Are Communist rule and the trampling of peasants’ rights compatible with prosperity? Considering that real Chinese wealth has doubled since 2000 one might be inclined to make this assertion.

To appreciate the magnitude of this growth, the U.S. economy has grown by 18 percent since 2000. Had the U.S. grown as fast as China, per capita income would be over $20,000 higher than it is today in America. The Chinese experience is remarkable.

AIER Visiting Research Fellow Craig Richardson probes this question in our March 17 issue of Research Reports. Professor Richardson asserts that China has enjoyed dramatic growth because,

there appears to be a three tier system of property rights that offers varying levels of protection, depending upon where the property is located and who owns it. Peasant farmers have the least protection, city residents have better protection, but foreign investors, ironically, have the most secure property rights by far.

In fact, not one single foreign investor has lost property in China during the past 50 years. The remarkable growth in China has been driven by the expansion of foreign investment resulting from the trust that has developed between Chinese officials and foreign business interests, and not the activities of individuals and enterprises whose rights have not been protected.

Foreign investor protection has ironically come at the expense of peasant farmers whose land has been taken for mere pennies on the dollar to the value of the land to outsiders. Conversely, property protection in America emerged from common law traditions and a respect for the fundamental rights residing in individuals, not governments.

Freedom from expropriation has, in both cases, nurtured incentives to invest for those who have the most to contribute. But long-term growth and social stability cannot continue in an environment where the rights from which these incentives are derived are not protected for all.