Global Ethics Corner: Google and State Capitalism?

Friday, July 2, 2010

The conflict between Google and China may be a threshold moment, a tipping point.

Google's withdrawal from China and subsequent accommodation highlights some ethical issues including: how should companies comply with local law, should companies focus on human rights issues like free speech, and is the phrase "do well by doing good" an effective business model or a cliché.

The tipping point issue, however, is underscored by the success of Google's competitor, Baidu. Baidu has close ties to the government of China and abides by all Chinese requirements.

Globally, the state has become an economic player, not only a regulator, and this portends a dramatically altered international environment. Around the world, businesses that are owned by or closely related to sovereign states are major players.

The state's capture of capitalism identifies competitive global economic models and the potential for international conflict.

In part, this is not new. Saudi oil fields were owned by companies including Exxon and Mobil. Now they are government owned business, and globally big oil companies control only about 3 percent of petroleum reserves. No longer restricted to energy, state business champions and investors are now wide-ranging.

Today, this model presents a challenge to free market political systems. Should these systems actively support companies which clash with state capitalist regimes? Should free market regimes back companies pursuing social objectives, profit, or both? Will this economic clash increase the prospects of real conflict?

What do you think? Is Google's confrontation with China a taste of the future?

By William Vocke

For more information see:

David Brooks, "The Larger Struggle," The New York Times, June 14, 2010

Katherin Hille, "Google Attempts China Rescue," Financial Times, June 30, 2010

Editors note: In early 2010, Chinese censorship of Google's Chinese Internet search engine and attacks on Google servers were issues, and, in response, Google shut down it China site. Beginning in March, Google redirected searches to its Hong Kong site. In June, automatic redirection of searches ended. Instead, users landed on a page which gave an option of opening the Hong Kong site. These changes anticipated the application for renewal of Google's license to be a Chinese internet provider, due at the end of June 2010.

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