Google vs China: capitalist model, virtual wall (new OpenDemocracy article)

A speech on the theme of internet freedom around the world delivered by Hillary Clinton on 21 January 2010 contained a striking phrase. The United States secretary of state, speaking at Washington’s journalism-focused Newseum, argued that nation-states that chose to limit free access to information risked “walling themselves off from the progress of the next century”.

The timing of Hillary Clinton’s speech may be fortuitous; it had been scheduled before the events of January 2010. But its core target is as unmistakable as its message – “We stand for a single internet where all of humanity has equal access to knowledge and ideas” – is crystal. For her comments came amid the turbulent fallout of Google’s decision –  announced on 12 January by the company’s chief legal officer, David Drummond – to take a “new approach” towards China:

“We have decided we are no longer willing to continue censoring our results on Google.cn, and so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all. We recognise that this may well mean having to shut down Google.cn, and potentially our offices in China.”

This statement is momentous, in two respects. First, it positions Google as a champion of principled capitalism, vested with what might be called the “nerd norms” of the engineers who built the internet. Second, it highlights the division between this new form of principled capitalism and the novel form of authoritarian capitalism that China represents.

The ostensible reason for Google’s change of posture was a battery of hacking attacks on Google’s infrastructure to steal information from it and from human-rights activists using its gmail service, part of a wider cyber-assault on the infrastructure of more than thirty other companies. Beyond this specific incident, however, something deeper and more profound is underway: the emergence of a clash of two new and distinct models of capitalism.

A company sacrifice

The sixth of Google’s ten corporate principles is: “You can make money without doing evil”. It is difficult to fully understand just how enormous a sacrifice Google may be making to uphold this principle as it faces down the Chinese government. In all likelihood Google may shortly have to quit the market as a result of its decision to abandon the censorship regime required of it under Chinese law. The implications for its long-term profitability could be very significant.

Some analysts have doubted the sincerity of Google’s motives, but the scale of its potential loss suggests otherwise. Google could suffer great commercial damage from neglecting a market of which it currently has over a quarter-share.

In the short term, Google already faces significant competition within China from the search-engine Baidu, which holds over half of the market. If Google ceases to operate in China then Baidu will almost certainly profit, and could pose a strategic threat to Google’s business beyond China in coming decades. The boosting of Baidu’s share-price by almost 14% on 13 January 2010, the day after Google revealed its new approach, may be an early indication of future trends.

In the medium and longer term, China represents a market of strategic opportunity. The Chinese Academy of Sciences reports that in 2008-09 alone, 90 million additional Chinese connected to the internet; by June 2009, there were 253 million Chinese internet-users, exceeding the number in the United States. Since this figure represents only 22.5% of the Chinese population, the potential for further growth is immense. China is now and will remain for the foreseeable future the home to the largest population of internet-users on the planet; the country will (as the International Telecommunication Union and the World Bank research suggests) become a huge market for many kinds of internet business in 2010-20.

There is in principle great room for Google to benefit here. At present, it has a 25%-plus share of the search-market in China, but this represents under 5% of the company’s global revenue (most of which comes from western countries with high internet penetration). If Google were to maintain or increase its quarter-share as the overall market grows – and if the profits from advertising services in China rise in line with China’s annual growth-rate of around 8% – then the share China represents of Google’s global income could expand to 20% or above.

For Google’s shareholders, the prospect of a withdrawal from a potential market of 1.3 billion users might seem too great a cost to pay to uphold the company’s principles. But Google’s action can be viewed as that of a principled capitalist, a champion of what might be called “nerd norms”.

A new normal

There is a double twist in the clash between Google and the Chinese government: each represents a model of capitalism at variance with the other, yet each also is the product of a culture at odds with capitalism as the latter originally developed and has been understood. The brand of capitalism adopted by the People’s Republic of China (PRC) is grounded in authoritarian communism; Google’s is grounded in the (at the time) oddball values of engineers and programmers.

These values, or “nerd norms”, are rooted in the first decades of the internet’s evolution in the late 1960s and early 1970s, when military-funded researchers developed networking systems that were far removed from the private sector – so much so that they did not even include a system for accounting for usage and billing. Beyond the confines of these research centres, popular networking expanded from the late 1970s and 1980s through dial-up bulletin-board systems maintained by amateur enthusiasts. This activity was in the main non-commercial.

