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Don’t be evil?

Via Daniel W. Drezner, I read this story about the new rules that China has established to regulate news reporting on the Internet.

“The state bans the spreading of any news with content that is against national security and public interest,” the official Xinhua news agency said in announcing the new rules, which took effect immediately.

The news agency did not detail the rules, but said Internet news sites must “be directed toward serving the people and socialism and insist on correct guidance of public opinion for maintaining national and public interests.”

That is a nice touch in the way they do not define what is against ‘national security and public interest’. In effect, it is whatever the Chinese Communist Party says it is.

The Chinese government is also getting quite adept at regulating Internet content in its own country, not least through help from US Internet and software companies. Dave Kopel writes that these companies might well have broken the law in selling this technology to the Chinese government, but the current administration refuses to apply it, and thinks that only pressure from consumers and shareholders will cause these companies to mend their ways.

Foreign companies that invest or do a lot of business with China are going to have more and more ethical headaches of this nature in the years ahead.

31 comments to Don’t be evil?

  • Pi.

    To be honest, I don’t think that international companies are going to bother themselves about any ethical problems in trading with China. The US government has marked China as a special case, and will overlook practically anything which it would invade a smaller country for in order to protect the trade possibilities created. The fact that the agreements with China have resulted in a massive trade deficit for the USA doesn’t seem to have dawned on anyone in the administration as yet…

    Pi.

  • Euan Gray

    the current administration refuses to apply it, and thinks that only pressure from consumers and shareholders will cause these companies to mend their ways

    But surely that is the appropriate libertarian solution? The administration should have no business interfering and should leave it to the consumers and shareholders? Or perhaps that theory doesn’t work too well in the real world.

    So, which is the right way? If you say the state must enforce these laws, then you concede that the unregulated market is not the optimal solution it is sold as. If you say the consumers and shareholders must provide all the pressure, then there should be no complaint about the state doing nothing.

    EG

  • Indeed, I agree that is the ideal libertarian solution. However, I suspect that as in the case of what happened with South African sanctions in the 1980’s, the pressure will be put on the state to bring its heavy, clumsy hand into the ring.

    Ultimately, human rights and property rights are the same thing, but not many human rights activists seem too aware of this fact.

    And there are plenty of other ethical dilemmas to worry about too. People that have to do business with the Chinese government will have to deal with them, and I do not envy them the task one little bit. I think the unpleasantness will get worse as the existing administration decays.

  • Jacob

    “But surely that is the appropriate libertarian solution? The administration should have no business interfering and should leave it to the consumers and shareholders?”

    Euan, you got it right this time.

    Pi,
    “The fact that the agreements with China have resulted in a massive trade deficit for the USA doesn’t seem to have dawned on anyone in the administration as yet…”

    So it’s only you who have noticed it ?
    China supplies the US and the rest of the world with a great lot of cheap and good products, to the benefit of all. Seems that this fact has dawned on the US administration, and it mostly does the right thing – which is: doing nothing.
    No such luck with the EU who impose all kind of quotas.

    About the silly attempt by China to censure the internet: it’s bound to fail, and they will learn this in due course. Anyhow, it’s much less vicious and harmful than some of the things they did in the past.

  • Euan Gray

    And there are plenty of other ethical dilemmas to worry about too. People that have to do business with the Chinese government will have to deal with them

    In business, the usual ethical dilemma is “can we make a bigger buck without pissing off the shareholders too much?” Given that making the bucks often translates into dividend payments, the horns of this dilemma are rather blunt.

    Wherever you do business, you have to deal with ethical issues. Is it right to pay bribes in order to function as a business, for example? In much of Africa it is necessary to do it, so your choice is pay bribes or don’t work. American companies do business there and inevitably pay bribes, even though this is illegal (Foreign Corrupt Practices Act). They get around the dilemma by calling bribes “facilitation fees” or “public relations.”

    If you want business to be ethical, you need someone to enforce the rules that make it ethical. Whilst in theory this may be done by the consumer and the shareholder, in practice it is usually not – the number of such people who care about the issues in a practically meaningful sense is small. Few people care whether their £80 Nike trainers were made ethically or by $1/day labour. Fashion or necessity trumps ethics for the consumer, and dividend trumps ethics for the shareholder.

