(All sources are at the end of the article)
The Google Kerfuffle
Perhaps the most interesting development in China/U.S. relations in a decade is happening right now over a spat between an iconic mega-corporation and China. For years, U.S. policy has been to court China economically while keeping the political reform rhetoric to a minimum, and in return China has been loath to pick any political fights with the U.S. Both countries governments, and the U.S. business sector, have benefited from the relationship. But amidst the current economic turmoil and a new U.S. administration, the time might be ripe for a policy shift, one that is perhaps long overdue. That shift, however, could be born out of a third party—Google.
In a January announcement the internet giant stated that it will no longer adhere to China’s internet censorship laws after it discovered that its operating systems in China had been the product of some highly sophisticated attacks aimed at spying on human rights activists and stealing trade secrets. Since that announcement on January 12th the issue has turned into an international incident that has put China’s human rights abuses back on display and turned into a war of words between the U.S. and China. Here’s how it has all played out so far:
No one knows exactly when, but within the last several months Google-China became aware of a series of very sophisticated attacks on its system that allowed hackers to bypass Google’s firewalls, steal data, then get out of the system while covering their tracks. The attacks reportedly targeted at least 20 major corporations (Dow Chemical and Northrop Grumman believed to be among them), as well as the e-mail accounts of political dissidents and human rights activists, leading many to believe that the hackers worked for the Chinese government, and that their intentions were not only to spy on individuals but to conduct corporate espionage.
January 12th: In light of the recent attacks on its system, Google announces it will no longer adhere to internet censorship laws in China, indicating that it is willing to leave the Chinese market if Beijing does not accept these terms (Blackstone).
January 13th: The State Department calls on Beijing to investigate the matter (BBC).
January 15th: The U.S. states that it will issue a formal demarche, or diplomatic note, to China formally requesting an explanation for the attacks.
January 17th: Google loosens control over some previously filtered searches, but also indicates that it would like to come to a deal with China on the matter rather than leave the country (Lee).
China downplays the issue, but insists that all companies must continue to abide by Chinese law (BBC).
January 18th: It is revealed that Google is investigating staff members for involvement in the attacks, leading many to believe that the attacks required access to certain key parts of its network that only employees could have had access to (Branigan).
Chinese newspapers report that some Google employees are put on leave, transferred, and/or denied access to Google’s internal network (Branigan).
January 20th: Google announces that it has postponed the China launch of its highly anticipated Android phone, built to compete with Apple’s iPhone, leaving investors worried (Carew, Lee).
January 21st: Secretary of State Hillary Clinton criticizes China in a speech on internet freedom stating that “countries that restrict free access to information or violate the basic rights of internet users risk walling themselves off from the progress of the next century” (U.S. Dept. of State).
China responds by blocking the transcript of the speech on the internet (Schwankert).
January 22nd: the Chinese Foreign Ministry says that Clinton’s remarks threaten ties between the two countries, issuing a statement calling on the U.S. “to respect the truth and stop using the so called internet freedom question to level baseless acusations” (Landler, Wong).
From January 22nd until now: The state run press has issued numerous articles lambasting American attacks on Chinese internet censorship, accusing the U.S. of hypocrisy and of, among other things, “information imperialism” (Schwankert).
Hundreds of protesters lay flowers at various Google branches across China and Hong Kong (Burma).
As of now, China and Google are reportedly in ongoing talks to resolve the matter, and in the meantime it seems like business as usual for google.cn. Yet it’s not business as usual for the U.S. and China, as tensions between the two countries are growing. Since the financial crisis an emboldened China has taken a more antagonistic tone with the U.S., a tone that began around the time fears of a financial bubble in China were surfacing.
In December, in an unprecedented move, China sent a low ranking official to meet with President Obama at the global warming conference to inform him that China will veto any mandated carbon-reduction goals. Shortly thereafter China refused to back further sanctions against Iran over its nuclear program, and in February, China, furious about a mandated U.S. arms sale to Taiwan, stated that it will punish the U.S. for its sale by sanctioning the U.S. companies that built the weapons, like Boeing and Lockheed Martin, from doing business in China. Could this be the beginning of a trade war?
