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Introduction

Capitalism verses Communism Economy

Capitalism refers to an economic system in which the production of goods and services is

solely owned by private individuals or businesses. In this case the production of all goods and

services is firmly clinched on the supply and demand from the general market which is also

called the market economy other than through the central system planning also known as planned

economy or the command economy. In the capitalism economic environment, the government

normally plays a secondary role and people and individual businesses make most of the decisions

and most of the companies are also owned by individuals (DeSoto 4).

The free market or the laissez – faire capitalism is the purest form of capitalism in which

the private individuals completely feel unstrained in making a determination on where to invest,

what to produce and sell at different times and what prices the goods and services ought to be

exchanged. This usually operates without checks or controls. Nevertheless most nations will

normally opt to implement a mixed capitalist system where government regulations will also

play a key role in the business and industry. Examples of nations that practice the capitalism

include: the United States of America, Canada, Western Europe and Australia (DeSoto, 6).

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On the other hand communism encompasses a political and economic ideology in which

there is a strong opposition to liberal democracy and capitalism. Communism advocates for a

classless economic system in which all the systems and means of production are not owned by

private entities but the community. In this case, the government plays a primary role and private

property is deemed nonexistent and severely curtailed. Also the production of goods and services

is not determined by factors of demand and supply as it is in the capitalism economy. Examples

of nations that practice the communism economy include china, Laos, Cuba and Vietnam

(DeSoto 15).

Section One

The “something else” that Hernando De Soto argues is necessary for a capitalist economy

to produce wealth

The many examples of nations that have suffered through the adoption of capitalism

system alone has prompted Hernado DeSoto to propose the “something else” that should be

incorporated in addition to capitalism for the full prosperity of any given economy and

guaranteeing of economic freedom for the ordinary. Examples of these nations are: most of the

South and Central America, most of the Middle Eastern countries, Russia, India and Mexico.

This “something else” according to Hernando DeSoto includes amicable and formal structures

for property management, enforceable property rights and inclusivity for all. The key problem in

the current economies is establishing what the economies in the past should have lived up to and

this is what has contributed to poverty in number of continents. It is believed that through the

designing and implementing of capital formations in which programs are set to empower the

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poor will not only bring prosperity and freedom but also ensure equality of survival for all

(DeSoto 82).

The lack of the three important aspects in the capitalist economy has resulted into

oppressing the poor because they feel marginalized when they are not included into the economic

system. The aspect of exclusion that is dominant in the capitalist economy has held the entire

economy stagnant and that’s why it has failed in many other parts of the world apart from

Western Europe. It is further demonstrated that if an economy is able to embrace the aspect of

property rights, the poor will also benefit and the economy will rise as a whole. This is however

not evident in the capitalist economy (DeSoto 97. In making this assertion very clear, the aspect

of property rights has been disparaged by the left leaning intellectuals and thus used as an

instrument of the privileged. The “plutocrats” who mean strongmen that have muscles according

to Hernando DeSoto have misused power and oppressed the poor. These strongmen decide on

what to take from the economy because the system lacks the appropriated laws to govern

property rights. It is therefore important to advocate for enforceable rule of law on property

rights in order to protect the poor from the muscles of the plutocrats and hence realize a complete

economy where each and every person is included and contributes to its growth. The end result

will be prosperity, freedom and creation of wealth (DeSoto 105).

Economies that want to create wealth for themselves should not just adopt the capitalism

system alone but there are other things that are important within the economy and which will add

to the prosperity and freedom that this nations. The conundrum of capitalism producing

prosperity and freedom for economies is a misplaced ideology because this production is

frequently characterized by bouts of politically instigated violence and very oppressive and

abusive dictatorships. This results into the poor suffering since they do not have the voice of

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command in that particular economy. Violence and dictatorship are detrimental and cannot

support the growth of a progressive economy. It is for only those who have enough resources and

the command for political power that will monopolize the economy. Capitalism only triumphs in

the west but fails in other parts of the world (DeSoto 149).

Section Two

Argument on whether China is Communist economy. Extent to which China have that

“something else” as proposed by Hernando DeSoto.

