More political ideals and business

Many reacted angrily when I proposed yesterday why flexibility is needed by companies forced to contend with Chinese censorship regulations. In today's post, I expand on why compromise is a small price to pay in return for accelerating Chinese economic development.

I spoke yesterday in a brief post about the difficulties of melding business interests with political considerations. Some in America's House of Representatives advocate a hard line in response to Chinese censorship regulations. They insist that American companies who do business there refuse to assist China in its censorship goals and show "real spine and willingness to stand up to the outrageous demands of a totalitarian regime." In response, I advocated flexibility, noting that economic engagement has often proved a better motivator for change than economic isolation, which would be the net result of forcing Cisco, Google, Yahoo and Microsoft to ignore the dictates of the Chinese government and adhere to Western norms of information access.

Some interpreted "flexibility" as meaning "allow companies to assist Kim Jong Il to make a super bomb that wipes all human life from the face of the earth and replace it with male and female clones of the 'Dear Leader'" (or something like that). Clearly, there are limits to the kinds of economic activities in which companies should be free to engage. Companies should not assist dangerous governments to create nuclear weapons. Companies shouldn't hire slave laborers in foreign countries, even if governments there let them do it. I would even say companies shouldn't hand over dissidents to government authorities so that they can prosecute them and throw them in jail.

Those "red lines," however, are substantially different than the sorts of things Google, Cisco, Microsoft and even (mostly) Yahoo are being asked to do. We are talking about restrictions on information accessed over the Internet. Though it clearly is not good that the Chinese government restricts its people from accessing information, it is not the same thing as facilitating the Chinese government to, say, build a bigger military, or better jails in which to house dissidents.

Though it's hard for the average computer geek to imagine life without access to the intravenous feed of knowledge that is the Internet, there are MANY sources of information besides that global network. There's satellite, a technology which is fairly hard to stop given the small size of modern satellite receivers. As I've noted in the past, though the Iranian government surely would wish otherwise, satellite dishes dot the Tehran cityscape like sunflowers turning towards a satellite sun.

There is local information passed around by word of mouth, informed by unofficial newspapers of the sort which published the early works of Soviet dissidents. There is radio, and shortwave can penetrate fairly deep within China, which is one reason possession of a radio in North Korea is considered a serious crime. Last, there is the information which comes from frequent contact with people from foreign countries.

Contact with foreigners happens in a variety of ways. If economic growth takes a front seat from a policy standpoint, totalitarian countries are more likely to encourage its best and brightest to study in foreign schools. That is certainly the case with China, a country sending ever growing numbers of its citizens to leading schools in the United States and Europe. Likewise, foreign businesses often send large numbers of their nationals to the target country, creating a cultural exchange that grows as the size of foreign investment grows. Such contacts don't just bring new ways of doing things, but also builds cross-cultural understanding that help to break down communications barriers and make problems more resolvable.

Last, business contacts help to drive the local economy, and a strong economy does more to reduce the power of totalitarian regimes than anything else. It's poor nations that have the most entrenched dictatorships, because citizens are more concernd with feeding their families than with who nominally rules them.  Affluent nations have more leisure time to worry about such issues. That seems the case with Taiwan and South Korea, both of whom were ruled by military dictatorships until the shift to democracy in the late 1980s, a period marked by high growth in both economies.

The reason this shift occurs isn't hard to understand, as related by Minxin Pei in his article "Constructing the Political Foundation for Rapid Economic Growth" (a reference to which was found in Fareed Zakaria's "The Future of Freedom"):

Rapid growth had liberalizing consequences that the ruling regime had not fully anticipated. With the economy taking off, Taiwan displayed the features common to all growing capitalist societies: The literacy rate increased; mass communication intensified; per capita income rose; and a differentiated urban sector -- including labor, a professional middle class, and a business entrepreneurial class -- came into being. The business class was remarkable for its independence. Although individual enterprises were small and unorganized they were beyond the capture of the party-state. (my emphasis)

This is why economic development should take precedence over calls to force totalitarian regimes to match Western norms of information access now. As noted, there are limits, as companies aren't free to do anything a totalitarian regime tells them to do (or enables them to do). However, the costs of limits on information are insufficient justification to force companies to take stances which would result in them being barred from economic activity within such nations.

First, mere access to information about Tiananmen Square or other crimes committed by the Chinese government isn't likely to cause the Chinese to rise up tomorrow and overthrow their government. The economic threshold hasn't been crossed, and too many still spend too much time worrying about basic necessities to back a serious challenge to the Communist Party.

Second, embargoing China from a software technology standpoint until they meet Western standards of openness isn't likely to prevent the country from continuing to limit such information, given that the Chinese are fully capable of providing such services themselves.

Third, keeping Western companies out deprives China of investment by Western technology companies, thus slowing down the economic development of China. No, a technology embargo is not going to have the same effect an oil embargo or an exports embargo, but it has a credible effect in a world where software is a critical component of modern business.

Fourth and last, it deprives the growing Chinese business class, the critical agent of change according to Minxin Pei, with access to Western cultural norms through the business contacts that come from being plugged-in to a global marketplace.

I pointed out in my last post that our embargo of Cuba and Iran has not succeeded in changing those regimes one iota in spite of decades of economic sanctions. In contrast, America has engaged with China since Nixon made his first visit in the mid-70s, lending support to Deng Xiaoping in his decision to start China down the path of economic liberalization and resulting, in my opinion, in the fast-growing Chinese economy that we see today.

There are any number of reasons not to do business with China, from the jailing of many of its citizens for political crimes to restrictions on religious freedom and the fact that many aren't allowed to leave their towns or villages without government permission. That has not prevented many companies - airlines, automobile companies, and even newspapers (which are likely to have the same information restrictions as Cisco, Yahoo, Google and Microsoft) - from doing business there.

Regimes can be changed by forcing them into economic collapse, as occurred with the Soviet Union.  Unfortunately, that's a slow process with an even longer road back to prosperity.  The difficulties of that road often send suffering citizens back to the comforting certainties of totalitarianism. Russia under Putin certainly bears that theory out.

Engagement is the best option, even if it involves some compromises. If the goal is to build a free society, the best course is through enabling people to develop economically and to decide for themselves that they want to be free.