Inkwell: Authors and Artists

    

> What is it about the Chinese psyche, or perhaps the human psyche in 
> general, that needs a financial or legal incentive to do what's right?

That's a very deep and profoundly interesting question.
  

    
Cynthia, David, Linda and JM - 

Recent comments seem to be converging towards a point, and I'd like to
use the case involving melamine-tainted milk as a springboard. Could
something like that case have happened in another country? Why are we
seeing so many cases of quality failure out of China? Who on the China
side is to blame? What is it about China that is different? 

To be frank, I'd rather have some of your own opinions on this one,
and I would like to start off by asking: are these quality problems a
matter of coincidence, or does China have a problem? What might be the
source of the problem? If some are going to ascribe it to "psyche,"
perhaps this could be explored. After others weigh in with thoughts,
more questions, or impressions, I'll come back with a few of my own
comments...
  

    
i can't speak to china, having only lived in thailand. but theravada
(at least) buddhism does seem to promote a mindset of lawlessness as
long as one "makes merit" before death. thailand, although i love it, 
is a numbingly corrupt country, especially in matters like public
health, and many people have speculated that the reincarnation aspects
of theravada buddhism have a numbing effect. human life is not as
valued.

my own PURELY speculative thought on china is that perhaps when one
has SO many people, the safety of the individual (that we exalt in the
west) takes a lower priority. 
  

    
But Japan was certainly pretty densely populated, and we didn't see
that kind of quality failure pumping out of Japan, did we?

Culturally, China reminds me a lot of America, at least in the
results, although they got there following different paths.  Both
cultures seem to revolve a bit too much around irrational,
something-for-nothing thinking and reverence for swindlers and
gamblers.

Did Mao and the Cultural Revolution sweep away a little too much of
traditional Chinese culture?  Are the Chinese rootless immigrants in
their own country, remaking themselves in a hedonistic capitalist
image, something akin to the post-Civil War, pre-Depression era in
America?
 
  

    
An old friend who worked as a diplomat in China summed up his experience
there by saying, "Mao did a great job eradicating bourgeois values; he did a
terrible job replacing them with anything else." Pervasive amorality is
incompatible with a just society, or an open one.

I remember when "Made in Japan" was identical to "Utter Crap", including
hazardous to health, as a label. Now I look disparagingly at the label "Made
in China" instead, but global trade has exploded in the past 40 years so
it's harder to avoid rubbish now than it was then. Also the prevailing
Western standards for how much stuff one person/family can own have grown
quite a bit since then too... far more than the growth in actual wealth.
  

    

I think there is something in the Chinese national character which
exacerabates the situation.  From one perspective, China swung from
central planning socialism to laissez faire capitalism.  But the desire
for social stability including maintaining the modern equivalent of the
"mandate of heaven" has not changed. That plus the desire to be a
powerful nation based on economic dominance leads to a situation where
anything is tolerated as long as it meets those goals.

Shipping poisoned food to the rest of the world thus is a good thing as
long as it promotes social stability and makes China economically
stronger.

As an aside, I think one of the accomplishments of the Bush administration
was to convince the Chinese that leaving the exchange rate as it was
could cause increasing instability. And that caused the Chinese to
carefully allow the exchange rate to adjust a bit.
  

    
Just a bit. The renminbi continues to be undervalued relative to the USD.
China doesn't allow that to change; it props up the USD by buying literally
trillions of them, preserving the cheap-export advantage.

Maybe I missed this, Paul; where do you live now? Do you still work in China
or with Chinese companies?
  

    
I'm not sure I'd call the issues with Chinese manufacturing quality a
"coincidence", but it would be interesting to see a statistical
comparison of quality issues, both normalized for state of econolmic
development and also compared with other Asian countries.  

But if there is a uniquely Chinese problem, my guess as to what it
stems from is the disconnect between China's economic system and its
political system.  Under Deng Xiaoping and his successors the Chinese
government allowed the formation of private capital, private employment,
personal wealth without confiscation, free travel, foreign investment,
and sovereign fund investment (that is, the Chinese government
investing in foreign debt and equity). In other words, pretty much
like any other capitalist country.  

Most of the world viewed this in a very positive light and so do I.
However, economic liberalization was not matched by political
liberalization, and China remains politically very authoritarian
(although not to the degree of regulating personal behavior, consumer
goods, clothing, etc., like in Mao's day). The mix of economic liberty
and political authoritarianism is not a good one, and does not seem to
me to be stable in the long run.  The burgeoning middle class will
expect political rights and influence, and the working class wonders
why, if the country is so rich, that their conditions do not improve
rapidly. I can see matters coming to a head in the next 10 years, and
there's no guarantee of the outcome.
  

    
I'd like a lot more proof before attributing anything to national
character. *The Jungle* was about conditions in this country, after
all. There's little reason to expect that manufacturers would be any
more honest without a history of the Food and Drug Administration and
the courts to keeping them in line.

You also have to account for scale. If there are five times as many
factories, so one would expect five times as many scandals.
  

    
If you go back historically and prehistorically, to the dawn of
humanity, at what point was there first an extrinsic rationale for NOT
being corrupt?  

When <jmcarlin> asks "What is it about the Chinese psyche, or perhaps
the human psyche in general, that needs a financial or legal incentive
to do what's right?"  I might instead ask what there is about anyone's
psyche that does NOT require an external motivator.  If you accept that
the United States is less corrupt (I'm not so sure) then one might ask
where that behavior came from.
  

