Rational choice

A framework for understanding and modelling individual decisions, which assumes that human behaviour reflects self-interested goals and preferences. It is the foundation of most theories that seek to explain why actors engage in corrupt activities.

The premise of rational choice theory is that people are strategic, rational actors who make purposeful choices that are intended to maximize their own individual utility and attain a goal that makes them better off (e.g., in terms of material resources or access or power). Individuals’ preferences are assumed to be well-defined, fixed and ranked consistently, and individuals are assumed to act instrumentally to achieve their goals. This means that they use available information to anticipate consequences and weigh the pros and cons (or costs and benefits) of all distinct options, construct a hierarchy of choices based on the expected utility, and select the option with the highest expected utility.

An early version of rational choice theory assumed that the outcomes of each decision were known fully ex ante, making the decision-making process straightforward. Later versions incorporated the idea that most decisions entail some degree of risk and uncertainty, hence the decision-maker must also evaluate the probabilities of each possible outcome and account for this in their calculations about the best option.

Originating in economics, rational choice theory has been adapted for use across the social sciences and its insights also inform the study of corruption. Although rooted in methodological individualism, rational choice assumes that individual decisions, when aggregated, provide insights for analysing collective outcomes and socio-economic and political trends at the macro level. Game theory is often used to study interactions among rational agents, and the effects of those interactions for collective outcomes.

Rational choice explanations of corruption fall broadly into three groups. The first sees corruption as a collective action problem akin to the prisoner's dilemma. Individuals have incentives to pursue their own self-interest, rather than to cooperate and favour the common good.

The second explanation views corruption as a principal– agent problem. Corruption is seen as the abuse of public authority for private gain. Agents (i.e., bureaucrats) are supposed to act on behalf of principals (i.e., citizens) to provide public goods, but agents have incentives to maximize their own interests rather than those of the principal.

G20 Anti-Corruption Working Group (ACWG)

An initiative established in 2010 to provide the G20 with recommendations on how to combat corruption on an international level.

The G20 ACWG aims to promote and strengthen the implementation of global anti-corruption regulatory frameworks, by leveraging the authority of the G20, an intergovernmental forum comprising 19 countries and the European Union. The ACWG produces multi-year action plans that are updated periodically to prioritize anti-corruption action points in several areas, including the ratification of relevant anti-corruption conventions, promotion of international cooperation, reducing the enforcement gap, and strengthening standards of transparency and integrity in the public and private sectors.

The ACWG cooperates with relevant international organizations such as UNODC, OECD, the World Bank, International Monetary Fund and the Financial Action Task Force (FATF). It also works closely with other G20 Working Groups on pertinent anti-corruption issues to determine best practices in tackling corruption. Accordingly, the group prepares annual reports to track member implementation of commitments and prepares outputs in the form of high-level principles aimed at developing anti-corruption laws, policies, and procedures in the G20 countries.

AA

Gatekeepers

Professional firms and financial institutions in the regulated sectors which are a potential entry point for those involved in money laundering who are seeking to place and layer dirty money into the global financial system.

The Financial Action Task Force (FATF) and domestic regulatory authorities regard as gatekeepers those in the regulated sectors who play a key role in opening or closing the door to dirty money. The gatekeepers are covered by AML laws and regulations and are usually expected to have in place AML compliance procedures. The term is considered more neutral and less pejorative than the designation professional enablers.

RB

Gender and corruption

A sub-field of corruption studies that explores and seeks to explain relationships between the social meanings that people associate with the sexes and various aspects of corruption.

The sub-field is concerned with the amount, and forms, of corruption that prevail in particular contexts and among different gender groups, the facilitating dynamics around corruption, and the impact of corruption.

Jakarta Principles

A set of sixteen principles designed to “ensure the independence and effectiveness of anti-corruption agencies”.

The Jakarta Principles were agreed by current and former heads of anti-corruption agencies, anti-corruption practitioners and other global experts. They were subsequently endorsed by the International Association of Anti-Corruption Authorities (Panama 2014), and noted – although not formally endorsed – by the United Nations Convention against Corruption states parties.

The Principles cover key areas such as accountability, how to maintain independence from political or other external interference, and financial arrangements. While the Principles have been criticized for being insubstantial in parts, they are also regarded as the most widely recognized set of guiding principles for anti-corruption agencies.

