Few Prophets When It Comes to Profits

A few weeks ago, I wrote a blog entitled "Trading with the Devil in the Hope of Changing Hell" in which I discussed how conventional foreign affairs and international trade dogma has long assumed that economic liberalization undermines repressive regimes. It is often argued by those desirous of trading with countries like China and Vietnam that economic development and increased trade with and exposure to liberal democracies inevitably leads to an improvement in freedom and human rights.

I also discussed a recent article in the September/October 2005 edition of Foreign Affairs in which Bruce Bueno de Mesquita and George W. Downs point out that recent events suggest that "savvy autocrats have learned how to cut the cord between growth and freedom, enjoying the benefits of the former without the risks of the latter." The key that these regimes have discovered in is embracing economic reforms that increase the provision of public goods, thereby improving the lives of the people (and suppressing the desire for democracy as seen as a means to prosperity, such as was one of the driving forces behind the collapse of the Iron Curtain), while at the very same time limiting the provision of "coordination goods." Coordination goods are those public goods that critically affect the ability of political opponents to communicate and coordinate but which have relatively little impact on economic growth. They include such things as free speech and the ability to organize and demonstrate peacefully. By adopting this strategy of suppressing coordination goods which are necessary to organize societal reform, while increasing access to public goods, repressive countries have been able to delay internal revolutionary tendencies, thereby insuring their continued survival.

Many believe that the best way to protest the West's continued (and increasing) trade with repressive regimes is to boycott products made in such countries and to lobby our governments to refuse to trade with them. I believe that this is naïve. I argue that a more appropriate and practical response is to restrict trade with such countries especially in the areas of coordination goods. Western companies should be restricted from doing business in countries like China if their services and products lead to a continued suppression in these key areas. Corresponding to this would be to link international aid to such repressive regimes to improvements in higher education, basic civil liberties, human rights and freedom of expression, including religious and press freedom. In this way, we actually aid those seeking to promote greater liberties in such societies.

An editorial in today's National Post entitled "Putting Profit Ahead of Principle" underlines the need to take action in this direction, since it is obvious from recent events that western businesses (especially in the IT field) will not act ethically if left to their own devices:

Putting profit ahead of principle
National Post
Saturday, January 07, 2006

Microsoft is not easily confused with a champion of free speech -- not since it became public knowledge last summer that the IT giant's Chinese blogging tool filtered out such delicate terms as "human rights," "democratic movement" and "Taiwan independence." But Microsoft has hit a new low in heeding requests from Chinese authorities to shut down a blog that had discussed a politically sensitive Beijing newspaper strike -- deleting without warning all of the site's content simply because the author, prominent Chinese blogger Zhao Jing, dared to post some factual information that made the Communist government squeamish.

Sadly, Microsoft's conduct is not entirely unique: Other Western IT companies have also been all too willing to co-operate with Beijing's efforts to silence its citizens. Particularly egregious was last year's decision by online service provider Yahoo! to turn over the e-mail records of journalist Shi Tao to Chinese authorities, landing him in jail for 10 years. Mr. Shi's crime? He had passed around a government order to squash media commemorations of the 1989 protests in Tiananmen Square.

Meanwhile, Cisco Systems has sold the Chinese the equipment they need to censor Web sites, and Google is believed to censor the Chinese version of its search engine.

In a limp attempt to justify their behaviour, both Microsoft and Yahoo! have claimed they are required to comply with China's laws -- as though there were no alternatives. The reality is that IT companies always have the option of making a principled choice not to facilitate a government's inexcusable muzzling of its citizens. And while taking such a stand could cost the companies their share of the Chinese market, it would be a hit worth taking for both moral and public relations reasons.

The sheer odiousness of lending a helping hand to an authoritarian government bent on squelching dissent does not seem to have fazed IT giants. But perhaps the potential for major backlash among their Western customers will convince them to change their ways.