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Parker AdamsProfessor NgECON 160 online15 March 2015

A Comparative Look at Capitalism in the United States

The US is very successful in producing wealth, more so than other countries. This is

mostly due to its ability to recognize, distinguish and make available working capital, which

most other countries are not as successful at doing. Because the US creates wealth for its

citizens, its citizens live a more fulfilling lifestyle under better conditions. One wonders why is

it that other countries do not or cannot create the same lifestyle. Methods are available to them

that are available to the US, but some countries’ governments have obstacles in this wealth-

producing process. We will look at some requirements and some examples of these obstacles

that crate inabilities to produce wealth for the citizens of some countries.

The ability for the US to produce wealth stems from several points. According to

DeSoto, what the US has that makes them successful that other countries do not have is a

property ownership system (p. 9). DeSoto brings up several points, but they stem from this one

main point and branch out to other branches of capitalistic production. This property ownership,

as it relates to capital production, affords capital-necessary qualities such as provable ownership,

accountability, and a stake in the well-being and maintenance of property and the land beneath

the property. Naturally, land is a limited resource; when property owners own property, the

availability of property reduces, making the price of property rise, given the laws of supply and

demand. According to DeSoto (2000), this property system also builds confidence and

accountability, both through information collecting and through ownership verification (p. 45).

DeSoto points out that various problems exist in other countries regarding this ownership such as

inability to verify addresses, collect on debts, and have a singular governing body for the sale

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and ownership of property. Upon visiting multiple other countries, DeSoto found that ownership

equates with difficulty, obstacles and conflict. According to DeSoto (2000), examples of

difficulty include years of procedure and protocol to simply build on land, let alone rightfully

own a property, as evidenced by the procedures in place in Peru (six years of bureaucratic

paperwork) and the Philippines (thirteen to twenty-five years) (p. 20). Individuals pursue capital

despite regulatory efforts. In Egypt, one can have their house demolished and become

imprisoned and fined for developing on land without expressed permission, which is extremely

difficult to obtain. Individuals do attempt to own businesses and property, but do so illegally.

This causes two problems. Firstly, regulatory agencies incapacitate incentives to produce and

build capital. Secondly, illegal businesses and ownership efforts are not reported to government,

resulting in failure to capture and recognize the capitalistic endeavors of individuals in those

countries currently already in place by its citizens. Both of these problems result in the country

not capitalizing on the production of its citizens and not producing wealth that its citizens

demand. Ultimately, according to DeSoto (2000), property ownership equates to economic

stability and individual protection (p. 92), but the US and England realize this while other

countries are not on par with this way of living. In the case of the Philippines, it is unable to

produce wealthy lifestyles and economic stability. It offers little incentive to build and produce,

and it fails to reap the benefit of un-tapped capital that is readily available for use in building

wealth.

In the case of China, according to DeSoto (2000), it has two very important qualities that

make it semi-successful in being capitalistic: property and business ownership and political

awareness (p. 12). China has plenty of working capital. China, however, believes that its

citizens’ ownership is collective rather than individual. If a person owns property or a business

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there, then that person is benefiting society more than creating personal wealth. China’s efforts

to erase classist society include governing capitalistic ventures as to not create a working class

under a “too” successful owner / operator. China recognizes and utilizes its working capital, but

limits the growth or success of individuals for the collective enrichment of society as a whole.

This also dis-incentives those vested in producing working capital, achieving economic

prosperity, or striving for personal financial success. An individual or business that is too

successful threatens Communist China by creating a separation of classes (working class vs.

rich) and not conforming to the socialism that exists in the country today.

After a country recognizes and utilizes its working capital (property ownership) it can use

that capital to experience and industrial explosion of product creation and enter into

specialization and trade. China is very successful in this respect but at the expense (and

detriment) of government involvement. According to McGregor (2010), after the mass-

starvation the country endured, China experienced an industrial explosion that it refers to as its

“Great Leap Forward,” which occurred in 1958-1961 (p. 231). It has since been very industrious

and produced goods for export that rival the trade-market across the globe. The proliferation of

“made in China” stickers we in the U.S. have become familiar with in products consumed every

day demonstrate China’s success in the world market. The Chinese Communist Party (CCP)

does limit the size and power of businesses and individuals though by controlling how

successful owner/operators become and limiting their growth and ability. Any entrepreneur

interested in doing business in China is encouraged to make the CCP a partner so that the

success of the company can attribute the CCP rather than threaten it.

Capitalism at its heart, according to Friedman (1980), requires an invisible hand of

control (p. 6). This invisible hand is price alone without control allows sales and purchases of

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goods to occur. In order for a capitalist system to flourish in China, the Philippines, and the US,

it must be out of the control of any one person’s or group’s control to attain maximum economic

success. The CCP heavily governs China. It is likely they will continue to produce wealth, but

it is not possible, according to Friedman’s theories, that China will attain its maximum economic

success. Without control, its citizens would have the possibility to produce freely, maximize

production, and produce the overall best benefit for China, Chinese citizens, and export-markets

alike. As long as the CCP directly interferes and controls resources, it is not possible for China

and its citizens to maximize their individual wealth.

For a country to realize wealth for its citizens, it must acknowledge property ownership

and take advantage of the working capital that this ownership yields. This capital can then be

the turning point to industrialization, which will allow individuals and businesses to produce

successful wealth through specializing in the production of goods. China is one example where

working capital is understood and put into practice, but chooses to control and limit that success.

China stunts individual prosperity so that class systems and individual enrichment are

disallowed and the collective good of society as a whole is prioritized above individual pursuits.

The problem with this is that this is a dis-incentive for an individual or business to reach for

wealth-producing economic success at the expense of others and at the risk of the CCP stopping

or controlling that success. This will ultimately complicate wealth and economic success.

An example that McGregor uses to illustrate this idea is the many obstacles associated

with owning property, improving capital, starting a business, and being in theory capitalistic.

Developments in other countries require ludicrous amounts of time, money, paperwork and

policy so that there is reluctance and hindrances of these processes.

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In the case of China, where it is capitalistic and politically industrialized, it will still not

achieve success in its endeavors because China limits rather than promotes its citizens’ own

individual interests to allow benefits to be maximized for everyone. According to Friedman

(1980), China is suffering from having diffused interests instead of concentrated interests with

their citizens (p. 292). As Friedman states (1980), “free trade … is the only way that a poor

country can promote the well-being of its citizens” (p. 39). The end of the dictatorship in China

would begin the era of individual freedom for its citizens. Until then, China will not be

prosperous, and therefore not achieve its full success in being capitalistic.

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Works Cited

Soto, Hernando de. The Mystery of Capital: Why Capitalism Triumphs in the West and Fails

Everywhere else. New York: Basic Books, 2000.

McGregor, Richard. The Party: The Secret World of China’s Communist Rulers. New York:

HarperCollins Books, 2010.

Friedman, Milton, and Rose Friedman. Free to Choose: A Personal Statement. New York:

Harcourt Brace Jovanovich, 1980