JL

Jeitinho

A Portuguese term used widely in Brazil to describe obtaining an advantage or solving a given problem by seeking reciprocal favours.

Described by DaMatta (1991) as “a clever dodge to bend the rules”, jeitinho utilizes different strategies of employing social capital, communication skills or personal resources in order to achieve individual goals, and may involve circumvention of social norms or formal regulations to accomplish this. The word literally translates to either “little way” or “knack”, which implies that it is both personalized, and dependent on the individual's skills in articulating the request to receive a jeitinho.

The related expression “jeitinho simpático” (meaning “nice way”), suggests positive connotations of harmony, resourcefulness, politeness and creativity. However, the expression “jeitinho malandro” (meaning “rogue way”) indicates the role of jeitinho in potentially corrupt acts such as bending the rules to grease the wheels of bureaucracy; this may involve the use of manipulative approaches characterized by dishonesty, deception and the violation of integrity standards in order to gain an undue advantage.

AAA

Further reading

DaMatta, R. 1991. Carnivals, Rogues and Heroes: Toward a Sociology of the Brazilian Dilemma. Notre Dame, IL: University of Notre Dame Press.

De Paiva, F. 2018. “Jeitinho (Brazil)”. In A. Ledeneva (ed.), The Global Encyclopaedia of Informality, Volume 1: Towards Understanding of Social and Cultural Complexity. London: UCL Press.

Economic crime

Illegal activity that involves money, assets, or finance. Corruption can be a form of economic crime when the benefits or losses that result from its commission are financial. Also referred to as financial crime.

Economic crime and corruption are often erroneously conflated. There are some important distinctions between the terms.

Corruption is not always a crime: there is a broad consensus in the social sciences that certain practices may be corrupt, even if they are not proscribed by law (see legal corruption). The private gain derived from corruption need not be financial or money based. Often gains are much broader, involving social status gains or the consolidation of power. The avoidance of loss or the gratification gained by harming others might also constitute the private gain from the commission of a corrupt act.

Economic crime encompasses a much broader range of activities than those involving corrupt actors. Crimes such as theft and fraud can be committed by anyone in society, as opposed to corrupt acts, which characteristically involve actors invested with some form of entrusted power. Money laundering is an example of an economic crime, which is often related to corruption and corrupt networks, but does not in itself constitute corruption unless it involves an abuse of entrusted power.

RDP

Further reading

Button, M., B. Hock & D. Shepherd 2022. Economic Crime: From Conception to Response. Abingdon: Routledge.

Gottschalk, P. 2010. “Categories of financial crime”. Journal of Financial Crime 17(4): 441– 58.

Lord, N. & M. Levi 2023. “Economic crime, economic criminology, and serious crimes for economic gain: on the conceptual and disciplinary (dis)order of the object of study”. Journal of Economic Criminology, 100014.

Electoral fraud/vote buying

Interference with or the manipulation of aspects of an election or improper influence over voters to shape the result.

There are many ways of fraudulently influencing elections. Where this is done in ways that abuse entrusted power to achieve a private gain, such behaviour is likely to be corrupt. The private gain might include a benefit accrued by a political party rather than an individual.

Danske Bank: case study

The largest known case of money laundering, in which up to €200 billion from Russia and other laundromat schemes was channelled through the Estonian branch of a large Danish bank between 2007 and 2015.

The issues at Danske Bank date back to November 2006 and its acquisition of the Finnish bank, Sampo Bank, along with its subsidiaries in Estonia, Latvia, Lithuania and a recently acquired bank in Russia. Since the 1990s, Sampo Bank in Estonia had developed a portfolio of non-resident customers, in particular serving Russian clients. Following the acquisition, the branch operated with a high degree of independence. Danske Bank Estonia had its own IT systems which meant customers were not covered by the group's risk monitoring systems.

The non-resident portfolio in Danske Bank Estonia is the main focus of investigations into money laundering. There were around 10,000 customers in total in the portfolio between 2007 and 2015. By 2013 the branch held 44 per cent of all deposits for non-resident customers in Estonian banks. In the relevant period, profits from the portfolio represented 40– 79 per cent of the branch's annual profits, and were an important source of income for the Danske Bank group as whole. Deposits originated from customers in various countries including Russia (23 per cent), Latvia (12 per cent), Cyprus (9 per cent) and the UK (4 per cent).

