Capitalism results in economic growth because it feeds innovation through competition. China has developed an increasingly free market economy. The Soviet Union was innovative whenever they were involved in competing with the United States, but for products only distributed within their nation, it was always the bare minimum. The “invisible hand” of competition, brings the market to a natural equilibrium according to Adam Smith. Competition supports individual growth as well, and eventually results in more specializations of work.

An important distinction between capitalism and communism is the idea of equal opportunity verses equal outcome. Capitalism supports the idea of equal opportunity, but this automatically results in an unequal outcome because of the varying amounts in which different people are willing to work. Communism on the other hand supports the idea of equal outcome. There should be no wealth gaps in a communist state because it doesn’t matter how much work a person puts into succeeding, they end up with the same result. There is no competition, and there is no opportunity for growth.

China was primarily communist before for the majority of the 20th century, but they began transitioning into a mixed economy during the 90’s. They’ve experienced great economic growth due to this transition. In 1990, China’s GDP was 360.585 billion USD, and in 2011 12.238 trillion USD (China, 2017). The gross nominal income, GNI, per capita has also grown from 330 USD in 1990, to 8, 690 USD in 2017 (China, 2017). The new plan for China is to focus on innovation and becoming a leader in technological advances. “Made in China 2025” is a plan set out by Xi Jinping to change the Chinese economy to a mixed economy instead of a controlled economy (Amadeo, 2018). They are recognizing the relationship that innovation and competition have in furthering the economy. China’s plans to evolve into a mixed economy with more privatized markets will turn China into a more economically balanced nation.