Excessive Investment,Compulsory Saving,and China's Great Famine of 1959–1961

This paper investigates the roles of excessive investment and compulsory saving in causing China's great famine during the period of 1959–1961. China initiated its ambitious industrialization campaign in 1958 under the false illusion that the agricultural sector would be able to provide sufficient savings. When the illusion proved to be false, a large number of industrial projects were left incomplete. However, since the economic returns for completing the half-done projects were high, central planners maintained high levels of grain procurement and urban labor force to complete these projects, even when famine became widespread. In addition, some political factors also contributed to the insufficient response by the central planners to the famine. The high grain procurement enforced by the State, compounded by other factors such as weather calamity, caused the most deadly famine in human history.