From 2007, Estonia's financial regulator, the Estonian Financial Supervisory Authority (EFSA), raised repeated concerns about money laundering risk with Danske Bank. The bank nonetheless continued to grow the non-resident portfolio over the next six years. The bank also declined to scale back the business in 2013 after the US bank J.P. Morgan ended its correspondent banking relationship with Danske Bank Estonia due to concerns around its money laundering controls.

Investigations escalated in December 2013 after a whistleblower, Howard Wilkinson, head of the bank's trading business in the Baltics from 2007 to 2014, came forward. He told the bank's Executive Board that the Estonia branch had “knowingly continued to deal with a company that had committed a crime”.

Sanctions

Anti-corruption sanctions are a foreign policy tool used by governments to freeze the assets of designated individuals and/or entities and deny their entry into the sanctioning government's country.

An individual or entity that has been selected by the country's relevant authorities to be sanctioned is called a designated person.

There are various anti-corruption sanctions regimes, with different definitions of corruption and varying scopes as to what illicit activities they cover. The first to be developed was the Global Magnitsky Act, implemented by the US in 2016, which covers human rights abuses as well as corruption. The UK's Global Anti-Corruption Sanctions Regime was implemented in April 2021, and Australia and Canada also have dedicated anti-corruption sanctions.

Notable figures who have been designated for corruption include Teodoro “Teodorin” Obiang, vice-president of Equatorial Guinea, under the UK Global Anti-Corruption Sanctions Regime, and Israeli international businessman Dan Gertler under the US Global Magnitsky regime.

MCH

Sarkozy, Nicholas: case study

Former French president convicted of corruption in relation to political financing in 2021.

Already known for his lavish tastes and celebrity lifestyle, Sarkozy's presidency was dubbed “bling-bling” by his critics. However, in the years after leaving office he faced several allegations relating to corruption, including influence peddling and illegal campaign financing.

In March 2021, Sarkozy was sentenced to three years in prison (two years suspended) for corruption and influence peddling, while in September of the same year he was sentenced to one year under house arrest for ille-gal campaign financing. He remained under investigation for claims that he received money for his 2007 campaign from Libyan dictator Colonel Gaddafi to the tune of €50 million and faced further allegations of influence peddling for a Russian insurance firm in 2019.

Throughout, Sarkozy maintained his innocence and was prepared to appeal against the convictions. His wife Carla Bruni publicly condemned the case and Sarkozy himself has since accused the judiciary of “hound-ing” him.

In the first conviction, Sarkozy was on trial with his lawyer, Thierry Herzog, and senior judge Gilbert Azibert. He was accused of attempting to bribe Azibert for confidential information about a judicial inquiry. The inquiry was of interest to Sarkozy because it was investigating whether he had accepted illicit funds from L’Oreal heiress Liliane Bettencourt to support his 2007 presidential election campaign. Sarkozy was ultimately cleared of wrongdoing in this instance.

BAE Systems: case study

UK-based aerospace and defence company with global operations that faced multiple allegations of bribery, notably in contracts between Saudi Arabia and the UK, giving impetus to the campaign for the UK Bribery Act.

The Al-Yamamah arms deal between the UK and Saudi Arabian governments spanned three decades and was worth over £43 billion. The first Memorandum of Understanding signed in 1985 included the procurement of 72 Tornado aircraft, other equipment and extensive maintenance and support contracts to the Royal Saudi Airforce. The final contract agreed in 2007 was for the supply of 72 Eurofighter combat aircraft. BAE Systems acted as the prime contractor on the deals. The Saudi government paid for arms by transferring a reported 300,000 barrels of oil per day to a dedicated account managed by the UK Ministry of Defence.

While the first allegations of corruption around the deal emerged in the Middle Eastern press in the mid-1980s, in the UK the issues came to public prominence in 2003. An investigation by two journalists at The Guardian, based initially on documentary research in the National Archives, revealed substantive concerns of corruption in the Al-Yamamah contracts. This included allegations that up to £6 billion may have been paid to agents and intermediaries on the contracts, commonly disguised using companies in offshore financial centres.