And finally, China is suddenly furious about a pre-planned visit to the White House by the Dali Lama, which was originally postponed until after Obama’s trip to China in order to appease Beijing. As a result, Beijing has sent word that the visit could jeopardize any future visits by President Hu Jintao to Washington.
But it’s not only China on the defensive, the U.S. is getting fed up with Beijing as well. Minxin Pei, a professor of government at Claremont McKenna College states, “The days when China can have it both ways—freeload on global public goods while enjoying international respect—are about to end. Disillusionment of its self-serving policies is setting in.” As a result the days of turning a blind eye to Beijing’s abuses may be over. Many Western states have already levied anti-dumping charges against China, and the U.S. is contemplating further retaliatory action if China continues to peg the RMB to the dollar.
So why the sudden change in tone now, and what does this have to do with Google? Simply put, the Google spat represents much more than Google’s bottom line, it represents two states with conflicting ideologies on the verge of the next great global power struggle. In short, Google is a pawn in the game of power politics.
Why Does It Matter?
Google matters for several reasons:
1) China is a rising power and the U.S. is a world hegemon
2) Google represents one side in a battle between two conflicting ideologies
3) China may be on the verge of economic trouble at home
These reasons combined are a recipe for the next Cold War.
Now, that’s a bold statement, so, to be clear, I am not inferring that bombs will start dropping soon, that the apocalypse is upon us, or that China and the Soviet Union are prototypes. But what I do see amidst the pomp, one-upmanship, and threats that have come about because of the Google issue is classic geopolitical brinksmanship of the sort used throughout the last great power struggle, the Cold War.
The Real Battle
Great political philosophers like Machiavelli, Hobbes, and Kenneth Waltz (all of the realist fold) believe that geopolitics is a zero-sum game, resulting in a world of anarchy in which states are self-interested actors in a continuous struggle for power—all vying for the top slot. Waltz advocates that this struggle takes place at various levels, regional and global, and between varying powers: great powers, rising powers, and weak powers that tend bandwagon with other powers. As a result of this power structure, we either live in a world that is multipolar (more than two great powers), bipolar (two great powers), or unipolar (only one great world power).
During the Cold War two great global powers, the U.S. and the Soviet Union, were engaged in a struggle for world influence/dominance. However, because the stakes were so high, rather than engage in action against one another these two great powers were in a perpetual state of feeling one another out, probing each other for weaknesses, and testing one another to see how the other would react through words, provocative military actions, and state influence.
Right now, two great powers are essentially sizing each other up before the long cold battle that lies ahead. They are feeling each other out, testing the waters if you will, amidst the worst economic catastrophe in a century. Like the Cold War, wrong decisions could have dire consequences, but unlike the Cold War, the fear is not nuclear war, but economic war between the world’s two largest economies.
To be sure, China is no Soviet Union in regards to power, nor is it even a great power yet. Rather, China is a rising power that is trying to change the status quo. And that makes China a threat to the U.S. who, as a global hegemon, has a stake in keeping things the way they are.
At the Heart of the Matter
Great power struggles usually begin or end as a result of some global crisis. World War I resulted in the emergence of the U.S., who, as a rising power, posed a threat to the current world order, which England had a monopoly on. Similarly, World War II resulted in the end of a unipolar world with the fall of global hegemon England, and the establishment of a bipolar world consisting of the U.S. and Russia. Finally, this bipolar world eventually gave way to another unipolar world with the U.S. winning the Cold War.
Now we are in the midst of another global crisis, a worldwide recession. And guess what, the current power structure is again being challenged, much like it was challenged by the U.S. at the end of World War I. The U.S. then, like China now, was a rising power in a unipolar world that challenged, and eventually changed, the status quo. However, what stands out most about the last major transition of power from one unipolar world to another, is that England’s concession of influence to the U.S. was a rather smooth process after WWII, while Russia’s concession was not. The major reason for such a discrepancy was ideology. The U.S. and England shared similar values and, hence, political systems, but Russia and the U.S. did not, nor do the U.S. and China.
Thus, when Google announced to the world that its issue with China "goes to the heart of a much bigger global debate about freedom of speech," it also identified the impetus for the next great power struggle—democracy. This whole Google spat would not be taking place if China were not a rising power as well as a communist/authoritarian society. In other words, if China were India, Google would be a non-issue.
