Economics Spring 2020 – Term Paper

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?