The investigation identified Prince Bandar bin Sultan Al Saud, son of the then Saudi Defence Minister, as a key beneficiary of the commissions. It also described a £60 million slush fund operated by BAE Systems to entertain Saudi officials on foreign visits. Employees from a travel agency, Travellers World, later made allegations that funds were used to provide cash, luxury gifts, holidays and prostitutes to Saudi officials overseeing the contracts. Investigators have estimated that the price of the contracts was inflated by 32 per cent to generate funds for commissions.

The UK Serious Fraud Office (SFO) began investigating the deals in 2004 but their work was abruptly brought to a halt in December 2016 after intervention by the then-attorney general and then-prime minister Tony Blair. Although national security reasons were cited as the rationale for dropping the investigation, the closure of the investigation also took place in the context of final negotiations for the 2007 sale of Eurofighter jets.

Facilitation payments

Small informal payments made to speed up a routine service to which the person or organization making the payment is already entitled.

In many jurisdictions facilitation payments, often paid in the form of cash or a gift, breach anti-bribery laws. Typical examples include paying a utilities representative to jump the queue for a connection, or paying a government official to speed up the processing of a visa. Some commentators note these are more accurately described as small bribes (see bribery).

The United States FCPAhas a prosecution exemption or exception for companies paying “facilitating payments” abroad, although other countries have followed the OECD's 2009 Recommendation to outlaw such practices. Companies frequently experience demands for facilitation payments around shipping and transport, and at the high end such payments amount to thousands of dollars.

There is a debate about the detriment caused by facilitation payments, with a minority of commentators claiming they are acceptable because they are widespread, grease the wheels and do no real harm. A widely-held view is that while facilitation payments may be less directly harmful than other bribes, they are nevertheless damaging because they privilege those who can afford to pay and, in aggregate, they undermine the rule of law.

RB

Fat Leonard: case study

Bribery scandal involving Leonard Glenn Francis (nicknamed “Fat Leonard”) in his role as a contractor to the US Navy.

Leonard Glenn Francis is a Malaysian national who, through his company Glenn Defense Marine (Asia) Pte. Limited (GDMA), provided husbanding services, including the provision of fuel, food and security for vessels in the US Seventh Fleet operating in the Asia-Pacific region. The award and management of these contracts was heavily influenced by corruption, involving collusion between Francis and US Navy officials. The scandal is estimated to have cost the US Navy at least $35 million, although the real amount may be much higher. As at 30 June 2022, 32 US Navy officials had been found guilty of criminal charges.

The contracting relationship between GDMA and the US Seventh Fleet spanned a 25-year period from the late 1990s until 2013. GDMA was a critical supplier to the Seventh Fleet, the largest fleet in the US Navy responsible for projecting US power across the Pacific Ocean.

Abramoff, Jack: case study

Emblematic case of institutional corruption in US politics and rare example of imprisonment for inappropriate lobbying.

Jack Abramoff began lobbying in the mid-1990s, having spent the previous decade working as a Hollywood producer. He soon mastered the art of bending rules and showering politicians with gifts, to the benefit of his clients. He later claimed to have had “very strong influence” over around 100 legislators, but saw that as a partial failure, as there were at least as many who were not controlled by him (Stahl 2011).

A 2006 judicial investigation revealed that Abramoff was involved in systematic abuses: he used his companies to receive more than $23 million via fraudulent kickback schemes, often deceiving his clients about the way he would use the hefty fees charged to them. Amongst his lobbying techniques, he had an elaborate mechanism in place for the purchase of gifts for public officials in return for important concessions such as voting in favour of tax breaks aimed to help his clients. A convinced supporter of libertarian conservative stances, and an unabashed anti-communist from his youth, Abramoff put his skills to the use of individuals and organizations who sought to influence politics in this direction, including by slashing taxation for the rich and lobbying for harder stances on reproductive rights.

Abramoff eventually confessed to defrauding four Native American tribes and others of around $25 million (estimated by others at closer to $40 million), evading $1.7 million in federal taxes, and to engaging in conspiracy to bribe public officials. Abramoff was convicted and sentenced to six years, serving three years and six months before being released in 2010 to a centre for rehabilitating former prisoners. His trial exposed a deeply ingrained system of lobbyists bribing politicians to secure political favours that went over and beyond this single case (Stone 2006). About the psychology behind his erstwhile success, Abramoff said: “Everyone in DC is for sale. Most of them might not know it. But when someone does something nice for you, what will you feel? Gratitude. Unless you’re a jerk” (UT Austin 2013).

