Canada, Italy, and Brazil.
What do these countries have in common? All of these countries had a substantially bigger economy than China just 40 years ago.
That might seem like a crazy statement today, especially considering that China has been the investing and economic darling of the world over the last several decades. But something happened recently that brought China’s economy to a standstill. The Coronavirus.
The outbreak of this disease has slowed down the manufacturing HUB of the world to the point where many other countries are seeing, drug, food, and retail shortages. But this is a problem unique to China. because if this outbreak were to have occurred in any other country, we would not have seen a global impact on the scale anywhere that we are seeing today. ..
During the thick of the industrial revolution in the early 1800’s, European and North American countries were going through a technological and economic boom. But what most people do not know is that during this time, China had by far the largest and most powerful economy in the world. In fact, China’s economy was larger than all european and north american countries combined.
This was for a few key reasons. One of which was that in the previous centuries, China focused on becoming the largest agricultural producer in the world. They began producing an abundance of a wide variety of food, while having a near monopoly on the production of salt. This allowed for China’s population to increase from 150 million to 400 million within one century. So by 1820, one third of the world lived in China. But, the Chinese empire began to crumble. As the rest of the world was focusing on a new economy, technologies and globalization, China was still focused on agriculture, commodities, and domestic trade.
And this came to a head in 1840 when steam-powered british ships arrived at the coast of China. This was the start of the opium war where 20 000 British troops with advanced technology faced off against 100 000 chinese troops. The war lasted 3 years, and this was the beginning of the end of the chinese empire. China was forced to give up key ports and cities around the country to the newly advanced western powers of the world. They were also forced to sign unequal treaties with the west, which crippled the chinese economy and forced them to pay reparations for war.
This was known as the century of humiliation for China. Where they went from being the economic powerhouse of the world, to an impoverished country that gave up substantial territory to Britain, Russia, Germany, and Japan.
in 1920, China seeked-out some assistance in order to help the country rebound from its humiliation. So it sought the help of Lenin and the Soviet Union. Over the next several decades, Wars, soviet influence, several power vacuums, and a new leader named Chairman Mao…led China towards a new form of economic policy called communism. Up until 1978, Communism was the main economic model of China. But the government new it was not working.
the GDP per capita was $156 and growing at a mere 2.9%, which meant that the average person in china was living in extreme poverty, and the future didn’t look so bright.
So, the country decided to try an old system. Something that they hadn’t tried in nearly 100 years, since the days of their global domination. That system was capitalism.
But China didn’t go full capitalism right away. They started off by de-collectivizing the agricultural sector. Then they began opening themselves up to foreign investors, and granted a few cities the permission to allow private small businesses. However, the vast majority of the chinese economy was still run by the state.
And after seeing the success of what capitalism and privatization did for them in the first few years of this new economic model, they released the purr strings on the economy and lifted price controls, began de-regulating virtually every industry, and allowed nearly any citizen to start their own business if they wanted to.
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