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The NBA’s China Problem Is Due To Political Control Over Markets

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Via Zerohedge

Authored by Richard Ebeling via The American Institute for Economic Research,

The news and sports media have been focused on the recent confrontation between the National Basketball Association (NBA) and the Chinese government due to a tweet by the general manager of the Houston Rockets about recent pro-democracy demonstrations in Hong Kong that brought down the wrath of China. While many commentaries have focused on the NBA’s attempt to placate the Chinese authorities in the face of losing millions if not billions of dollars in lost revenues in the Chinese market, less attention has been given to what lies behind it all: a government’s ability to shut down commercial dealings between willing participants by simple command. 

It all began when Rockets General Manager Daryl Morey posted a personal tweet that said, “Flight for freedom, stand for Hong Kong.” For several months massive and sometimes violent demonstrations have been going on in the former British colony of Hong Kong. When the British Union Jack was lowered from the last flag pole in Hong Kong in 1997, there was an agreement between London and Beijing that for several decades Chinese authority within the former colony would not interfere with many if not most of the freedoms that people had enjoyed for a good part of the time since 1842, when Hong Kong came under British jurisdiction. 

China’s Threats to Freedom in Hong Kong

The arrangement was known as “One Country, Two Systems,” meaning that on the Chinese mainland, the Communist Party ruled with their existing authoritarian power, while in Hong Kong, many of the internal affairs of the territory would remain untouched by Beijing. But especially in recent years, the Chinese government has been attempting to eat away at the freedoms enjoyed by the people of Hong Kong, including freedom of speech and the press, which has often taken the form of harsh commentaries on Chinese government domestic and foreign policies.

What set off the demonstrations early in the summer of 2019 was a proposed law that would more easily compel the extradition to China of those accused of illegal acts against Chinese law. The extradition proposal itself was really less than it was made out to be, given other Chinese encroachments on Hong Kong freedoms. It was more like a straw-that-breaks-the-camel’s-back that sent waves of people, weekend after weekend, into the streets of the city. The demonstrators’ demands have been not only a withdrawing of the extradition legislation, but demands that the Chinese government respect the freedom of the people of Hong Kong in general, with even some voices calling for Hong Kong’s independence.

China’s Domestic Authoritarianism and Global Imperialism

Chinese President Xi Jinping has not only been tightening the authoritarian screws at home against any and all dissent against him or his government, he has been far more aggressively nationalistic in his foreign policies, insisting on reestablishing a global place in the sun for China through a grand mercantilist-type vision of growing Chinese influence and power over many other parts of the world. (See my article “Economic Armaments and China’s Global Ambitions.”)

Many if not most territories “lost” by China in past centuries are often expressed as fair game to once more bring back into the administrative fold of those in Beijing. Thus, the Chinese government insists that a good part of the South China Sea is “historical” Chinese territory, on which they have been building a series of artificial islands and demanding that other nations stay out of these newly established territorial waters without their permission. 

It is equally on this basis that Beijing says that Hong Kong as well as the self-ruling island of Taiwan is part of China. It is the reason the Chinese government opposes “separatist” talk concerning Tibet or among the Muslim Uighur population in the huge western region of Xinjiang, where from all accounts the Chinese authorities have incarcerated upward of a million Uighurs in “re-education camps” that others call mass detention centers; reportedly harsh and even brutal treatment is experienced by those who challenge those who rule over them in these camps. (See my article “Freedom and the Right of Self-Determination.”)

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A Tweet Brings China Down on the NBA

So, given the direction of Chinese domestic and foreign policy, when Daryl Morey tweeted his support for the Hong Kong demonstrators and their cause, this immediately set off the ire of the Chinese government. All media and public broadcasting of Houston Rocket basketball events were banned from the Chinese airwaves. Rockets team sportswear and paraphernalia were banned from sale in China. This was followed by the end to a wide variety of business and other commercial relationships between the NBA in general and Chinese businesses, including the threat of breaking endorsement and other ties between leading American basketball players and Chinese companies. 

Millions, if not billions, of dollars of revenues were now at risk of being lost, all because of a tweet and the hesitation by the NBA and individual team owners and representatives to unequivocally distance themselves from the Houston Rockets, or the Rockets’ own partial apologies for offending the “Chinese people.” 

In the United States, conservative and “progressive” politicians and pundits lambasted the NBA for not standing up to the Chinese government and its attempt to hinder the freedom of speech of NBA administrators and team members. The NBA was told by voices all across the U.S. political spectrum that their reluctance to tell the Chinese authorities “Hell, No” demonstrated that the NBA and the individual teams placed the fear of lost profits above the political principle of freedom of speech. It showed the decadence of “capitalism” and the greed of those interested only in money. 

Some of these pundits pointed out the hypocrisy of the NBA, which has heralded the right and freedom of its players to publicly speak out against “social injustice” and the policies of the current president of the United States, but which now kowtowed to a foreign government threatening its financial bottom line from lost business in China. 

China’s Reaction to the NBA and the Importance of Economic Liberty

What has been missed in all this, I would suggest, is the important institutional dilemma when any government has the power and authority to dictate with whom its own citizens do business and on what basis and terms of exchange. That the day after Morey’s tweet suddenly all of the leading Chinese media outlets and enterprises doing business with the Rockets and the NBA in general announced that they were halting or cancelling their dealings with the Americans makes it very clear that this was not a “spontaneous” series of acts by private Chinese citizens simultaneously upset with the words and deeds of their American business partners.

This was a command coming from the Beijing government authorities to whom all those Chinese enterprises — public and private — are absolutely answerable for their existence and financial survival. Even think of disobeying, and literally “heads would roll” in terms of being fired from state enterprises and having your legal ability to operate threatened in your nominally “private” enterprise. 

