Part 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.
Capitalism refers to an economic system that is based on the functionality of free market; open competition; profit maximization motive and the means of production are owned and produced by the private sector or by cooperatives that limit the government or state control of resources. In this social system, the capitalist class own most of the properties and are paid to produce the goods and services consumed in these economies. The main motive of producing goods in these economies however is not to protect people from government exploitation, but to make profits. A combination of the profit motive and the classification in the capitalist system has been taken for a free market economy, which has not always been the case. Production possibilities frontiers have been used to show the mechanism by which capitalism produces wealth, which is through specialization according to comparative advantage. Several nations of the world have exercised capitalism in their economies and experienced large increases in the total and per capita wealth and created stable peaceful political societies that have been characterized by respect for individual rights and maximization of personal freedom. Examples of these economies include Taiwan, Japan, Korea, Singapore, and Until the Communist Chinese takeover, Hong Kong. The United States, Western Europe, Canada, and Australia also adopted the capitalist system despite being already prosperous and free, and became more prosperous. Nevertheless, this system has been ignored by several nations, which have decided to adopt authoritarian system that has received criticism from the former nations. According to Desoto, adopting capitalism is required but not sufficient to United States and Western European levels of prosperity and freedom. He further argues that adopting capitalism in not enough, and that countries have to chose a capitalist economic system and do something else. I believe that the “something else” that Desoto refers to in this case is limiting property rights.
China is one of the fast developing nations of the world today, and has been threatening the economies of the developed United States, Western Europe, Australia, and Canada. The Chinese state has recently challenged the aforementioned states in different forums, which have led to debates that the United States is trying to contain China that the former contradicts. Nevertheless, China is a communist state that gives no opportunities for capitalism. According to the capitalists, they believe that communist systems are characterized by brutal dictatorships where individuals do not have basic rights such as free speech, freedom of religion, freedom of association, and the right to fair trial before an impartial jury of their peers. They also believe that individuals have no say in who rules the countries, and scores of communist citizens are routinely harassed, imprisoned, and executed for simply speaking up or expressing an opinion about the situation. Even though these assertions could be true to some extent, capitalistic systems also produce similar or even worse consequences. In the latter system, the property owners oppress the working class, who labor very hard to make profits for their masters. However, in the communists system, where property rights are controlled and overridden by the government, it is important to note that the resulting developments are even greater than realized in capitalism. In my opinion, the “something else that capitalism should adopt in order to ensure that more development is realized is to limit the property rights, and shift much of the property privileges to the government as opposed to private and corporations that seek to maximize profits at the expense of the working class. Desoto gives an example in his book to represent capitalism. He claims that most of us are like the six blind men in the presence of an elephant: one grasps the animal’s searching trunk and thinks the elephant is a snake. Another finds tail and thinks the elephant is a rope; a third is fascinated by the large, snail-like ears; another embraces its leg and concludes that the elephant is a tree. No one views the elephant in its totality and thus they cannot come up with a strategy for dealing with the very large problem at hand” (De Soto, 74). In my opinion, I believe this example represents the capitalistic system were the elephant represents the property owners, who exploit the poor members of the society (six blind men). The government should reduce the elephant to a manageable sized animal as well as help the blind men regain their sight. In this manner, the economy would experience greater development since most of the population would be helping in the creation of wealth.
Part 2. To what extent does Communist China that something else. Choose two examples from McGregor that illustrate the extent that the something else exists in Communist China.
After the founding of the Chinese Communist Party in 1921 with a mere 53 members, the party has grown to cover most of the Chinese state, and has been the ruling party of the People’s Republic since 1949. Despite the challenges that this party has faced in its existence in China, it currently runs one of the world’s most growing and commanding economies. In China, the Communist party controls the three most influential areas of the economy, which is the information sector, the military – the People’s Liberation Army -, and a nationwide network of party related positions and organizations that darkens the government (McGregor, pp. 34-50). The Communist party allows individuals to conduct their businesses without state interference. However, the party allowed business people to join it, and the Communist Chinese Party appoints the heads of the best performing companies in the Chinese economy. The most important driving force behind the Success of the Chinese nation is the fact that it embraces Marxism alongside authoritative capitalism, which is the something else that the other sates of Western Europe and the United States have ignored. Here, it is believed that democracy slows development since there are many players in the market. Apart from the biased appointments that serve the interests of the Communist Chinese Party, McGregor further illustrates the management in within the party, where most of the members stay long in office to ensure that changes are only effected in favor of the party. Additionally, the absence of an official opposition in China ensures that development and trade are managed in contrast to the capitalism systems experienced in the United States and other countries of Western Europe, Canada, and Australia. The extent to which China practices limitation to property rights ensures that people own the properties, but the Communist party exercises control over these properties as opposed to the capitalistic system where property owners manage and control the means of production.
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.
In my opinion, I believe that the Communist Chinese dictators will be successful in using the capitalistic system to produce prosperity. Considering the past developments of the Chinese state, which have scared the Western European nations and the United States, the dictatorship system has been successful in providing order and prosperity. In the past when the Chinese state used the democratic system to create individual freedom, the economic development was rather slow and there were constant conflicts in the Chinese nation. According to McGregor, the Communist Chinese Party ensures that it draws all the successful an influential business people and companies to support its agenda, which further ensures that the main aim of producing goods and services is for national development and not profit maximization. I believe that according to Milton Friedman’s thesis that prosperity will create individual freedom and the end to dictatorship, the property owners in the society have the advantage to exploit the working class. Nevertheless, I concur with Desoto’s proposal that the countries of Western Europe and the United States should ensure that they combine their capitalist systems with communism to speed to development as has been exhibited in China.
Works Cited:
De Soto, Hernando. The Mystery of Capital. Ealing, London, England: Transworld, 2010. Print
McGregor, Richard. The Party: The Secret World of China's Communist Rulers. City of Westminster, London: Penguin Books, 2011. Print