There is a possibility that the next great military conflict could be fought over Taiwan. As we write this book, the likelihood of militarized conflict involving the United States and the PRC is higher than it has been for many decades. The sense of heightened “tensions” and looming conflict in the Taiwan Strait1 has become global news broadcasts. Some readers’ interest in Taiwan may have been prompted by news coverage of House of Representatives Speaker Nancy Pelosi's visit to Taipei in August 2022 and the People's Liberation Army's (PLA) live-fire military exercises that immediately followed it, or from commentators and some elected officials comparing the situation in Taiwan to Russia's invasion and war against Ukraine. But the situation in the Taiwan Strait is complex, nuanced and defies simple analogies. Peace in the Taiwan Strait is a product not just of Taiwan's own actions, but those of the PRC and the US. The preferences and actions of China and the US, and the conduct of relations between these two superpowers, have an inescapable impact on Taiwanese security, prosperity, and even Taiwan's continued existence as an autonomous polity and society. A militarized superpower conflict would be devastating for the people who call Taiwan home. It would destroy peace in the Asian region, fundamentally alter the global order and wreak havoc on the global economy. While the dire consequences of a hypothetical war are largely agreed on – including in the PRC – there is much more to the Taiwan story than conflict.

Taiwan is home to almost 24 million people, living in a hard-won liberal democratic society. Taiwan's diverse peoples – Indigenous Austronesian Taiwanese, transnational Hakka, immigrants from all over Southeast Asia, and different generations of Han Chinese – constitute a unique hybrid culture and society. Taiwan has been shaped by numerous colonizing powers and persevered through Kuomintang (KMT) one-party authoritarian rule to become one of the most economically vibrant and progressive societies in Asia.

It is an accepted heuristic to describe Taiwan as marginalized. That description is not entirely accurate, since it conflates several aspects of international interactions. Taiwan is marginalized in the sense that it has a mere 13 formal diplomatic allies and is barred from participation in many international organizations as a result of PRC opposition. This situation continues despite growing international support for Taiwan's participation in organizations that affect the material well-being of Taiwan's 24 million people, such as the World Health Organization (WHO), or the safety of Taiwanese and others, such as the International Civil Aviation Organization (ICAO). Since both of these examples are specialized organizations under the United Nations, the PRC's veto power means Taiwan's participation is entirely by the PRC's grace.

During the period of Ma's China-friendly policies, the PRC allowed Taiwan to participate as an observer, only to retract this favour when Tsai Ing-wen won the presidency. There are other organizations that Taiwan can participate in where statehood is not a precondition for membership. But participation is still usually contingent on doing so under a name that meets the PRC's demand that it does not hint at recognition of Taiwanese sovereignty. Taiwanese representative teams can only compete at the Olympics and other international sporting competitions under the otherwise meaningless name of “Chinese Taipei” (there is no such place or entity). Taiwan participates in the WTO as the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu, and appears in WTO communications as Chinese Taipei. Taiwan is represented in some other organizations, but the indignities it suffers to do so are incongruous given its standing as a major global economy, technology powerhouse and successful liberal democracy. It is a loss to the international community, as demonstrated during the Covid-19 pandemic when Taiwan was excluded from receiving guidance from the WHO – and from contributing its expertise. For Taiwanese people it is also a matter of national dignity and pride. However, this does not mean that Taiwan should only be seen as marginalized.

In the summer of 2021, The Economist published a special section on Taiwan with the tagline “the most dangerous place on earth” (Economist 2021). Despite the sensational title, it provided a measured and sober account of the potential for militarized superpower conflict in the Taiwan Strait. It was a reasonable line to take, prompted by increasingly fractious Sino-US relations and deeply frozen cross-Strait relations. It also reflected a long history of academic and policy assessments that have dealt with the same question. Some scholarly research came to a similar conclusion that Taiwan is increasingly in danger, while other work did not and instead see Taiwan's position as still stable (Foreign Affairs 2022).

Those with an interest in international relations (IR) theory might be familiar with seeing Taiwan portrayed using different analytical lenses. For example, scholars working within the neorealist approach to IR, which foregrounds power, self-interest and maximization, have tended to see the Taiwan issue as a likely if not inevitable casus belli between the US and China. Neorealists explain the absence, to date, of such a confrontation by invoking deterrence. In the case of Taiwan, deterrence has come primarily in the form of American strategic ambiguity backed by the US’ superior military capabilities.

