Growth Contradicts the Links between Democracy and Growth - Essay Example

?Running head: China’s growth contradicts the links between democracy and growth. China’s growth contradicts the links between democracy and growth. Insert Name Insert Grade Course Insert Tutor’s Name 07 April 2011 China’s growth contradicts the links between democracy and growth Introduction China is currently a powerful entity in the world’s political economy, signified by its large population and physical size compared to other states in the world. It has been characterized by huge economic advancement both currently and in the recent past, however, the country has for a long time lacked democracy, which has been proved to cause negative effects on China’s economic growth in the long run. China has focused less on democracy issues due to the reduced sense of urgency depicted by insignificant negative effects of lack of democracy on economic growth. Alongside democracy, capital and labor are some of the critical factors considered to have a significant effect on economic growth in the long run. There have been misconceptions that China’s economic growth is linked to the fact that China is a one-party state that upholds the authoritarian form of government. These mistaken views have influenced other countries to believe that authoritarian rule contributes hugely to economic growth, although China’s growth is tied to liberalization of political and economic reforms, which have led to reduced authoritarianism. China’s growth contradicts the links between democracy and growth China’s growth contradiction with democracy has brought about complication in the fact that the world’s richest countries attribute their success and growth to existence of democracy in their systems. The belief that economic development are linked to democracy is getting weaker as authoritarian regimes like China are proving that they have the capability of achieving economic growth without putting any efforts on political democracies. However, it remains a fact that high per capita income in democratic states has a significant effect in achieving stable and increasing economic growth. Over the last twenty-five years, China's has maintained tremendous economic growth with rigid political aspects that have remained closely tied to authoritarian form of governance. This stagnation in political reforms has negated the concept of economic growth, resulting in educated citizens who later pressure the most authoritarian governments to allow for democracies in which they themselves can exercise control over political situations for the benefit of the entire country. Claims that democracy does not contribute to economic development arise with respect to government’s function of representing the common needs of all the citizens. Different requirements, views, and opinions of different citizens necessitate the government to function independently and represent the collective views of all citizens other than needs of a few individuals. Democracy existence is said to be a hindrance to the independence a government in fostering economic growth and effective citizen representation. The government is given the responsibility of collecting taxes and putting the revenue into productive use with respect to aggregate preferences of citizens. Therefore, democracies may become obstacles for government’s rational functionality; however, multiparty systems in voting in governments may represent rational preferences that meet a variety of conditions to a limited proportion. Moreover, democracy may reflect a system of governance that meets requirements of citizens but does not foster aggregate preferences such as economic prosperity. However, autonomy of the government in countries like China only infringes on political freedom and not economic freedom. Lack of political freedom is depicted by the single party governance where the government places independent emphasis on liberalization of foreign and private investment. Usually, authoritarian governments that have liberalized their economies are statistically proved to economically perform better than democratic governments. This is because authoritarian governments have the mechanism to push towards economic prosperity as aggregate preference through free-market econ­omies. Therefore, developing countries can achieve a faster rate of economic growth in case the system of governance has a strong hold of authority to wield political power. China is a major economic power state with a massively huge population of approximately 1.3 billion according to Day (2005), although the government is so much concerned regarding China’s population growth rate and has put in place policies to strictly limit birth. China’s government has enacted policies and laws for Population and Family Planning, which allow a family to have only one child with the exception of another in case of unavoidable circumstances or relaxed policies for minority groups. In case of violation of laws and policies of population and family planning, the individuals are liable to meet social compensation charges. However, enactment of the one-child population and family planning policy has been rejected by many citizens and human rights activists, accusing the government of forced abortions. There have also been many negative perceptions against the population and family planning policies particularly with the shortage of girls in the society. Indeed, the government has basically enacted laws and policies of population and family planning to meet its target of a moderate population for development. Reasons behind China’s economic growth China has for a long time experienced explosive economic growth without political democracy characterized by economic and political reforms. Its government implemented policies that attracted foreign direct investment, with local entrepreneurs focusing more on international markets. In the past, the government of China used to control the country’s major productive assets, which led to redundancy of the highly potential economy. The government sought to put an end to economic dormancy contributing factors such as the state control of productive assets by liberalizing foreign trade and investment, relaxing price controls and encouraging private businesses. The government