Capitalism and Entrepreneurship in China - Assignment Example

CAPITALISM AND ENTREPRENEURSHIP IN CHINA An ancient civilization and an emerging economic powerhouse in the heart of Asia, China is quickly developing one of the strongest economies in the world. Chinese products can be found all over the world from Athens to Zurich and since its cautious embrace of a more market-oriented capitalist outlook, the modern People’s Republic of China has exhibited phenomenal economic growth. China today represents a new form of economic development and this country has witnessed sustained financial growth while resisting pressures to democratize and has continued to develop inline with Maoist socialist thought. Oftentimes, the economic model of development propagated by China today is described as “authoritarian capitalism” (Gat 2007, 33). China has recently taken cautious steps towards the embrace of market-oriented principles and while capitalism and entrepreneurship remain relatively new concepts, these concepts are starting to take hold. How has China developed over the past century? What is the recent history of China and how does this history explain the model of development which it has decided to pursue? What roles do the business and agricultural sectors play in the Chinese economy and lastly, has the Chinese economy grown under globalization? These questions, and many more, will be addressed in this exploration of China and its cautious embrace of capitalism and entrepreneurship today. Economic and Historical Analysis China is an ancient civilization with a long tradition of dynastic rule and strong leaders. China has been ruled by the Communist Party of China (CCP) since 1949, an avowedly socialist form of government which established the People’s Republic of China, and initially viewed capitalism through a skeptic’s lens. As a socialist party with communist leanings, successive Chinese governments undertook disastrous social and economic initiatives including Five Year Plans, the failed Great Leap Forward and the violent Cultural Revolution (see Kim 1998). Despite these early years, China has cautiously embraced economic liberalism and a capitalist economic orientation, albeit with strong authoritarian tendencies. China today has the 4th largest economy in the world behind the United States, Japan and Germany, estimated at $2,645 billion per year. With a population of more than 1.3 billion, China remains a largely rural country with 43% of its labor force employed in agriculture with another 25% in industry and 32% in the service sector. Industry, however, has driven the economic growth of this country which represents 49% of the total $2,645 billion GDP. Accordingly, the average annual growth in China over a ten year period was an astonishing 10.5% (1996-2006). Much of this growth is tied to the global economy and China’s role in international economic affairs today (The Economist 2008, 111). Neoliberalism and the World Globalization, as it exists today, rests largely on the shoulders of neoliberal economics and the global entrenchment of capitalism as the dominant economic system in the world. Neo-liberalism, the belief in laissez-faire economics, was best articulated by Margaret Thatcher in the United Kingdom and Ronald Reagan in the United States in the 1980s. US President Ronald Regan famously remarked “government was not the solution but the problem” (Hobsbawm 1994). Neo-liberals put all of their faith in the distributive capabilities of the invisible hand of the free market, and believe that business was inherently good and that government bad. The government was longer interested in the provision of welfare but existed to stimulate the capitalist economic market. The United States under Ronald Reagan was thus described as the “greatest of the neo-liberal regimes” (Hobsbawm 1994, 137). Accordingly, The essence of neo-liberalism, its pure form, is a more or less thoroughgoing adherence, in rhetoric if not in practice, to the virtues of a market economy, and, by extension, a market-oriented society. While some neo-liberals appear to assume that one can construct any kind of ‘society’ on any kind of economy, the position taken here is that the economy, the state and civil society are, in fact, inextricably interrelated (Broadman 2007, 68). How did neoliberalism, the dominant political and economic ideology of the West since the Reagan years make inroads around the world and into the formerly Communist countries of Eastern Europe and China? The Second World, consisting of the global Communist community during the Cold War, was severely undermined by economic and political crises which began in the late 1960s. The result was political and economic disorder. Economic crises undermined the political foundations of states like China and the USSR – particularly after the deaths of men such as Mao & Brezhnev – and the centrally planned economic systems of these countries remained under stress and increasingly precarious. The Communist world was also not immune to global economic crises as evidenced by effects of the OPEC crisis of 1973. These aftershocks paved the way for perestroika and glasnost in the USSR, the implosion of Yugoslavia and