Great Leap Forward or Backward Anatomy of a Central Planning.pdf

Great Leap Forward or Backward? Anatomy of a Central Planning Disaster1 Mark Yuying An2 Wei Li3 Dennis Tao Yang4 March, 2001 1We are grateful to Dwayne Benjamin, Loren Brandt, Marco Cagetti, Maxim Engers, Allen Kel- ley, Greg La Blanc, John MacLaren, Anne Zhao, Xiaodong Zhu, and seminar participants at North Carolina State University, Duke University, University of Toronto, and University of Virginia for their valuable suggestions and comments. 2Fannie Mae, Mail Stop 1H3N-01, 3900 Wisconsin Ave., NW, Washington, DC 20016. Telephone: (202)752-8442; Fax (202) 752-5460; Email: mark y an@ 3University of Virginia, Darden School of Business, Charlottesville, VA 22906. Telephone: (804)243-7691; Fax (804)243-7681; Email: LiW@ 4Duke University, Department of Economics, Durham, NC 27708. Telephone: (919)660-1821; Fax: (919)684-8974; Email: yang@ Abstract The Great Leap Forward (GLF) disaster, characterized by a collapse of grain output, and the associated famine in China between 1959 and 1961, can be attributed to a systemic failure in central planning. Encouraged by unrealistic expectations for agricultural productivity gains from collectivization, the government switched to an accelerated and infeasible timetable for industrialization. Consequently, it diverted massive amounts of agricultural resources to industry and imposed excessive grain procurement burdens on peasants, leaving them with insufficient food to sustain labor productivity. Grain output fell sharply at the onset of these policies and started to recover gradually when the policies were reversed. Official data and our supplementary survey data support the theoretical prediction regarding the dynamic progression of the disaster. They also show that over 80 percent of the decli