of China also invested in educating its citizens to come up with an effective skilled workforce, and undertaking the construction of industries. This is in realization that quality of labor force has a direct relationship with growth rates of the economy. China sought to educate its citizens that has gone a long way in promoting economic developments and social well being, as productivity of the workforce is determine by the level of education and specifically the higher education (Yum-Keung Kwan and Yu, pg 3). The strategies implemented to develop the giant economy are critical factors that are said to have brought China’s economy to its current state. Economic growth is usually attributed to the level of capital investments such as technological improvement, infrastructure, and stock capital assets. The efficiency of the work force is also valued to contribute to economic growth to a lesser degree than the capital investment. However, this has not been the case to China’s economic growth that is attributed to the huge efficient work force that has sustained increase in productivity, thus leading to economic boom. In addition, political and economic reforms are the driving forces behind economic growth with liberalization of foreign and private investment. The government sought to encourage joint ventures, private and community investment by offering profit incentives and guiding market oriented ventures. Capital markets investors and manufacturing firms could concentrate more on improving productivity due to motivation factor of profit incentives. China’s growth has seen development of the agricultural sector through economic reforms that improved property rights that accommodated multiracial ownership and small non-agricultural ventures. This led to improved productivity in rural areas characterized productive use of farms and price increases of agricultural products with improve labor efficiency. Chinas explosive economic growth is characterized by increase productivity in the industrial sector with production of iron, steel home appliances, and automobile products (Yao, Wu, and Lin, pg 22). Specialized efficient use of labor that was being adopted by investors in rural areas have generally contributed to Chinas work force shifting from agriculture to entrepreneurial activities that have higher value. Generally, a combination of capital investment both in rural and urban areas and profit incentives to private, community and foreign investment is a major contributing factor a boom in productivity and hence an explosive economic growth. China’s government capitalized in this combination with significant efforts in developing rural enterprises and avoiding urban influx of workers in search of industrial sector employment. The re-valuation of China’s currency to support its economic agenda, as it has for a long time invested a huge amount in the United States by holding their treasuries to maturity and reinvests the amount in the same country. The real value of China’s security holdings in the United States market amounting to trillions of dollars has a significant effect in China’s purchasing power and economic growth. Security holdings that China has invested in the Unite States have been continuously increasing by billions of dollars in the recent past with regards to gaining from large foreign exchange with the United States treasuries. The government of China is however concerned of the magnitude of impact that its Security holdings in the United States may have on its economic and political stability in case of variations. Given this situation, banks in China need to intervene on the issue of currency markets by undertaking to sell the yuan currency and purchase the dollar to hedge against exchange rate appreciation in China’s currency markets. China’s currencies face significant risk in undervaluation of the yuan currency and negative effects on China’s economy balance of trade. The economy may also loss its dollar reserves in the United State security if does not reduce its exports to the foreign market and improve its balance of payment. The fiscal strength of China remains stable, however the government nee to off support to citizens and businesses that face challenges due to appreciation of the Yuan currency with regards to world currency markets. Individuals may suffer with respect to appreciation of the yuan currency although the overall economy benefits from this appreciation as it significantly helps in reducing inflation rates. Social Concerns as a Result of China’s Growth A huge proportion of China’s developing economy with regards to capital investment is tied to private foreign investment by multinational corporations from the United States. The country has experienced huge capital investments both foreign and domestic due to economic reforms and huge capacity of China’s economy that has the ability to absorb an unlimited number of economic ventures. Although the government of China encourages unlimited foreign and domestic economic ventures, it fears for negative social impact associated with rapid economic developments accompanied by technology and culture transfers. Rising citizen expectations and excessive rapid economic developments poses a major threat of tearing the societies apart. Social forces and rebellions were depicted by the 1989 movement of intellectuals that was a result of mobilization against social concerns as a responsibility of government to find a solution (Cao, pg 63). The government ordered for a crackdown against the movement causing widespread condemnation of human rights violation all over the world. The Communist government had no apologies for the accusations of openly challenging independence aspirations among intellectual citizens. Since then, activists and rebellious movement participants have continued to languish in jail with China recording world’s highest number of executions. Moreover, there have reduced efforts and willingness to fight for China’s political freedoms, reforms, and liberalization. China’s government has cracked down severely on differing political views among its citizens, with suspicious increase in military personnel. Among the social concerns are the industrial land, air and water pollution that is affecting both the local and international