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From state resource allocation to a 'low-level equilibrium trap': re-evaluation of economic performance of Mao's China, 1949-78

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  • Deng, Kent
  • Shen, Jim Huangnan

Abstract

This paper provides a full picture of how Maoist economy actually performed. We argue that Mao’s China neither undertook a structural change towards industrialisation nor generated a sustainable growth from 1949 to 1978.2 With fatal shortcomings of a planned economic system imported from the Soviet Union – the ‘principle-agent’ problem and information asymmetry for the bureaucracy, and disincentives for producers – China’s economy remained not only deliberately unbalanced but also predominantly rural until the 1980s. More importantly, the Maoist economy was not designed to enrich and empower the masses in society. Instead, all key consumer goods including food, clothing and housing were strictly rationed. The material life of ordinary citizens in China saw no improvement. This paper aims to reveal the harsh reality of the Maoist economy with solid evidence and theoretical explanation.

Suggested Citation

  • Deng, Kent & Shen, Jim Huangnan, 2019. "From state resource allocation to a 'low-level equilibrium trap': re-evaluation of economic performance of Mao's China, 1949-78," Economic History Working Papers 101127, London School of Economics and Political Science, Department of Economic History.
    • Handle: RePEc:ehl:wpaper:101127
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    References listed on IDEAS

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    1. von Glahn,Richard, 2016. "The Economic History of China," Cambridge Books, Cambridge University Press, number 9781107030565, January.
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    More about this item

    Keywords

    Maoist economy; structural change; disincentives; information asymmetry; price distortion; material life;
    All these keywords.

    JEL classification:

    • N00 - Economic History - - General - - - General
    • N55 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - Asia including Middle East
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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