Trust, Honesty, and China

So, China is going to eat our economic lunch and dominate the globe? True enough, China has much going for it, mainly hugeness, but also what’s really the world’s most unrestrained free market capitalism (the non-state-owned sector, that is). But not so fast. One element that helped make capitalism so successful in the West seems distinctly weak in China. That is an ethos of trust and honesty.

Sneer cynically if you like, but the fact is that commerce could hardly function at all without a basic level of trust and honesty among participants, and its lack is punished by the market. That’s certainly illustrated in my own business of trading in coins. In dealer-to-dealer trade, especially where authenticity of merchandise is an issue, trust is extremely important. A sleazy dealer soon gets a rep, and weeded out. And we keep each other informed about untrustworthy customers too. They’re actually rare. I send nearly all my orders in advance of payment, with only a tiny percentage of problems. Businesses don’t thrive in the long run by ripping people off, but by catering to their needs. This ethos is embedded in our DNA. In the West, at least.

The Economist recently reported on Yale’s baleful experience setting up shop in China. Now, of course cheating is a real problem in American schools. But it seems Chinese students carried it to a whole new level. Most were literally amoral: getting ahead was all that counted, and the means didn’t matter. Thus plagiarism, for example, was endemic. And an essay by NPR’s Louisa Lim, in the Times Book Review, made a similar point about Chinese culture with regard to how government operates at all levels, with pervasive corruption, bribery being central to the Chinese way of life.

Recently too we learned of the Chinese government’s large scale cyber hacking operation, stealing sensitive information from foreign businesses. Now, Western companies are not all angels, and corporate espionage does happen. But for the government to create a whole bureaucracy to do it?

Cartoon by Dave Granlund

And, when caught out, to simply brazenly lie? All this bespeaks a mentality very different from ours.

Columnist David Brooks has observed that it reflects China’s seeing world economic competition as akin to war, with deceit and skullduggery being natural weapons. However, Westerners would regard this as self-defeating, because it destroys the trust that lubricates free exchange. But Brooks fears what he calls a “brutality cascade” in which the rules of the game tend to become those of the most ruthless player.

Yet, he says, there’s another path: strive to establish norms of legitimacy upheld by the broadest possible coalition, isolate the violators, and make it clear that joining the “friendship circle” pays great benefits while staying outside will prove costly.

Chinadigitaltimes.net

I want to be clear that not all Chinese are amoral. I’ve done business with many good people there. But it’s obvious that there’s an important cultural difference, that I believe will handicap China in building its world economic role. Dishonesty and corruption creates a foundation of sand for an economy. If China wants to become the global economic kingpin, it will have to grow up and become a responsible adult.

As Chinese author Wang Xiaofang has written, quoted in the Times essay, “The habit of falsehood is fatal to a culture. But to us, falsehood is the essence.”