    
China has been called a currency manipulator in part because it
doesn't have a free-floating currency exchange. Appreciating the
renminbi would help close the trade gap, but having a fixed peg is not
a crime in and of itself, and many economies have a more rigid
exchange. Hong Kong, which is just next door to China, has a fixed peg.
There are advantages as well as disadvantages to such a system. On
fixed exchange rates...  

http://en.wikipedia.org/wiki/Fixed_exchange_rate
  

    
Michael - I'm not so sure that statistical evidence is the best
measure in these cases. First, it would require that we focus mostly on
product recalls. Not all products that are faulty threaten public
safety, and my own sense is that quality fade is more pervasive than is
indicated by news reports. Chinese factory owners will go to great
lengths to create a product that looks like it is "B Grade" when it is
actually "C Grade." In the wood industry, I've seen industrialists try
to pass off one kind of wood for another, using a great deal of skill
so that ever experts can't tell the difference. Some of this relates to
the "counterfeit culture" that I describe in the book. 

Second, statistics don't say enough about the nature of failures. They
don't take into account the degree of callousness involved, or they
may not hint at a widespread apathy to correcting the problem. If
American consumers knew some of those who initiate quality problems as
a part of their business plan and saw the extent to which these people
really don't give a damn, they would be more concerned. We are talking
about sociopathy on a grand scale, and consumers remain at risk so long
as the issue is not being addressed. I say "sociopathy," by the way,
because traditional negative incentives like the threat of execution do
not necessarily motivate. 

After punishments were handed out in the melamine case, dairy
producers were still at it. Having learned their lesson, they switched
to a leather byproduct.

http://english.cri.cn/6909/2009/04/26/189s478943.htm
  

    
> I've seen industrialists try
> to pass off one kind of wood for another, using a great deal of
skill
> so that ever experts can't tell the difference.

If nobody can tell the difference, then does it really matter?
  

    
It does if you build an apartment building with what you think is Wood
A, only to discover later that's it's the weaker Wood B.

Whoops!
 
  

    
See also - the (poorly) made in China drywall that's stinking up homes
across the American south (and corroding their pipes and wiring).
 
  

    

My real question is how can we get the American public to wake up
and start yelling at Congress and the President to do something?
  

    
That's my joke, like the old saw about the tree in the woods:

If a customer was cheated but never even knew it, did it actually
happen?
  

    
Drywall is yet another case, yes... 

Victims will be getting tax breaks. I find it interesting that our
government has come up with a "solution" to the problem even before it
had a chance to learn what it was exactly that caused the problem. This
is the issue with quality problems out of China -- that we don't know
what it is that we do not know, and that suppliers in China are not
transparent. 
  

    
On the wood case, I was referring to some furniture. To use another
example, we had some desks that were supposed to be "solid oak" and no
merely "oak." At one point, we discovered that the factory was placing
a wood oak panel to some pieces that were clearly not oak. Was anyone
harmed? Not really. But if you were to have bought the furniture based
on the claim that it was "solid oak," you would have been a fool. We
will have years to discover how much of what we purchased from China
was not quite what we expected... 
  

    
This link goes with the drywall comment, above... 

http://blog.nola.com/tpmoney/2009/07/irs_may_offer_tax_break_to_chi.html
  

    
How are we the people gonna pay for that?  Tariffs on Chinese goods
would be the logical solution.  So of course, that's right off the
table.
 
  

    
Brian - There are some things about China manufacturing that may be
better understood from being on the ground. This might sound like an
unfair comment to make, since most Americans will not have the chance
to have the sort of experience that takes them behind the scenes and
has them working with manufacturers for the long-term. You will have to
trust me that there is much gamesmanship going on in the sector, and
that no matter how hard they try, importers are failing to win the game
of hide-and-seek that they are willy-nilly playing with suppliers.
This is not the sort of forum for going into all of the details. That's
the purpose of the book, etc...
  

    
Cynthia - Related to your comments, we might consider cultural factors
that affect behavior: a mania for money; irreligiousness; emphasis on
family over broader community; the pervasive sense in China that the
window of opportunity may close at any point; the belief held by many
Chinese that China rightly deserves to return itself to its former
state of power and glory. 

Culture must not necessarily refer to the long-term. Consider that in
the short-term the Communist Party has set out a carrot (i.e., rewards
to entrepreneurs for bringing in US dollars) with no stick (i.e.,
punishment for production failures). Of course, attitudes have been
affected by such policies, and so there is no surprise there that these
factory owners “go for it” when they can. 

I want to add one more point related to Brian's comment about "The
Jungle." In the book, I had something to say about this, though
indirectly. You know, we were all told in the 1990s that the average
American was going to save $300 with the help of outsourcing to China.
At the time, no one suggested that there was going to be a trade off.
We were never told, "you'll save some money, but we're going to wind
back consumer product safety to the 19th century." It's one thing for
China to go through its own growing pains, but if American consumers
understood that a trade-off was involved, few would have supported
flinging open wider the doors of trade with China. The bottom line is
that China was not ready, and that our decision to push for greater
levels of trade with China was motivated primarily by our own greed. On
this account, I am specifically talking about politicians and business
leaders who saw opportunity. Our policy with China can be seen as a
experiment with questionable results.

I say this, by the way, as Merrill Lynch announces that China will
achieve 9% GDP growth, while we remain mired in economy. President
Obama wants to focus on creating more manufacturing jobs at home, which
is all well and good. A better idea might have been to keep more of
the economy here in the first place. 
  

    
Make that "mired in economic recession" 
  

    
Right.  It was not "our greed," but the greed of a small number of
people in the U.S. who have made vast sums of money trading with China.
 It's not like there was a massive popular movement for free trade
with China.  I know this is kind of a persnickety point, but worth
making, I think.  The whole "free trade" movement is very much an elite
project and always has been.