Google vs. China: Heavyweight, Middle Class Bout of the Century

Ready, Aim, Firewall!

Whether it is a political race, a business battle, or a heavyweight boxing match, every great fight should feature a match of skilled, powerful, opponents, but also an interesting back story.

The Google vs. China contest features both in abundance.

In this corner, we have China, a nation of 1.3 billion people, with 384 million Internet users and a 10% economic growth rate (“only” 8.7% during 2009, when most other economies shrank), which has already become the “world’s factory,” and is looking to move up the economic value added chain through a combination of hard work and cyberespionage. It is the champion of closed source, closed systems, and top-down economic growth.

In this corner, we have Google, the world’s most innovative, most profitable, new economy company, which has brought libraries worth of free knowledge and information to the doorstep of the poorest villager in the poorest country in the world, as long as he has an Internet connection. It is the champion of open source, open systems, and bottom-up economic growth through the power of networking.

The elements of the back story in this battle—intellectual property, economic growth, scientific progress, and individual freedom—are the issues that get us excited here at The Licensing Law Blog. And the winner of this contest just may determine the course of the early 21st Century.

The fight so far: Google entered the Chinese Internet search market in 2006, after cutting a deal with the Chinese government to censor results on topics it considered sensitive—mainly topics critical of the Communist Party, such as The Three T’s (Taiwan, Tibet, Tiananmen). Google claims that it was the victim of a massive cyberattack in December that not only stole its intellectual property (thought to be software source code), but also sought to crack its G-Mail system to find out information about critics of the Chinese regime. In early January, Google reported that in light of the attacks, it could no longer in good conscience remain in China, and was considering withdrawing from the country and removing all censorship filters on Chinese search results, a threat it had not carried out as of this writing.

In recent history, nations that have increased the amount of education and information available to its citizens have usually generated economic growth and wealth for all.

In the US, we have assumed that democracy will give rise to freedom will give rise to education will give rise to progress, but that has not always been true. Sometimes, the inequality, dysfunction, and corruption in agrarian societies have been so great, that only a totalitarian system could institute universal education and transition the populace from poor agricultural workers to educated industrial workers.

Example 1: after the Bolshevik Revolution in 1917, and subsequent victory by the Communist Party, Russia went from the “Sleeping Giant” of Europe to serious contender with the US for the world’s most powerful nation. A big reason was all the sons and daughters of peasants with advanced engineering degrees creating advanced weapons systems for the Kremlin. As well, the advances in education were marred by totalitarian excesses, such as the millions killed or imprisoned by Stalinist purges.

Example 2: after the victory of Mao and the Communist Party in 1949, China went from centuries at the mercy of warlords and colonial powers to the world’s third greatest economic power in terms of GDP, and estimated to surpass Japan for the number two spot this year. A big reason is all the sons and daughters of peasants with engineering degrees and US MBA’s creating new factories. The Chinese government’s progress in making education available to billions more people has been marred by totalitarian excesses, such as the Cultural Revolution.

But as a modern day Marx might point out, in the Chinese Communist Party’s success lies the very seeds of its destruction. Economic success creates a new class of people with new wealth and power that wants even more wealth and power– a middle class. And at least in Western history, the rise of the middle class created a challenge to rule by the landed aristocracy, resulting in democratic revolutions in which one person would have one vote, and the freedom to do and say what he wanted.

The CCP saw a harbinger of this future during the Tiananmen Square uprising in 1989, and determined not to let it happen that way in China. After crushing the pro-democracy movement, it presented the following bargain to the nascent Chinese middle class: don’t challenge or criticize us, and we will deliver a steadily increasing standard of living for you and your children. And for the last 20 years, they have delivered on their promise. But there is plenty more promise to deliver. Forty three percent of the labor force is still engaged in agriculture, even though agriculture generates only 11% of the GDP. GDP per capita was $6,000 in 2008, 133rd in the world.

China’s government knows that not only its own people, but also many foreign companies desperately want to benefit from China’s 10% plus growth rate. So these companies might be willing to overlook things like human rights, freedom of expression, even economic espionage, to secure a spot on the inside of the Great Firewall. And Google was one of them, until now.

And while one company versus the totalitarian government of 1.3 billion people might seem like a sure-thing, one punch knockout victory for the Communists, the Chinese government is probably running a lot more scared than most observers think. Because IT experts say that once Google is outside of China, there are a myriad of ways it can set up its networks to widen cracks in the Great Firewall. And if suddenly uncensored, unfiltered information is accessible in China, it could be the start of a 21st Century Cultural Revolution.

© 2010 – 2011, Richard R. Bergovoy. All rights reserved.

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