Sunday, July 8, 2007

China gazes into an American mirror

A commentator on my recent post on the China threat spoke of the "deliberate contamination of pet food," suggesting some kind of plot hatched in Beijing to flood the world market with dangerous goods. In other words, China's liberalization is a kind of trojan horse project by which China will undermine the global order and win without a fight.

Stepping back into reality, I found Joseph Kahn's article in the New York Times' Week in Review on Chinese regulatory reform interesting, because Kahn explicitly notes an idea that I have mentioned here before, namely that the best parallel for China's rise may in fact by the rise of the United States in the late nineteenth century.

To wit:
Phony fertilizer destroys crops. Stores shelves are filled with deodorized rotten eggs, and chemical glucose is passed off as honey. Exports slump when European regulators find dangerous bacteria in packaged meat.

More product safety scandals in China? Not this time. These quality problems prompted a sluggish United States government to tighten food and drug regulation 101 years ago, when President Theodore Roosevelt signed the act that created the Food and Drug Administration.

Like America’s industrializing economy a century ago, China’s is powered by zealous entrepreneurs who sometimes act like pirates. Both countries suffered epidemics of fatal fakes, and both have had regulators who were too inept, corrupt or hamstrung to do much about it.

While Americans and others are right to be concerned about products imported from China, it is not as if Chinese are not suffering from a woefully inadequate regulatory environment. Take the recent explosion at a karaoke bar that killed twenty-five people, another in a string of man-made catastrophes that has plagued China of late.

China is belatedly discovering that a liberal market economy is not simply a function of the state's stepping back and letting the market do its thing. The state must use its power not to pick winners and losers, but to ensure transparency and enforce proper conduct within the marketplace — punishing transgressions as necessary. The rule of law is, of course, an essential tool for fulfilling these roles. The question is whether the regulatory state outlined in Kahn's article is possible in a market in which all actors are not, in fact, equal: privileges of CCP membership and outright corruption by minor party officials are substantial obstacles standing in the way of an economy grounded in the rule of law.

Nevertheless, in domestic governance as in international affairs, China has much to learn from the rise of the superpower across the Pacific, and considerably less time in which to figure it all out.

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