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 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.