A Free Market Economy - Research Paper Example

Economy Introduction Free market economy is a system that allows the government a limited control over the activities of the market. The state is only responsible in intervening on the economy during crisis. According to McGregor (2), the main duty of the central government is collecting tax and acting as a watchdog in the market. In free market economies, individuals make decisions independently and the leadership is considerate. The government consults when devising policies on trade. McGregor (5) states that the economy is open and the government is not dictatorial. Free market system enhances the development of democracies as discussed in the piece. Moreover, free market system promotes fairness in the society by threatening dictatorial rule. Part 1 Free market policies that threaten dictatorial governments Governments around the globe prefer the free market system because of the advantages that arise upon use. Indeed, the system encourages entrepreneurship and healthy competition. In dictatorial States, the system poses threat to governments. According to Cobin (16), free market leads to economic growth and the development of democratic empires. In China, the system has been fundamental in strengthening democracy. The rise in private wealth acquisition in China is attributable to the free market system. For instance, the system promotes democracy in China. Free market system discourages dictatorship in several instances making the system preferable in developed democracies. According to Wehner and Brooks (37), the use of free trade policies limits State’s monopoly. As such, the system denies government the monopoly of making trade policies on behalf of the citizens. Governments using the system consult citizens when making trade policies. Wehner and Brooks (24) add that free market system enhances fairness in employments. Moreover, government listens to public opinion when making national budget in free market systems. Dictatorial governments find it hard to embrace the free market system because it encourages citizens to take part in planning. In free markets, the public helps the government in planning for activities that affect trade. For instance, citizens vote when choosing their leaders, yet voting is against the principles of dictatorship. Moreover, people make decisions through consensus in free trade (Kates 7). Citizens prefer the use free trade policies because the policies advocates for fairness in trade. Free market system advocates for the use of monetary policies in restructuring economies. This is only achievable in the presence of democracy. The economy encourages dialogue during planning. This makes it difficult for a government to embrace dictatorship (Wehner and Brooks 27). There is a direct connection between economy and politics making governments listen to the views of masses when devising trade policies. A majority of the countries that have adopted free market economic system are not dictatorial. This is an indication that free market system discourages dictatorship. Policies that prohibit the government against setting prices for commodities are helpful in promoting democracy. In free market economies, market forces control the activities of the market. According to Cobin (151), governments intervene only when the country faces crisis. Additionally, a free market encourages the poor to exploit the rich because they control dictatorial governments. When the poor have the capacity to develop, they become a threat to the government. In free markets, people champion their rights through voting; hence, the poor in the country have the capability to elect one of their own to a leadership position. 2 China’s economy According to Richard McGregor, China’s economy is both a free market and communist economy. It is a free market because leadership has embraced liberalization of trade. For example, individuals have built their own business empires from trade. In China, the communist party encourages ownership of properties by individuals. The government promotes privatization as stated by Friedman (17). The privatization of national corporations is an indication that the communist party uses free trade practices. However, the government still regulates the activities of the private sector. McGregor states in his book that the government urges individuals to invest in businesses. Moreover, the government uses the principles of free market in allocating resources to the poor. The Chinese system is not a free market economy because the administration still owns a bulk of shares in the telecommunication industry. Besides, the government owns airlines natural resources like the gas that should belong to private corporations. As noted by McGregor (2), the ruling party has introduced the use of communists’ policies in trade institutions. The communist party has employed secret agents to monitor trading in the domestic market. The authorities use the principles of free market economy and communist economy simultaneously. The country has also adopted the Confucian culture as apparent when the government denies the public information concerning trade. Citizens adhere to government policies on trade. This is an indication that China assumes the state of a controlled market economy. Moreover, China is not a free market economy because the governments still regulates several activities within the market. This has made the United States refer to China as undemocratic. Free market economy fails when few individuals can use their influence to control the activities of the market. According to McGregor’s book, the theory cannot work since individuals have different capabilities. The current growth in the economy is attributable to the adoption of some of the free market economy principles described by Friedman. Unfortunately, free market policies open the local market to foreigners. This allows wealthy foreigners to interfere with the activities of dictatorial government (Friedman 56). Moreover, the policies champions the rights of the poor; thus an impediment to dictatorship. 3 Milton Friedman's hypothesis The communist party is capable of disapproving Friedman’s hypothesis by maintaining their influence on the country without interfering with the economy. In China, the government is still controlling ownership for most of the public utilities. This is an indication that Friedman’s hypothesis has failed. Moreover, the communist party is still making decisions concerning privatization of corporation on behalf of the masses. According to Wehner and Brooks (1), independence of citizens is not threatening the communist rule in China. The communist party is dictatorial, yet there is growth in China. Growth has been taking place in China, and the party has faced less resistance from the public. Freedman’s opinion is false because the communist party is controlling marketing activities on the media. The government has adopted the free market principles, but they are still in control in China. Indeed, the government is practicing dictatorship whereby they shape opinion on issues that affect the economy. However, the hypothesis proves that fact that consumer demand drives the economy and not the activities of the government. Majority of the individuals who hold wealth in China supports the government (McGregor 4). This makes it difficult for the masses employed by the wealthy individuals to overthrow the government. China’s government has adopted communist principles yet they have not faced rebellion from the public. The populace agrees that free market principles benefit the economy. Interestingly, Chinese are still happy with their government despite authorities embracing free market economies. The Chinese believe that the government has a role to play in shaping the economy. The authoritarian government is spearheading the growth of the economy (Cobin 519). Consequently, some of the regulations of by government are impeding on the development. Indeed, growth was stagnant in when the government controlled most of the activities of the market. Friedman’s hypothesis applies in some instances because the growth of China will stagnate in future. As a result, people will turn to the government for solutions. Failure in the economy will end the leadership of the communist party. People will opt for democracy and free market economies that deny the government the autonomy of controlling the activities of the market. Individuals will share benefits amongst themselves upon overthrowing dictatorial regimes. Friedman’s hypothesis will be disapproved in China because the dictatorial governments in China have been successful in intervene on the economy during difficulties. Moreover, economic growth is improving the ratings of the communist party in China (Wehner and Brooks 58). The communist party cannot fail because they operate in a secretive manner and they have purged Karl Marx’s ideology in monitoring the economy. Conclusion Nations around the world prefer using free market principles because they have been tested and found to be effective during development. However, free trade policies are not effective in dictatorial states because they limit the role of the government in controlling trade. Communist societies avoid the use of free market policies because it denies the government control. Instead, dictatorial regimes use different approaches because they fear that free market policies interfere with their hold on power. Lastly, it is difficult adopt free market policies when dictatorship is the form of government in place. Works Cited Cobin, John. A Primer on Modern Themes in Free Market Economics and Policy. Boca Raton: Universal-Publishers, 2009. Print. Friedman, Milton. Capitalism and Freedom. Chicago: University of Chicago Press, 1962. Print. Kates, Steven. Free Market Economics. Cheltenham: Elgar, 2011. Print. McGregor, Richard. The Party: The Secret World of China's Communist Rulers. London: Penguin Books, 2011. Print. Wehner, Peter and Arthur Brooks. Wealth & Justice: The Morality of Democratic Capitalism. Washington, D.C: AEI Press, 2011. Print. Read More