    You can have an ethical market or you can have an unregulated market. I don’t see how in reality (as opposed to theory) you can have an unregulated AND ethical market.

    EG

  • Few people care whether their £80 Nike trainers were made ethically or by $1/day labour. Fashion or necessity trumps ethics for the consumer, and dividend trumps ethics for the shareholder.

    Ah, I see where you are coming from. Never mind that $1/day may be the prevailing wage rate there (or else why would people elect to work for that company?), somehow providing jobs in the Third World is “unethical”. Got it.

  • It all depend on whose ethics, too. I don’t have a problem wearing shoes made by a $1 a day labour. That worker needs that job to feed his/her family after all.

    But I do have a problem with software and Internet companies selling solutions to a corrupt, noxious regime like the Chinese government.

    Of course, ethics are all different for different people. No doubt some readers will be horrified by my ethical priorities. That is their problem; as a private citizen, I can adopt whatever ethical priorities I like.

    However may I venture to suggest that the aforementioned software and Internet companies give some thought to the ethical issues involved? Because like it or not, we do not have a deregulated market and if they don’t consider these things, the State will do it for them, and no doubt make things worse then the situation is now.

  • If you say the consumers and shareholders must provide all the pressure, then there should be no complaint about the state doing nothing.

    Indeed. The state should do nothing.

  • Ugh, preview is your friend. I meant to say, “But I do have a problem with software and Internet companies selling censorship and police-state solutions to a corrupt, noxious regime like the Chinese government.”

    Selling ‘regular’ products to a dodgy outfit like China’s government is an unavoidable fact of life.

  • Jacob

    Euan,
    “can we make a bigger buck without pissing off the shareholders too much?”

    That’s patronizing prejudice. Businessmen are people like you and me (probably better). They have their moral stands, and opinions and dilemas, just like everybody else, probably more so.

    To say: “businessmen have no morals and all they care for is money” is a deep residue of Marxist crap.

  • Euan Gray

    Ah, I see where you are coming from. Never mind that $1/day may be the prevailing wage rate there (or else why would people elect to work for that company?), somehow providing jobs in the Third World is “unethical”. Got it.

    No, you haven’t got it.

    Your argument assumes that employment is voluntary and that people can at any time pick and choose where they work and, within the limits of their abilities, for how much. For most people most of the time, this is not the case.

    If $1/day is the going rate and if it can provide what the employee needs (as opposed to wants) then it is fair enough. If the employee COULD work somewhere else for $2/day but chooses not to, then it is fair enough. However, if the only choice is working for $1/day or abject misery and poverty, then what choice does the employee really have?

    If you can get adequate food, shelter, water and heat on $1/day then there is no ethical question. But what if you cannot? Is it ethical to offer a choice only between inadequate food and no food? Sadly, this is the reality in much of the third world. Sometimes employment is not voluntary but is a dire necessity and even then is barely sufficient to meet needs. It is often not a case of someone “electing” to work somewhere, but having no choice but to accept an inadequate wage because it is better than no wage.

    Left to itself and assuming enough competition, the free market will reduce costs including labour costs. It won’t generally voluntarily increase costs by, for example, providing higher wages or better conditions unless there is a market for it. Such markets exist, but are often niche markets. Selling at lower prices is generally a better strategy than selling at higher prices but with higher paid workers, and this is what the market will normally encourage.

    That’s not wrong, but I think it can become an ethical issue when the inability of the workforce to get an adequate alternative is exploited. Note I don’t mean that it is wrong if the employee has a choice between an barely-adequate and a marginally-better-than-adequate option, but where he has only a choice between inadequate solutions and where that inadequacy is exploited.

    But I do have a problem with software and Internet companies selling solutions to a corrupt, noxious regime like the Chinese government

    But if there is profit in it for the vendor, what right have you to say no? If you have a problem with this and if you seek to create a solution to that problem, then you are imposing your ethics on the market.

    As you suggest, it depends on whose ethics are involved. If you see any desirability in imposing yours, then you must either accept that others can do the same or alternatively that nobody can and that you just have to accept the undesirable situation of western companies flogging censorship facilities to a repressive state. If not, who decides which ethics are the “right” ones? Who imposes the rules? Who enforces them?