popular Chinese dissent expressed in Tiananmen Square and captured live on camera. The political and economic fragilities of the Second World were exposed following 1968 and slowly led to political decay, leading to the eventual implosion of the Soviet Union. In addition to establishing a foothold in the formerly Communist countries of Eastern Europe, neoliberalism has made cautious inroads into China, a new and increasingly potent global economic actor (Strayer 1998). China and the Global Economy Globalization is an international phenomenon with important geopolitical ramifications. Accordingly, the current state of world affairs coincided with the emergence of neo-liberalism as a driving political and economic force in the 1980s. At the forefront of the recent economic overtures were the Asian economic “Tigers”, a group of Asia countries who emerged in the late 1980s and early 1990s, precipitating a global economic shift towards emerging East Asia and its rapidly expanding markets. Chinese development, while embracing market-oriented economic policies, differs substantially from the other Asian Tigers in that it has chosen to gradually liberalize its economy but has resisted pressures to democratize in the face of an opening in the economic sphere. Based upon the principles of economic liberalism but with a strong role for the state, China began with the creation of attractive economic-oriented trade zones to appeal to foreign investors and stimulate national growth. Industrialization and export-oriented development were key to China’s development model. Accordingly, this model of growth is a modern attempt at harnessing the forces of global economic capitalism through state-led development. This form of development focuses on macro-economic concerns (raising the Gross Domestic Product, decreasing the national unemployment rate, etc.) by attracting foreign investors and utilizing the resources already available to stimulate growth. While his form of economic development is currently being practiced around the world, it has been particularly successful as a developmental model in the case of China (Nolan 2001, 130-142; Close et al. 2006, 28-37). Although in East Asia, Taiwan, South Korea, Japan and Hong Kong remain important economic actors, "the most dynamic and rapidly growing economy of the globe after the fall of Soviet communism was that of Communist China, leading Western business-school lectures and the authors of management manuals, a flourishing genre of literature, to scan the teachings of Confucius for the secrets of entrepreneurial success" (Hobsbawm 1994, 131). China has benefited tremendously from increased interdependence and has established a strong manufacturing centre, shifting employment away from traditional manufacturing centers in the West. China remains the major challenge to US economic control as wages continue to remain low in China and Chinese products continue to flood the world’s global marketplace. China has remained competitive, commands one of the world’s largest economies and has established a working and viable example of authoritarian capitalism. This shifting of global production centers to the East has led hurt traditional manufacturing centers in the West, exemplified by the decay felt by the once-vibrant US automotive hub of Detroit, Michigan. Concluding Remarks Globalization has been propelled by capitalism and the internationalization of the capitalist economic system. China represents an alternative development model than that articulated by the liberal democracies of the West, including France, the United States and Great Britain, who have espoused democratic capitalism as a model for development. China advocates an alternative developmental model and has grown its economy through strategic economic planning, exported oriented growth in a global economy and a strong current of political authoritarianism. Capitalism and entrepreneurship are new concepts which are starting to take hold in China. Only by understanding its past can we understand why China is the way that it is now. By embracing capitalist economic principles and reforming the structures of its economy, China has effectively positioned itself as a key player on the international economic stage and has witnessed incredible economic growth while resisting pressures to democratize (Peerenboom 2007, 1-30). BIBLIOGRAPHY Broadman, H. G. 2007, Africas Silk Road: China and Indias new economic frontier, World Bank, Washington, DC. Close, Paul et al, 2006. The Beijing Olympiad: the political economy of a sporting event, Routledge, New York. Kim, Eun Mee, 1998, The four Asian Tigers, Academic Press, London. Hobsbawm, E, 2004, Age of Extremes: The Short History of the Twentieth Century: 1914-1991, Abacus, London. Gat, A, 2001, “The Return of Authoritarian Great Powers”, Foreign Affairs, July/August. Lardy, N.R, 1994, China in the World Economy, Peterson Institute, Washington. Nolan, Peter, 2001, China and the Global Economy, Palgrave, London. Peerenboom, R. P., 2007, China modernizes : threat to the West or model for the rest? / Oxford University Press, Oxford. The Economist, 2009, Pocket World in Figures, 2009 Edition. Profile Books, London. . Read More