When China moved towards the free market system, the poor people of China rapidly started getting richer. How rich you are depends on the value of what you produce, not on what other people are kept from producing.
Would that it were so marvelously simple!
The value of what I produce does not depend only on my abilities and my willingness to put in effort.
A person is more productive when he has tools to work with, and raw materials to work on.
The value of tools and raw materials is typically low. My home computer is more powerful than the computer an employer typically gives me, and my home office is way nicer than the office the employer gives me, if the cheapskate gives me an office at all (cubicle more likely)
Thus, the majority of value added goes to employees, not the employer. Profits are typically a few percent of the wage bill.
If you work through an agency, it looks like a large part of value goes to the agency, but this reflects taxes and the cost of interfacing with the government - hiring people to do actual work requires hiring more people to deal with labyrinthine red tape, so employers are willing to pay a lot more when the agency deals with that red tape. When they hire you through an agency, they are hiring you to do the work, and also paying someone else to take some of the heat of dealing with the state.
The very large discrepancy between agency fees and your wages is primarily a measure of regulatory burden on employers. When the regulatory burden rises, as it recently did, wages have to fall, or prices to rise, or else unemployment rises, as it is rising now.
And the value of what I produce does not depend only on its utility, either. It also depends on what others are willing to pay for it.
Marginal utility - read "
economics in one lesson". Diamonds really do provide more utility than water, because people have all the water they need, but do not have all the diamonds they need.
This is why the United States and Canada enjoyed full employment up to about 1968, and continue to enjoy relative prosperity. A relatively small population living among great resources of farmland, forests, and minerals, as well as having factories and offices using the world's most advanced technology.
Then why is Singapore more prosperous than the USA? Singapore has nothing but a large sandbank. At least Hong Kong has rocks.
Singapore has the freest trade in the world, and the least resources in the world, and Singapore's GDP per capita is $62,100 (2010 est.) while US GDP per capita is $47,200 (2010 est.)
India has had the free-enterprise system for quite a while,
India has only had free enterprise since 1988, the same time as most of the post soviet nations.
The Indian castes differ racially from each other. The more Dravidian the caste, the lower its IQ. The Indian lower castes, the great majority of the population, have substantially lower IQ. The upper castes have near white IQ (the upper castes being racially aryan (mostly near white) and racially Brahmin (mostly near oriental), and mixtures thereof. When companies import Indian engineers, which is a large portion of Indians in the US, they import the very smartest ones, which are much smarter than the average white - but they are not as smart as the average white engineer. The racial inferiority of the great majority of the Indian population limits what India can accomplish. Thus India will always be poorer than the typical post Soviet nation.
So the problems after 1968 have two obvious causes:
Liberalized rules on imports have given low-wage countries access to the North American market. This reduces the price paid for things like radios, television sets, and automobiles, thus decreasing their monetary value to such an extent that people could no longer afford food and housing at American prices where they to be employed producing them.
1968 was not famous for liberalizing imports. It was famous for the great society, for the massive movement leftwards.