Background:
In Free to Choose, Milton Friedman makes the case that capitalism, i.e. free markets combined with governments that follow The Do Nothing Policy produce prosperity and freedom. In lecture, production possibilities frontiers were used to show the mechanism by which capitalism produces wealth, i.e. specialization according to comparative advantage and exchange. The history of the 20th century is replete with examples of countries that have followed just such a policy of free market capitalism and experienced large increases in total and per capita wealth plus created stable peaceful political societies characterized by respect for individual rights and maximizing personal freedom, e.g. Japan, Taiwan, Korea, Singapore, and, until the communist Chinese takeover, Hong Kong. In the 20th century, countries that were already prosperous and free that continued choosing capitalist systems became more prosperous, e.g. the United States, Western Europe, Canada, and Australia.
A conundrum of the “capitalism produces prosperity and freedom” policy are countries that have capitalist economies but haven’t produced much prosperity and are frequently but not exclusively characterized by bouts of politically based violence and oppressive abusive dictatorships, e.g. most middle eastern countries, most of South and Central America, Mexico, India, Russia, and until the last 20 years communist China. In The Mystery of Capital, Hernando DeSoto addresses this conundrum and points out that adopting capitalism is required but not sufficient to produce U.S. and western European levels of prosperity and freedom. DeSoto argues that adopting capitalism isn’t enough. Countries have to choose a capitalist economic system plus do something else.
A major challenge to Milton Friedman’s Capitalism produces Freedom theory is the economic rise of Communist China. China trades with the outside world and has enriched themselves and those they trade with but shows little progress transitioning to a peaceful country which respects human rights and gives ordinary people a say in how they are governed. In fact, China oppresses religious minorities (Christians and Muslims), imprisons and kills political dissenters without due process, attempts to dominate its’ neighbors militarily, and uses technology to monitor normal people’s lives and impose a strict code of conduct and uniform belief system.
Communist China is getting wealthier and average people are gaining disposable income but there is no sign that ordinary Chinese people are making any progress toward ending the oppressive totalitarian dictatorship of the Communist Party.
Paper Assignment
Section 1. According to Hernando DeSoto, why are many 3rd world countries not getting rich even though they have ostensibly capitalist free market economies?
Section 2. What has made the difference between China and other 3rd world countries that has allowed China to create wealth while other poor countries have languished?
Section 3. In your opinion, will China ever become a democratic society that respects human rights, treats its’ citizens humanely and is at peace with its’ neighbors. Explain your logic. Why is Milton Friedman’s theory about capitalism leading to freedom failing in Communist China?
Section 4. According to Peter Navarro in Death by China and Stephen Miller in Trumpnomics what is Donald Trumps strategy for dealing with China? In your opinion, will it work?
ANSWER
The entire world is praising development that is currently experienced in China, which is not only in
economics but also in foreign affairs. China is a younger country compared with other developed nations, and it
started constructing itself in 1949, and, after thirty years of development, companies started facing unexpected
changes. Generally, companies that are not owned by the state are currently involved in sectors that were highly
occupied by state-owned organizations. Presently, most of the developed and developing nations, for instance,
China, are strengthening economic development and, after it opened the economic reform, the economy has
been rapidly growing for the past thirty years, and communist China has become the third-largest economies in
the globe. Thus, the main aim of this essay is to analyze why most of the third world countries are not becoming
rich, although they have abilities. Also, the paper will partly explain why China continues to grow than other
third world countries.
Section 1
According to Hernando Desoto, most of the third world nations are not becoming wealthier because of
political instability, excessively depending on imports, lack of liberalization, bureaucracy in the government,
poor education, and higher levels of illiteracy. Hernando (29) stated that there is an excellent interconnection
between political instability and economic development and, the uncertainties caused by politics minimize
investment and the pace of economic growth. Therefore, weak economic growth creates a collapse of the
government is some third world countries. Excessive dependence on imports also prevents most third world
countries from being productive; for instance, many countries in Africa lack production facilities and personnel,
and this makes them mainly rely on imports. Further, Hernardo (30) stated that bureaucracy in government is
another factor that prevents third world countries from becoming rich, and in this case, he says that proper
authority is maybe the essential factor to eradicate poverty and promote development. However, government
bureaucracy should not be assessed in terms of implementing policies, but also in the context of government
governance. Hernando (30) opined that the rules that establish the bureaucratic processes, either formal or
informal, are essential to change the perspective of citizens on how governments operate. Thus, most
governments in third world countries make poor policies, and at times, when policies are good, they fail to
implement them. Besides, these countries are full of corruption among government officials, and the culprits are
never prosecuted thereby increasing wastage of resources that prevent them from becoming wealthy.
On the other hand, Hernando (31) stated that another factor that prevents third world countries from
becoming rich is poor education and high levels of illiteracy. Poverty has many roots like a tree, but one of the
primary causes of poverty in third world countries is poor education. However, not every individual who lacks
quality education is weak, and not every country that has weak educational system is poor, but in most cases,
states fail to become rich due to poor education quality and higher levels of illiteracy among the citizens. The
rationale behind this is, families living in poor conditions will have to drop their children from school, which
implies that the children will also live in poor conditions. Quality education and standard illiteracy level are
considered to be an equalizer because of the open doors to employment opportunities, resources, and skills
needed by citizens to succeed. Hernando (33) contented that if these third world countries provide high-quality
education, impart skills to citizens, and support citizens' wellbeing, it will help to reduce cases of poverty.
Further, the issue of illiteracy level prevents third world countries from becoming rich as outlined by Hernando
because, people lack innovational knowledge and skills that they can use to create job opportunities or self
employments.
