Losing the New China: a Story of American Commerce, Desire and Betrayal- Ethan Gutmann (Encounter Books) 253 pp. $25.95

Losing the New China: a Story of American Commerce, Desire and Betrayal is at once Ethan Gutmann’s personal odyssey a story of idealism, temptation, possible corruption, and redemption, and his report from the front on the dangerous turn taking place in our relations with China.

This book calls into question the current wisdom about China, and reveals how the U.S., in particular U.S. business, is playing a far different role in China than we have all assumed.

From Christmas Day 1998 to August 2001 Gutmann had a ring-side seat on what is happening in Beijing today. He worked first as a film producer for a Chinese company that eventually turned to the making of propaganda, and then as the employee of a firm that helps American businesses handle the challenges of doing business in China.

That firm offers a full range of services, but its essential service is to reinterpret “the concept of success.” It helps companies not making money in China make the case for continuing to do business there. Not to put too fine a point on it, Gutmann helped the representatives of top American companies make fools of their CEOs, visiting American Congressmen, and their staffs, by spinning likely stories about business opportunity in China, and about China itself.

Gutmann, then, was in a privileged position to understand the assumptions that Americans bring to doing business in China, and, to a lesser degree, the assumptions the government of China has about the U.S.

In eight chapters, each of which provides one facet of the bigger picture, Gutmann explains how and why the Chinese Communist Party instigated the riots following the U.S.’ accidental bombing of the Chinese embassy in Belgrade, and how following the riots American business in effect supported the Party, in the process fatefully emboldening Communist hawks. He tells how even idealistic Chinese today find themselves selling out, as the once dissident film-maker Gutmann worked for in Beijing did in order assure her professional survival.

The book reveals how American businessmen in China work to manipulate the view the U.S. has of China. It also tells how Americans have built for themselves a fantasy, an “El Dorado,” that takes the place for them of the real China. Gutmann tells how American companies routinely fail in China, but nevertheless keep pouring good money after bad.

Author Ethan Gutmann (Encounter Books)

He does a case study of Cisco Systems, one of the exceptions to American business failure, which has made a fortune by giving the tyrants of Beijing the tools to censor the internet. Gutmann also tells of other exceptions, once-failing American companies that have saved themselves by now providing the Chinese military with sophisticated 4th generation weapons technology.

Finally, Gutmann describes the sexual revolution going on in China today, in which Americans are featured players, by turns naïve, adventurous, sleazy, and cynical.

Gutmann’s approach is personal, beginning from what he saw, heard and experienced in Beijing, writing with a novelist’s eye and ear for detail, anecdote and dialogue. But the matter of these chapters goes far beyond the personal. Gutmann often breaks new ground in our knowledge of American business and China, and his treatments of the internet and of technology transfers to China are particularly sobering. While each chapter works very well as an essay, each treats a subject matter that could profit from book-length treatment. I hope we will see Gutmann return to these subjects in the future.

“Transformation”

Gutmann arrived in Beijing in thrall to the idea of the “transformation” of China. He believed in “the power of free enterprise to transform societies” and that “American business would be the facilitators of the third force, the vanguard in creating the new China.”

These revolutionary hopes for doing business with China have been the backbone of American policy for decades. Since Nixon “opened” China, America has sought not to contain or confront China, but rather to “engage” it, and by engagement peacefully transform China into something more like us, a capitalistic, democratic China.

American business has sold the idea of transformation to shareholders, to the American public, and the American government, seeking ever greater investment in China, a liberalization of trade, and an end to any attempt to link relations to other issues, such as human rights.

This idea of transformation harnesses in tandem two great passions that might otherwise be at odds, the desire for money and the desire for justice. The American businessman does not need to choose between human rights and profit, but can very conveniently do good by doing well for himself.

On the one hand the belief that there is a huge amount of money to be made in China, what Gutmann calls the “gold mountain,” fuels hopes for transformation. On the other hand, America’s deep-seated and powerful Wilsonian impulse drives these hopes forward. Americans have always been tempted to try to spread freedom and democracy throughout the world.

American self-love only makes these hopes stronger, for when an American businessman looks at China through the lens of “transformation,” he sees a giant nation in the process of becoming like the U.S.

The idea of transformation offers something for everyone. It provides a theoretical grounding for high-minded academics, gives a good conscience to those who want to make a buck, and provides a real world mechanism for idealists. It provides cover for knaves, and a platform for projectors and visionaries. The hopes for transformation can live comfortably in an ever-receding future, and every present circumstance, no matter how apparently discouraging, can be “reinterpreted” in light of the original faith. The idea of transformation is the ever fertile womb from which continually issues wishful thinking about China.

