-owned enterprises have developed joint ventures with party-owned holding companies, state-owned enterprises and big private firms that have led to even further penetration by the party of Taiwan's private sector. What has emerged is a new kind of party-state-private corporate capital bloc.

How will KMT, Inc. fare in the future? How will it both influence and weather Taiwan's ongoing process of democratic consolidation and further integration into global capitalism? How will its functions change? KMT, Inc. will undoubtedly continue its move away from patronage toward profit, further distancing itself from its revolutionary, Leninist heritage and moving toward its capitalist future. In the process it may ultimately find a middle-ground on which to meet and reconcile with its China mainland adversaries. It may also, in the current Asian economic crisis, teach its capitalist neighbors a trick or two about staying afloat in a hostile sea.

KARL J. FIELDS is an Associate Professor of Politics and Government and director of Asian Studies at the University of Puget Sound, and the author of Enterprise and the State in South Korea and Taiwan (Cornell University Press, 1995).

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