Q1. The Great Leap Forward a failure of central planning according to Li and Yang
The Great Leap Forward Movement was an economic and social program adopted by the People’s Republic of China under the leadership of Mao Zedong. The movement aimed at rapidly transforming China from an agricultural-based economy into a fast and rapidly growing society through accelerated industrialization and collectivism. Prior to the adoption of the Great Leap Forward movement, China witnessed several socio-economic and political challenges which undermined its growth and put the citizens at a crossroad with the ruling class. Some of these challenges include; foreign invasions, civil wars, rising income inequality, and political disorder which nurtured corruption and economic crimes in the country. To address and overcome these challenges, Mao Zedong introduced new policies which he believed were essential in enhancing economic growth and development in the country.
Chief changes associated with the Great Leap forward included the introduction of mandatory agricultural collectivization, prohibition of private farming, implementation of a restriction on rural people through political struggle sessions and social pressure, and encouraging industrialization as opposed to agrarianism ideology. Contrary to the positive expected results, the Great Leap Forward movement resulted in numerous challenges, thus worsening Chinese ailing economic situation. The movement resulted in tens of millions of deaths, increased income inequality, and low private investment. According to Li and Yang, these challenges of the Great Leap Forward were as a result of the failure of central planning by the Mao Zedong.
Mao Zedong adopted the communist economic system as opposed to the much effective capitalistic system, a critical factor that contributed to the failure of the Great Leap Forward Movement. The primary goal of the Great Leap Forward movement was to see China overtake other already developed countries such as the US and the UK. In order to achieve this, Mao Zedong reformed China into communes with each of these communes containing at least 5000 families. Under these communes, families were forced to surrender their farming tools and animals and joined work brigades to help in irrigation and water conservation. The mandatory involvement of the locals resulted in the expansion of projects initiated by the government, and also the dominance and authority of the ruling class on national issues. While working in the communes, people were required to meet not only the set social and economic goals by the government but also beat them.
In order to foster rapid economic growth and development in a country, the government is always required to adopt an effective central plan which provides a conducive environment that allows both public and private investment. The government is also expected to offer the citizens some degree of freedom to enable them to make independent choices on which goods or services to buy. High degree of economic freedom often enhances private investments which lead to an increase in the quantities of goods and services produced thus enhancing economic growth and services. On the contrary, the Great Leap Movement by Mao Zedong did not materialize the expected results because of the failure of the Mao’s government to adopt a central plan that would otherwise foster independent consumption and investment demand, two economic factors which are central to a country’s rapid economic growth and development.
Q2. Major Imbalances of the Chinese Economy
Since the implementation of the market reforms adopted in the late 1970s, China has made tremendous and impressive strides in matters concerning economic growth and development. These reforms have seen the country achieve and sustain double-digit growth for an extended period now. Even with the global financial crisis of 2007-2009 which saw the financial markets of many countries like the US crumble down, China’s economy was less affected with its economic growth only ticking down slightly to 9.2 percent during the crisis. After the global financial crisis, China’s economy was ranked the fastest growing markets and has managed to maintain this almost a decade later. Two fundamental economic issues that have been pinpointed to be vital in enhancing China’s economy are its ever-growing market for both consumption and investment coupled with its growing exports. Despite the economic success associated with China’s economy in the past three decades, Nicholas Lardy, a renowned expert on China’s economic success and challenges, offers a contrary opinion.
In his book Sustaining China’s Economic Growth: After the Global Financial Crisis, Lardy suggests that China’s economy has several imbalances which may be calamitous for the nation in the long run. He reiterates that with the continued growth of these economic imbalances, the country’s economy will require fundamental market-oriented reforms to bring it to a new but sustained growth path. Some of the imbalances that Lardy points out in his book are the low private consumption expenditure, large official holdings of foreign exchange, an outsized manufacturing sector and a small service sector, and lastly an unsustainable rate of investment in real estate sector. Lardy points out that although these factors have played vital roles in enhancing and sustaining China’s economy during and after the global financial crisis of the 2007-2009, they make the economy to be unsteady, imbalance, unsustainable, uncoordinated, and may result in structural ramifications in future.
There is no doubt that China has been holding large quantities of the dollar currency in its reserve with the primary purpose of depreciating the value of the yuan currency. With cheap export products because of depreciated local currency and low cost of production, China has witnessed an increasing positive balance of trade in the last three decades. Because of the low price of its manufactured products in the global market, Chinese exports have also experienced high demand growth which in turn translates to increased output and expansion of its manufactural base. Increased export earnings from these exports have also promoted growth in its capital stock thus making it easy for the country’s financial system to generate additional capital for continued investment which further fuels China’s economy to greater heights.
