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Capitalism

Capitalism Free Essay

In different economies, capitalism has proven to be one of the most successful modes of doing business. Capitalism is based on individual rights in a business setting. It is a system of economy that builds on private ownership of the production means and the handling of its operation and its cost for the purpose of gaining profit. Competitive markets, wage labor, capital and private properties are some of the few characteristics that are necessary for a capitalist market economy. The owners of these components of the financial markets production determine the investment and the decision-making process. The competition on the market is the determinant within which the prices of goods are set and the distribution of products is done. This is to mean that the prices on the markets are dependent on termed laws of supply and demand, which work in a repetitive process. The purpose of capitalism is to reduce or remove interference from the government in market competition. Communist China has just recently embraced capitalism. The government is in itself communist, but the people of the country have embraced capitalism, and the state now allows people to keep the returns from production means. The following research paper is going to answer a few questions concerning capitalist economy and what is needed for it to produce wealth and prosperity. It is going to discuss different aspects of capitalism that are present in the communist China and assess whether capitalism will bring success to this region.

The benefits that capitalism has brought on a global level are sporadic and uneven. Some societies have tried capitalism and achieved great success; others have had only scant success, while other nations have not tried capitalism. Global capitalism cannot be successful by itself; among other things, it needs local capital to produce wealth and prosperity (Soto 62). Various aspects of capitalism on a global level, which include free trade, stable currencies, foreign investments, private ownership, and others, are always an aid when it comes to the growth of the economy, but they are not everything. Local development has always been overlooked, but it is the key to a successful economy. However, it is not easy to achieve, especially in the poor and developing countries. For local development to occur, there must be regional capital in place to kick start the process of growth. In these poor nations, capital is very hard to find, because the little assets that the people have cannot be qualified as capital. That means the rights to property are primitive. The need for local capital is necessary for prosperity and the ultimate prevention of oppressive dictatorships, which may deny freedom to the local people in specific regions.

Property rights that are clearly defined generate benefits that are shared equally by everyone. They have helped people in poor countries by making borrowing of money for capital easy. Not only did they do that, but can also be used as formal collateral when asking for loans (Soto 201). In developing countries, however, the process of obtaining legal titles has proved to be a handful for most of the poor people, enabling  squatters to prevail. In Egypt, for example, if any person wants to buy and legally register a piece of desert land that is owned by the state, they have to go through bureaucratic procedures that do not exceed seventy-seven private and public agencies. This is the sole reason as to why almost four million people have built their houses illegally in Egypt. Moreover, if after building the premises illegally a person would want to obtain the rights to their house, they risks facing imprisonment, their house being demolished, or having to pay a very big fine.

Another example that portrays the difficulty of getting property rights in developing countries is the situation in Peru. Having to build a house on the land that is owned by the state, one has to pass through about fifty-two offices in the government in which a person will have to complete over two hundred procedural steps. It will take one almost six years to complete the whole process and a further 728 steps if they want to gain land ownership. This shows that poor also have assets, however small they are. The main difference between the West and the developing countries is that, in western countries, there are legal structures put in place and established rights of property, while the developing world has structures for local ownership that are informal (Soto 231). Clearly defined property rights are also important, since they come up with information that the markets need.

Without property rights, the potential that is within the market is untapped, and it makes the legal system lose connection with commerce. The property rights system is all about ownership, which is clearly evident in that it is this system that bolsters capitalism (Soto 172). Denying ownership depresses the growth of the economy, but destroys capitalism at the same time. In developing countries, there are some wealthy private investors who get property rights and find the legal capital by navigating all the obstacles involved, but they are few are far between. This goes on to make capitalism an exclusive club that is only available to a small privileged minority. In a nutshell, in the west, there are property rights. They exist in countries that are developing too, but illegally. The developing countries should legalize this, develop systems for record-keeping and tracking, and establish legal contracts for these rights. With this system, they will be able to get huge amounts of data by accessing information about a single person’s asset ownership. What is needed for capitalism to be successful and produce wealth is the legalization and organization of these property rights in a central system.

For a long time now, The Republic of China has officially categorized itself as one using communism. While the government is communist, the people of China express support and are in total agreement that personal success and achievements in business are more probable in a free market economy. In the last decade, the Chinese economy has risen to be the second largest economy in the world by embracing capitalism, opening up their economy to investors from foreign countries, and removing limitations from privatization of small businesses. However, the government, having encouraged free trade and small business privatization, does not respect the liberties and freedoms of the people that are associated with capitalism.

One example that shows the capitalist aspects of the Chinese economy is the pumping of huge amounts of money into banks for them to able to lend to people aggressively, including personal business investments (McGregor 72). This was done in 2009, and the country’s economic growth has been on a rise since then. The government also went on and ensured that the financial institutions were liberal, and they were absorbed in the economy. In 2001, the Chinese Communist Party, which is the ruling party in the country, allowed business people within China to join the party. The Chinese economy also allows small business investors in the country to keep the profits and personal benefits that they acquire through their private investments.

Although the people of China have embraced capitalism, a few aspects of communism are still present in the economy. Major sectors of the country’s business are still controlled by the government, specifically by the ruling party. The people in charge of the top organizations and companies in the country are appointed by the ruling party. One example that can be used to elaborate this is that, out of the huge amounts of money that were injected into the banks in 2009, only 15 percent of the loans borrowed were awarded to private businesses(McGregor 134). Other credits were awarded to investments that were owned by the state and had the backing of the ruling party. Of course, this was possible by interest arrangements between the two parties. CCP, as the ruling party, took care of its own. This shows how communism is still rooted deep within the Chinese economy. Another aspect, described by McGregor, involves the ruling communist party removing all the political opposition parties and taking control of the media and the courts in the country, which in turn has suppressed civil society and freedom of religion. China has revealed the existence of the something else at a greater extent in their communist economy. As McGregor suggests, the Central Organization Department, which is the party’s vast, has no public phone number to aid the communications from the outside world. McGregor also points out that. in communist China, the guardian’s party personnel files are kept as a top secret, a fact that. if it existed in the United States, would have overseen the appointments of the whole cabinet in the government.

In the world right now, resources are being utilized at a maximum level, and the truth is that they are dwindling. Every economy in the world is in a race to maximize the utilization of every resource that is available amid competition from other markets. In the future, it will be very hard for the dictators, or, as they prefer, the ruling party, in China to be able to guarantee prosperity and individual freedoms to the nation without ending its tyranny and agenda for personal interest. The biggest challenge that the party has at the moment is the governance of itself. The party has done a terrific job in the establishment of a modern economy, which is arguably one of the largest economies, but the people ruling the country will have to deal with the already high social expectations, energy and environmental challenges,, and a population that is aging. The political system of China is a strong and unmovable force in governing the Chinese society, and it has proven itself countless of times (McGregor 107). There are, however, small signs of corrosion in the system of the evolving economy. The issue at hand is whether the CCP will be able to develop a structure that is unique and able to preserve the party’s personal interest and form the Chinese society at the same time.

A capitalist economy requires local capital for local businesses in the developing countries, as well as the legalization of property rights to ensure growth, wealth, and prosperity in these nations. Communist China has embraced capitalism in the last decade and has seen its economy grow to become one of the biggest economies around the globe. The people in China have local capital, and major reforms have been implemented to protect ownership rights and private investor interests to the same extent as the benefit of the national government. This has ensured the local capital and the success in the development of small businesses. Hence, the growth of the economy has been possible.


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