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Beware The Dragon's Roar

As Westerner's rush to take advantage of China's low manufacturing costs and endless appetite for consumer goods, they ought to keep one ear cocked for a telltale sound - the low rumble of a nation growing angrier by the minute.

Now that you have a low-cost manufacturing presence in China, you think you’re sitting pretty, don’t you?

Maybe it’s your own plant, maybe it’s a joint venture with a Chinese company, or maybe you’ve simply found an indigenous supplier you can rely on. Or perhaps you’re pushing more product into the Celestial Kingdom that you could have imagined possible. Either way, everything looks rosy as far as the eye can see, right?

Well, before you light that victory cigar, you might want to think about a largely forgotten but decidedly painful lesson from history.

Almost five centuries ago, a few simple folk in central Europe got mad as hell and decided they weren’t going to take it anymore. Eventually, some 300,000 wretchedly poor souls – men, women and even children – would grab farm implements, clubs and stolen weapons and form themselves into impromptu armies. They then set about exacting a bit of revenge for all the misery that they and their ancestors had endured for longer than anyone could remember.

The year was 1524, and the great Peasants’ War had begun.

The war first flared up in the kingdoms, duchies and principalities that would one day unite as a single country named Germany, but soon hostilities spread into Austria and Switzerland as well. For a year the peasants burned the castles of noblemen, attacked churches and monasteries and killed hundreds if not thousands of individuals. Their goal was relief from the economic and social privations under which they, their parents, their grandparents and countless generations before them had always existed.

Exploited by nobles who taxed them grievously and denied them even the right to hunt and fish for themselves, abused by corrupt officials of both government and the church, locked into the same caste for generations, and facing an unbridgeable gap between themselves and their “betters,” the peasants finally rose up and made a stand. In the end their revolt would be suppressed ruthlessly, as soldiers in the employ of the nobility managed to butcher some 100,000 insurrectionists. But the rippling effects of the war hobbled many European economies for years afterwards.

So what does all this have to do with you and your company? The Peasants’ War occurred a long time ago. Surely nothing like it could happen today – could it?

Think again. A situation remarkably similar to that of 1524 has been brewing for almost two decades in China, and it is just possible that one day soon it will boil over into a full-scale revolt.

China’s de facto hierarchical system, its mad-dash approach to industrialization, catastrophic environmental degradation of inhabited regions and endemic official corruption have combined to relegate the country’s 800 million peasants to almost the same condition as those hapless mugs in Germany five centuries ago.

Today, government in China at the grassroots level makes the U.S. Congress look like a model of probity. Party bosses in the countryside have used their positions to create businesses of their own while bleeding the local populations whose interests they are supposed to protect.

A typical example is coal mining. China now has the highest rate of mining-related deaths in the world, with cave-ins, explosions and other disasters happening on an almost daily basis. Yet the officials who are charged with regulating and overseeing the operations of the coal industry are, by and large, sitting on their hands. The most widely proffered explanation: endemic corruption.

In addition, more and more state welfare systems are being jettisoned nationwide. As a result, the gap between the urban rich and the rural poor continues to widen. There is even a gap in the expression of discontent in China. The peaceful pro-democracy protests in Tiananmen Square in 1989 were largely the product of big-city students and intellectuals. Peasants in the countryside could never afford to get to Beijing to participate, even if they had known that demonstrations were taking place there.

China’s government has recently begun what it calls a “crackdown” on corruption. Since 2003, according to Xinhua, the state news agency, some 67,500 officials at all levels have been prosecuted. In the first half of 2006 alone, more than 17,000 individuals were either fired from their positions or jailed. Unfortunately, the bulk of the prosecutions are occurring in Beijing, Shanghai, Tianjin and other large cities. The countryside where the peasantry scratches out a meager existence is still a morass of official criminality.

Recently, the national government called on Chinese news organizations to contribute to the building of a “harmonious socialist society” by publicizing “harmonious culture” and by promoting a “sound social moral atmosphere.” This is tantamount to “requesting” less coverage of the reality of inequality throughout the nation and more shots of official perp walks.

It is, some say, too little and too late. China’s annual growth figures may continue to be eye-popping in the immediate future, but unless the Chinese get serious quickly about tackling systemic corruption, anyone relying on Chinese parts makers, subcontractors or manufacturing facilities would do well to keep in mind what happened five centuries ago and half a world away.

People can be pushed only so far before they push back. And if a few simple folk in China get mad as hell and decide they’re not going to take it anymore, a 21st century Peasants’ War would have disastrous repercussions not only for you, but for businesses, industries and national economies around the globe.

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