Examining China ’ s Great Leap Forward from a Development Perspective (2024)

Introduction

In the 1950s and 1960s, development thinking was centred mainly around the growth-oriented view based on Harrod-Domar’s Growth Theory (von Kimakowitz, 2010). The model explains the associations between income, savings, investments, and output needed to achieve full employment and stable growth found in developed economies (Oman & Wignaraja, 1991). The model has largely resulted in policy prescriptions that utilise conditions based on abundant labour and scarce capital. Additionally, this type of growth-oriented development flourished due to the emergence of international organisations such as the World Bank and the International Monetary Fund in the post-war period. Of these prescriptions, there were three major concepts that encouraged growth as development, the “Big Push”, “Balanced Growth”, and W. W. Rostow’s “Take-off Theory”.

This paper examines the case of China’s economic development through the lens of Rostow’s “Take-off Theory” as well as the later expanded “Stages of Economic Growth” from 1949 to the early 2000’s with special focus its social and economic policy, the Great Leap Forward (1958 to 1962). The Great Leap Forward was widely seen as a major economic disaster and many deaths as well as the Great Chinese Famine from 1958 to 1961 were attributed to it. There is a usefulness in examining the Great Leap Forward through a development perspective rather than ordinarily through a political lens as this gives us insight into the policy failure from an economic development standpoint, and provides a comparison with the alternative steps that the country has taken to achieve its success today. Additionally, the case highlights some limitations of Rostow’s development theories in explaining the development of countries through a unilineal view.

Theoretical Foundation

Rostow’s “Take-off Theory” stands out from the three as the only empirically derived growth model (Rostow, 1956), which explains that countries could “take-off” into a self-sustained stage of growth by raising their savings investment to a percentage above their Gross Domestic Product (GDP). Rostow later hypothesizes that an economy prepares for the “take-off” within two or three decades to transform itself into a self-sustained state. Rostow’s later work, the “Stages of Economic Growth”, expands on the idea of “take-off”, identifying a unilineal development pattern involving five stages of an economy’s economic progress (Rostow, 1990). Rostow introduces the five stages of a society’s economic development as (1) the traditional society, (2) pre-conditions for take-off, (3) take-off, (4) drive to maturity, and (5) the age of high mass-consumption.

Traditional Society

Traditional society as described by Rostow, is the most basic form of society, characterised by a majority primary sector economy consisting of subsistence farming as well as hunting and gathering (Rostow, 1990). The overall economy experiences low labour productivity and low surplus output for markets, alongside a low capital stock. Additionally, economic growth is limited due to the absence of modern technologies and individual economic mobility. Often there is no powerful central government, and feudalistic structures alongside clan and family dynamics play an important role. The social structure generally consists of a strong hierarchy, with little potential for class mobility, while Rostow also believed that the society assumes economic progress is not possible for them or their descendants.

Pre-conditions for Take-off

Rostow classifies this period as taking up to a century or more, due to the deep structural changes required before take-off. This stage requires fundamental changes, such as a society’s attitudes towards science, risk-taking, and profit-making (Rostow, 1990). Institutions like central government, financial markets, and education have to be developed, while infrastructure needs including railways, ports, and electricity have to be built — Rostow describes this as a form of building up social overhead capital. Additionally, the labour force needs to develop in its adaptability in order to meet the changing demands of the economy, while enough food needs to be produced for a fast-growing population. Agriculture plays an important role in this stage, providing surplus food, increasing incomes and savings, and stimulating industrial investment (Rostow, 1990, pp. 17–18); another condition for achieving take-off.