But conflicting ideologies do not get along with each other. Nor do economic forces get along with ideologies that ignore human nature and the cogs of advancement, which brings us full circle to article 1: At some point China will have to stop building and start creating, something not conducive to China's form of government.
Economics are an Extension of Politics (and vice versa)
Even if China is in the midst of a real estate bubble, as James Chanos and others claim, and even if China is able to deflate that bubble and continue positive GDP growth for years to come, it is still a developing country with a backward ideology. This is where the Google spat and James Chanos’ theory become entwined. Google, an icon of advancement and innovation—and the product of democracy—combined with fears of coming economic trouble, have put Beijing on the defensive amidst a suddenly changed world where they seem to be holding all the cards.
Yet, an abruptly emboldened China may be overplaying its hand, and picking a fight it doesn’t want. To be sure, China has a developing market with nearly 1/4 of the world’s consumers, but that alone doesn’t make for a super power—military might and sustained post-industrial growth does, two things still elusive in China. True, China has the largest military in terms of manpower, but it ranks second to the U.S. with a 5.8% share of all military spending in the world, a pittance compared to the U.S. who has a far more advanced military apparatus and accounts for 41% of all military spending.
Yet more importantly, an advanced military capable of worldwide deployment is not only the product of money, but an advanced society. However, a recent report by Bank of America and Merrill Lynch on the performance of emerging markets shows that China is underperforming its developing peers like Brazil, Russia, and India (Foroohar). What’s more, if we look at China in terms of GDP per capita (a much better indication of a countries wealth) we see that China is far behind many of its Asian neighbors: China $6,500, Malaysia $14,700, South Korea $27,700, Taiwan $30,200, Japan $32,600, Singapore $50,300 (CIA World Factbook).
More interesting, however, than the fact that the above countries have a greater GDP per capita and are more technologically advanced than China, is that they also have radically different forms of government. Japan is a developed democracy, South Korea and Taiwan are developing democracies, and although Malaysia and Singapore are not democracies, they do guarantee certain rights and have educational systems that allow for the free flow of information. That, more than anything else, has propelled these countries to, or on their way to, post-industrial economies.
China on the other hand, is really good at copying things, while it steals or outsources what it can’t reproduce. Cases in point, Widow’s PCs are widely used in China, but it is estimated that 90% of them run pirated copies of Windows (Acohido, McLeod, Chu). What’s more, Business Week reports that “China’s technology is at least two generations behind world leaders,” noting that many of the new tech industries China touts, from autos and airliners to batteries and computer chips, either do not stand up to first world standards or they are older models built with foreign parts (Roberts, Engardio). And let’s be blunt, that which China does produce, from infrastructure to consumer goods, is mostly “crap.” One only need look at the devastation caused by the 2008 earthquake, and the slew of tainted consumer products recalled over the last decade in China to get an idea of the quality of Chinese goods.
In short: companies like Google exist not only because of wealth, but because of political systems that allow for the free flow of information and guarantee certain rights. If China is ever to make the leap from a developing to a developed economy it is going to have to undergo substantial political reform. This won’t happen overnight, and some have argued, rather convincingly, that it shouldn’t, pointing out that China’s lack of domestic stability and social safety nets does not lend itself to a favorable environment for democracy.
This view has also been, rather conveniently, the excuse of the communist regime in China, who, since the death of Mao, has consistently emphasized domestic stability over progress; an attitude firmly secured after the dramatic events of Tiananmen Square in 1989. Since then the party has used this “stability first” policy as justification to crack down quickly and harshly on any political descent.
Unfortunately, the lesson the regime took away from Tiananmen was that democratic reform movements are a danger to domestic stability and the economy, when it should have learned that if you’re going to push forward with economic reform without political reform then you better be ready for trouble when the economy goes bad. What China failed to understand was that Tiananmen came about as a result of bad economic policy, not a deep seeded desire for democracy “right now.” Or as China Expert, Nicolas Lardy, states, “Tiananmen was an economic uprising that legitimized itself with democratic gloss.”