    Or you can be realistic about the world and treat each case as it comes, not being afraid to deny goods to objectionable people. However, that probably entails the realisation that the unregulated market is no more a perfect solution than regulation, in some cases better and in others worse. Theory colliding with the brute reality of the world, unfortunately.

    EG

  • It is often not a case of someone “electing” to work somewhere, but having no choice but to accept an inadequate wage because it is better than no wage. […] Note I don’t mean that it is wrong if the employee has a choice between an barely-adequate and a marginally-better-than-adequate option, but where he has only a choice between inadequate solutions and where that inadequacy is exploited.

    Which shows the absurdity of your position: how it is unethical to provide either (a) SOME employment whenere none exists or (b) Marginally better employment compared to the alternative? Either way, the person taking the employment is better off, so how is it unethical? You use the term ‘exploited’ as if that has some self-evident objective meaning. Exploited as in ‘company is making a profit’? I prefer the term ‘employed’.

  • Joshua

    However, if the only choice is working for $1/day or abject misery and poverty, then what choice does the employee really have?

    Well…he has the choice between working for $1/day or abject misery and poverty. If $1/day plus hard labor is less appealing than abject misery, he won’t take the job.

    You are right, essentially. This is a pretty horrible choice to have to make. And I think Libertarians do tend to gloss over some of the hardships people are put through in the early stages of capital development. But the reason we gloss over such things in arguments is not because we are unaware of them or insensitive to them, but rather because they are easily exploited for economically uninformed arguments by the opposition.

    Let’s consider what happens if a megacorp comes in and suddnely pays, say, half the American minimum wage in a country where average per capita income hovers at around $200/yr. What will this do to markets? Well, employees of this company will have earned a year’s salary in a matter of about a week. Within a single year, they would have earned a lifetime’s worth of income. This may sound like a good thing at first blush, but consider, among other things, what it means for their neighbors as well as for the company’s ability to continue to function. People who were starving last year and this year have 50 years’ earnings in their pockets tend to disrupt economic order in such environments. They will buy up supplies of things others need and drive up prices doing so, putting their unemployed neighbors further into poverty.

    It is indeed unfortunate that some people on this planet continue to have to make choices between wages of $1/day and subsistence living. But this is neither the fault nor the problem of the companies offering them this choice. Rather, it is a necessary consequence of the general economic underdevelopment of the region they inhabit. One company showing up and offering jobs will not solve all their problems by a long shot, but it is the first and most important step to eventual prosperity. Investment in such regions opens the possibility for the accumulation of capital that is (even Marx admits) a sine qua non of economic growth. The region itself must begin to prosper before any sensible talk of paying the kind of wages you’re talking about can begin.

  • Euan Gray

    But the reason we gloss over such things in arguments is not because we are unaware of them or insensitive to them, but rather because they are easily exploited for economically uninformed arguments by the opposition

    In which case, don’t you think, it might be more productive for the libertarian to consider how to actually deal with the problems, both of the supposedly economically illiterate opposition and of the people who have to make the unpleasant choice? The fact this rarely seems to be done, and instead the problem is either glossed over, ignored or dismissed as unimportant strongly suggests the libertarian does not actually have the answers.

    The region itself must begin to prosper before any sensible talk of paying the kind of wages you’re talking about can begin

    And what wages was I talking about, exactly? Did I suggest Chinese labour should be paid western rates?

    EG

  • Jacob

    “Libertarians do tend to gloss over some of the hardships people are put through in the early stages of capital development.”

    Not true.

    Libertarians (or, more exactly – liberal economists) offer the best way out in a dire situation (poverty) that is the “state of nature” for most people. Free enterprise.

    No other solution offers a better way out of poverty. If you install, for example, Mr. Euan Gray as czar, and he decrees that $1 is unfair and inadequate, therefore a minimum wage of, say, $2 must be paid or else the enterprise is shut down or fined – then you have socialism, and that system has been tried and failed miserably.

  • Joshua

    Mr. Gray – I do suggest you read my comment again. My example did not involve “western rates,” but rather half of one of the lowest available “western rates.”

    You are right that you did not make any concrete statements about what kind of wages you were discussing, but you most definitely did suggest that these companies should pay people above the going wage rate in the local economy for no other reason than to satisfy our altruistic instincts.

