The threat by Google to pull out of China because of Chinese espionage efforts to hack into the gmail accounts of human rights activists has captured enormous attention. Of course, anyone who has paid any consistent attention to China and its massive growth would know that the Google revelations are really nothing new. What is new, perhaps, is Google’s willingness to turn an economic battle into one that looks like a moral stand.
My friend Zachary Karabell has an outstanding snippet on the Google China mess in Time Magazine titled “Silicon Valley is No Longer King.” Karabell is also author of Superfusion: How China and America Became One Economy and Why the World’s Prosperity Depends On It — but to some degree his article, excerpted in part below, argues that there is less fusion between the US and China than there is that China is eating our lunch on a lot of fronts.
His piece starts:
The furor surrounding Google’s bombshell announcement that it was contemplating withdrawing from business in China has centered on long-simmering issues of privacy, government control, and censorship. Google, a company whose DNA dictates that it “do no harm,” is particularly well-cast in the role of defender of western values of freedom of expression and open access to information against a Chinese system that brooks no political dissent and reserves the right to forcibly prevent certain types of information ranging from political expression to porn.
But there is another story here, more prosaic but no less important to the future arc of global business and the global balance of power. Google has not been doing all that well in China, as many have noted in recent days, badly trailing the domestic Chinese search company Baidu. But it isn’t just that Google has struggled. All of the New Economy western companies in the media and information business have failed to establish themselves in China. Before Google, eBay and Yahoo both made investments of years and millions upon millions of dollars to tap the fast-growing Internet generation in China, and like Google, they could not gain traction. Both companies ended up pulling the plug on their China ventures, with eBay losing out to domestic Chinese auction company Taobao, and Yahoo ceding its operations for an ownership stake in Alibaba.com (which also controls Taobao).
The failure of these New Economy players in China is in stark contrast to the success of brick-and-mortar companies. Consumer stars like Nike, food franchises like Kentucky Fried Chicken, industrial giants like General Electric and United Technologies, and technology behemoths ranging from Microsoft to Intel to IBM have prospered in China. In fact, mainland China has been the most impressive growth market for hundreds of global companies for the past decade. So how did Google stumble so badly?
On Wednesday next week, the New America Foundation is teaming up with Slate for an event on Google, China and Internet Freedom (register here if you would like to attend) featuring Open Society Institute fellow Rebecca MacKinnon, Foreign Policy contributing editor Evgeny Morozov, Columbia Law School professor and Slate contributor Tim Wu, and Clinton’s senior adviser for innovation Alec Ross. Atlantic Monthly correspondent and New America board member James Fallows will moderate.
I have been saying for some time that America’s challenge versus China is that the latter, in a national sense, has looked like Google — full of promise and growth in the future and thus China has been given a political weight that its substantive realities in real time today don’t justify. America, in contrast, looks like a large, well-branded, underperforming asset — like Xerox or General Motors.
Clearly, no matter what the outcome of this standoff, I think China looks less like Google now and perhaps more like Goldman Sachs — which I’ll explain another day.
— Steve Clemons