In old Tibet, the three major estate-holders and their agents accounted for only five percent of Tibet's population, but they owned almost all of Tibet's farmland, pastures, forests, mountains, rivers, and beaches, as well as most of the livestock. About 95 percent of old Tibet's population was made up of serfs, including "tralpa" as they are known in the Tibetan language (people who tilled plots of land assigned to them and who were obligated to provide corvee labor for serf owners), "duiqoin" (small households with chimneys emitting smoke), and "nangzan" (hereditary household slaves who were deprived of any means of production and personal freedom). They had no means of production and suffered cruel economic exploitation.

The first exploitation serfs suffered was land rent. Serf owners on feudal manors divided the land into two parts: The largest part was kept as manor demesne while smaller lots were rented to serfs under stringent conditions. To use the lots, serfs had to work on the demesne with their own farm implements and provide their own food. Such unpaid labor constituted the rent they paid to serf owners. Most of the grain that serfs harvested from the lots was finally taken away by estate-holders. A "tralpa" could only keep 100-150 kilograms of grain annually, which was not enough to live on; his diet mainly consisted of wild herbs and weeds mixed with a little grain. In addition to the heavy land rent paid in the form of labor, serfs had to pay numerous taxes and fees.

The second exploitation serfs suffered was corvee labor - a broad term covering not only corvee, but taxes and levies, and rents for land and livestock. The former local government of Tibet alone levied more than 200 kinds of taxes. Serfs had to contribute more than 50 percent or sometimes even 70 to 80 percent of their labor, unpaid, to the government and estate-holders. Corvee labor was divided into two kinds: one was that which serfs provided to the estate-holders they were bonded to and their agents; the other was the unpaid work serfs did for the local government of Tibet and its subordinates. The heaviest was transport corvee, because Tibet is large but sparsely populated and transport was inconvenient, necessitating the transport of all kinds of goods by humans or pack animals. Year after year, serfs were made to transport materials over mountains and rivers for the local government. This gave rise to the saying, "The boots have no soles, and the backs of the cattle are hairless."

The third exploitation serfs suffered was usury.

In old Tibet, the three major estate-holders were all exploiters of usury. The local government of Tibet had many money-lending agencies, and lending money and collecting interest were among officials' duties. Many monasteries also participated in money-lending. Revenue from usury made up 25 to 30 percent of the total revenue of the three major monasteries, namely Drepung, Sera and Ganden. Most aristocrats were also engaged in usury, the interest of which accounted for 15 percent of their family revenues. Serfs had to borrow money to survive, and more than 90 percent of serf households were in debt. Serfs were burdened with new debts, debts passed down from previous generations, debts resulting from joint liability, and debts apportioned among all the serfs. One third of these were the debts passed down from previous generations which could never be repaid, even by succeeding generations, due to the imposition of compound interest.

Feudal serfdom under theocracy seriously obstructed social progress in Tibet. At the time of the peaceful liberation in 1951, there was almost no trace of modern industry, commerce, science and technology, education, culture, or health care. With no roads in the modern sense, Tibet was cut off from the outside world. Primitive farming had long been used in agricultural production, and farm tools were rudimentary. Herdsmen had to travel from place to place to find pasture for their livestock. There were few strains and breeds of grains and animals, and some had even degenerated. The level of both the productive forces and social development was thus extremely low.

French traveler Alexandra David-Neel described people's life in her book Le vieux Tibet Face a la Chine nouvelle (When Old Tibet Meets New China), "These poor people can only stay on their sterile land forever. They lose all human freedom, and become poorer and poorer each year." The people had no basic right to subsistence, much less to development. They were deprived of the right to education, and could not be schooled in their native language and culture. By the 1950s, the 2,000 or more studying in old-style government-run schools and old-style private schools were exclusively aristocrats; the illiteracy rate of the young and the middle-aged was 95 percent. The people had no right to economic development. The three major estate-holders squeezed profits from serfs, but did not update their tools; serfs worked day and night, but could not make more social products because they had no capability for social reproduction.

The feudal serfdom under theocracy in old Tibet was savage, cruel and backward, like the dark society of medieval Europe. In his book The Unveiling of Lhasa, British military journalist Edmund Candler, who visited Lhasa in 1904, recorded details of the old Tibetan society: "... at present, the people are medieval, not only in their system of government and their religion, their inquisition, their witchcraft, their incarnations, their ordeals by fire and boiling oil, but in every aspect of their daily life."