Outrage of the Week: Slumbering Amidst the China Threat

It is the kind of power that has never quite been seen in history: the world’s most populous nation, run by a centralized dictatorship fully capable of violently clamping down on dissent and democratic demands, and still the rest of the world is beating a path to its door. Its GDP growth runs at ten percent a year. It has the world’s largest standing army and a formidable nuclear arsenal. It is also riddled with corruption and abuse that comes from being an opaque society where basic rules of accountability, transparency and sound governance have yet to take root.

But when a steady stream of bad news out of China —from melamine in wheat gluten that contaminated U.S.- and Canadian-made dog and cat food, to fake vitamin tablets and counterfeit toothpaste containing diethylene glycol, and now, just this week, lead in children’s toys— hit North America, the public seemed shocked —shocked that corruption and lack of integrity in China could actually be affecting their lives.

China’s contempt for intellectual property laws and copyright standards makes Kazaa- downloading college students look like disciples of the late Jack Valenti. Recently, Wal- Mart settled with the designer Fendi over the retailer’s selling of counterfeit handbags which it claimed were made in Italy. Where do you suppose they really came from? Two-thirds of all the products recalled in the U.S. come from China. The Chinese stock markets, where modest wage earners have borrowed and have mortgaged themselves to the hilt to put huge amounts at risk, are overheated and poised for serious meltdown. When it comes, it would not be entirely surprising to see it accompanied by widespread violence. China, by the way, continues to receive billions in loans from the World Bank, despite its ability to double its number of billionaires on an annual basis and the fact that it is one of America’s largest creditors. Not surprisingly, China remains the principal sponsor of the despotic and genocidal thugs who are responsible for the African holocaust in Darfur. China doesn’t much care about where it gets its oil, as long as it gets it. Does the West embrace these values too, unable to resist the allure of cheap ski jackets and good buys on patio umbrellas?

We have discussed before on these pages there are consequences when consumers and policy makers decide that where they do business and with whom is not really that important, as long as the price is right. This short-sighted approach not only creates an invitation to the kind of tampering, short-cutting and outright criminal activity that has come to be associated with China’s exports in recent months, but it makes even stronger and more powerful a regime that places little value on freedom, integrity, openness, human rights or even human life. China’s air and water pollution, not to mention its people’s endemic cigarette smoking, will someday tender a health care bill that the country might not be able to pay. It may not even bother to try, as the ease by which state-run companies and cronies of the regime are permitted to pollute rivers and lakes with impunity already foreshadows. These facts, like anything else critical of established power in China, rarely make their way into the state-controlled media. There is no freedom of the press. Internet access to many popular Western news sites is prohibited. For the oligarchs and elite in China, this, too, is seen as an admirable departure from Western-style governance.

That China has embarked on an interesting experiment in its approach to capitalism there can be no question. Rather than extending freedom for all its citizens, it has chosen to elevate a privileged few and allow them to attain and keep enormous wealth —wealth doubtless shared with the appropriate party official. There have been two Chinas for many decades. The concept will continue for many more. Creating a well educated and affluent elite with connections to government and the ability to get things done in ways democracies might find offensive is how the current regime hopes to maintain power and stave off the wider push for reform. With its ever increasing demand for cheaper products from knock-off antiques to mp3 players, the West may well be accommodating the rise of a more powerful, but nevertheless authoritarian, unaccountable and unfailingly communist, regime. Yet the West continues to slumber in the face of the potential political consequences of those trends, just as it does over the implications of a more powerful China within its own economy and corporate sphere.

Now the tentacles of that regime are making their way into the ownership of long- standing America business icons. State-run investment funds have bought their way into a piece of the Blackstone Group. This was revealed only because Blackstone is about to make available shares to the general public. How much else China owns by investing in private hedge funds and other secretive pools of capital may never be disclosed. And what are the consequences when large private corporate interests become more closely aligned with the state interests of this closed and unaccountable totalitarian system? On this question, Western policy makers remain asleep, just as they were over the possibility of contamination of North America’s food chain from Chinese imports.

The Chinese people are a noble people whose yearning for freedom and opportunity has captured the hearts of millions around the world. We do a disservice to their hopes by our ever-increasing business with dictators who are propped up by secret police and the use of torture and a so-called justice system where an email complaining about corruption can send a Chinese citizen to years in solitary confinement.

The West cannot continue to claim shock and surprise over the untoward effects of China’s growing power, since it is the industrialized world’s own consumers, corporations and governments that are making it possible. It needs to take responsible action to minimize those impacts. As long as North America, in its dealings with China, continues to turn a blind eye to the values of freedom, democracy and human rights it is supposed to cherish —values its young men and women fought and died to defend— and as long as accountability and openness are relegated to bit players on a stage where low, low prices and big, big markets have the lead parts, the problems of China’s corruption will continue to infect our imports, our health and, soon enough, our economy. This is not to suggest that we should isolate China or refuse to do business with that country. But it is to put forward the proposition that the repeated failure of everyone involved —from ordinary consumers to major corporations and democratic governments— to grapple with the gathering storm posed by China’s economic might, lack of transparency and failure, to observe principles of sound governance and accountability, are bound to have even more far-reaching consequences which will make the recent flurry of consumer recalls look like a calm breeze. And it is our choice for the Outrage of the Week.