Problems of the Maoist economy in setting the stage for Chinese economic transformation Flashcards
Structure of the command economy that was inefficient hampered growth and also led to the erosion of China’s comparative advantage that had to be resolved in order to achieve economic prosperity in the future
Internationally,
Not competitive due to the lack of competition from foreign producers, deprivation of valuable information and technological advancements
→ Lack of competition and exposure hence led to lack of FDI flows which led to lack of development
→ Gap in the level of manufacturing productivity between China and the
USA was argued to have widened between the mid-1960s and 1978
Domestically,
1964 3rd front programme = economy produced more military goods rather than consumer goods.
State ownership and central planning: profit rates in firms were inflated from lack of competition = inefficient, too much interference by the CCP, scale of production was too small to reap EOS
→ inefficient and could not support
Maoist policies like the Great Leap forward caused massive production losses across industries in China which had to be addressed to ensure future economic prosperity
Agricultural losses,
Collectivisation was carried out
Ill-informed large scale irrigation projects carried out, unproven agricultural techniques introduced
→ declining crop yields led to famine and death = loss of labour of 30M
Industrialisation losses,
Backyard steel furnaces built on farms and urban neighbourhoods produced low quality pig iron
Existing equipment and tools were confiscated to be used in production
BUT, yielded no additional output of final goods
→ loss of capital stock of 40% and a decrease in manufactured goods
→ Further worsening of the industrial sector as the govt cut investment by 82% in 1960-1962
Maoist policies like the Cultural revolution led to a fall in overall productive capacity which had to be patched by the government of the day in order to ensure future economic prosperity
Red guards targeted old culture, ideas, customs and habits as being unrevolutionary
1M people of whom were educators and intellectuals were persecuted and killed
Distracted the workforce from work to be embroiled in this political struggle
→ Agricultural production dropped, income stagnated, productive capacity dropped
