Economically from Mao’s founding of the PRC in 1949 until Mao’s death in 1976, the Chinese economy
grew at a rather good average annual rate of about 6%, with an average annual inflation rate of just around
1-2%, and the Chinese acquired around $4 billion in foreign exchange reserves, so it improved moderately
but remained poor. This happened with a lot of volatility. More specifically:
Between 1949 and 1952 the new government consolidated power and eliminated opposition. This included
wiping out the elites such as the landlord owners of agricultural lands, which included killing many of them.
Deng Xiaoping led that move in the southwest and was praised by Mao for doing it well.
Through most of the 1950s to consolidate power Mao undertook programs to identify capitalists (called “anti-
rightist” campaigns) and either disable, imprison, or kill them.
Between 1952 and 1957, with the help of the Soviets, industrial production grew at 19% per year, national
income grew at 9% per year, and agricultural production grew by 4% per year. The Chinese government built
industrial facilities and imported lots of equipment from the Soviets. It also reformed agriculture by creating
cooperatives to achieve economies of scale by having farmers work together. These were highly productive
years. However during this period, after Stalin's death in 1953, Nikita Khrushchev came to power, criticized
Stalin and his policies, and alienated Mao, which led to these Chinese and Soviet leaders openly criticizing
each other, which began a period of reduced Soviet support.
Around 1960 the Soviet Union shifted from an ally to an enemy and withdrew economic supports.
From 1958 through 1962, due to a drought, economic mismanagement from the top-down mandated attempt
to become an industrial power called the Great Leap Forward, and reduced Soviet economic support, the
economy contracted by 25% and an estimated 16-40 million people died of famine. Industrial output fell by
34% and fell by 12% more in 1962.16 All parties agree that it was a terrible period, though there is some
disagreement about how much it was terrible because of terrible management by Mao versus terrible because
of the other causes.
The economy recovered and went to new highs from 1963 to 1966. Then came the Cultural Revolution.
As is classic in all cycles, internal political challenges to Mao’s leadership and ideology arose. These internal
political battles had traditionally been extremely brutal and risky for the supreme leader. As mentioned earlier, I
was told by an esteemed Chinese scholar that 37% of Chinese emperors died in office from unnatural causes and
about half of these were because of people close to the emperor.
In 1964 Khrushchev was overthrown by a coup in Russia, and political and ideological struggles were on Mao’s
mind (and everyone else’s). Mao’s Legalist and Marxist inclinations made him a brutal fighter for power and for
the proletariat, so to deal with this threat to his power Mao fostered a political revolution to “purify class ranks”
called the Cultural Revolution. It was to purge political and ideological opponents and to reinforce “Mao Zedong
Thought.” It went from 1966 until 1976, though was most violent roughly between 1966 and 1969. Mao won the
political/ideological battle, purging his rival Lin Biao who was accused of a botched coup against Mao; he died in
a plane crash and “Mao Zedong Thought” was written into the constitution. The Cultural Revolution curtailed
education and cost or damaged millions of lives.17 These conditions further undermined education and slowed
advances in the Chinese economy, especially in the late 1960s. By the early 1970s the situation began to stabilize
under the operational leadership of Premier Zhou Enlai, and the economy grew at around 6% per year. In 1969
there was a border war between China and the Soviet Union, which wiped out a Chinese battalion. During this
period there was also a political struggle between “the Gang of Four” hard-core Maoists and moderates who
favored reforms (most importantly Zhou Enlai and Deng Xiaoping).
1971 was a year of great change in China. In 1971 the Cultural Revolution was producing great turmoil and Mao’s
health continued to decline. That contributed to Zhou Enlai playing an increasing leadership role from the
background, which led to him, in 1973, being elected a “vice chairman of the Communist Party,” putting him in
the position of appearing to be Mao’s successor. Also in 1971 China was threatened by the Soviet Union, which
was militarily much more powerful and shared a 2,500-mile border with China, leading to increasing border
threats. In 1975, after the US withdrew from Vietnam, which shares a 900-mile border with southern China,
Russia built an alliance with Vietnam and moved in troops and arms. Mao had a geopolitical principle to
identify the main enemy, neutralize the enemies’ allies, and draw them away from the enemy. Mao identified
the Soviet Union as China’s main enemy and recognized that the Soviets were in a war with the United
States that hadn’t yet turned hot but could. That led him to make the strategic move of approaching the US.