    As to your other point, Jacob is right that Libertarians DO offer a way out of poverty in these regions. You were never clear on which system you were advocating, but I submit that ignoring local economic realities is unlikely to improve life for anyone.

    The essence of my comment was that it’s true that economic progress is sometimes slower than we’d like – but there simply are no alternatives. People can imagine ideal wage rates all they want; these daydreams do nothing to change the reality that the supply of goods in these regions is what it is, and that paying people above what that supply can sustain in relation to their productivity is no kind of solution – as the Soviet Union and others have very effectively demonstrated.

  • Euan Gray

    One could retort that if you installed, for example, Jacob as managing director of the Republic of Libertopia, Inc., you would see little if any progress, and that slowly – progress in working conditions and such like having been accomplished in the west basically only at the behest of the state.

    However, and more reasonably, one could point out that neither dogmatic socialism nor dogmatic laissez-faire will provide a useful solution.

    Increasing the cost of labour by mandating improved wages or conditions (a socialist measure) can be countered by making the manufacturing process less labour intensive (a capitalist measure) – it will spur advances in automation, more efficient methods, etc., and the benefits of these things in time flow to everyone. If you DON’T do this, then the pressure for efficiency and labour reduction through automation, etc., is diminished because things aren’t changing so quickly, and so progress is less quick.

    EG

  • Euan Gray

    you most definitely did suggest that these companies should pay people above the going wage rate in the local economy for no other reason than to satisfy our altruistic instincts

    No, what I was trying to get at was that if the going wage rate is not a natural rate – for example, a distortedly low rate created by the presence of a pool of low paid convict or semi-indentured labour – then it is perhaps unethical for companies to exploit this unnaturally low rate.

    I was quite clear that there is no issue if the $1/day or whatever it is is enough to provide the necessities of existence. A proper market allocation of wage rates will more or less ensure this, but the supply of non-market priced labour will distort it – whether the distortion is overpayment or underpayment.

    Suppose the going rate is $2. You employ people at this rate. Fine. Suppose now a pool of convict labour is made available by the state at $1/day. What do you do? Keep paying $2 and let your competitor use the cheap labour to his advantage? Use the cheap convict labour yourself and make your existing labour unemployed?

    Suppose the local labour needs $1.90 per day to provide the necessities of life – food, shelter, water, heat and sanitation. If they have to compete with the $1 convict labour and sell themselves at that same rate, they are working but have insufficient income to meet basic needs. Do you care? Do you do anything about it? Is it ethical to use the cheap labour? Is it more ethical to accept a competitive disadvantage and keep paying $2 to free labour?

    EG

  • Joshua

    OK – this is much more sensible than what you seemed to be saying earlier.

    Of course, the process that you are describing will happen without socialist intervention in the economy as well, since corporations will automate anyway to try to keep their labor costs lower than those of the competition. This process brings down prices and thus increases general wealth (or increases wages in purchasing power terms, if you prefer). Further, workers themselves become more valuable as the process is automated because they require more training and skills to do their jobs.

    The difference between doing this the socialist way and doing it the capitalist way is that the capitalist way pays everyone economically sustainable wages throughout the process. You never get into sticky situations like the 26% inflation rate and annual wage increases of 40% to compensate that nearly killed the UK in the 1970s.

  • Joshua

    This post refers to Mr. Gray’s earlier respons to Jacob.

    In fact, no one on this site is suggesting that it would ever be OK to use convict labor for profit, so I don’t feel the need to deal with this example.

  • Joshua

    Preview is your friend, yes…

    In fact what I meant was that the first of these three posts refers to Mr. Gray’s response to Jacob and that there is no need to deal with his later example of convict labor since I think we can all agree that it would be unethical to make use of such labor. Also, in practical terms, such situations are unlikely to arise very often since there are few governments that can weather the PR storm of supplying convicts with lucrative western-financed jobs on any large scale while their people starve ;-)

  • Euan Gray

    Also, in practical terms, such situations are unlikely to arise very often since there are few governments that can weather the PR storm of supplying convicts with lucrative western-financed jobs on any large scale while their people starve ;-)

    A tad naive, I fear.

