A few weeks ago we talked about the big downward movement in Chinese real GDP in the late 1950s and 1960s.
While it is correct to de-emphasize the importance of business cycles because they are of secondary importance relative to growth, it is important to keep in mind that we are talking about real people who are hurt in real ways, not just dips on a graph.
In this case, these look like a depression-scale event in China.
Unfortunately, depressions aren’t caused by people and policies, while the downturn in China was in fact a policy that had effects that look like a depression.
To make matters worse, Chinese policies created a depression-scale event in a country full of people living at subsistence level. The result was starvation on a scale never seen before or since.
The Great Leap Forward was an agricultural reorganization policy of Mao Zedong that ended horribly. In part, it also led to a loss of some of Mao’s political power, who responded with the Cultural Revolution – a policy that amounted to getting rid of everyone who knew what they were doing. The bottom line is that depression-scale blip in Chinese real GDP corresponds to the deaths of millions under each policy – so we’re talking Hitler-scale.