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America, China, and the Spirit of Enterprise

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America, China, and the Spirit of Enterprise

As Beijing’s repressive model makes clear, state power remains the greatest threat to freedom. December 1, 2022
Politics and law
Economy, finance, and budgets
The Social Order

The stories of two men, and of the companies they founded, cast some light on the stakes of the geopolitical competition between China and the U.S.

In 1999, Jack Ma, a former English teacher, started a business in his cramped apartment in Hangzhou. Ma took risks. (When others think an idea is crazy, he once quipped, “that’s your chance.”) He worked hard. (He has called 12-hour workdays a “blessing.”) He overcame setbacks. (“Have a good sleep, wake up, try it again.”) Above all, he focused on the needs of his customers. (“When you look at [them], you want to serve.”) Through his company, Alibaba, Ma brought e-commerce to China. “Alibaba has transformed the way Chinese shop,” Duncan Clark writes in his biography of the firm, “giving them access to a range and quality of items that previous generations could only dream of.” Ma became China’s richest person.

Then, in October 2020, Ma spoke at an event in Shanghai. “Innovation mainly comes from the marketplace,” he said. Regulators should “supervise” such innovation, he continued, but not try to “manage” it. Not long after Ma made these remarks, the Chinese government blocked the IPO of Ant, an Alibaba affiliate, and opened an antitrust investigation of Alibaba itself. Alibaba has since been restructured and fined $2.5 billion. Ant will reportedly be fined more than $1 billion for its part in what the Chinese Communist Party calls a “disorderly expansion of capital.” Ma has all but vanished. He has apparently fled to Japan.

A few years before Ma founded Alibaba, Jeff Bezos set up an online bookstore in his garage. From its founding down to the present day, that company, Amazon, has sought to maintain what Bezos calls a “day one mentality.” It is always seeking to disrupt old ways of doing things. Some of its biggest bets—e.g., the Fire Phone—have gone bust. (“My life is based on a large series of mistakes,” Bezos has claimed.) Others—free two-day shipping, cloud computing—have been transformative. During the dot-com crash, Amazon nearly collapsed. By 2017, Bezos was the richest man in the world. Along the way, the company has been hard on its employees and has drawn plenty of other criticisms, but it has been a boon to consumers. In one of his books on the firm, Brad Stone refers to Amazon’s “religious refusal to violate the trust of customers in any way.”

Bezos owns the Washington Post, which piously states on its masthead that “Democracy Dies in Darkness,” and whose columnists chastise politicians and government officials almost daily. Lately, Bezos has taken to denouncing the Biden administration’s handling of inflation, accusing the government of displaying “a deep misunderstanding of basic market dynamics.” As an American, Bezos is free to speak his mind.

Freedom is a hard thing to compartmentalize. A government that fears experimentation in the market for goods is apt to fear it in the market of ideas, as well. Similarly, a government that thinks it knows how to structure the economy is apt to think that it knows everything. Why should such a body permit criticism? In short, tolerance of risk and openness to debate go together. When “regulatory authorities” have “become zero risk,” Ma warned in the speech that landed him in trouble, the “whole society has become risky.” One wonders whether China’s apparatchiks see the irony in laying a man low for saying this.

Amazon is a ruthlessly self-critical organization. “Attention always turn[s],” observes Stone, “to the ways in which [employees] could have done better.” The firm also encourages disagreement. Conflict yields results, Bezos says. A politician like Senator Elizabeth Warren does not subscribe to these principles. When Amazon publicly (and correctly) challenged her assertion that the company pays “close to nothing” in taxes, she vowed to “break up Big Tech so you’re not powerful enough to heckle senators with snotty tweets.”