It should have demonstrated, beyond a shadow of a doubt, that however much China has been praised for its four decades of economic reforms in a direction permitting degrees of individual initiative and private business, the entire Chinese economy remains under the microscopic control and command of the government. If and when businesses are left alone by the Chinese government, it is when those directing and managing those enterprises are doing what is explicitly or implicitly in the directions the Chinese authorities wants them to be moving. 

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And when those doing the central planning of the Chinese economy, starting with President Xi at the top, want any or all of those enterprisers to do different things differently, they are instantly at the beck and call of those holding the power of life and death over them and their businesses. This is the meaning of “socialism with Chinese characteristics.” Others might call it economic fascism, under which businesses may nominally be in private hands, but it is the government that ultimately determines and dictates how those in charge of their businesses go about doing business. In other words, economic fascism is simply socialism with nominal (and not real) private-enterprise characteristics. 

Beijing Regularly Threatens American Businesses 

The Chinese government has used this power to strong-arm American companies doing business in China numerous times over the years, including being at the service of the communist authorities in their attempt to surveil everyone in the country and dictate the type of political, social, economic, and historical information that will be accessible to citizens of China. In other instances, it has concerned an American company sharing proprietary technology with a Chinese enterprise with which it wants to do business. And at other times, it has been more crassly materialistic, with the expectation that a U.S. company will give a bribe or appoint some government higher-up’s son or nephew to a well-paying position in a joint U.S.–Chinese enterprise 

In this latest instance concerning the NBA, it is demanding that a group of American sports teams either keep their collective mouths shut on political matters dear to the Chinese government or parrot the Communist Party ideological line, after giving the necessary public and groveling apology for daring to challenge anything said or done by the rising global power of the 21st century. 

In the hysteria of an American political election season, the worst thing that could happen would be if politicians and pundits now propose to legislate or regulate the response by the NBA or the Houston Rockets to the Chinese government. With all the chatter about the Chinese attempting to abridge the freedom of speech of Americans through the weapon of financial intimidation if they want to do business in China, it then would be the U.S. government dictating what those sports teams and their NBA representatives could say and agree to in trying to salvage their growing business in China.

The U.S. authorities would be merely doing a political variation on the same commanding-and-controlling theme that the Chinese government is accused of doing. Plus, the establishment of such a precedent would only reinforce the degree to which the U.S. government already regulates, controls, restricts, and commands American enterprises in far too many ways and directions. 

Donald Trump Cannot Dictate People’s Words or Actions

Those who have suggested hypocrisy in the NBA, in that domestically it encourages players to publicly express their political and social views on a variety of American policy-related issues, but cowers in fear before the Chinese government over a tweet, forget an important difference: the U.S. government cannot just shut down those teams and destroy their financial viability. 

There is much made of President Donald Trump’s huffing and puffing about football players who kneel during the national anthem at the beginning of a game, or that he says how the mainstream media are out to get him and declares much of what they print and say to be “fake news.” His critics accuse him of trying to intimidate those who wish nothing more than express their views under the First Amendment to the Constitution and speak their minds as citizens of a democratic society. 

There is one important difference in the words and actions of Donald Trump and those of President Xi Jinping and his government in China: Donald cannot command that all companies doing business with the NFL in terms of products, media coverage, or endorsement contracts are to stop doing so until every football player who has kneeled during the national anthem publicly apologize for “offending the American people” and promises to happily stand and sing along at the start of every game from now on. 

Nor can the president of the United States order the firing of the heads of CNN or MSNBC, or command that Fox News get back in line never criticizing anything he says or does, like as good Trumpians they used to always do. The strength of freedom of speech in the United States is demonstrated by the fact that no matter how much Donald Trump may rant and rave, the mainstream media continues to report and editorialize just the way they want, no matter how much they say that he is a friend of fascism and an enemy of freedom. 

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Freedom Requires Separating Markets From the State

Why and how can they do this? Because in spite of the degree to which the government influences and regulates much in the American marketplace, it still remains institutionally grounded in an important and respected degree of personal freedom, private property, and freedom of enterprise outside of Chinese-style heavy-handed central planning. It is precisely because of the remaining degree of free enterprise in the United States, again, even with the existing interventionist and regulatory intrusions and controls, that sports teams and their members can make public statements of disagreement without being shut down, driven out of business, or arrested as “enemies of the people.” And the same applies to conflicting and competing news reporting and editorializing in the various forms of mass communication. 

The essential lesson that should be drawn from this recent dispute between the National Basketball Association and the communist government of China is not that administrators and players in the NBA are being intimidated to make public apologies and toe the party line, but that this is why friends of freedom should always be concerned about and argue against government involvement and regulatory oversight and control over private enterprise and the free market. 

It is not only that government regulation over business misdirects how and what private enterprises do, which deflects them away from competitively trying to find the best ways of satisfying consumer demands as the means to earning profits. That is certainly true. 

Equally if not more importantly in terms of freedom in society, it is that every introduction and extension of government control, command, and regulation over the private affairs of the marketplace threatens the liberty of the citizenry. How you manage and direct your enterprise as a businessman; where and at what type of work you will be able to earn a living; and with whom you may do business and under what terms. All these become more and more dependent not on your free choices and voluntary associations with others on mutually agreed-upon terms, but upon the fate and favors of those in political power, and their goals and agenda to which you must conform or suffer potentially devastating consequences.

It is not just classical liberal ideologizing about the importance of separating the marketplace from the state, private enterprise from political control. The dilemma that the NBA and its affiliates find themselves in with the Chinese government is the latest example of why a free society is not sustainable without a functioning free market that is widely free and independent from the power of those in political authority. 

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