China is a communist economy. In as much as many people still believe that China has

changed from being a communist economy to a capitalist economy, the economists assertion is

that China remains to be a communist economy (McGregor, 67). Nevertheless some elements of

capitalism have pervaded the Chinese society and made its economy to triple in size in the past

decade. China’s economy operates like that of the Soviet Union where the ruling party

eliminated all the forms of political opposition and controls the entire media and the courts. In

this regard, it suppresses religion and the civil society thus sending the dissidents to the labour

camps. The communist Party has taken charge of the Chinese history and controls it economy

despite the efforts of the critics to see it fall. The Chinese communist economy has further been

strengthened by the fact that the party enjoys flexibility and pragmatism in areas of economic

management which is also aligned with unrivalled obduracy and the denial to change their

political management (Thoughts of Chairman Xi).

It is also important to note that the party because of its great dominance in China is able

to recruit entirely everyone from all part of the society including the best and brightest

entrepreneurs hence providing improved networking opportunities and access to decision

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makers. This has thus allowed the party to run at the center of the Chinese economy hence

solidifying the communism perspective. In addition, the Chinese economy allows foreign

diplomats to establish networks with party official and not the government. This is because, party

official make the most important decisions regarding the economy. For China, the aspect of

“something else” as expounded by Hernando DeSoto is exhibited through the networking

phenomenon which allows for the foreign diplomats and investors to build strong business ties

with party officials hence facilitating and improving business processes (McGregor 127).

Nevertheless, it has been noted that China has gone a long way in trying to become a market-

capitalist-economy. This has been illustrated through its recent engagement to foreign

investments. China how allowed its firms to compete internationally and invest in oversea

countries. The day to day economic life in China operates through markets and their farmers

have a much better ownership rights as opposed to what is present in a capitalist economy. This

rights are however not complete. China also enjoys sophisticated stock exchange and capital

markets as facilitated by the communist economy (Thoughts of Chairman Xi).

In addition, most of the small and medium sized companies in China that have continued

to flourish within the export market are not private in Western sense though they happen to have

some links with their local government. Furthermore, it is important to note that majority of the

successful Chinese companies are state owned and very few such as Huawei, Lenovo and Ali

Baba are genuinely private owned enterprises with close links with the government. These

aspects contribute to the “something else” as expounded by the Richard McGregor in the

Mystery of Capital and have made China outstand the Japan as one of the fastest growing

economies (Thoughts of Chairman Xi).

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Section Three

My opinion on the whether the dictators in the Communist China will 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 of dictatorship

I say yes. The communist China will be successful in using the capitalist system to create

prosperity. The Communist China currently has a very strong and determined drive for major

power status. Their urge to narrow the gap between herself and the two superpowers remains as

their central objective in her campaign for economic development. This course has prompted the

Chinese planners to focus their concentration on expanding the country’s capacity in producing

capital goods and military material. Communist Chiba has thus established a mechanism that

institutionalizes the high rate of involuntary saving and channeling it towards the desired line of

investment. This has thus brought the different segments of the economy under the control of the

major policy makers and planners (Thoughts of Chairman Xi). Through this strategy, Communist

China is able to mobilize resources and allocate them at a greater speed and with the required

maximum flexibility. The Communist Party is consulted on all major business decisions. These

many aspects has continued to grant a lot of authority to the party and since everything has to be

done in consultation with the communist, this means that all the final economic decision will

have to be made by the Communist. In the end this system will produce prosperity but this

prosperity and create economic freedom for the ordinary. This is because of embracing the

“something else” that has been posited by Hernando DeSoto.

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Conclusion

The paper has looked at both the aspects of the capitalist economy verses the communist

economy. Some of the nations that have greatly embraced the capitalist economy include: the

United States of America, Soviet Union, Western Europe, Mexico, Russia, and India. However,

it has been also been noted this type of economy has failed drastically in all the other parts

mentioned apart from Western Europe. China has been illustrated to be a strong communist

economy but with few aspect of capitalism cropping in so as to realize maximum prosperity and

economic freedom. The Communist party controls the China’s decision making process though it

allows for the introduction of news aspects such as property ownership rights that are referred to

as “something else” by Richard McGregor which is entirely missing in the capitalist economy.

The “something else” that China’s economy embraces is what has made it one of the fastest

growing becomes of the world. I choose to stand with China.

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Works Cited

DeSoto, Hernando . The Mystery of Capital. , 2010. Internet resource.. [online] Accessed from

https://books.google.co.ke/books on Web. 2 Dec. 2018.

"The Thoughts Of Chairman Xi - BBC News." BBC News. N. p., 2018. Web. 2 Dec. 2018.

McGregor, Richard. The Party: The Secret World of China's Communist Rulers. London:

Penguin, 2012. Print.

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