Friday, December 25, 2009

Merry Christmas, Mr. Liu: The Prisoner's Dilemma in China

I spent many years traveling and conducting business in China. I've devoted an enormous amount of time and effort to learning the Chinese language, and studying China's history, literature, and culture. I still relish the opportunity to drop an apposite allusion or scribble out a few relevant characters to the delight of some new Chinese friend.

In the course of the '80s, I went through a period of exhilaration: China was developing so fast! -- and on trip after trip to places far and wide in China, I got to see the transformation firsthand.

Shenzhen and the rest of the Pearl River delta saw explosive growth. (My professor from college, Ezra Vogel, had foreseen how development there would be a model for growth throughout the rest of China, and described it in his book, One Step Ahead in China: Guangdong under Reform.)

The worm turned, of course, on June 4, 1989, at Tiananmen. It was a moment of government brutality against political expression.

For years, I struggled to understand the thinking of the Chinese government. No matter whether or not Beijing craves control, isn't it worried about scaring people away? On balance, isn't it going to lose more than it are gains?

A parallel struggle was understanding investors. Why didn't the lack of rights, law, and freedom of information in China cause people who had a choice to abandon China in droves? In particular, what about investors? Especially foreign investors, who have all the options in the world?

And yet foreign investors just kept tripping over each other to get into China. Why did the people with the $$ put up with a lack of legal protections?

This pair of questions began to obsess me at the time of the handover of Hong Kong to China in the summer of 1997. I thought if there was ever a moment for people to wake up and smell the coffee, this was it. In fact, I imagined (!) that people in Hong Kong were actually in a position to dictate to Beijing that they needed legal protections to remain in place as before, or else they would take their money and skedaddle. Why this didn't happen -- couldn't happen -- puzzled me.

In particular, it was very apparent to me that people with money and human capital to invest in China seemed to underestimate their relative power. Beijing needed them!

Eventually, I came upon a decision-making model called "The Prisoner's Dilemma". It's a model that describes how, in a situation of power parity but unequal information, one monolithic party can prevent other parties (who are themselves natural allies) from working in concert to act in their own best interests. In effect, those other parties have no "choice" but to knuckle under.

Beijing has an intuitive understanding that, in a way that is determined by conditions of unequal information, it can monolithically dictate terms, and that other, "distributed," parties will be hard-pressed to stand up to those terms. Specifically, Beijing observes a cynical cost/benefit calculus which says, "Sure, a few players will always wise up and exercise their options to move away from us; but, by and large, everyone else is too paralyzed to move."

The case of the Chinese dissident, Liu Xiaobo, puts a fine point on this. About a year ago, Liu and others assembled a charter of political and legal rights called "Charter '08". They called for a regime of rights for people in China along the lines of those present in every Western country. Leading Chinese progressives signed onto "Charter '08" in very large numbers.

Rights, laws, and a free flow of information. Sounds like it would be good for business, right?

Beijing didn't like "Charter '08."

Signers of "Charter '08" were detained all over China. (See map above.) Liu Xiaobo has now been sentenced to 11 years in prison.

Will the global investment community continue to yawn at developments in China? Sadly, they seem to think Liu Xiaobo and a few stray intellectuals are the only victims. Unfortunately, the real prisoner's dilemma is theirs . . . .

Related posts

It may be difficult to see today that the success of our movement in the future will depend on Chinese activists having the same freedoms that activists in the West enjoy. But, I predict, that is precisely what will make all the difference.

(See What is the US Peace and Justice Movement Doing for Dissidents in China?)

"How can it be that no one is speaking directly to what happened?" I wondered. "Should I say something? Is it just me? Can it be possible that most people aren't like me, tremendously troubled by how we should respond to what has happened in China?"

(See Remember June 4)

Memories of Occupy Chicago:
Posterboard and markers: $21.79
Leaflets: $7:50
Bullhorn: $99.99
Standing up for peace and justice when everyone around you is saying "Get a job!" and "GO F**K YOURSELF!": Priceless
(See Dissent: PRICELESS! )