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Beijing’s order for Ant Group to close its lending business in a separate app made big news on Monday. Of the FT se neem (our emphasis):
Chinese regulators have already ordered Ant to separate the back of its two lending companies, Huabei, which is similar to a traditional credit card, and Jiebei, which makes small unsecured loans, from the rest of its financial offerings and bring in external shareholders. Now the officials want the two businesses to be split into an independent app as well.
According to the plan, Ant must also transfer the user data that lends its loan decisions to a new joint venture that is partly state-owned, according to two people familiar with the process.
That the CCP wants access to data on people’s spending habits is not exactly a shock. As we have long argued (see here, here and here) the suppression of Ant is less about cheating Jack Ma than maintaining control over money as we switch to an almost completely digital system of payments and settlements and credit creation.
The attack on Ant is only one of the highlights of a multi-year plan to maintain Beijing’s near monopoly, not only in the creation of currencies, but also in providing credit and cleaning up the entire economy. This plan includes a crypto-ban and the introduction of a central bank digital currency, the design of which will create a centralized ledger that gives the People’s Bank of China access to every transaction made using it.
It is, frankly, another step towards realizing the dream of the eventual demonized planned economy, as envisaged by the original Soviet Union. Gosplan, in which goods are distributed seamlessly from each according to their ability to manufacture them to each according to their needs.
This way to a Gosplan 2.0-style central cleaning system for all goods and services based on Alibaba’s data on consumer spending data as far back as 2015. As FT Alphaville then remarked, Big Tech has long had the potential to become the money system itself:
This is where we can find the next evolutionary point in the lending story in the market, and it is something to look at, along with the growth of online retailers and online retail credit and banking routes. Think about it, if you do not lend as much money as prepaid redemption rights for goods and services at Alibaba – provided you get more rights to goods and services in the long run if you really need them – you actually need nothing via the traditional banking system.
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Add to this an knowledge of an online retailer about the spending habits of customers, and suddenly it is not only a money issuer but also a central billing system that can expect both supply and demand, and takes care of it accordingly when it does not match. Discounts for handbags with discounts to those who know them long for such products as and when an abundance of handbags is expected, and build up cheap credit to potential shoe suppliers as women’s wish lists for Jimmy Choos. In many ways, it is the path to the perfect command economy.
This brings us to our second point.
Ant’s fight speaks of what Benoît Cœuré of the Bank for International Settlements referred to as an international sparring contest over “the balance of power between government and the great technology in shaping the future of payments and related data rights and control”.
It’s worldwide, not locally. And so the extent to which the restriction is considered is considered unique to this particular sovereign is exaggerated.
Beijing’s decision may fit into the broader Perestroika – without-the-Glasnost arc of China’s economic policy. And we’ll be surprised if Mark Zuckerberg disappears from the public eye for months. But the CCP’s playbook is being watched by others.
US and European financial officials are increasingly looking at government-backed digital currencies and more tough tech from Big Tech to tackle the threat of Bitcoin and the Facebook-led Libra (now Diem) project.
This makes Western criticism on China’s path to a state-sponsored digital Gosplan much harder to swallow.
The better question in this context is: will this radical transformation of the monetary system ever be properly transferred to world citizenship and truly voted for? This is especially the case in Western democracies, where the alternatives to a state-controlled digital system have the potential to transfer power to private technocracies.
Our concern here at FT Alphaville is that these changes are taking place in China and elsewhere outside of popular political discourse, while the majority of the population is completely unaware of the implications of fast shopping without friction on platforms like Amazon and Alibaba. Even more worrying is the fact that no one in the political arena is interested in conducting a proper information campaign about it.
The closing scene from the last episode of Adam Curtis’ most recent documentary in six parts Can’t get you out of my head does the best job so far to tell the awkward choices society faces at this point:
One possible future is that individualism will disappear and with it the idea of individual freedom. As already beginning in China, data will be collected on a large scale and used to predict and manage all human behavior in the way the psychological BF Skinner predicted. He said that individualism would be only a brief moment in history before science would find a way to manage and control everyone. You would, says Skinner, create a world that transcends freedom and dignity.
Another possibility is that the future will be like the past. Many people hope that with the election of Joe Biden in America it will be possible to return to an old stability where individualism can still be ruled by a benevolent elite. But although Donald Trump has left and the Brexit agreement has been reached, they have both revealed that enormous pressure is building up among Western societies that will not go away, while protests have erupted in Russia again following the arrest of Alexey Navalny. Tens of thousands took to the streets to put an end to the corrupt regime led by Vladimir Putin. The reality is that all these societies, not only America and Britain, but also China and Russia are exhausted, empty of new ideas. All of them have corruption that is deeply ingrained in their institutions, corruption that makes politicians seem powerless, while China, which many believe is a model for the future, is not only full of corruption, but that growth is declining far more than the official figures reveal as the population ages rapidly. Instead of being an alternative future, China may still be an old dilapidated society that relies on a powerful surveillance system to retain its power, because it also has no other vision for the future.
The third possibility is to try to imagine truly new kinds of futures that have never existed. But in order to do that, we as individuals will have to regain the confidence we lost in this frightening and uncertain time. But the psychological theories that tell us we are weak and manipulative are already cracking and more and more people are starting to realize that the fragmented emotions of anxiety and suspicion that they feel inside them are actually just the raw material for the technological enterprises to feed off. It is possible that we are much stronger than we think. The one thing that is certain is that the world of the future will be different and that the people in the future will also feel and think differently. If we can regain our trust, we will realize that we have the power to influence how the future turns out, and as a first step, we need to imagine what kind of future we want to build.
The socio-political implications of who controls the new digital monetary system are what is really at stake.
We do not have all the answers. But the ideal is to strive for a system that relies on trust, not data or oversight to manage people. It must also find a way to curb the corrupt forces within centralized systems – tools that everyone can take notice of at a glance can be an option. Yet technological advances are going in the opposite direction, with the focus on increasingly embedded and complex systems, driven by personal data, which are prior concerns about privacy in the process. The only alternative, meanwhile, is to focus on energy-intensive bureaucratic systems such as blockchain.
If this continues, there will never be systems that truly empower and protect individuals. And finally, we need to prepare ourselves for versions of what we have seen in China around the world today.