China may be a very different country, but in many ways it is a younger version of us. The sooner we understand this, the sooner we can realize that China’s fast and loose brand of commerce is not an expression of national character, much less a conspiracy to poison us and our pets, but a phase in the country’s development. Call it adolescent capitalism, if you will: bursting with energy, exuberant, dynamic. Like any teenager, China’s behavior is also maddening, irresponsible, and dangerous. But it is a phase, and understanding it that way gives us some much-needed perspective, as well as some tools for handling the problem. Indeed, if we want to understand how to deal with China, we could do worse than look to our own history as a guide.
A bit of empathy might even be in order. One hundred and fifty years ago, even America’s closest trade partners were despairing about our cheating ways….
In the United States of the early 19th century, capitalism as we know it today was still very much in its infancy. Most people still lived on small farms, and despite the persistent myth that America was the land of laissez-faire, there were plenty of laws on the books aimed at keeping tight reins on the market economy. But as commerce became more complex, and stretched over greater distances, this patchwork system of local and state-level regulations was gradually overwhelmed by a new generation of wheeler-dealer entrepreneurs.
Taking a page from the British, who had pioneered many ingenious methods of adulteration a generation or two earlier, American manufacturers, distributors, and vendors of food began tampering with their products en masse — bulking out supplies with cheap filler, using dangerous additives to mask spoilage or to give foodstuffs a more appealing color.
In one industry after another, 19th-century American producers churned out counterfeit products in remarkable quantities, slapping fake labels on locally made knockoffs of foreign ales, wines, gloves, and thread. As one expose at the time put it: “We have ‘Paris hats’ made in New York, ‘London Gin’ and ‘London Porter’ that never was in a ship’s hold, ‘Superfine French paper’ made in Massachusetts.”
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What was it that made the 19th-century United States such a hotbed of bogus goods? And why is China’s economic boom today, as New York Times writer Howard French clucked earlier this month, “minted in counterfeit”?
Piracy, fraud, and counterfeiting, whether of currency, commodities, or brand-name electronics, flourishes at a particular moment in a capitalist society: the regulatory interregnum that emerges in the wake of fast-paced capitalist change. This period is one in which technology has improved, often dramatically, and markets have burst their older boundaries. Yet the country still relies on obsolete ways of controlling commerce. Until there’s something to replace them, counterfeiters and other flim-flam operators flourish, pushing new means of making money to their logical, if unethical, conclusion.
Indeed, the ease with which counterfeiters and corner-cutters operate in China today can be attributed to many of the same failings that plagued the United States 150 years ago: a weak, outdated regulatory regime ill-suited to handling the complexities of modern commerce; limited incentives for the state to police and eliminate fraud; and, perhaps most important of all, a blurring of the lines between legitimate and fraudulent means of making money.
All of these are typical of capitalism in its early, exuberant phase of development. The United States may have been the worst offender, but early industrial Britain had significant problems with food adulteration and counterfeiting, and Russia from the 1990s onward has been the scene of some of the worst capitalist excesses in recent memory. And in all likelihood China’s recklessness is just that: a phase that will eventually pass when the nation’s regulatory institutions catch up with its economic ambition.
None of this is to suggest that we should exonerate China for shipping poisonous pet food and lead-impregnated toys, nor that we can count on China merely to follow in our footsteps. There are, obviously, enormous differences between modern China and the United States of 150 years ago. China is not a democracy; however angry its citizens may be, they have limited capacity to translate their rage into legislation aimed at putting the brakes on the economic free-for-all. And there’s no equivalent of the muckraking American journalists who thrust these issues into the public spotlight. Just as bad, many of the worst excesses are being conducted under the auspices of the state.