Take-off

This is the central stage in Rostow´s model, comprising a relatively brief period of two or three decades where manufacturing takes up a greater role in the economy. During this time, urbanization and industrialization increase, rapidly expanding the secondary sectors over the primary. Rostow argues that at least one manufacturing sector, such as textiles, has to take prominence within the economy for international competitiveness. Rostow also specifies that the proportion of investment to national incomes or Net National Product (NNP) must rise from 5.0% to 10.0% or higher in order to exceed population growth (Rostow, 1990, p. 41). He reasoned that a typical marginal capital-output ratio of an economy during this stage is around 3.5:1 and that population can be expected to grow at a pace of 1.0 to 1.5% per annum. Based on this assumption, an unchanged rate of NNP requires investment (saving) rates need to account for around 3.50 to 5.25% of NNP. However, in order to shift NNP per capita growth rates to 2.0%, it requires investment rates of above 10.0% of NNP. Despite the difficulty in gathering historical investment and NNP ratios, Rostow analysed data of Germany, Great Britain, and Sweden concluding that investment rates significantly rose during take-off periods and varied with various factors, such as social overhead costs per capita.

The Drive to Maturity: Period of Self-sustained Growth

At this stage, Rostow describes an economy as having become mature, and thus capable of propelling a self-sustained growth via industry diversification and development throughout the country. With the conditions of investment rates being between 10.0 and 20.0% of national income, economic development becomes automatic. The initial prominent industries that constituted the economy’s comparative advantage would decline in growth as diminishing returns occur. However, the economy’s overall positive growth rates result from newly emerging industries (Rostow, 1990, p. 59). The shift from rural to urban civilization proceeds, while the structure of foreign trade continues to advance. Rostow cites the example that in the 19th century Germany, the dominant growth drivers shifted from coal and iron to industries toward chemicals, electricity and machine tools (Rostow, 1990, pp. 9, 59).

Age of High Mass-consumption

In the last stage, the tertiary sector becomes a mainstay as leading sectors shift towards durable consumer goods and services (Rostow, 1990, p. 10). Living standards rise for the masses, while and consumer goods are mass-produced; this growth is sustained by the increase of the middle class of consumers. Typically, consumers have increased disposable income for goods above their basic necessities, and Rostow accordingly regards the prominence of the automobile as an appropriate symbol of this phase (Rostow, 1990, p. 11). According to Rostow, the United States was the first nation to enter into this stage during the 1920s, whereas Germany entered only in the 1950s.

Policy Formulation

In 2015, China’s Net National Income reached USD8.31 trillion (World Bank, 2015), five times more than it was in 2005, and a hundredfold compared to that in 1970. Its rapid growth in the last three decades, 1985 to 2015 (Appendix A) is marvelled at by economists around the world. Despite its distinct communist stance and persistent system of government-backed and state-run industry (McNally, 2013, pp. 46–47), the development path taken by China from 1949 onward seems to closely resemble W. W. Rostow’s liberal economic five stages of growth (Appendix B). However, the road to economic success was not as straightforward as the model would suggest, and various economic and social reforms can be observed throughout China’s economic growth over the decades.

During China’s Mao Era, Chairman Mao Zedong and the incumbent government launched a major social and economic reform titled the Great Leap Forward (GLF) occurring from 1958 to 1961. The policy’s overall objective was to accelerate economic growth via economic centralisation and state planning. The economic side of the GLF involved using a state-monopoly on agriculture to finance rapid industrialisation. Agricultural collectivisation was introduced, involving the sharing of land, tools, and draft animals, while private ownership on land was gradually phased out (Liu, 2016). The GLF thus became a natural experiment in removing private property rights (He & Sun, 2016).

Project Implementation

The GLF strongly resembles Rostow’s preconditions for take-off stage in that its main goal was to accelerate food production, thereby raising incomes and funnelling that into rapid industrialisation (Hu, Guangyu, Hui, & Griffith, 2014). With an expected accelerated food production, the state government intended to store surplus food to avoid famine as well as to earn foreign exchange from exports. Additionally, Mao utilised peasant labour to manufacture steel through communal backyard furnaces (Chan, 2009). These policy moves were congruent with Rostow’s emphasis on gaining a comparative advantage in at least one industrial sector, whilst greatly increasing surplus food produced to generate income and induce population growth. Due to prolonged periods of civil war (Wilbur & Young, 2017) as well as World War II, the Chinese economy was hard-pressed during the Mao Era to rapidly industrialise. It could be argued that the GLF failed to achieve the “take-off” stage as it could not generate two the preconditions, built-up social overhead capital, and income from the agricultural sector diverted to manufacturing as described by Rostow.

