Business Ethics Final Exam Question 1/Answer…

1. Some may assume that the values of Democracy are consistent with the values of free-market Capitalism. Others would deny such relevance. Armatya Sen provides a compelling argument for the universal appeal to Democracy, and claims that economic growth works best when melded with democratic principles. The question is, is Democracy a necessary condition for there to be economic growth, or is rather merely sufficient?

I do not believe that Democracy is a necessary condition for there to be economic growth. It may seem as though Democracy is consistent with free market Capitalism, but it isn’t necessarily so. While, from the western point of view, Democracy may seem like a universal value, it is not now, nor has it ever been valued universally.
The obvious case in point is China. The Communist Party of China wields vast and strict control over all areas of life in China including religion, communication, entertainment, education, labor, and politics, however they have relinquished small amounts of control over economy, industry and agriculture. China began moving toward economic liberation in the 1970’s under the unofficial rule of Deng Xiaopeng after the death of Chairman Mao in 1976. Deng Xiaopeng astutely moved the Soviet style planned economy into a more functional mixed economy under the one party rule. This system is termed Market Socialism. The transition first occurred in Special Economic Zones set up to experiment with pseudo-private ownership of agriculture to estimate if there were increases in productivity. The increase was dramatic enough for the government to extend the idea of pseudo-private property ownership to manufacturing as well. Although there is privatized industry, it is strongly controlled and regulated by the single party government.
The result of this economic liberation is that China has become the fastest growing major economy. China is the largest exporter and the second largest importer of goods. China’s economy has averaged 10% growth annually since 1981. The poverty rate in China has moved from 53% in 1981 to just 8% in 2001, which is extraordinary considering the population is estimated to be around 1,338,613,000. The standard of living is lower than that in the United States. The current poverty rate in the United States falls between 13 and 17%. According to the World Bank website, China is the third largest economy behind the United States and Japan. The Gross Domestic Product of China is slated to surpass that of the United States by 2027. In January of this year, China co-founded the Association of South East Asia or the Asean 6 Free Trade Zone, comprised of six countries and over 2 billion people. It is the largest free trade zone in the world.
The United States established their “economic engagement” policy toward China in 2000. This policy allows for trade with an otherwise closed country. When the United States granted China basic trading rights, it was with the hope that China would gradually lean toward democracy as a result of the influx of international (US) money and western cultural influence. The Chinese government relaxed travel restrictions both in and out of China. The Chinese became aware of the outside world and the Communist Party of China could only censor the inflowing information and news so much. Ten years later, the hope of democracy in China has not been realized, to the disappointment of the United States and most of the western world. This is largely in part to Chinese Nationalism, which is greatly misunderstood and underestimated. That, coupled with the rapid industrialization of industry and the enormous decrease in poverty, has only strengthened Nationalism. Communism is stronger than ever in China, and with the general increase in the quality of life, there is less and less resistance toward the communist government. China has become a major economic superpower without Democracy; therefore Democracy is not a necessary condition for economic growth.

Shirk, Susan. China, Fragile Superpower, Oxford University Press, New York, 2007
Spence, Jonathan, The Search for Modern China, Norton & Company, New York, 1999

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