Good Microeconomics Term Paper Example

Type of paper: Term Paper

Topic: Wealth, Countries, System, Commerce, Property, Business, Communism, Party

Pages: 5

Words: 1375

Published: 2020/12/11


Every country across the globe is determined to realize economic growth. In efforts to establish grounds for economic growth, different countries have chosen to use different approaches. Among these approaches is the communism. Communism is an economic plan which is mostly found in Asian countries. The other approach is capitalism. Capitalism is the most modern economic approach at the moment. Many countries across the world have resorted to capitalism in order to experience economic growth. Capitalism has its roots in western countries. This economic model is associated with prosperity and freedom experienced in western countries such as England, Germany, France, USA, and Canada, among others. Apart from prosperity, capitalism has been associated with the freedom being experienced in the above named, developed countries (Bowles 21).
However, some countries have adopted capitalism approach but have not yet experienced any significant growth. Such countries are mostly found in Africa, South America, and Asia. Although these countries have struggled to establish themselves as capitalists, they have not experienced prosperity and freedom that is being experienced in developed capitalist nations. These countries are still faced with the problem of dictatorship, ethnic violence, civil wars, lack of liberty of speech and so forth. This phenomenon leads one to thinking that there is a secret that the developed countries do not share about capitalism that enabled them to have the prosperity and freedom they enjoy today. This mystery that Hernando de Soto tries to unravel in his book, “The Mystery of Capital.” For that reason, this paper explores the mystery of the capital and explores the extent to which the Communist China has achieved regarding the mystery.

Section 1: The Mystery of Capital

Many countries across the globe have adopted the capitalist approach to producing wealth. Most them being young nations, have been compelled by the immense accumulation of wealth by the developed western countries through the same economic model. For instance, most African countries after attaining their independence in 1960’s emulated the same capitalist approach used by their colonizers. However, almost fifty years down the line, these countries have managed to produce very little wealth. In fact, others have failed to accumulate any wealth at all and rely on international grants and loans. The countries are faced now and then with conflicts and dictatorial regimes. In some of these countries, especially those located in the Middle East, the citizens are denied fundamental rights such as freedom of speech, religion, fair trial and so forth. Despite the western countries and these developing countries all being capitalists, there is an enormous difference in terms of prosperity and freedom among them (Soto 23).
In efforts to unravel this mystery, Hernando talks of hidden process of conversion of the Western countries (Soto 45). In western nations, the formal property system starts with description and organization of assets in terms of economic and social aspects. This information is preserved in recording systems. As a result, these countries are capable of establishing the potential value of the asset. It is important to note that it 's hard to move any asset in the market if its economic and social aspects are not fixed in a formal property system. The establishment of the social and economic aspects of any assets through the legal property system makes it easier to control the asset in the market.
At this point, it is where we find the difference between the communist and capitalist nations. In communist countries, the poor have accumulated a lot of wealth but they cannot access the formal property system. Since the formal property system is a complex one, the poor end up losing control over their wealth. The complexity is brought about the government institutions, regulations, statutes and legislations (Soto 53). Therefore, de Soto realizes that it the formal property system that makes the difference between the communist world and developing world and the developed western countries in terms of prosperity and freedom.
In order to illustrate his point further, de Soto gives an example of the six effects that formal property system has had on western countries. These effects include the following. First, we have fixed the economic potential of assets. Through description and organizing of the economic and social aspects of the asset, it is possible to estimate its potential economic value. Since the name, title and other details of the asset are recorded, transferring the asset becomes easier (Soto 74). The other effect of formal property system is the integration of dispersed information into one system. All the information regarding individual properties was recorded in Europe in the past centuries. This included information about farms and settlement. The information was put into one system, and necessary legislation put in place to protect the property.
Through formal property system, people are made accountable. The system makes owners more accountable to their properties rather than initially where the property was operated from a community context. In addition, the assets are made fungible. This implies that the properties are made more useful. In addition, the formal property system networks people. After people being counted accountable to their properties and their assets made fungible, they are also networked. This helped to identify certain persons with certain activities. This move created a sort of specialization in activities (Soto 82-83).
Lastly, the government protects all the transactions involving assets. This is done in terms of title deeds, terms of contracts, securities and so forth (Soto 96). Hence, from formal property system, every individual is given a chance to create wealth. In addition, the person is helped in making his asset more useful. All these effects make the difference between western countries and communist or other developing capitalist nations.

Section 2: Communist China and Formal Property System

China is a communist superpower that ruled by Chinese Communist Party. The party has been present for several decades. The Chinese Communist Party comprises of more than seventy-three million members. The party controls everything in the country. This includes the military, court, media and at large the government. All the cities and villages are all under the dictatorial rule of the party. In addition, the Party presides over large, wealthy businesses. It chooses the senior executive and all other profitable enterprises. It is no wonder that most of these party members are on the Fortune 500 list (McGregor 52).
In far as issues regarding formal property system in China are concerned, the country has succeeded. As pointed out earlier, the Chinese Communist Party controls everything, including the personal wealth. The top executives of the companies are selected by the ruling party (McGregor 21). The party owns all the cities and villages. This is without forgetting the court of law. As a result, individuals cannot benefit from the protection of the law courts since they are impartial. The party members are involved in corrupt activities and shielded by the party. These are factors behind the continued violation of people's fundamental rights such as freedom of speech.

Section 3: Ending Dictatorship in the Communist China

I think the issues of capitalism and formal property system will end dictatorship in communist China and bring both prosperity and freedom. Every single day, the Chinese people are becoming aware of the rights that they are being denied. Through the establishment of a formal property system, every individual in the country will have control over his or her property. As a result, the Communist party will have nothing to control. However, the process will be tough given the party's grip on the media, court and military (McGregor 36). According to McGregor, elements of corruption and other vices evident in communist china will be averted if the management of natural resources is left to the people since at the moment the Chinese Communist Party controls everything, including the personal wealth.


In conclusion, de Soto and Friedman provides useful insights in regard to accumulation of wealth by different countries. Soto unravels the mystery behind the success of capitalism in accumulating wealth and establishing a free society: formal property system. The legal property system undertaken in western countries is the secret behind the differences in terms of prosperity and freedom between western countries and other capitalist countries. The fact that the Chinese Communist Party controls everything in China, including the government, the military, court, cities, businesses, media and so forth makes the country score so low in terms of formal property system. The party owns all the wealth. This is why there is little freedom in China despite the vast accumulation of wealth.

Works Cited

Bowles, Paul. Capitalism. Harlow, England: Pearson/Longman, 2007. Print.
McGregor, Richard. The Party: The Secret World of China's Communist Rulers. New York, NY: Harper, 2010. Print.
Soto, Hernando De. The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else. New York: Basic, 2000. Print.

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