In much the same vein, many of the technologies on which the spread of the internet depended were developed at “homebrew” meetings where in the mid-1970s amateur enthusiasts freely traded their computing inventions; or by hackers working at academic institutes driven by a pure compulsion to explore the possibilities of technology. These pioneers of the internet were driven by an engineer’s interest in technology far more than by profit.

The culture that evolved around them and the “nerd norms” that began to form resist rigid definition. Kevin Kelly, the founding editor of Wired, described the phenomenon best in 1999 when he defined the virtual elements that would become expressive of value in the emerging digital economy:

“Those things that cannot be copied will become the true currency, the true sources of wealth. What cannot be copied? Trust. Authenticity. Immediacy. Presence. Experience. Relationships.”

This is in retrospect a prescient foretaste of the Web 2.0 phase of the net’s development, when communities and interrelationships would become dominant. But it also articulates the enduring if often unspoken disposition towards good conduct and good faith on the internet that animated many of the pioneers.

This disposition, even rule, is more than a sign of good manners: it is an approach to good business. In a memo on “the meaning of openness” published in December 2009, Google summed up its approach as working not just to benefit the company itself but to improve the entire internet. In these terms  Google’s “do-the-right-thing” mantra – embodied in its self-declared “mission to facilitate access to information for the entire world, and in every language” – has roots as deep at the internet itself.

In order to enter the Chinese market in January 2006, Google had courted widespread controversy by adhering to the Chinese government’s legal requirement to censor its search results. The company justified breaching its own core principles “in the belief that the benefits of increased access to information for people in China and a more open internet outweighed our discomfort in agreeing to censor some results”.

But Google’s embarrassment then and its decision to break with the Chinese government now alike reflect its commitment to corporate principles that are more than just window-dressing. For these are grounded in the foundations from which both the internet and Google itself sprang. If Google is representative of a broader trend, then the implication is that information-technology sector may be moving beyond an amoral, bottom-line form of capitalism towards something more principled.

A contest of models

The Google-China dispute can be understood in this light as the clash of two dynamic cultures: a democratising internet that is inherently disposed to inclusion and a market-authoritarian model (exemplified by China) that seeks to ensure tacit acceptance of the state’s management of information. The confrontation is made even sharper and more political by China’s global aspirations; Google’s large user-base tin the PRC; the American background of the company at a time of sensitivity between the established and the rising superpower; and the existence of a larger and growing online community aware of evolving global norms.

At stake is a fundamental tenet of democratic governance. And it is here that China’s current regime poses a serious challenge to the idea of western democracy. China’s market-authoritarian model asserts that communal well-being is advanced more readily without a cacophonous media, an unruly legislature and an open public square. The Enlightenment ideals of free speech, assembly and belief that informed western progress for some 200 years are set aside. In their place is a model that promises steady growth and security guaranteed by a stable, authoritarian government .

It is a model that has acquired a powerful voice in global institutions (the United Nations, the World Trade Organisation [WTO] and the World Health Organisation [WHO]); and that many in the developing world see as being more manageable and effective than the western market-democratic model – and thus would seek to emulate.

Yet the Chinese leadership must tread warily in this situation, both abroad and at home. It may view international norms as a creation of the west, but policies that violate these – from its treatment of Tibetans or Uyghurs who seek greater freedom, to its censorship systems – expose it to wounding global criticism; and it must also now cope with the resentment of many Chinese internet-users at the loss of a service that has enhanced their lives and contributed to their new identity as members of a progressive online community.

But if China’s security services have bruised sections of the country’s burgeoning internet-savvy middle class, the concerns of this group are not yet enough to still the state’s authoritarian hand. It may be acceptable to criticise elements of China’s system (a corrupt functionary, a defective product or an individual’s incompetence), but it remans unacceptable to criticise the system itself as unjust or for violating the terms of the civic bargain. In this respect the Google decision is also a measure of the distance between China’s corporate-political culture and the principles of democratic governance. 

The China-Google clash reveals an increasingly important global division that will become ever clearer from 2010 onward: between those who Google and those who do not. Citizens in those parts of the globe that adhere to a form of authoritarian capitalism will view information through the prism of Baidu or  equivalent services willing to accept state monitoring and control. There is a possibility in this situation that the free Google of the rest of the world might evolve to become what American blue-jeans and rock-and-roll were to many young people in the communist bloc during the cold war: an icon of liberty. If, as Hillary Clinton implies, there is a 21st-century, virtual equivalent of the Berlin wall whose spiritual heart is Beijing – then the future, after all, may lie on the Google side.