Commentary: American Business Dealings in China Show Stakeholder Capitalist Commitments Are Hollow

by Scott Paul

 

This is a bad year to have paid the International Olympic Committee $100 million for the right to put its iconic rings on your soda cans or shampoo bottles. But this is what the rarefied air of being a top Olympic sponsor buys you in 2022: The Winter Games are being played in an authoritarian state with an atrocious human rights record, and none of its underwriters are eager to play up their association in the important American market.

These games are halfway over. The sponsors just have to wait for Paris in 2024 or Milan in 2026 when it will be more palatable to advertise again, but the whole exercise gives lie to the newfound credo of stakeholder capitalism preached by the corporate elite. According to the Business Roundtable, “dealing ethically and fairly with our suppliers” is now among its members’ guiding commitments. And that’s just not easy to do in China, where more than one report has linked the international supply chains winding through the country to terms like “detention camps” and “forced labor.”

So will these Olympics be the last big partnership between American corporations and China? Of course not. Ratings may be down while the spotlight is turned on, but the West’s corporate entanglements there haven’t fallen off at all, because many of the stakeholder capitalists at the top of the American economy are addicted to the money they make there. And that, in turn, has had real consequences for middle America.

Stretched out over the roughly twenty years since Washington normalized trade relations with the Chinese government, there have been millions of American jobs lost to offshoring and millions more lost to Chinese import competition. We hollowed out entire regional economies in the United States when our political leaders (President Clinton and majorities in Congress) gave the okay to the business community to decamp for a country that gave them generous tax breaks, cheap land, lax labor and environmental standards, and a huge market of consumers. The businesses, in exchange, shared their intellectual property with the locals and trained up a workforce.

Their return on investment has greatly diminished over time, as China has used that know-how to raise up its own champions, who increasingly lead in their home markets. Still, the American corporate class isn’t eager to break from this status quo. They’re reinforcing it.

Whether it’s Goldman Sachs financing an artificial intelligence company with ties to the Chinese military; Apple making a $275 billion handshake deal with the Chinese state to invest there in return for a light regulatory touch or working the halls of power in Washington to water down legislation targeting imports made by forced Uyghur labor; a successful lobbying effort to loosen solar panel tariffs even though that industry’s supply lines run through a Chinese province dotted with labor camps; or Tesla deliberately opening a showroom in that province’s capital for its $75,000 electric vehicles – the money clearly still talks.

It’s shameful behavior but it’s lucrative, and it’s illustrative of the character of this stratum of the corporate elite. In one breath they will declare, “We share a fundamental commitment to all our stakeholders,” and in the next they do business with – and thereby lend credibility to – a government that is forcing an ethnic minority into factories to stamp out its identity. And it all hinges on their bet that American consumer indifference will allow them to keep it up.

That may be an increasingly risky bet. Yes, it’s a lot to expect consumers to say that these ubiquitous corporations – which have intertwined themselves into both a deeply unethical supply chain and our lives – must do better or else. But American voters are souring on our economic interaction with a state credibly accused of so many atrocities, and our two political parties are also taking an increasingly dim view. It’s becoming difficult to straddle the line between the Chinese government, which demands silence from these companies regarding its abuses, and the U.S. public, which is deeply uneasy with this bilateral relationship as it stands.

As such, there will likely be a day when enough is enough, and it will cost these companies more than it’s worth to have “Made In China” stamped on the products they’re selling us. Until then: Unburden yourself of the idea that our corporate class is worried about its stakeholders. If it were, it wouldn’t wink, nod and benefit from the abuses carried out on some of them.

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Scott Paul is president of the Alliance for American Manufacturing.
Photo “McDonald’s at the Olympics” by Chris. CC BY-NC-SA 2.0

 

 

 

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