Friday, June 08, 2007

Capitalism=Rule of Law In China

The great error of China's leaders is that they believe they can allow greater economic freedom as a pragmatic measure to bring in greater wealth and thus to increase their nation's international influence—but that they can do this without importing the moral code that makes capitalism work.

Yet the Chinese are beginning to discover that free markets and free trade require values that introduce the moral basis for limited government in general, including political freedom. The article below points to one aspect of that struggle: a series of cases in which animal food and human medicines exported from China have turned out to be fraudulently adulterated with poisonous substances.

The Chinese government is now trying to crack down on this kind of fraud—but it will have trouble enforcing this crackdown, due to the rampant corruption and rule by whim that is the legacy of the Communist dictatorship.

So far, China has benefited by eliminating the totalitarian economic controls from its Communist past—but it has not succeeded at implanting the capitalist cornerstones of honesty, enforcement of contracts, respect for property rights, and the rule of law. Thus, the usual advice given to Westerners who want to do business in China is: don't trust anyone.

That is what is holding China back—and if it wants to continue to thrive on international trade, the Chinese government is going to have to establish the honesty and trust that is possible only under the rule of law.

"China to Revise Rules on Food and Drug Enforcement," David Barboza, New York Times, June 6 Responding to growing international concerns about tainted food and counterfeit drugs, China said late Tuesday that it was overhauling its food and drug safety regulations and would introduce nationwide inspections….

The announcement follows a series of embarrassing episodes this year involving China’s export of tainted pet food ingredients and toothpaste. The shipments of pet food ingredients, contaminated by the chemical melamine, set off one of the largest pet food recalls in United States history.

In recent weeks, several countries, including the United States, Panama and Nicaragua, recalled or issued warnings about toothpaste made in China because it contained a toxic chemical called diethylene glycol.

Last month, The New York Times reported that at least 100 people had died in Panama after taking medicine containing diethylene glycol that had been produced in China and exported as the harmless syrup glycerine….

Much of the blame has centered on weak enforcement of the nation’s food and drug regulations, as well as corruption, bribery, and a business culture where counterfeiting thrives.

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