Warren’s rebuke captures the outlook of America’s progressive antitrust lawyers. Under the antitrust rules of the last 40 years or so, regulators monitor whether firms are competing to improve consumer welfare. As Ma might put it, they supervise rather than manage. This approach does not sit well with the left-wing activists who now set antitrust policy for the federal government. They don’t particularly care if a large firm is offering low prices, high quality, and innovation. They want antitrust enforcement to stand on their discretion, as guided by an amorphous mix of factors. Angered as she is by “snotty tweets,” Warren would clearly prefer to instill fear than to promote the creation of wealth.

Many of China’s millions of street cameras now feature facial-recognition software. The CCP closely monitors social media, and it uses smartphone data to track its citizens’ movements. State surveillance in China was widespread even before Covid-19, and it has expanded during the pandemic, as the government has tried to suppress the virus by locking down society. That same technology is now being used to suppress dissidents opposed to the lockdowns. After attending a protest, one student learned that he was stalked, via his phone data, by the police. The authorities ordered him to write an account of why he had been in the area. Another student was questioned by police after he shared on social media his intention to leave blank pieces of paper in public restrooms. As the Wall Street Journal explains, “protesters have held up blank sheets of paper at demonstrations to express opposition to censorship.”

That it’s dangerous to wave white paper around in China is, quite obviously, a grave indictment of that nation’s governing regime. But this tyranny isn’t just wicked; it also falters on its own terms. A collateral victim of Chinese oppression is the Chinese economy. Restaurants are closed, factories are shuttered, travel is tightly restricted, and, unsurprisingly, unemployment is rising.

The CCP is noticing, belatedly, that perhaps Ma was on to something. News headlines proclaim an “easing” or “softening” of the government’s stance toward tech companies. But it’s presumptuous to think that the spirit of enterprise can be turned off and on like a switch. And in any event, the CCP is still the CCP. The state says it will now foster the “healthy and orderly development” of the platform economy, the metaverse, and the wider private sector. Those carefully chosen adjectives are a tipoff that authoritarians never learn. The CCP didn’t want a private software industry; it wanted a state-backed robotics and AI industry. The Party is willing to trash the one in pursuit of the other. In its attempt to create planned success from the top, it risks winding up with neither.

Meantime, the CCP has purged itself of anyone likely to question President Xi Jinping. At this point, writes one China scholar, “no other political elite dares to challenge [Xi’s] policy mistakes.” Again, we see the close tie between freedom of speech and material progress. Both the Covid-19 lockdowns and the tech-sector crackdown are now official doctrine, hard to reverse in a place where dissent is not allowed. The upshot is that China’s economic growth will likely continue to languish at around 3 percent—lower than the state’s already scaled-back target. Xi has been reduced to talking, not of overtaking the U.S. economy, but of China’s becoming a “mid-level developed country.”

Despite the recent setbacks, China’s autocrats have grand ambitions. They aim to undermine democracy in the West and otherwise impose their values abroad. They appear willing to wield military aggression in service of their ends. If, in the decades to come, China becomes the dominant world power, it will not raise its flag over Washington. But it could indeed succeed in transforming our way of life. Americans would do well to take this threat seriously—including by learning from China’s mistakes.

Of course, America’s big tech firms are a mixed blessing. Look again at Amazon. The company rose to the crisis of the early pandemic by doubling its fulfillment capacity, and it has spent $67 billion on R&D in the past year alone. Then again, not that long ago it opened its online marketplace to unregulated Chinese dealers that copied and undercut their American competitors. American tech giants should not be surprised when they face pushback for failing to support the national interest, as by refusing to work with the American military; for endorsing policies that undermine American prosperity, such as ESG initiatives that worsen inflation; or for getting too cozy with China. Perhaps U.S. tech firms could stand to be more patriotic and less progressive. To speak out and say so is to be American.

Some important lessons are coming out of China these days. One is that invention and affluence never come about precisely as one would like them to—they can’t be managed from above. Another is that, though worrisome cultural forces flow through our society, state power remains the greatest threat to freedom.

Photos: Cooper Neill/Getty Images (left) / PHILIPPE LOPEZ/AFP via Getty Images (right)

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