Scholars in the neoliberal tradition have been more sanguine about the likelihood of conflict. These scholars foreground trilateral economic interactions and emphasize the stability conferred by the economic institutions and policy architecture constitutive of both US–China and cross-Strait relations. The high costs and disruption that would result from militarized conflict are so daunting that all sides are compelled to avoid actions that would lead to confrontation. These scholars point to the intensification of market connections among the three sides and the economic complementarities that benefit each actor and conclude that there is too much to lose by engaging in war.

Constructivist scholars, with their focus on identity and values, veer between optimistic arguments about common ethnic and cultural bonds on either side of the Strait, and pessimistic observations of the rise of nationalism, competing identities, and values supercharged by diverging national and cultural identities in Taiwan and China.

There is no single grand history of Taiwan. Instead, there are many histories involving multiple peoples, civilizations and empires that have all at different times lived, thrived, or struggled on the islands of Taiwan. These histories are imperative to understanding contemporary Taiwan, but even scholars often lament the difficulty of succinctly retelling them. Taiwan has been ruled by the Portuguese, Dutch, Ming dynasty, Qing dynasty and the Japanese. From 1945 to the present day, it has existed as the Republic of China (ROC), which was founded in China in 1912 and existed there until 1949. For thousands of years before that, Taiwan was home to Indigenous peoples of Austronesian heritage, who are culturally and linguistically related to other Pacific Island cultures. Traders and pirates once made Taiwan one of the most important and diverse centres of commerce, and in the last 400 years people from all over Southeast and Northeast Asia – and periodically, Europeans – have called Taiwan home. Today, Taiwan’s population is predominantly Han Chinese (over 95 per cent). But to describe Taiwan as a Han Chinese society would be to erase the multicultural melange that has defined so much of Taiwan’s history. The goal of this chapter is to explore some of this historical diversity, showing how various settlers, colonizers, and empires have shaped Taiwan, and how these forces are manifest today.

PREMODERN TAIWAN

Any history of Taiwan must begin by recognizing that Indigenous peoples lived and thrived on these islands long before any Chinese or western powers brought Taiwan into the world of modern geopolitics. At the same time, perhaps no other group has suffered more throughout each era of Taiwanese history than Indigenous peoples. Today, Indigenous Taiwanese make up a small percentage of the total population (around 2.5 per cent) due to centuries of colonialism, imperialism, and systemic oppression. But they continue to survive as complex contemporary peoples, and their relevance to Taiwan’s history and politics today should not be understated.

Indigenous Taiwanese likely arrived in Taiwan over 4,000 years ago. By contrast, Han Chinese only began living in Taiwan around 400 years ago. Indigenous languages are Austronesian, unlike Sinitic Chinese languages, and based on linguistic clues anthropologists suspect that from Taiwan Austronesian peoples migrated as far as Hawaii and Madagascar (Ko et al. 2014).

In the decades following the Second World War Taiwan transitioned to a newly industrialized country (NIC) and became one of four “Asian Tigers” with Singapore, South Korea and Hong Kong. The rapid and sustained growth experienced by these economies has been the subject of decades of political economy research. The puzzle has been to explain how they successfully transitioned from low-performing economies to integral parts of the global economic order, unlike many developing economies. One of the development strategies used to achieve this result was export-oriented industrialization. Prior to the Asian Tigers’ success, economists were sceptical of export-oriented industrialization. Yet, Taiwan made it work.

The conditions for rapid development were not immediately favourable. Taiwan in the early 1950s was in a chaotic state. The KMT was engaged in a brutal crackdown on local Taiwanese through the White Terror and martial law. Chiang Kai-shek was preoccupied with the prospect of war with the PRC, leading to disproportionate spending on the military and defence. Hyperinflation and instability were rampant, and the KMT desperately needed to stabilize the economy and find an economic plan that would lead to growth. Economic reform was needed, but priorities were unfocused. The KMT leadership was made up of officials with backgrounds in the military or engineering, most of whom had minimal economic policy experience. The authoritarian KMT was amenable to a strong interventionist state with the government operating state-owned enterprises (SOEs), but was largely uninterested in developing the private sector. The ROC was also heavily reliant on US aid, which was largely keeping Taiwan's economy afloat.

