Thursday, March 25, 2010

"Google versus China - It's no Contest"

Sydney M. Williams

Thought of the Day
“Google versus China – It’s no Contest”
March 25, 2010

China is experiencing the jeopardy that comes from bringing financial success to individuals living in an authoritarian state. Financial success brings economic freedom and economic freedom ultimately demands political freedom. The well publicized conflict with Google is a manifestation of that struggle.

China’s ascendancy has been real and dramatic, but gradual and controlled. As different as their culture is from ours, their economic success is proof their system works for them. Three hundred million people have moved from abject poverty to the middle class. As a friend and investor in Asia pointed out, contrast the financial success of China with that of Russia who tried to go from zero to sixty in three seconds, enriching a handful of oligarchs, but impoverishing millions. Or compare the success of capitalism in China, at this point, with that of Asia’s largest Democracy, India, whose economic pace has been notably slower than China’s. We may not approve of the way their government exercises totalitarian control – certainly I do not – but their citizenry has benefitted.

BBC’s Damian Grammaticus, reporting from Beijing, suggested that Google’s move to shut down its mainland Chinese search service is “a major blow to China’s international image.” Gartner, Inc. analyst, Whit Andrews, said “any financial pain Google suffers will be worth the respect the company wins for refusing to bow to a government’s demand.” On the other hand, BGC financial analyst said that what Google did was “a direct slap in the face to the government.” In my opinion, Google gambled and lost. Google made a mercantile decision – to garner market share by forcing China to open their doors. Now, in defeat, Google is attempting to convert a business loss into a moral gain. Just as we expect companies operating within the U.S. to abide by our laws, companies operating in China should expect to act in accordance with their laws.

The purpose of companies is to serve their shareholders, employees and customers. There may be times when making a political statement does serve their constituencies, but I am not sure this is the time. According to the BBC, the Chinese internet market is growing by 40% a year. There are an estimated 350 million people on line in China, a country in which Google garners about 3% of their revenues. A Susquehanna Financial Group analyst, Marianne Wolk, expects the internet ad market to grow from $3 billion in 2009 to $20 billion in 2014 – a better than six fold increase in five years. Did Google management best serve their shareholders by taking a political gamble that violated the laws of the country in which they were operating and pass up on perhaps as much as a ten fold increase in revenues?

Like most Americans, I appreciate and revel in the freedoms which are ours. Within the confines of laws and acceptable social behavior, the freedom of individuals in America to think, write and act as they please is one of our great strengths. And, like most Americans, I would likely sense and dislike any restrictions on movement or thought that living in China might entail. But ours is a Country that has practiced Democracy for more than 200 years. China has been a Communist dictatorship that is morphing into a capitalist powerhouse. Mark Leonard, the Executive Director of the European Council on Foreign Relations, and who was a visiting scholar at the Chinese Academy of Social Sciences, has written a book, What Does China Think? He is not an economist, but a student of culture. He concludes his book: “Beijing’s ascent has already changed the balance of economic and political power and it is now changing the world’s ideas about politics, economics and order. Those who argued that the People’s Republic would become more Western with its growing wealth have been proven wrong. For the first time since the end of the Cold War, Europe and America face a formidable alternative: the Chinese model.”

China continues to be a work in progress, but thus far a successful one. The road will incur bumps, but the trajectory is up and incomes will continue to expand. Financial freedom breeds freedom of ideas, and ideas breed openness to differing opinions, and ultimately to the concept of individual rights. The ideas that created the United States two and a quarter centuries ago may have been largely based on English customs and laws, but they reached back to a polyglot origin – Romans, Greeks and Hebrews. The culture in China may well change, but in the meantime the people are being served better than they were three decades ago.

Here in the U.S., there has been a ratcheting up in China bashing. Our government has deemed their currency should be revalued higher. Is it possible that the Google flap has the implicit backing of the Administration? China is a rising giant in the East and threatens our hegemony in the Pacific region. Foreign policy of the U.S. has, since the collapse of the Soviet Union, been one of maintaining regional balances, thereby thwarting the rise of any one power. China’s economic and military growth and its cultural influence are threatening that stability. But these forces, in my opinion, are inexorable and inevitable. As a nation, we must come to terms with that fact and learn to live with the concept that, within a generation, we will be dealing with an equal partner.

Labels:

0 Comments:

Post a Comment

Subscribe to Post Comments [Atom]

<< Home