Kroeber, however, differs with Lardy’s argument that China’s economy is imbalance and goes ahead to state that such thoughts are overstated (Kroeber 161). To Kroeber, the fact that some countries such as Japan, South Korea, and Taiwan have all enjoyed a high degree of economic growth and rapid development because of the factors that Lardy had argued were the sources of economic imbalances, makes it correct to conclude that such problems are overstated. It is essential to acknowledge the fact that not every country can witness rapid growth and development by merely following the earlier economic path followed by other developed countries. This is because countries are different in terms of their economic ideologies and market orientation. Hence, it is not a must that a country to first achieve increased consumption demand before embarking on fostering high investment demand to realize substantial growth. That is, the opposite can also work out just as it has been working out for China in the last three decades. Hence, while Lardy is of the school of thought that low level of social welfare spending contributes to China’s economic imbalances, Kroeber, however, is of the contrary opinion.
Q3. The general state of well-being in China today
China has been experiencing tremendous growth in recent years, making it the second largest economy in the world after the US. It is, therefore, expected that with such growth, there would be a general improvement in the state of well-being amongst its citizens. However, surprisingly, the country’s growth has not spread evenly between the inland and the country’s coastal provinces. One important macroeconomic indicator used in measuring the general wellbeing of a country’s citizens is the GDP per capita as opposed to nominal GDP. This is because while nominal GDP only reflects the total number of goods and services produced in the country, GDP per capita, on the other hand, shows the actual average share that each person contributes to the country’s total GDP. The other key indicators for measuring general well-being are life expectancy, consumer purchasing parity, a degree of freedom, level of environmental pollution, and the general state of major sectors like health.
In 2018, China’s GDP was estimated at $14.172 trillion while its GDP per capita was $10,099 representing approximately 6.6 percent growth in the country’s GDP (“Tan Huileng”). These two statistics place China as the second largest economy based on its nominal GDP but position 71st across the globe on the aspect of per capita income. It, therefore, means that even with the higher GDP growth, many Chinese are still considered poor if compared to citizens of other developed countries. With the increase in GDP per capita in the last two decades, consumers have been enjoying increased consumption parity despite that their parity is still low if compared to other major economies like the US. The country’s life expectancy has also climbed from 67 years in 1980 to 75.3 years in 2018, indicating the improvement in the general well-being of the people (“Graham, Zhou, and Zhang). In general, China’s healthcare system has witnessed much improvement in the last three decades. Most of its hospitals are modernized with state-of-the-art medical equipment. The ratio between medical professionals and the citizens has significantly reduced meaning that individuals can access quality healthcare at affordable rates.
China has also experienced rapid industrialization and increased population growth, two factors which have significantly contributed to its environmental degradation. Most of its citizens have on numerous occasions complained of excessive air pollution which has generally affected their well-being by exposing them to various diseases such as lung cancer. However, the government has shown its commitment to address these environmental concerns by adopting various measures to curb excessive pollution in the country. According to the UN, China has firmly established itself as a global leader on issues concerning green finance since November 2017, but it needs to overcome some of the issues the organization terms as challenges to unlocking its full potential (“United Nations Environment Programme”). The country, however, suffers from authoritative leadership with the citizens enjoying a limited degree of freedom. In general, the state of well-being in the country has greatly increased in the last three decades, but unfortunately, it is still low compared to other developed countries such as the USA and most European nations.
Graham Carol, Zhou Shaojie, and Zhang Junyi. Happiness and health in China: The paradox of progress. Brookings. Retrieved from www.brookings.edu/research/happiness-and-health-in-china-the-paradox-of-progress/.
Kroeber, Arthur R. China’s Economy: What Everyone Needs to Know®. Oxford University Press, 2016.
Lardy, Nicholas R., and Arvind Subramanian. Sustaining China’s economic growth after the global financial crisis. Peterson Institute, 2011.
Tan Huileng. China’s economy grew at 6.6% in 2018, the lowest pace in 28 years. CNBC. 2019. Retrieved from www.cnbc.com/2019/01/21/china-2018-gdp-china-reports-economic-growth-for-fourth-quarter-year.html.
United Nations Environment Programme. China consolidates positions as global leader on green finance, says new research. ONU. 2017. Retrieved from www.unenvironment.org/es/node/19253.