The price of tyranny is always corruption and the trampling of the human soul. These costs are now evident to the world, but more significantly, to the Chinese people, in a decimated Sichuan Province and in the shattered ruins of a thousand classrooms.
When the earth opened up in central China two weeks ago, and the extent of the devastation and suffering became apparent, the world forgot about politics for a while and concentrated on the human dimension. Central committees and secret police forces, two functions long associated with communism, were the last thing on anyone’s mind. Many countries offered praise toward the Chinese regime for the openness it showed in permitting the world’s media to report on what happened. There were hopes expressed that things were changing for the better in the governance of the world’s most populous nation.
But all that came to a screeching halt when Beijing announced that it would allow families who lost their only child in the disaster to apply for a certificate permitting them to have another. So it is in this country, whose authoritarian regime regulates all aspects of society with no accountability or opposition, that human life is now subjected to the ultimate bureaucratic indignity. Like so many other things in China, childbirth is relegated to a mere transaction that requires some official stamp of approval. Perhaps it is a predictable Orwellian-style turn in a state where the government has such a formal antipathy toward organized religion and the practice of religious rights. One need look no further than recent events in Tibet for that evidence. But the larger question is: How short is the step between making decisions about birth and making them about the last frontier of human existence? Will it someday become inconvenient for the regime to permit older people who are sick to have the care they need? Once a government crosses the bridge and begins to dabble with decisions about birth, will it have any compunction about making the ultimate determination at the closing stages of life?
When, in North America last year, store shelves were stocked with poisoned dog food and tainted toothpaste, contaminated vitamin pills and children’s toys painted with lead -all the result of wrongdoing in China- the world was properly outraged. Some suggested, as we did on these pages, that such defects were the inevitable result of a society that lacked transparency, accountability and good government. With revelations that many of the buildings that collapsed in the earthquake, killing thousands of children, were the result of shoddy construction, now even some Chinese are beginning to look inward at their own system. The government’s spirit of openness in showing the world the aftermath of the tragedy has suddenly been shut to its own media’s examination of the corruption issues that led to such devastation.
The party officials and central committees, the policies that favor the friends of those in charge while muting dissent on the part of others, all have far-reaching consequences in the lives of ordinary people. The shameful misconduct of those responsible who allowed the construction of such substandard buildings is part of a longer litany of betrayal, from carcinogenic air pollution to contaminated lakes and rivers, that is leaving the Chinese people and their children a legacy of pain and disease that the world has seldom experienced on such a scale. It is being done in the name of profit, which, first and foremost, is about enriching the party bosses in Beijing and their friends, regardless of the costs.
What the rulers at the top do not grasp (as juntas, central committees and tyrants rarely do) is that it is not possible to indefinitely buy the loyalty of a society with the prospects of greater economic wealth while denying it the larger privileges of citizenship and basic human rights. The world, and in this respect the great people of China are no different, is not just the sum of its transactions and accounting statements. No amount of money can console the grieving parent of a lost child. Double-digit economic growth, which China’s regime has trumpeted for years, is no substitute for honesty and transparency in public governance. The price of tyranny is always corruption and the trampling of the human soul. These costs are now evident to the world, but more significantly, to the Chinese people themselves, in a decimated Sichuan Province and in the shattered ruins of a thousand classrooms.
Freedom and democracy are the only tools that give people the ability to hold the powerful to answer for their actions. Without the discipline of accountability, no organization, whether it is a corporation or a government, will function in a manner that serves anything but the vested interests of those on the inside and at the top. It is possible now, in their moment of national sadness, that this understanding will begin to gain new adherents among the Chinese people. They may well come to see that something of the old (but still very current) regime collapsed and fell into the rubble on that terrible day as a result of its endemic corruption and lack of transparency.
Many of the people in China who lost their only child must now look upon the government for their hope of another. But in that mournful gaze they might also begin to question if humans are not entitled as a fundamental right to make such decisions on their own, without the stamp of some government official posted on their bedroom door like a local building permit.
To live under the all-snooping eyes of such a corrupt regime stifles more than family life. It is an offense against human nature itself.
BEIJING: (AP) China’s Citic Securities Co. on Tuesday called off a deal to invest in Bear Stearns Cos. after the troubled Wall Street bank was acquired by JP Morgan Chase & Co.
Now, that is a surprise.
As we have been suggesting for a while now, the biggest and most damaging impact from China has not been the poisoned dog food or the counterfeit toothpaste, nor is it even the lead in children’s toys or the SARS epidemic which originated in China and almost shut down parts of Canada. Serious and unsettling as these have been, they pale in comparison to China’s apparent power to induce North American consumers to fall into a state of obliviousness and sleep walk into disaster in their pursuit of cheap products.
It seems many have forgotten that they are really dealing with and enriching a regime that is fundamentally corrupt, as any dictatorship which lacks principles of transparency and accountability fundamentally is. The West was too quick to grant China most favored nation status some years ago. It did so without thinking about the consequences —about the lost jobs at home, the appalling working and sanitary conditions in China or about making a communist totalitarian system one of the major creditors of the United States. We are beginning to see some of those consequences, just as we are the spectacle of what some companies will do in placing profits ahead of prudence.
As we have remarked before, the real concern is that this is just the tip of the iceberg and that a number of other shocks lie ahead —not just involving product safety but other ways in which the China contagion of corruption and deceit, along with its mounting wealth, has afflicted our society, our economy and our institutions.
It has long been said that there is no free lunch. If that is the case, perhaps we have all paid a much higher price than anticipated for the products we thought China was producing at bargain basement prices. What we observed a few months ago seems particularly fitting at this time of summer holidays and daily horrors in the marketplace.
None of us can afford to take a vacation from the stakeholder responsibilities we all have as citizens, consumers and investors, and when we do, the results can be chilling.
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.
Chinese stocks are taking quite a tumble today. There appears to be no official or definitive explanation as to why. Getting to why in China is never easy, especially when it comes to business. Rampant corruption and lack of transparency make truth and accuracy elusive commodities in that country. The poor corporate governance practices that have been ignored by many analysts and accepted by most investors in return for soaring numbers will not assist in stabilizing flagging market confidence as the gains shift in reverse. Many investors will now begin to ask how much they really know about China and its companies. Others will conclude that the lure of short-term gains is not worth the risk of dealing in a financial market that undervalues western practices of truthfulness, transparency and disclosure. A regime that places little value on human rights, after all, is unlikely to care too much about investor rights.
I have for some time suspected that these conditions, along with widespread corruption in China, were creating a serious distortion in that country’s true financial picture and that recent stock gains may well be, in part at least, the result of heavily jiggered figures. Any hint of a government crackdown or effort to bring genuine transparency to the market might well reveal China’s own Enron equivalents, and on a much larger scale. Most of China’s corporate economy and publicly traded companies are owned and controlled by the state. Many investors appear to have forgotten that this is a communist regime where accountability and openness are observed as the exception rather than the rule. Proper disclosure, meaningful certification of financial results and insider trading laws don’t exist in the Chinese markets for all practical purposes. Their absence may not be forgiven very long by western investors if a major slide is in the works and there is a contagion influence upon North American and European markets.
China is not a country whose capital markets infrastructure, regulatory apparatus, securities law enforcement or corporate governance practices were ever prepared for the huge run up in valuations that has taken place in the past 20 months or so. It certainly won’t be eqipped to deal with that other —and often forgotten by investors— part of Newton’s first law of physics.