Building Social Overhead Capital

The GLF implemented social policies involving the banning of spiritual and religious freedom, changes to communal working structures, and the removal of private ownership alongside its economic ones, making it all the more difficult to achieve a stable social structure (He & Sun, 2016, pp. 184–185). Its communal working structure and Mao’s focus on the peasant as the backbone of the communist economy also made it difficult to achieve any form of individual social mobility as described by Rostow. Finally, there was little advancement in production nor any focus on improving capital goods. These factors made it difficult to build up social overhead capital. Though granted, there were efforts by Mao’s government to improve the social standing of women and improve rural education (Hu, Guangyu, Hui, & Griffith, 2014), these were only minor increments to the social overhead capital needed.

Diverting Agricultural Income

The GLF was equally unsuccessful in diverting the necessary agricultural income for stimulating the manufacturing sector as a precondition for take-off. There was little surplus income generated from the agricultural production due to reckless agricultural innovations as well as poorly planned and constructed irrigation systems (Hu, Guangyu, Hui, & Griffith, 2014). These were the result of unreachable output targets and high taxation of the communes’ production by the state-monopoly. Mao also incorrectly focused only on grain and food production, neglecting more productive commercial agriculture and cash crops for export. This minimized any surplus generated from the agricultural communalisation effort. Additionally, the dual focus on steel production via backyard furnaces was extremely counterproductive toward generating income as it diverted labour away from agriculture and ultimately failed to produce any income-generating steel due to a lack of expertise and capital equipment (Shabad, 1959).

Impact Generation

Overall, the GLF was a stark failure to achieve economic development in China and resulted in the Great Famine along with an estimated 45 million deaths (Mitter, 2012). The policy was overly ambitious, while poor governance and planning meant that little could be done to correct for it. It is apparent that the take-off was not achieved until 1978 (Appendix B) during the Chinese Economic Reform that ended collective farming (BBC, 2006). Investment rates did not rise to the sufficient levels as described by Rostow, while there was no success in either agricultural of manufacturing sectors. Finally, a stable political, social, and institutional framework only emerged after Mao’s death with the takeover of Deng Xiaoping’s focus on a more a market-based economy and trade policies.

Conclusion

Mao’s China after World War II and the conclusion of its civil war, faced considerable internal problems and remained confined to Soviet influence (Shen & Xia, 2011). Despite the turmoil, Mao believed that the backbone of the future Chinese economy would be rooted in the Chinese peasant, and he envisioned a transition from an agrarian society to an industrialised socialist society through communalisation. However, the results were far from it due to massive instability throughout the country, as well as poor planning and execution. The preconditions for Rostow’s “take-off” could not be generated via the GLF, and only occurred in during the Chinese Economic Reform.

The case highlights that Rostow’s model does have its limitations, especially with regard to his proposed time periods of the stages, but also with regard to the free-market principles that it is based on. Poor planning or innovative economic reform on the part of state actors can affect the outcome of development regardless of the situation of the economy at the time. Rostow’s development model is based on hermetic free-market principles, ie. the relationship between Savings-Investment and Economic Growth; and Mao’s socialist policies had little place in it. Yet, today’s China has managed to subvert this limitation and ultimately attain the age of high mass-consumption stage as described by Rostow’s liberal capitalistic development model. All this has developed alongside strict financial and capital controls as well as widespread state-ownership of its corporations. China’s “state-run” economic growth continues to prove free-market economists wrong, though that remains to be seen in the long term as China is fast approaching a plateau (Bulloch, 2017).

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