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Socialist economic growth and political investment cycles

  • Zou, Heng-fu

Socialist economic growth in China and Eastern Europe has long been characterized by investment hunger, drives toward expansion, and cyclical fluctuation of investment rates. For decades, relatively high growth rates - often accompanied by a shortage of consumption goods - have typically been achieved at the consumers'expense. Treating social planners as self-interested bureaucrats, the author offers a positive model to help understand the norms of socialist economic growth. This model demonstrates: (a) how rapid capital accumulation tends to serve the social planners'own interests; (b) why investment hunger is an inevitable consequence of social planners'rational choices; and (c) when a drive toward expansion can cause a permanent shortage of consumption goods. Through numerical examples and empirical tests, the author provides a framework within which to analyze political investment cycles in a socialist economy. In China, he finds that high investment rates have often been linked to leftist political regimes and low or moderate investment rates with rightist political regimes.

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Article provided by Elsevier in its journal European Journal of Political Economy.

Volume (Year): 7 (1991)
Issue (Month): 2 (July)
Pages: 141-157

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Handle: RePEc:eee:poleco:v:7:y:1991:i:2:p:141-157
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505544

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  1. Alberto Alesina, 1988. "Macroeconomics and Politics," NBER Chapters, in: NBER Macroeconomics Annual 1988, Volume 3, pages 13-62 National Bureau of Economic Research, Inc.
  2. Bajt, Alexander, 1971. "Investment Cycles in European Socialist Economies: A Review Article," Journal of Economic Literature, American Economic Association, vol. 9(1), pages 53-63, March.
  3. Roland, Gerard, 1987. "Investment growth fluctuations in the Soviet Union: An econometric analysis," Journal of Comparative Economics, Elsevier, vol. 11(2), pages 192-206, June.
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