Reality Intrudes

Upon arrival in China Gutmann himself wondered if “corruption and human rights abuses… could be just the growing pains of a transition that remained largely invisible to western eyes.”

Gutmann would soon find out. He reports how once, when he and another American businessman were having drinks, they broke into hysterical laughter.

Ethan and Jimbo no doubt laughed in liberation, at seeing their situation in China clearly for what it was. Their hysterics, though, testify to something else: this truth contained shame and fear they could only reluctantly acknowledge.

The American expatriate in China lives in a state of constant contradiction. The reality of China does not support dreams of democratic transformation, or dreams of climbing the gold mountain. But the expatriate has staked his life on those dreams, and in fact part of him still believes them. Moreover, when he speaks to the world outside China, he must wholeheartedly sell those dreams to others, in order to justify his own existence.

Only occasionally, in a private moment, with a like-minded fellow over drinks, can that expatriate businessman allow himself to see frankly how ridiculous is the illusion he believes and sells, and the ugliness of what in other moments he will not face.

The Transformation of American Business

The purveyors of transformation do not allow for the possibility of China transforming the U.S., but this seems to be one effect of the headlong plunge by American business into China.

A Chinese school teacher in Shenzhen speaks to Gutmann of “American companies with Chinese characteristics.” That teacher is referring to companies for whom “the normalization of illegal activity” has become “an accepted part of doing business.” They do so because without adopting corrupt practices they would lose the ability to compete at all. What these companies cannot now estimate is the long-term cost to them of abandoning the corporate culture of the United States, with its expectations of transparency, accountability, legality, and fair play. But corruption is perhaps the less worrisome competitive strategy adopted by American business.

Gutmann makes clear that the executives of Cisco Systems could have had no illusions as to the way in which their technological breakthroughs would be used to stamp out free speech on China’s internet. It is a short path from a Cisco router to the hell of a Chinese labor camp.

Network Associates could also have had no illusions, when it provided China with stocks of computer viruses, that those viruses could be used to jump start China’s ambitious cyber-war capabilities.

Similarly, Loral and other American high-tech companies have worked hard to gain opportunities to transfer dual-use technologies to China’s military. If China begins an invasion of Taiwan by disabling America’s satellites, and launching precision-guided munitions at its carrier groups, American business will have provided the know-how.

At work here is a different kind of transformation than what Gutmann used to sell gullible CEOs and Congressmen. The desire for profit, unmoored from other considerations, is leading some American businesses self-consciously to strengthen Chinese tyranny.

There is another wrinkle to this story, one about which I wish Gutmann had said more.

Laurence Brahm is a brilliant American lawyer who devotes himself to serving the needs of the Chinese Communist Party, a devotion for which he is handsomely rewarded. Gutmann relates, “One night, after too many drinks at the Red Capital Club, I asked what drove him. Was it, I asked quietly, the aesthetics of Chinese totalitarianism? Yes, he replied, smiling.”

Mr. Gutman continues, “Was Laurence Brahm an aberration? If so, it was largely a question of his panache. Other American expats grew phototropically toward the center of Chinese power, but less flamboyantly than he did.”

Is there in the basement of the modern democratic soul a hidden admiration for totalitarianism, and even a desire to serve it?

What’s in a Name?

Gutmann quotes the Director of the American Chamber of Commerce in Beijing as explaining the importance of referring to China as a “post-communist” country. By identifying China as “post-communist,” one is subtly making the case for the inevitable convergence of China and the U.S., and for the present, ongoing transformation of China into a democratic country.

Of course, “post-communist” does not necessarily mean “proto-democratic.” In the aftermath of the riots following the Belgrade embassy bombing, Gutmann asks himself what exactly he had seen: “Chinese hypernationalism? Fascism with Chinese characteristics?”

Gutmann most often refers to China as “authoritarian.” I myself prefer his suggestion of “Fascism with Chinese characteristics.” China’s leaders have made love of China the ground for their own legitimacy, the political principle that transcends all others, and the basis for an aggressive campaign to dominate Asia. At the same time, they have assured that economic activity in China will remain under the control of those friendly to the Party, a corporate organization of the economy that strengthens rather than challenges the Party’s rule.

Applying the name of “fascist” to China is a matter of political taxonomy about which opinions may differ. What should be clear is that the Chinese Communist Party is far advanced in transforming China along a trajectory far different from that described in the press releases of the American Chamber of Commerce. America’s businessmen are working to assist that transformation, while beginning to adopt the ways of this corrupt society. This is the urgent news that Ethan Gutmann brings back from his trip to China, news for which we should be grateful, and to which we should closely attend.