And herein lies the rub for China’s stability before progress policy: things will only remain stable if the country continues to progress. Since China has chosen only to progress with economic reform, if the economy suddenly goes sour or slows too much, then any stability Beijing may have gained, or time it may have bought, through improving people’s lives economically is at serious risk—and that may be why Beijing pumped so much, maybe too much, money into the system in 2009.
Thus, if there is a bubble, as Chanos and others believe, and it bursts, then China could be in more than just economic trouble—and that is why Google’s political stand right now is exacerbating all other scuffles with the West. Google represents all that has backed China into a corner and put them on the defensive. However, China retrenching sets the stage for a global power struggle of the likes not seen since the Cold War.
Final Analysis
China/U.S. relations, more than any other state relationship, will shape the next century. If the two get along then the rest of the world will surely prosper, if they do not, there will be great conflict throughout the world. Unfortunately, history suggests these two powers will not play nicely with each other.
China, as a rising power, will challenge the current world order, something the U.S. will fight. However, this power struggle will be exacerbated by conflicting values and fundamentally different political ideologies.
Unlike Russia during the Cold War, China’s greatest weapon is not its military apparatus, but its market, which they will use to punish adversaries in an attempt to reshape the current power structure. Obviously, this “economic weapon” will be most effective during times of Western financial instability, like we have right now. Thus, it should come as no surprise that China has suddenly taken a more aggressive stance towards the West in the recent months.
Such posturing was bound to happen at some point, but a suddenly emboldened Beijing may also be the product of looming economic woes at home. When faced with domestic strife, states often look for outside threats in an attempt to compensate for their own failures at home.
That is why I find James Chanos’ theory that China is in a financial bubble so compelling. If Beijing was hell bent on playing the economic card then why didn’t they do it 6-7 months ago, or at the onset of the financial crisis? Perhaps because Beijing did not yet feel threatened by the crisis? Maybe now they do.
These fears may have stemmed from Beijing’s over-zealous stimulus package. In an attempt to keep its people happy and maintain stability, Beijing may have created a bubble. If China did pump too much money into the system then they are at greater risk than most democracies are at addressing the problem. China does not have the safety nets and proper social institutions that most democracies do to soften the blow of a financial crisis. And as China has learned from the Tiananmen Square incident, economic woes can quickly lead to political protest—and that is what this whole thing boils down to, not economics, but the defense of a political ideology that is corrupt and static.
That’s’ what Google represents, and that’s why Beijing went out of its way to ensure the whole Google issue was not discussed in Davos last month at the World Economic Forum. Google is the byproduct of democracy and capitalism, and China knows that if it is ever going to be able to foster and sustain such innovative companies of its own it is going to have to make the leap from a developing to an advanced society. But in order to do that they will have to allow for the free flow of information and debate—and that can’t happen without some type of democratic reform. Or, as Daniel Gross of Newsweek puts it, “Without free minds it’s difficult to have free markets, and vice versa.” Thus, paradoxally, if Chanos is right, and China is in for economic trouble, Beijing is politically vulnerable in the short run, but if Chanos is wrong and China continues to grow then the regime is politically vulnerable in the long run.
So, is China busted? Yes, but politically, not economically. Just as economics is an extension of politics, as we see right now in China, so too is politics an extension of economics. And, as China expert Gordon Chang points out, “Sustained modernization is the enemy of one party state’s.” In short: Beijing’s damned if it is and it’s damned if it isn’t in economic trouble. Thus, the adage that capitalism does not work without democracy may prove to be true after all. Yet, democratic reform won’t happen overnight though in China. It will probably happen gradually over the course of decades, but economic forces dictate that it will happen at some point. After all, what non-oil rich, non-democratic country has been able to sustain growth in the long run? And what country with a strong middle class has not developed into a democracy?
So, even though it appears that China is holding all the cards right now, in reality the cards are stacked against Beijing. That doesn’t mean, however, that we aren’t in for the next global power struggle. If history has taught us anything, it is that human nature has not changed over the last 3000 years, and states, despite all of the paradigms, are still run by people. Translation: Beijing will not reform quietly into the night, and as China’s economy grows and fluctuates you can bet that Chinese hubris and anti-Americanism will only get worse. So, hold on to your butts, things are about to get interesting.
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