societies. There are serious concerns of the social costs such as pollution as a result of industrialization. Industries need to be forced to clean the environment, power stations and relocate there plants to areas that are far away from human settlements. Investment should also be done with regards to purchasing new equipments and factories that do not emit environmental pollutants. The social costs have massive and more permanent effects as it affects the poor citizens that arise as a result of inequitable distribution of resources. Social concerns that have come up as a result of China’s economic growth are characterized by differential regional development and increased gap between the rich an the poor. For example, the western region of China is relatively underdeveloped compared to other regions. The gap between the rich and poor is being propagated as the economic situations make the richer richer and the poor more poverty-stricken. The economy developments are unbalance geographically and sector wise. China’s government implemented its reform policies selectively among provinces leading to unequal economic development among the coastal, inland, and dynamic provinces. Coastal provinces develop at a faster rate than the inland provinces leading inter regional disparities (Demurger, pg 14). China's massive economic growth however is not equally distributed among the different regions as the economic gains are directed to a biased group of people and individuals with increasingly rampant corruption taking place. Among the overall population of China, limited numbers of citizens have increasingly become richer while hundreds of millions of the citizens have surprisingly remained poor and even become poorer in extreme cases. The government tried to shift the rural areas from focusing on agriculture to more valuable entrepreneurial and industrial ventures, a huge number of China’s citizens remain focused on agricultural productivity. China’s government fears for eruption of chaos and civil unrest due to the rising contradictions between economic reforms and democratic developments. The government has been struggling hard to stabilize its political status alongside sustaining the explosive economic growth after the 1989 student’s movement. Existence of intellectuals as a result of economic reforms and development consecutively has been the driving force behind political transformation in China (Gilboy, George, Heginbotham, Eric, Foreign Affairs, Para 1) Transnational corporations have focused on the business opportunities and economic potential in China despite existence of lack of democracy as compared to India, which is ranked as the biggest democracy in the world. India is regarded as a politically stable environment that is conducive for foreign investors but surprisingly China is receives more foreign investors despite its one party rule, which renders it politically unstable an unfavorable for foreign investors. Foreign investors focus on China for investment has led to further economic developments with increased potential of emerging as a super power. Foreign investment in China is mostly from multinational corporations that originate from the United States and trade surplus to the Chinese economy. As a result of trade partnership and foreign investment of multinational corporations based in the United States investing in the economy of China, the United States has undertaken to push for re-valuation of the Chinese currency to facilitate trade that is more beneficial and interactions. China has enacted policies of facilitating investment in the United States stocks and capital assets, which are considered as a relatively risky venture. However, China’s currency re-valuation and maintenance in the worlds market will go a long way in stabilizing the yuan currency and hedging against the risky investment in the United States with considerable control of inflation. The current economic and political situations in China is characterized by increasing rate of inflation and with consequently reducing rates of economic growth is a hindrance to the working nation of China being motivated to foster continued development towards envisioning China to become a super power. The current reduce rate of economic growth in China has been caused by poor performance of the service sector which has been the least underperforming industry in China since the year 2005. The reduced rate of economic growth has been has been worsened by inflation with rapid increases in prices of goods. Conclusion China has continually maintained it political position with increasingly reduced focus responding to democracy aspirations of its citizens and the whole world. However, China’s lack of democracy has not been an issue of concern to the government of China given its ability to sustain explosive economic growth more than democratic countries such as India. China emphasizes on capital and labor as the main factors that drive a country towards achieving economic growth both in the in the short and long run. China’s government believes economic growth can effectively be achieved by independent governments that are not answerable to any third parties. Given the fact that China is a one-party state whose elected government can act independently and efficiently to foster maximum economic growth. However, Chinas massive economic growth can also be attributed to liberalization and economic reforms. Works Cited Cao, Tian Y. The Chinese model of modern development. NY: Routledge, 2005. Day, Kristen A. China’s Environment and the Challenge of sustainable development. NY: M.E. Sharpe, 2005. Demurger, Sylvie. Economic opening and growth in China. NY: OECD Publishing, 2000. Gilboy, George and Heginbotham, Eric. “China’s Coming Transformation.” Foreign Affairs, Vol. 80 Issue 4, p26-39, 14p, 1. Black and White Photograph, 2001. http://web.ebscohost.com/ehost/detail?vid=4&hid=11&sid=4ebe98a8-61d6-4c58-a915-35b93ab33b3e%40sessionmgr15&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=a9h&AN=4604614 Kwan, Yum-Keung & Yu, Siu-hung E. Critical issues in China’s growth and development. Hampshire: Ashgate Publishing, Ltd. 2005. Yao, Yang, Wu, Ho-Mou & Lin, Justin Y. Reform and development in China: What Can China Offer the Developing World. NY: Taylor & Francis, 2010. Read More