Yet another product safety scandal in China. This time, it’s melamine. Not surprisingly, many are claiming that there is something unique to Chinese business practices that is the cause of China’s many product safety scandals. Bee Wilson, in Tuesday’s New York Times, goes a long way toward debunking this notion by pointing out that product safety scandals are not unique to China; in fact, America had its own milk scandal a century and a half ago. The Washington Post a year ago also provided an interesting perspective on the safety of exports leaving the United States. For those who remain convinced that there’s just something wrong with China, consider this:
Today, not just one — but two great powers are struggling; each facing a crisis of confidence in a key industry. For China, it’s the manufacturing sector that’s in turmoil. For America, it’s the financial sector that’s in turmoil. Though there are of course real differences between these twin crises, it’s the similarities that are most striking.
* In both cases, the troubled sectors had recently experienced rapid growth.
* In both cases, questionable business practices were largely left unregulated.
* In both cases, greed is being blamed, and heads are going to roll.
Interestingly, the remedies being discussed are similar as well: new codes of conduct, increased regulation, stiffer penalties. While it’s beyond the scope of this blog to discuss how to remedy America’s financial sector, it is clear that the remedies being discussed for China’s manufacturing sector must be supplemented with a push for transparency. The profit motive is incredibly powerful — historically far more powerful than the most stringent codes of conduct, regulation, and penalties. The best way to promote safe practices is to make them profitable. And the best way to make them profitable is to focus, intensely, on providing transparency about who is engaging in safe practices and who is not. More on this in future posts.