August 24, 2010

Was Policy Failure behind China's Great Famine?

A rigid central planning policy, rather than poor weather and low farm yields, may be the principal cause of wide-scale starvation that hit China in the mid-twentieth century.


Between 17 and 30 million Chinese citizens died of starvation from 1959 to 1961, virtually all in China’s farming regions. As many as half of the victims may have been children under ten. At the time, China’s government went to great lengths to conceal evidence of famine, hiding the dead and moving grain stores around the country to parade in front of visiting foreigners. In the years and decades that followed afterward the most that Chinese officials would concede is that changes in weather had caused a steep drop in food production.

Outsiders trying to determine the scope of the famine and its underlying causes have been stymied by missing or unreliable historical data. Recently, some researchers have shown that changes in weather alone could not have caused the kind of drastic drop in food production that preceded the famine. Others have suggested that certain farming practices during collectivization exhausted the soil and resulted in agricultural inefficiencies that account for most of the drop in production.

Yet food production may not tell the whole story of the tragedy. Nobel Prize–winning economist Amartya Sen has made a convincing argument that famines almost always happen as a result of bottlenecks in distribution and only rarely as a result of food shortages alone.

At the time of the famine, no actual market for food existed in China. Instead, China employed a highly centralized food procurement policy reflecting classic features of central planning: the government set production and procurement targets for each region, taking grain from rural areas and redistributing it to cities.

Professor Pierre Yared worked with Xin Meng of Australian National University and Nancy Qian of Yale to see if China’s famine could be attributed to distribution problems that exacerbated the effect of the drop in production preceding the famine.

Official records likely underreported the true number of deaths and overreported farm production during the famine years. But China has recently begun to acknowledge the famine, and its National Bureau of Statistics has worked to correct records from that era. Yared and his coresearchers used the corrected data, but also employed additional data that indirectly allowed them to compare the true mortality and food production levels across geographic regions during the famine era.

A census, for example, is more than a snapshot of a demographic moment — it can also reveal a good deal of historical information. If the number of 34-, 33- and 30-year-old census respondents was roughly 100,000 each, but the number of 32- and 31-year-old respondents was roughly 70,000 each, researchers could reasonably assume that a significant event or condition drove down the birthrate for the years these last two groups were born in — the way disproportionate mortality and a lack of food would do. That’s how the researchers were able to estimate the severity of famine in each region, recording relative dips in the birthrate in famine versus normal years. The researchers also examined geographic data as well as historical rainfall data to estimate relative regional agricultural production across China. Importantly, both the proxies for famine deaths and agricultural production are not subject to some of the reporting biases of the official historical records.

By comparing the historical estimate of China’s grain production with a conservative estimate of the total calories required to sustain life, the researchers concluded that, even though food production declined prior to the famine, China still harvested at least three times more grain than it needed to feed its people.

The researchers then examined the severity of the famine across China by looking at the relationship between regional food production and regional mortality rates. As expected, they found that in normal, non-famine years the most fertile regions produced more food per person and experienced lower mortality. “But the puzzling thing was that regions that produced the most food per person during the famine ended up experiencing the very worst mortality outcomes,” Yared says.

The researchers concluded from this evidence that the decline in food production alone could not have been the sole cause of the famine. Instead, the famine must have been caused by a combination of a drop in production together with a failure in the redistributive system of the centrally planned regime. Importantly, such a failure resulted in regions with higher food production per capita suffering higher famine mortality rates.

“Under central planning, regions that produced a lot also had a lot taken from them,” Yared says. “That was the optimal thing to do since these regions had more food to spare. Nonetheless, with this policy came the risk that if production hit significantly below target across all regions, then the more productive regions could be subject to over-procurement, particularly if the level of procurement could not be reduced in response to actual levels of production. This explains why such regions experienced the worst outcomes when production was significantly below target.”

The researchers believe that the procurement system’s inability to adjust to the drop in production below target explains why the regions that produced the most experienced the worst outcomes. In general, the inflexibility of the system had the benefit of allowing the government to solve incentive problems. Enforcing a procurement target was easier than relying on regional leaders to provide accurate reports that did not over- or under-estimate food production.

The system was particularly inflexible under Mao Zedong’s leadership in the years leading up to the famine, especially in light of events and political pressures facing China at the time. A tense political environment generated pressure to stifle information — especially negative information — and to follow rules, informally reinforcing the rigidity of the policy. Few were willing to criticize the government. “It was more politically viable for regional leaders to provide grain at the level the procurement policy demanded — even if that meant risking starvation for that region,” Yared explains. “Those who did break the rules may have been let off the hook in the immediate term, but most ended up being purged later on.” The size of the bureaucracy and lack of a good communication infrastructure further delayed the relay of information.

In other words, the Chinese government may not have understood the true scope of the problem as it developed because of the policies and the political climate, which suppressed the exchange of information. Likewise, once the extent of the famine became more obvious, leaders may not have wanted to risk acknowledging it, and could not respond very quickly.

Yared acknowledges that even though central planning can fail in the presence of a large economic shock, markets can also fail. “But we also know that all of the worst famines in the 20th century — in China, the Ukraine and North Korea — happened under central planning.” As a potential explanation, he points to the Austrian economists Friedrich Hayek and Ludwig von Mises, who argued that markets are superior because they provide almost instant information, while nonmarket systems cannot adjust quickly enough when faced with severe or multiple shocks. “When a price goes up,” Yared says, “suddenly everybody knows there’s a shock and they adjust their behavior, which spreads the burden across the economy.”

Pierre Yared is assistant professor of finance and economics at Columbia Business School.

Read the Research

Xin Meng, Nancy Qian, Pierre Yared

"The Institutional Causes of China's Great Famine, 1959-1961"

View abstract/citation  Download PDF  

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