Positive Effects of Capitalism in Developing Countries

The world has developed tremendously during the last century. This quick development, which led to the age of industrialization and economic growth in most democratic countries, can be attributed to the rise of capitalism. There is an undeniable connection between economic progress and capitalism. Today, most developing countries have already embraced this economic concept, which is the opposite of socialism or close economy, as they now begin to see the many benefits and positive impacts of capitalism. Apart from economic growth, capitalism can also initiate positive political and social reforms in developing countries, thereby leading to the recognition of individual rights, civil liberties, better standard of living and peaceful coexistence among cultural, religious and political groups.

In Asia, a number of formerly weak economies are now economically strong after adapting to capitalist trends introduced by the Western world, particularly the United States. The proliferation of the concept of free market system in some Asian countries made the region one of the leading movers in the global economy. Some of these East Asian economic ‘dragons’ or ‘tigers’ are Singapore, Hong Kong, Taiwan, and South Korea, which were formerly weak countries economically before the Second World War (Sklair, 1994, p.72).

In Latin America, two countries that embraced capitalism—Mexico and Brazil—also saw economic progress following the wave of privatization of the formerly state-owned corporations (Gianaris, 1996, p.96). The question is why capitalism worked in these formerly socialist and authoritarian countries. It is because capitalism is so strong a catalyst of change. With capitalism, these closed economies were forced to engage in privatization, embark on policy reforms to allow the entry of foreign investors, and radicalize free trade, which permitted countries to engage in trade without red tape, state intervention and legal frictions.

Other countries like India and Philippines have also embraced the American concept of capitalism. After years of wallowing in poverty, India realized that it had to attract foreign investors who possess the technical capacity and competence in area commerce, manufacturing, real estate, among others (Lippit, 2005, p.84). In its effort to attract investors, the government of India is currently spending billions of dollars in infrastructures, thereby creating more jobs, and boosting its efforts in fighting graft and corruption and bribery (Cooper & Watts, 2007). This policy effort can absorb billions of dollars in foreign direct investment, which can be India’s best answer to poverty and unemployment. On the other hand, the Philippine government has to combat corruption and red tape in order to attract direct foreign investment.

Before Communist China partially adopted capitalism, the Chinese economy was in tatters, inflation was beyond control, and the country’s social and political system in disarray, which led to student protests and the massacre of student protesters in what is now known as the Tiananmen Square tragedy (Selden, 1992, p.37). In embracing capitalism, China had to consider policy reforms like the gradual recognition of property rights, which is one of the important rights in a capitalist country. In his controversial book, former Chinese Premier Zhao Ziyang (2009, p. 205) once advocated for the reintroduction of capitalism, as he saw that this economic system could be the solution to China’s economic ills in the past.

Despite the many criticisms of capitalism, there is a need to look at its positive impacts on the modern world. Massive social, political and economic changes were seen in the past decades due to the widening influence of capitalism all over the world. Some formerly closed economies have adopted capitalism because of its many economic and social benefits. Capitalism is the only economic system that is consistent with individual rights—man’s right to life, liberty, property and the pursuit of happiness.

The concept of property rights spawned radical technological development in the past decades with the introduction of new inventions, innovations and artistic creations. Prices of metals declined because of the discovery of new alternatives. Also, goods and commodities became affordable because of competition among market players and with the introduction of new products and services in the market. Indeed, the last half a century, which saw the rise of capitalism, was the only period in man’s history that saw massive technological and economic development. This is the reason why developing economies are now embracing the capitalism.

List of References:

Cooper, C. & Watts, H. (2007). “Indian Infrastructure begs better bond market.” Reuters.

Retrieved on May 27, 2009, from http://www.reuters.com/article/IndiaInvestment07/idUSBOM5870820071207

Gianaris, N.V. (1996). Modern Capitalism. California: Greenwood Publishing

Lippit, V.D. (2005). Capitalism. New York: Routledge

Selden, M. (1992). The Political Economy of Chinese Development. New York: M.E. Sharpe

Sklair, L. (1994). Capitalism and Development. New York: Routledge

Ziyang, Z. (2009). Prisoner of the State: The Secret Journal of Premier Zhao Ziyang.

Orlando: Simon & Schuster