Magazine article The American Prospect

Our CEOs, Their Foreign Agents

Magazine article The American Prospect

Our CEOs, Their Foreign Agents

Article excerpt

IN DECEMBER 2004, IBM ANNOUNCED THE SALE OF ITS personal computer division to China's Lenovo. The announcement came as a surprise in Washington but was old news in Beijing. As IBM Chairman Sam Palmisano later told The New York Times, the deal had originated during his July 2003 trip to Beijing to meet not with Lenovo but with top-level Chinese government officials from whom he sought permission to sell to a Chinese company. IBM wanted to support Chinas industrial strategy (including the upgrading of its technological capacities and know-how), Palmisano told the Times, partly because "if you become ingrained in their agenda and become truly local and help them advance, then your opportunities are enlarged.... You become part of their strategy." After Beijing approved the proposal, Palmisano proceeded to Lenovo to negotiate the deal that wound up not only with Lenovo taking over IBM's PC division but also with IBM and the Chinese government as co-investors in Chinas fifth largest company.

IBM had been a major supporter of China's entry into the World Trade Organization, which is founded upon the premise that its members maintain free and open markets. Nevertheless, Palmisano's visit demonstrated that he understood the role of government in the Chinese economy. Conversely, Palmisano did not go to Washington to meet with top U.S. authorities before talking to Lenovo. Nor did he think about becoming part of U.S. economic strategy, chiefly because the United States does not have an economic strategy. Indeed, the U.S. business community has strongly opposed all proposals advocating such a strategy, in accord with the notion that free markets make the best decisions in allocating scarce resources.

The Lenovo deal made nonsense of that assumption. By his own admission, Palmisano was not operating in response to market forces but rather in response to Chinas industrial policies. In view of that, it is not surprising that IBM'S lobbying efforts in Washington have been very favorable to China's interests.

IBM is hardly alone. China requires companies like Google to keep some information off of its China Web site. Were the U.S. government to impose such censorship on Google, the company would no doubt refuse. In China, however, it readily agreed to filter out the BBC, the word "democracy," and anything about freeing Tibet. Yahoo turned over to Chinese authorities the name of a journalist who was using its e-mail in ways unhelpful to the regime. …

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