    The type of government that would be prepared to supply convict labour is the type of government that is unlikely to be swayed much by adverse publicity.

    EG

  • Euan Gray

    Of course, the process that you are describing will happen without socialist intervention in the economy as well, since corporations will automate anyway to try to keep their labor costs lower than those of the competition

    But it will happen much more slowly. There is much less of a spur to invest in automation. That this happens can be clearly enough seen from a cursory perusal of western economic history. I think it’s not unreasonable to suggest that had the world gone libertarian in, say, 1850, we would not now have cheap powerful computers, efficient and safe transport, and so on, not to mention sewerage and clean water. We would, of course, EVENTUALLY get these things, but the pace of progress would be rather slower.

    Whether it is better to manipulate things and prompt progress or to keep the hands off and wait for the market to do something is another question. I like computers, drainage, clean water and efficient transport, so I don’t mind a little manipulation.

    The difference between doing this the socialist way and doing it the capitalist way is that the capitalist way pays everyone economically sustainable wages throughout the process

    You’re setting up a false dilemma, since it is not an either/or question. The way things seem to work best is to have the occasional socialist measure aimed at improving things and then let the capitalists figure out the best way of providing it. If you take it too far either way, it doesn’t work well. Arguably, we in the west have gone rather too far in the socialist direction. 150 years ago, we possibly leaned too far in the capitalist direction.

    You never get into sticky situations like the 26% inflation rate and annual wage increases of 40% to compensate that nearly killed the UK in the 1970s.

    Whether socialist or capitalist, you will get this if you aren’t sensible with expanding the money supply. Having an unregulated market is no guarantee that you can’t get these things.

    EG

  • Dick Cheney

    I agree with Mr Gray. To imagine the Chinese govt would never DREAM of using convict labour is naive.

    All “libertarians” want is to get things as cheap as possible.

  • Jacob

    A few remarks:

    Convicts don’t make good, productive workers. I doubt private enterprises would ever willingly employ them.
    (Maybe state enterprises employ convicts in China. I don’t know about that).

    As to inflation:
    Whether socialist or capitalist, you will get this if you aren’t sensible with expanding the money supply.
    Money supply is a monopol controlled by the state (central bank), not private enterprise.

    I think it’s not unreasonable to suggest that had the world gone libertarian in, say, 1850, we would not now have cheap powerful computers, efficient and safe transport,

    I think it is unreasonable. Did government intervention produce “cheap powerful computers, efficient and safe transport” ?? I don’t think so.

  • Joshua

    In fact what I said was that “such situations are unlikely to arise very often in practice” because of “PR” reasons. I’m sure some corrupt officials here and there would love to sell off convicts as slaves if they could get away with it. The point is that few if any current governments could blithely build a factory nearby and have it only employ convicts without the locals getting upset about not having jobs. Nowhere did I say that no Chinese officials would even dream of it. I’m sure there are a few of them who do.

    But probably you’re right and I’m naive. Since you know more about it, I don’t suppose you’d indulge me and give me an example of Chinese officials selling prison labor to western companies?

    In response to Mr. Gray, my reading of western economic history is definitely not that most decisive technological breakthroughs would never have happened without a government push. There is, in fact, every reason to think we might have even more inventions floating about without the government constantly siphoning off as much wealth as it does.

    I don’t think my distinction is a false dilemma at all – but perhaps what I should have said is that the capitalist way is guaranteed to pay sustainable wages throughout. The free market will not allow companies who either overpay or underpay their workers to survive for very long. Now, of course a well-managed socialist system generally informed by economic reality (i.e. the kind you’re talking about as opposed to, say, the Soviet Union) can avoid these pitfalls too – but it does so by not straying too far from what the market would otherwise pay.

    The example I provided with Britain in the 70s is relevant because a lot of the troubles there had to do with exactly the kinds of things we’re talking about – namely, wages were artificially high, the benefits of that system were confined to certain sectors of the economy (i.e. certain groups had purchasing power above what they rationally should have), and prices were heavily influenced by government meddling and thus not an accurate reflection of real worth. The UK situation circa 1974 is exactly the kind of danger that undue meddling in an economy will entail.

  • Euan Gray

    I doubt private enterprises would ever willingly employ them.

    Why? They used to employ slaves, but I doubt they’d willingly do it now. Times change, morality changes.

