On the Google Incident

The hacking of Google, and the firm's decision to re-evaluate its entire operation in Communist China (h/t to NRO - The Corner) , may lead to dramatic changes on several levels, including bringing the day of liberation closer than before Google made its announcement. That may sound dramatic, but I believe it to be true. To understand why, let's take this step by step.

We'll start with the purpose of the attack on Google: "accessing the Gmail accounts of Chinese human rights activists." The first lesson we - and everyone else - can learn is this: any foreign business in Communist China will become part of the regime's surveillance system - whether they want to be or not. Ethan Gutmann has done a terrific job detailing how low the American business community had fallen in Losing the New China. In those cases, however, the firms were more than willing to help the cadres find and seize anti-Communists. In this case, Google clearly assumed (like most investors and businesses) that they would be "non-political." They found out the hard way that there is no such thing as non-political in Communist China. Current and future investors will take note, and hopefully make some very different decisions based upon this.

There is one line of thought that Google's decision is driven more by dollars and cents than common sense or moral outrage (see Sarah Lacy at Tech Crunch). In its own way, however, even this is good news, in part because the thrust of Lacy's column (revealed in this question: "Does anyone really think Google would be doing this if it had top market share in the country?") completely misses the point. The CCP will ensure Google will never win "top market share." Foreign business aren't supposed to succeed; they're supposed to throw good money after bad into Communist China while the CCP finds their intellectual property and robs them blind (again, Gutmann is a fantastic source). That hasn't stopped so many from dreaming of profits and "one billion customers." Google is no different.

What Google's action tells us is something about the American information technology sector: aiding repression is still considered bad business. We weren't sure if the old hyper-libertarian impulse that had been with the IT sector since its birth was still around. Now we know it is. This means it will be much harder for the CCP to convince Google's rivals or its successors to take its place as a dissident tracker (no one can claim they didn't see it coming anymore).

Given the fallout that is coming from this, why would the CCP risk losing so many investors - present and future - with this move? Well, here's the final (and most important lesson) here: The CCP cares about its preservation and its power first, last, and always. Economics, diplomacy, and everything else are just means to the above end. No one can claim otherwise. No one can be fooled by the CCP propaganda that they peddle about its "peaceful rise" and its supposed concern about economic growth above all else.

In short - to borrow and twist the famous line from The Usual Suspects - the devil can no longer convince the world that he doesn't exist.

This is something that will be remembered with every CCP acquisition abroad, every CCP foray into international politics. The elites of free world may finally began to view the CCP with the suspicion it deserves (the peoples of the free world have that suspicion already). However, this could be most damaging in the area it first started - outside investments in Communist China.

The CCP needs outside investors for a slew of reasons: the money, of course, the de facto endorsement that comes with an investment, and the new friends that can be used as apologists. As I have noted repeatedly, the CCP needs affirmation from outside to justify its regime to the suffering people inside. Without the former, the latter becomes that much harder (one of the lessons learned from European Communism in the 1980s), and getting more of the former took a major hit with Google's announcement yesterday.

Yes, the regime will survive if Google finally does withdraw, but it will be weakened, and with Iran in turmoil, anti-Communists gaining momentum in Taiwan, and India growing more leery of Zhongnanhai, the CCP cannot afford any more weakness.