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Section 2
Previous studies on economic growth have proposed a significant role for capital investment in
economic development, and a higher portion of Chinese growth can be attributed to capital investment that
makes the country to be more productive than other third world countries, and this means that the county has
new machineries, improved technology, and has highly invested in infrastructure that helps it to increase output.
Therefore, capital investment makes the difference between China and other third world countries, and it has
allowed China to be rich while other countries are languishing in poverty. The Chinese machinery industry has
maintained development for one decade, and it has enabled the country to invest in high-tech production, which
creates new opportunities within the machinery sector. Growth sectors include producing and upgrading
industrial robots, improved machinery tools and, agricultural machines that have helped the country to increase
production, and in turn, becoming wealthy than other developing countries without this machinery.
Secondly, as compared to other countries languishing in poverty, China has transformed itself from
being considered as the "world's factory" to be a technological innovation hive. Besides, the company is
cooperating with other third world countries in the digital and technology area, an approach that has helped it to
increase in wealth through investing its technology locally and in other countries. Lastly, china and some of the
third world countries are collaborating in infrastructural investment, an approach that has enabled China to
increase its wealth. Infrastructural development is currently the top priority for the government of China, which
has for long, acknowledged that the economy runs on the reliable transport system, electricity, and
telecommunications. A higher number of Chinese have benefitted from power, telecommunication
improvement, and transport system that experience massive annual growth. In recent years, the Chinese
government has utilized considerable infrastructural spending to evade declining economic development.
Further, infrastructure is virtually essential to improve the economic development and wealth of a country and,
Chinese infrastructural investment has contributed to high productivity and development than other countries
that have poor infrastructure. Besides, the investment has helped to facilitate trade connections with other third
world countries and has promoted economic inclusion. Richard stated that the economy depends on good
infrastructure for connecting supply chains and effectively moving goods from one area to another and across
borders. Besides, the infrastructure helps in connecting households across urban areas to a high quality jobs,
health care, and educational opportunities.
Section 3
The form of Democracy is slowly changing in China, but the country will never have an independent
parliament like the United Kingdom and Canada. Besides, the state will never have Democracy within the
presidency like the United States of America, but rather, it will get its unique format. Although Democracy was
introduced in the late 19th century, the country has not yet embraced it to respect human rights and humanely
treating them and there is no possibility that this will happen soon. The rationale behind this is because; most of
the people are not ready to fight for their Democracy since they consider economic development and social
stability as the essential things rather than freedom of speech and other rights. However, there are hopes that
China will be at peace with its neighbors because no country is an island and, due to the recent economic
growth experienced, China must collaborate with neighboring countries to maintain its economic influence.
According to Milton Fieldsman's theory about capitalism, principles of limited command and divided
authority are essential to reserve freedom. Besides, Milton opined that although countries use economic
freedom to attain political freedom, political freedom cannot be used to achieve financial freedom. Therefore,
the crossbreed form of capitalism in China has caused proper economic development and has enriched people,
but the government has still retained its control. Also, the capitalist hybrid has expanded support from other
countries such as Russia and Vietnam, who are now employing this model as a practicable alternative to the
major democracies. Milton stated that financial liberalization is described by facing the complete loss of powers
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over the residents in politics and administration. Currently, the majority of undemocratic regimes such as China
are experiencing this situation, and the rationale for this is the fact that the world is in an era of globalization.
Accordingly, communist China is currently facing this dilemma, and to ensure that the country upholds social
stability, the economy must continue to be liberalized to ensure that there are high rates of development.
Similarly, a large number of Chinese got job opportunities after the market reforms, and this ensured that people
do not over-rely on the state, but this led to the creation of a middle class that highly demand political freedom
and to be represented in the national politics. Therefore, communist China wants to maintain political control
but, this goal is undermined by financial liberalization because, if there is liberalization of policies in power, it
economic development will be hindered and the country will then be destabilized.
Section 4
The administration of Donald Trump started a trade war with China intending to sweep geopolitical and
currently, the entire government is mandated to ensure that China respects the rules and slow its rise. According
to Peter Navarro, Donald Trump aims to ensure that Americans shun from using Chinese products, and to
ensure that this implemented, the administration seeks to impose tariffs (Navarro, Peter, and Greg). However,
these tariffs have created retaliatory measures that have affected the markets. Besides, the tariffs have created
diplomatic issues that have complicated relations with the United States of America. The primary reason to
impose tariffs on China is protecting local industries from a competition created by foreign firms.
Consequently, imposing tariffs is meant to preserve old and ineffective industries from external competition
caused by Chinese enterprises. Further, Navarro, Peter, and Greg stated that tariffs are intended to protect
consumers from dumping by the Chinese industries and other foreign firms, and this occurs when an
international company imposes a tax on local products.
Currently, China manufactures a high percentage of furniture that is imported to America. Additionally,
china sells specific types of metals at lower prices, and this made the Trump administration to develop anti-
dumping regulations aiming to safeguard local manufacturers. Besides, China and America share the most
significant diplomatic relations and trade partnerships, whereby China imports most of its products to America,
such as Phones, computer equipment, and communication products. However, Trump's administration has
imposed tariffs that prevent China from importing different goods to America, such as technological transfers.
Nevertheless, Navarro, Peter, and Greg contended that this measure to limit China from importing products is
impossible since no country is an island to survive on its own. Accordingly, most American firms are currently
using Chinese markets and machinery for production and final assembling of products and as a result, this
assists in reducing the costs and provides competitive prices and advantages in the global market. The strategy
of the United States to China will probably cause conflict between the two countries, and although America is
still the leading player and has a higher impact on the global market, it cannot survive on its own in terms of
production and technology which are efficiently provided by China. The administration should embrace market
liberalization rather than imposing tariffs that cause an increase in products.