Section 1: What is the something else that DeSoto argues is necessary for a capitalist economy to produce wealth? Choose and explain one example or counter example used by DeSoto to make his case.
The developed capitalist economies have the wealth to produce more financial resources for the investors. The individuals in the developed countries have houses, lands, and many other assets depending on those they can produce financial resources through the developed financial markets to make relatively more and more investments. Consequently, according to DeSoto, the capital is the most influential factor to be relatively more competitive in the international markets.
DeSoto claims that the developed economies are threatened by the undercapitalized structures of the less developed countries and the developing countries. The developed countries need to enlarge their markets and need to be able to use the resources all around the world. However, the less developed countries and the developing economies do not allow the developed countries to enlarge their markets in the world. The rest of the world cannot create the required performance for the economic development. The main reason behind this is the lack of the assets in the other countries. The individuals in the less developed countries and the developing countries cannot create enough savings because many of them suffer from the poverty and their income does not allow them to have some assets. The lack of assets in these countries causes an undercapitalized economic structure. Considering that the financial markets are not developed at a desired level and the savings are very little in the less developed countries and the developing countries, these economies cannot create the required capital to finance their economic development.
The lack of capital in the less developed countries and the developing countries causes an undesired structure in these countries. These countries need to catch up with the developed countries for a healthy capitalist system. However, these countries do not have the capitalist culture due to their historical experience. For instance, the countries those had a communism experience in their past cannot develop the capitalist culture in their economies. Many of the individuals in these countries expect everything from the government, and they do not feel that they need to be entrepreneurs. A different story with the similar results takes place in the less developed countries. The individuals in the less developed countries do not have the knowledge of developing themselves to make relatively more income and make a relatively higher level savings. These economies are mainly traditional economies, and they do not have the technology to produce relatively more. Subsequently, the less developed labor force, by using the traditional production technologies, does not have the opportunity to be successful capitalists.
Consequently, there exist essential differences between the developed economies and the less developed economies and the developing economies. The developed economies have a developed capitalist culture and the individuals in these countries are relatively more competitive. The individuals in the less developed countries and the developing countries do not have this culture and they are not willing to be competitive or to be a successful capitalist is not the main aim of their lives. Thus, the developed economies can create enough wealth to produce the required financial resources for a capitalist boost in their economies. The gap between the developed, the developing, and the less developed countries will open more in time. This situation threatens the sustainability of the capitalist development in the world. The developed countries have reached a peak in the capitalist development, and they need the other countries to join to their capitalist development.
Section 2: To what extent does Communist China have that something else? Choose two examples from McGregor that illustrate the extent that the something else exists in Communist China.
The Communist China has developed a different approach to the capitalism. As known, China is a communist country; however, the country is trying to be competitive by using the tools of the capitalist world. Inside the country, one can claim that no citizen is free, but the same China has many capitalist advantages in the international markets. China has used the advantage of the low-cost labor force in the beginning and maybe still using this power; however, the same China could develop some skills to be relatively more competitive in the international trade. At the beginning of the China story, the developed countries have claimed that the Chinese products are low-quality products, but China has solved this problem, and nowadays, one might claim that the Chinese products has the quality compared to the products produced in the developed countries and they are relatively cheaper.
McGregor mentions two essential features of the Chinese economy: the reality of party and successful economy management that is successful in the capitalist international markets. The party management is placed into every cell of the Chinese economy and social life. The party members are considered as highly capable of everything, and the other people have to respect these people and their decisions. Loyalty to the party is very important and even if one does express something against the party, he, or she might be punished. In a simple explanation, the loyalty to the party is forced by the party, and there is not freedom in the country. Party is everywhere. Party makes all the essential decisions in the Chinese economy and the Chinese social life. Even the elections are managed by the party, and the elections are not a sign of democratic management that is an important claim of the communist regimes.
How does the party management influence the economy? In China, there is a little freedom in the social life as well as in the economy. Thus, being an entrepreneur requires satisfying some rules those are requested by the party. Some these rules are written in the legal texts while some others are in these texts. Thus, freedom of being entrepreneur is regulated by the party.
Another important implication of the lack of freedom in the Chinese economy is the low level of transition between the different income level groups. A person in the low-income level has a little opportunity to move up to a relatively higher level of income, and the rich people’s children will be most probably rich in the future. Thus, the individuals do not have any motivation to be competitive in the labor market or the entrepreneurship market. Thus, they just continue their regular lives until they pass away.
The economic power of the Chinese economy comes from the party management. The party management pushes the companies and all the other entities in China to be relatively more competitive in the world trade. The party management develops model of being relatively more competitive in the international trade and forces the companies and the other entities to follow their strategies. Considering that all the labor force has to follow the rules set according to the international trade strategies, all the Chinese people from the factory owners to the workers do not have an alternative option than following the forced strategies and the rules. This situation creates an essential economic power for the Chinese economy in the international trade arena. The Chinese economy can copy the products from the other companies and can produce them in China at very low level of production costs. Research and development works are assigned to the universities, and the universities work in a perfect harmony with the producing companies. Further than this, one might claim that all the agents in the Chinese economy have to work in an almost perfect harmony because the party management punishes the ones betraying the party. No other country all around the world can create this harmony in their capitalistic structures. Also, considering that the Chinese economy has the largest amount of the human resources in the world, the Chinese economy becomes an important power in the world. Section 3: In your opinion and given your answers in Part 1 and 2, will the dictators in Communist China be successful in using a capitalist system to produce prosperity but deny Milton Friedman’s thesis that prosperity will create individual freedom and the end to dictatorship? Choose an example from McGregor that buttresses your opinion.
Milton Friedman claims that when the economic system produces prosperity and then the individuals in the community will have more freedom to make their decisions, consume and invest freely. In this case, the individuals will refuse to follow the rules set by a dictatorship in the country. The prosperity in an economy means the individuals will have a relatively higher level of average income, and the increasing income will make them powerful to make their decisions. The poverty forces people to follow other people's decisions because the poor people need to receive some help from the rich people. The most essential example is the Dark Age. Many people suffered from poverty, and they went to the church farms to have some food, and they worked like slaves. After the European economy had started recovering, many of the poor people moved into the cities, and they became merchants.
The communist Chinese economy is producing prosperity nowadays as one of the largest economies in the world. The Chinese products have a high capacity to compete with the other nations’ products. However, this prosperity in the Chinese economy is not leading a capitalist revolution in China. We still hear a number of news that many Chinese people are suffering from poverty and bad working conditions. Thus, we observe that the prosperity does not make the desired contribution to the Chinese people.
McGregor explains why the Chinese economy cannot achieve to be democratic. The party management is every cell in China. Even the prosperity produced in the Chinese economy is a result of the party management’s actions. The part controls everything. The party could develop a way to produce prosperity; however, the same party management considers developing freedoms in the country as a threat to the party management. Thus, any move not controlled by the party management is intervened and probably stopped. Also, the individuals might get punished easily without depending on their social and economic status.
Works Cited
De Soto, Hernando. The Mystery of Capital. London: Black Swan, 2001. Print.
McGregor, Richard. The Party: The Secret World of China's Communist Rulers. New York, NY:
Harper, 2010. Print.