    Money supply is a monopol controlled by the state (central bank), not private enterprise.

    But whoever controls it, if he is not careful about expanding it, will get excessive inflation. It makes no difference whatsoever whether the issuer is private or state.

    Did government intervention produce “cheap powerful computers, efficient and safe transport” ?? I don’t think so.

    Well, actually…

    The initial advances in electronic computers and safe efficient transport (at least in the air) were made because of the demands of the state for, respectively, cipher breaking and large scale rapid troop movement. The enormous impetus given to these industries by the demands of the state in wartime are not plausibly deniable.

    Note, though, that I said we would not have these things NOW. I did not say we would NEVER have them, rather that the rate of progress without state intervention is lower, not zero.

    The point is that few if any current governments could blithely build a factory nearby and have it only employ convicts

    The Russians did it. The Nazis did it. The Chinese still do it. The North Koreans almost certainly do it.

    In response to Mr. Gray, my reading of western economic history is definitely not that most decisive technological breakthroughs would never have happened without a government push

    Fine, but you’re answering a point not made. I said clearly before, and repeat here, that the advances would have been made anyway. Eventually. With the state involvement, they just happened faster. It is very well understood that war generally results in a substantial acceleration of technical progress, as does a non-war state demand that something be done – for example, send people to the moon, build a supersonic airliner.

    The example I provided with Britain in the 70s is relevant because a lot of the troubles there had to do with exactly the kinds of things we’re talking about

    It’s actually much more to do with reckless expansion of the money supply. The Labour government by 1976 had realised (Callaghan, Healey) that tightening control of the money supply was the only real solution to the problem. It has been speculated that a Labour election victory in 1979 would likely have resulted in similar monetarist policy being introduced in the 1980s through sheer necessity (rather than through dogma, as actually happened).

    EG

  • Joshua

    Just to nitpick a bit more on the question of 1970s economic policy in the UK – I think you’ll find that Labour’s solution to the problem (which was successful on the whole before things spun out of control in 1978) had a lot to do with (semi-voluntary) wage rise caps. The idea was that this would bring inflation under control – and if memory serves, inflation was down to just over 10% within two years. One theory on what started the Winter of Discontent, in fact, was that Callaghan wanted to continue holding wage rises to 5% in the hopes that he could get inflation into the single digits. Certain trade unions bucked this, and things spun out of control. But the point is that the Callaghan government apparently shared my opinion that wage and price inaccuracies had no small roll to play in the problem.

    You may be right that Labour would eventually have been forced to turn to a more monetarist policy – but much more reluctantly than Thatcher, obviously. Again, though, I think the relevant difference at the time, whatever Thatcher writes in her memoirs, was in the two parties’ positions on employment. Labour was still committed to full employment as far as possible, and Thatcher obviously was not. To me, these issues are linked, because paying workers more than they’re worth (especially when the state is complicit) is roughly the same thing – albeit indirectly – as “recklessly expanding the money supply” (because, again, you’re allowing people to purchase goods at a level which is uninformed by supply and individual productivity). Letting some bloated jobs go was necessary to get things back into some kind of equilibrium, though no doubt it was very painful in human terms for a lot of people in the early 80s.

    As to your other point – you’re right that I misread you. I repent. What I now want to say is that my reading of western economic history is definitely not that these inventions would have been slower in coming. :-)

  • Dick Cheney

    Re: Chinese Leviathan

    Curious this defense of China. What attracted me to this site is the picture of a Karl Popper book. The “Open Society & its Enemies” hardly advocates that dictatorships are OK so long as they produce lots of cheap toys.
    Also, what is libertarian about being forbidden to strike? Work should be a contract between employer & worker. If the workers strike, the boss is free to sack them, or to give them more money if he wants to keep their experience. It shd be nothing to do with the State (Leviathan, for some.)

  • Jacob

    “The “Open Society & its Enemies” hardly advocates that dictatorships are OK so long as they produce lots of cheap toys. “

    But common sense says that these dictators are an improvement over those who start “red guards” murder campaigns.

  • The way I see it, China in 2005 is a vast improvement on China circa 1965 or 1975 or 1985… but it is still an odious authoritarian state run on fascist (rather than communist) lines.