It's not all about signals.

Photographer: Peter Kneffel/AFP/Getty Images

China Didn't Invent Industrial Espionage

Stephen Mihm, an associate professor of history at the University of Georgia, is a contributor to the Bloomberg View. Follow him on Twitter at @smihm.
Read More.
a | A

The U.S. Justice Department last week charged six Chinese scientists for stealing trade secrets and engaging in industrial espionage on behalf of China. A separate case, announced Friday, involved the former chairman of the physics department at Temple University, a China-born U.S. citizen who allegedly passed along semiconductor technology while working at an unnamed American company.

Such cases often are held up as evidence of China’s perfidy and unscrupulous dealings in the global economy. But before getting into high dudgeon mode, the U.S., and for that matter, almost every Western nation, might wish to remember their own, no-holds-barred campaigns to swipe industrial secrets.

In fact, one of the first cases involved the theft of industrial secrets from China. In the 17th and 18th centuries, the Chinese alone possessed the ability to produce high-end “hard-paste” porcelain, an expensive material beloved by Europe’s elites. In the 1680s, a French Jesuit, Pere d’Entrecolles, traveled to China, where he saw the kilns and likely read technical works on the subject.

In September 1712, he wrote that while visiting Jingdezhen, then known as the porcelain capital of China, he had compiled “a minute description of all that concerns this kind of work.”

Within a few decades, a porcelain factory in Sévres, France, was producing hard-paste porcelain on par with the Chinese product. In a further twist, the British managed to swipe the secrets from the French, inaugurating Britain’s own high-end porcelain industry.

That was just the beginning. Throughout the 18th century, every European power attempted to rip off industrial secrets. Britain and France spent decades pilfering from one another, though it was the French who did most of the stealing. They enlisted the help of the colorful John Holker, an ingenious British industrialist who had fled to France after supporting unsuccessful attempts to return the Stuarts to the throne.

The campaign he waged on behalf of the French crown involved everything from outright theft of plans and blueprints to concerted efforts to bring British artisans to France. These attempts to lure skilled workmen yielded results. In 1771, Holker’s son brought back detailed blueprints of the “spinning jenny,” a machine that vastly increased the production of yarn used in textiles.

The British fought back. Over the course of the 18th century, Parliament passed several measures aimed at stemming the flow of people and ideas. One class of laws sought to punish “enticers” who tried to recruit skilled British workers, and included a fine of 500 pounds for every Briton so enticed.

Britain also attacked the problem from the supply side, drawing up laws that barred skilled workers from migrating to other countries, even if they intended to return. Many machinists had all the knowledge required to replicate Britain’s industrial might.

Finally, the Brits enacted laws that sought to prevent the export of machinery in different industries. A 1774 law governing the textile business made illegal the export of “any machine, engine, tool, press, paper, utensil or implement whatsoever.” None of this was particularly effective in shutting down the flow of industrial secrets, though the evidence suggests that it certainly delayed their dissemination.

Although nations other than France enjoyed reputations for industrial espionage, one nation in particular was known for using the illicit methods to great advantage: the U.S. In the country's very first years, aspiring industrialists looked to Europe and quickly learned to take the easy way out, stealing instead of inventing.

Here, too, Britain was the target. American entrepreneurs arranged to have textile machinery disguised as more innocuous wares. A British official in the U.S. interdicted a shipment of four textile machines “packed in Queen’s ware crates and casks, to elude discovery.” But even when it worked, this method of acquiring high-tech goods from Britain had limited success: the machines needed human beings to run them, repair them and ultimately, improve them.

As a consequence, a wide range of government authorities and private associations offered bounties aimed at recruiting skilled workers who could build and operate the machines. That meant circumventing British emigration laws. In 1789, a British mechanic named Samuel Slater disguised himself as a farmer, boarded a ship for the U.S., and joined forces with aspiring industrialists in Pawtucket, Rhode Island.

The rest is history: Slater built a water-powered textile mill from memory, starting the American industrial revolution.

Other illicit gains pushed innovation further. Wealthy Bostonian Francis Cabot Lowell visited Great Britain in 1810. He toured textile mills, claiming he planned to become an agent to market their wares in the U.S.

In fact, he secretly made detailed drawings of the new power looms. When he returned to the U.S. in 1813, he paired up with a skilled mechanic named Paul Moody, who translated the plans into machines. This was the beginning of the next phase of the American industrial revolution.

The U.S. continued to borrow from abroad for decades, refining and improving, and borrowing some more. Eventually, the laggard became the world’s biggest economy in the 1870s. Since then, the shoe has often been on the other foot, with entrepreneurs in other nations eager to take U.S. innovations to jumpstart their economies.

The Cold War marked a departure from the usual dynamic: the Soviet Union and its allies coveted capitalist technologies to further their distinctly anti-capitalist ambitions. But the end of that era, and the rise of China, has brought a return to form as free-market economies vie against one another.

The Chinese understand the futility of reinventing the wheel. Far better -- and faster -- to steal it from someone else.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Stephen Mihm at smihm1@bloomberg.net

To contact the editor on this story:
Max Berley at mberley@bloomberg.net