From 1957, when the US began cutting back its aid to Taiwan, the KMT realized that reform was urgently needed. It pushed the KMT to prioritize economic and party reform in order to reduce its dependency on the US. Economists and bureaucratic planners would have a bigger say in how to grow Taiwan's economy. A combination of Taiwanese bureaucrats from the KMT and the International Monetary Fund (IMF) began collaborating on ideas to overcome Taiwan's economic problems. They agreed that Taiwan's reliance on the American foreign exchange was its biggest problem, and that it was not taking full advantage of its potential to export.

There has never been greater international interest in Taiwan, nor such widespread concern. This moment is long overdue. For decades, Taiwanese people have hoped that their achievements in economic transformation and democratic transition would be recognized, and that Taiwan could participate and contribute to international society on its own merits. For political reasons discussed throughout this book, that has not happened. Taiwan's desire to be seen as a respected player on the global stage has generally been frustrated. It is ironic that it took the intensification of PRC threats to alert global audiences to Taiwan's many achievements, and to inculcate feelings of solidarity for Taiwan's struggle. To meaningfully care about what happens in Taiwan, however, requires an understanding of what makes Taiwan special, why it matters and what can be done to keep Taiwan peaceful.

This book is pitched at readers who are new to Taiwan and want to learn more about it. We hope to introduce the complexities of Taiwan and “the Taiwan issue” in a clear and accessible way. We cannot speak on behalf of Taiwanese people or articulate what it means to be Taiwanese, but we can speak to the process of learning about Taiwan. Our research and experiences as academics can help connect those who want to know more about Taiwan. We anticipate that this group will include policymakers, journalists, businesspeople, students and concerned citizens around the world. Both authors have worked extensively with such stakeholders and have identified a need and appetite for this kind of publication. In this book, we aim to provide a comprehensive and balanced discussion of “where are we at?”, an explanation of “how did we get here?”, and informed speculation about “where are things heading?”

One of our main motivations for writing the book is to recentre Taiwan. In doing so, we want to provide an alternative to typical analyses that depict Taiwan as a passive object or define it solely as a site of potential conflict. As western academic specialists of Taiwanese politics who have spent much of our lives studying and living in Taiwan, we are keenly aware that Taiwan is frequently relegated to a “flashpoint” and a cause of nebulous “tensions”.

What is the US position with regard to Taiwan? Due to Taiwan's contested and unrecognized status, and the ambiguities that the US has deliberately cultivated, the answer is not straightforward. The Taiwan issue abounds in complications, such as the subtle difference between the US’ “One-China policy” and the PRC's “One-China principle”. In this chapter we set out the “Taiwan Relations Act”, the “Three Joint Communiques” and “Six Assurances” that have formed the US framework for handling Taiwan and China relations since the 1970s. We also discuss the US’ posture of “strategic ambiguity”, a useful position that has recently come under pressure from within the US. Demystifying these concepts and terminology is fundamental to understanding the US position. In this chapter, we explain the history of the US–Taiwan relationship, how key US–Taiwan policy was formed, and how these policies are used in practice today.

FROM ROC TO PRC: HOW THE UNITED STATES CAME TO NOT RECOGNIZE TAIWAN

During the Chinese Civil War (technically 1945–49, but fought intermittently since the 1920s), the US and most of the western world supported and backed the KMT side against the CCP. Even after the Civil War ended and the KMT fled to Taiwan, the US continued to support the KMT's claim to represent the legitimate government of China. Despite being exiled to Taiwan and possessing no authority over Chinese territory, the ROC on Taiwan was still seen as the “true” China by much of the world. At the United Nations and other international organizations the ROC was recognized as the governing body of China for several decades. The advent of the Korean War in the summer of 1950 sealed the US’ determination to support the ROC and prevent the PLA from invading and taking control of Taiwan. The US provided training for Chiang's Nationalist Army, substantial military aid and technical assistance, and ultimately signed a mutual defence treaty with the ROC in 1954.

In the same period, the PRC underwent dramatic changes. After its founding in 1949, the PRC experienced new levels of state and nation building, but also devastating events like the Great Leap Forward (1958– 60) and the Cultural Revolution (1966–76).