5 October 2018
AP Comp Gov
Government involvement in economics has had negative effects on the development of free trade according to Milton Friedman in Comparative Politics. The regulated distribution of goods and services by the government serves only to increase prices. Adam Smith’s invisible hand of the market, according to Friedman, is the only way to have a free and fair economy. He used the example of American airlines which now sell cheaper tickets because of the deregulation they have received. China, on the other hand, has people in charge of the distribution of materials. This is much more restrictive than the United States Department of Commerce, which mostly deals with regulations on the standards of goods being sold. The setting of prices by the government does not work, and this is supported by the results of The Marshall Plan in 1950. The debate of rapid change or gradual change proves that each situation is individual, and the countries like China have a long way to go towards the free economy.
The Chinese government swings between regulated communism and free-market practices. Currently, according to The New York Times, the government is pushing for fewer private business, which would have negative effects on the global economy by raising the price of Chinese goods. The Times claims that this swing back to the government is in response to Trump’s trade war threats.
In a consumerist world, how can countries like China improve their economy to be as successful as the United States?
If China were to adopt Adam Smith economics, its economy would most likely rise to compete with the United States. Due to the lower prices of good because of deregulation, businesses would have more competition to drive the economy. The same results that happened with the US Airline could be repeated in China if the government stepped back from the economy.
Dickopvick, J. Tyler, and Johnathan Eastwood. Comparative Politics: Classic and Contemporary Readings. Oxford University Press, 2017.
Yuan, Li. “Private Businesses Built Modern China. Now the Government Is Pushing Back.” The New York Times. October 03, 2018. Accessed October 05, 2018. https://www.nytimes.com/2018/10/03/business/china-economy-private-enterprise.html.