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Why China Needs Its Own Progressive Era

Recalls of Chinese products echo America's economic growing pains a century ago when reforms were enacted to put capitalism on a better path.
Will China do the same today?

By Joseph Kahn in Beijing

Poisonous pharmaceutical ingredients. Filthy shellfish. Contaminated pet food. Toys tainted with lead paint. Faulty tires.

A long list of recent Chinese product recalls—and an angry outcry from countries that import Chinese goods—has exposed the dark side of China's booming economy. Last year, China exported $1 trillion worth of goods, nearly a third of which went to the United States, where consumers have grown accustomed to buying a wide range of inexpensive Chinese products.

With China's government embarrassed by the recalls and the nation's export-driven economy potentially at risk, the question is whether China can fix the problem before consumers take their business elsewhere.

For a model of how to tackle the problem, some experts say, China should look to another country that went through similar economic growing pains a century ago: the United States.

In the late 19th century, the U.S. had its own series of product-safety scandals: Phony fertilizer destroyed crops. Stores sold deodorized rotten eggs and chemical glucose that was passed off as honey. Exports slumped when European regulators found dangerous bacteria in packaged meat.

By the turn of the 20th century, investigative journalists like Upton Sinclair and Jacob Riis—known as "muckrakers"—had exposed so many of these unsafe products and working conditions in the U.S. that the government was forced to act. In 1906, President Theodore Roosevelt signed the law that created the Food and Drug Administration. Antitrust laws were passed to limit the power of big business and break up monopolies.

So many reforms were enacted that the period became known as the Progressive Era.

Like America's industrializing economy a century ago, China's economy today is powered by zealous entrepreneurs who sometimes act as much like pirates as businessmen. And like in 19th-century America, Chinese regulators today are too inept, corrupt, or lacking the necessary authority to do much about the epidemic of unsafe products.

Stephen Mihm, a history professor at the University of Georgia, says China is like a younger version of the U.S. "China's fast-and-loose brand of commerce is not an expression of national character, much less a conspiracy to poison us and our pets," he says, "but a phase in the country's development."

"Call it adolescent capitalism, if you will: bursting with energy, exuberant, dynamic," Mihm says. "Like any teenager, China's behavior is also maddening, irresponsible, and dangerous."

Until 30 years ago, China's economy was controlled by the Communist government and was closed to the world. In 1978, President Deng Xiaoping launched a program of economic reforms, opening the economy to investment from abroad and free enterprise, while keeping a tight grip on the political system. Since then, China's economy has been transformed, but its repressive one-party political system remains.

And that's a big part of the problem, as China's authoritarian government struggles to develop a modern regulatory system that can supervise a dynamic market economy.

Fixing The Whole System

"Competition inside our bureaucracy has led to a diffusion of power and a tendency to shirk responsibility," says Mao Shoulong, a public-policy expert at People's University in Beijing. "Cracking down on individual criminals doesn't solve the problem. We need to fix the whole system."

The question now is whether the latest incidents are enough to push China toward its own Progressive Era. The answer, experts say, is a cautious yes. But first, they warn, Beijing must take a fresh approach to policing Chinese businesses.

Shoddy goods, by most measures, made up no more than a tiny fraction of total Chinese exports. And American consumers are now so dependent on Chinese goods that there is little talk of widespread boycotts—yet.

Even before the recent recalls, Chinese consumers were the victims of product-safety problems. In 2004, about 50 infants died of malnutrition from drinking Chinese-made infant formula that lacked protein. The next year, a popular red dye used in China by Kentucky Fried Chicken and Heinz was found to contain a cancer-causing agent.

Now that the safety problems are affecting exports—and American and European regulators are applying pressure—officials in Beijing seem to be picking up the pace of reforms.

Nationwide Inspections

The Chinese government says it plans to spend $1.1 billion to improve food and drug safety supervision by 2010. The government also says it will begin offering rewards to those who blow the whistle on bad producers. Meanwhile, the government says it has begun nationwide inspections of farms, groceries, restaurants, and factories in an effort to root out fake and substandard goods.

But Chinese regulators face daunting challenges in trying to overhaul a corrupt and ineffective regulatory system that is ill-equipped to control a marketplace teeming with unlicensed businesses and entrepreneurs willing to cut corners for profit.

"The reality is this is a vast problem, involving hundreds of thousands of factories, which are hard to police," says Arthur Kroeber, publisher of The China Economic Quarterly.

'Deeply Alarmed'

The government response suggests that China is worried about the possibility of trade sanctions or further damage to its image heading into 2008, when Beijing will host the Summer Olympics. Meanwhile, in the U.S., the incidents have given some protectionist-minded lawmakers another argument against free trade.

"I think Chinese leaders are deeply alarmed," says Dali Yang, an expert on China's government at the East Asian Institute in Singapore. "They will not let a tiny percentage of bad exports damage their reputation."

That may be why the state-run media have been given unusual latitude to expose shoddy goods. One of the most popular shows on Chinese television, Weekly Quality Report, investigates accidents, poisonings, and cheap fakes. Recent topics included defective motorcycle helmets, a fake rabies vaccine, faulty tires, and toxic food additives.

But regulatory changes don't happen overnight. In the U.S., the Food and Drug Administration was created in 1906, but it wasn't until the 1960s that the agency acquired the powers it had long sought to ensure a safe drug supply.

"I'd be surprised," Yang says, "if it takes China that long."