Justin Lin et al'

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Justin Lin et al.

• Pre-reform Economic Development in China
• 1952-1978

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Why China Did Not Achieve Economic
Modernization, but Reminded a Low-Income
Developing Country during 1950s-1970s?
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• Total economic size increased substantially
  National income increased by 6 per year
• High rate of growth but low level of development
• Why?

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There were several reasons

• Low starting level China was very poor
• Uneven distribution among sectors
• High rate of accumulation by governments
  planning
• Income/standard of living were suppressed

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Table 1 Basic indicators of economic growth,
1952-78 ()
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Investment and Industrial Structure were Distorted

• Heavy to light industry investment ratio from
  5.7 to 9.1 (1976-78)
• Not consistent with the general patterns of an
  industrial structure in economic development
• Table 3
• Chenerys large-country model (Figure 1)

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Figure 2

• Production possibility curve

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Consequences

• Heavy industry created less jobs than light
  industry and agriculture
• Inward looking declining in international trade
• of the share of import/export in total value of
  agriculture and industry decreased from 8.2 in
  1952-54 to 5.9 in 1976-78
• What happened to Taiwan and Korea?

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Other Topics Covered

• Lack of incentive and inefficiency
• Prices were determined by accounting and the
  planner
• Prices were determined by bargaining power
  relative importance in the plan
• Favorable vs. unfavorable prices

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Show the Graphs

• Surplus
• Shortage

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His Conclusion Asking whether or Not Socialist
System is an Obstacle to Economic Growth and
Development?

• Other reforms from socialist to capitalist are
  not entirely successful
• Example included Latin America and India (adopted
  import substitution)
• The main problems in China were
• The leap-forward strategy
• Macro-policy environment fiscal condition
  inflation
• Distorted product and factor prices

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Comparison of China and India

• Similarities
• Both large developing countries
• Development strategies, resource endowment
• Economic structure in 1950s
• Adopted heavy industry policy
• Differences
• Micro institution for agriculture
• Political systems
• Same outcomes of economic development
• Why? The leap-forward strategy failed.

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Questions/Answers