Many scholars have lauded Taiwan's successful democratization as a "political miracle," parallel to its well-known "economic miracle" of the 1960s and 1970s. This paper argues, however, that the fulfillment of formal, procedural conditions of democracy conceals the development of a distorted democracy in Taiwan. An iron rectangle of the state, the ruling party, local factions, and conglomerates ... [Show full abstract] have gradually dominated Taiwan's political economy at the expense of distributional equality and economic efficiency. In addition to the analysis of these four institutions, this paper extends the neo-institutional analysis to a comparison with the cases of Korea and Japan. These cross-country comparisons disclose the gradual convergence of the Taiwanese case with the Korean and Japanese models.