Financial Crisis Reduces Economic Freedom in China and the West

July 31, 2009

(PhysOrg.com) -- The current financial crisis may reduce economic freedom as governments are likely increase intervention in a bid to protect their own economies - according to a study in Pacific Focus published by Wiley-Blackwell.

The paper entitled, “Geopolitics, Economic Freedom and Growth in China and the West” provides an analysis of the current financial crisis and its impacts on global economic freedom. By examining the divergent economic fate of China and the West after World War Two, the study demonstrates the positive correlation between economic freedom and prosperity.

The study also introduces the determinants of why China could begin catch-up growth after government reforms and provides an analysis of this growth during the late 1970s.

“The West was able to overcome mass poverty much earlier than China, because of its limited government, as a result of political fragmentation, and comparatively free markets. It was only after China liberated its markets and joined the capitalist world economy in the 1970s that she managed to catch-up with the West”, said author Dr. Erich Weede, a retired Professor of Sociology at the University of Bonn.

He added, “The financial crisis that began in the US housing market and banking system has severely affected many countries around the world, and governments may succumb to the temptation of protectionist policies to shield their economies. Nevertheless, it is essential to remember the damage that protectionism caused during the last global depression and the benefits that economic freedom entails.”

More information: This article is published in the Pacific Focus (Vol. 24, Issue 2, pp. 131-160).

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