Freeman

ARTICLE

Peking Duck or Kentucky Fried?

DECEMBER 01, 1988 by LAWRENCE W. REED

Mr. Reed is President of The Mackinac Center in Midland, Michigan, and chief economist for James U. Blanchard & Company, based in New Orleans, Louisiana. This article first appeared in the March 28, 1988, issue of The Detroit News.

Mao Tse-tung, the man whose 1949 revolution brought communism to China, once launched a nationwide “Four Pests” campaign. Part of the effort was designed to eradicate houseflies by having every Chinese meet a quota of swatting at least 10 flies a day.

Now years later, as the “Great Helmsman” rests in peace in Beijing’s Tiananmen Square, China still has plenty of flies. But something that would undoubtedly disturb Mao far more, if he only knew it, is on view just across the street from his mausoleum: the smiling face of Colonel Harlan Sanders.

In November of 1987, Beijing became the site of the world’s largest Kentucky Fried Chicken restaurant. The 500-seat fast-food eatery is the latest monument to the policies of Deng Xiaoping, under whose leadership post-Mao China has been moving away from three decades of radical isolation and doctrinaire Marxist control of the economy. In Beijing, at least, glasnost is finger-lickin’ good.

Store manager Khaw Swee Kwang reports the place serves an average of 1,000 meals on weekdays and nearly double that on weekends. Two- and three-piece chicken dinners sell at prices comparable to what Americans pay here. The chain is negotiating with the government to open other outlets.

Strict quality control assures the taste is no different from that in the American outlets.The chickens are raised on farms outside the capital to Kentucky Fried Chicken’s exacting specifications. Ditto the potatoes and cabbage. Only the famous “11 herbs and spices,” a trade secret, are imported.

In an interview, Khaw made it plain that running such a capitalist establishment in a communist country has been profitable but not easy. The Chinese government, for instance, insists on majority ownership. Kentucky Fried Chicken’s share is limited to 40 per cent.

The management must eventually be predominantly Chinese. Khaw himself is from Singapore (which boasts 31 Kentucky Fried Chicken outlets) and will leave Beijing when his mission to train Chinese managers is completed.

Workers drawn from the local labor pool present a major challenge. The so-called “iron rice bowl,” a Maoist notion that each worker should have a secure, lifetime job (an unbreakable rice bowl), has become so much a part of Chinese life that workers must be taught that merely showing up for work is not enough. They must learn a new ethic centered around the capitalist notion that “the customer is always right.”

“It’s always been difficult to teach them to really care, to go the extra mile in keeping customers happy,” Khaw says. By prior arrangement with the government, the restaurant is permitted to fire unsatisfactory employees. The mere prospect, according to management, has been a “powerful incentive.”

Employee wages are fixed by the government, which is anxious to avoid being embarrassed by a foreign capitalist enterprise’s paying more than its domestic counterparts. Because high morale and better performance incentives are important to Kentucky Fried Chicken, the management has found the low-wage scale too stingy and restrictive. The problem is partly circumvented with occasional bonuses “paid” in fried chicken.

The restaurant is also experiencing another problem, the same energy hassle that afflicts all buildings in Beijing. The state-owned utility refuses to supply any heat before November 15. It’s shut off on March 15 regardless of the weather. The city often endures below freezing temperatures into April.

Patrons like the restaurant not only for the food and the colorful, well-lighted surroundings, but for its American aura as well. More than a few will tell the visiting foreigner that eating there is as close as they are likely ever to come to fulfilling their dream of seeing the United States.

Somebody once said the formula for rolling back the communists calls for bombarding them with capitalist mail-order catalogs, video tapes, and fast food. If so, Colonel Sanders may be one of America’s more cost-effective weapons.

ASSOCIATED ISSUE

December 1988

ABOUT

LAWRENCE W. REED

Lawrence W. (“Larry”) Reed became president of FEE in 2008 after serving as chairman of its board of trustees in the 1990s and both writing and speaking for FEE since the late 1970s. Prior to becoming FEE’s president, he served for 20 years as president of the Mackinac Center for Public Policy in Midland, Michigan. He also taught economics full-time from 1977 to 1984 at Northwood University in Michigan and chaired its department of economics from 1982 to 1984.

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