Effective Government Industrial Policies A traditional explanation for Taiwan’s success is the operation of the free market. In contrast, Robert Wade and others have shown that Taiwan employed extensive government industrial policies and have presented somewhat controversial evidence that Taiwan’s success is due in large measure to the effectiveness of industrial policy. Taiwan has had active industrial policy systems in place to license exports, control direct foreign investment both in and from Taiwan, establish export cartels, and provide fiscal incentives for investment in priority sectors and concessional credit for favored industries. The government plays a much less active role today, now that developed-country status has been nearly attained, but it is interesting to view the roles played in Taiwan’s more formative development stages.