The German school argued that emphasizing consumption would eventually be self-defeating. It would bias the system away from wealth creation—and ultimately make it impossible to consume as much. To use a homely analogy: One effect of getting regular exercise is being able to eat more food, just as an effect of steadily rising production is being able to consume more. But if people believe that the reason to get exercise is to permit themselves to eat more, rather than for longer term benefits they will behave in a different way. List’s argument was that developing productive power was in itself a reward.
[…] The German view is more paternalistic [than that of the Anglo-Americans]. People might not automatically choose the best society or the best use of their money. The state, therefore, must be concerned with both the process and the result. Expressing an Asian variant of the German view, the sociologist Ronald Dore has written that the Japanese—“like all good Confucianists”—believe that “you cannot get a decent, moral society, not even an efficient society, simply out of the mechanisms of the market powered by the motivational fuel of self-interest.” So, in different words, said Friedrich List.
—James Fallows, “How the World Works,” The Atlantic (December 1993).
The perception of the Chinese Internet among international observers and commentators is dominated by an impression of control. 1The theatrical tradition of Chinese power is an indispensable reference here. China has been exceptional among the great civilizations for the emphasis it has placed upon public perception as the key to administrative authority, with an understanding of rule as essentially dramatic. In the narrow context that concerns us here, it is important to note that in the eyes of the Chinese authorities being seen to control Internet communications takes precedence over the subordinate and instrumental social and technical capabilities involved. This can be contrasted with Internet security politics in the United States, where invisible data-traffic monitoring receives clear priority. At the center of China’s—deliberately conspicuous—system of digital communications oversight stands the Golden Shield project, far more popularly known as “the Great Firewall of China.”
No less than the original Great Wall, or even the Imperial Palace, the Great Firewall is a monument. It is first of all a statement, and only secondarily a functional apparatus, with capabilities sufficient to give said statement public credibility. What it overtly means is more important than what it covertly does. The message is long familiar, and recognizably Confucian rather than distinctly communist: signaling social defiance is not a tolerable cultural decision.
This seems to be an improbable environment in which to insert blockchain cryptosystems. Bitcoin unmistakably retains an aura of extreme social defiance. 2In order to arrive at a remotely concrete sense of “defiance” it is no doubt important to distinguish between those actors (associated more with the Left) seeking to break into the public sphere in the name of protest, and those (associated more with the Right) seeking to break out of the public sphere, to protect private interests from social or government accountancy. It can scarcely be controversial to propose that, while concern for the latter is by no means negligible in today’s China, it is the former that elicits genuine alarm. The legacy of the libertarian-oriented hacker counterculture remains clearly legible in its founding documentation and among its first-wave supporters. Among its most ardent proponents, the vitriolic presupposition of government illegitimacy is combined with an approximately unconditional endorsement of anarchistic—or at least agoristic—practices. 3This aspect of Bitcoin has been dramatized by the online black-market Silk Road run by Dread Pirate Roberts (Ross Ulbricht), recently described by Daniel Krawisz as “the greatest agorist of our times.” In this sense, Bitcoin appears as the impending fulfillment of the “Californian Ideology”—a hyper-capitalist assertion of spontaneous order, or radical decentralization, essentially antagonistic to all concentrated authority.
Any balanced estimation of Bitcoin’s prospects in China has to begin with a realistic correction of this impression. While insight into Chinese security analysis is never easily attained, it can be confidently assumed that revolutionary agorism does not figure prominently on any official list of Internet threats. Even in America, in comparatively close cultural proximity to the ‘cipherpunks’ of the West Coast, Bitcoin is undergoing rapid, and far-reaching domestication. 4This trend is personified by Marc Andreessen, whose promotion of Bitcoin “mainstreaming” includes an explicit attempt to reframe the blockchain (distributed public ledger) as a defense against excessive anonymity, fully compatible with government regulatory interests. Insofar as arguments of this kind are found persuasive in Washington DC and New York, they are likely to find an appreciative reception in Beijing. In China, where ideological libertarianism is effectively nonexistent, the possibility of technologically catalyzed anarchist politics has to seem vanishingly remote.
The concerns of Chinese officials with regards to the Internet are quite different. They are overwhelmingly oriented to the perceived threat of mass activism, triggered by social media networks, and exemplified by the dynamics of the so-called Color Revolutions in the ex-Soviet republics and subsequently by the Arab Spring. 5Irrespective of the actual contribution of social media to these events, the seriousness with which it was taken by the Chinese authorities is beyond serious question. During the spring of 2011, the word “Jasmine” was targeted for suppression by the Chinese Great Firewall filter, despite its rich cultural resonances in the country. It is the capacity of the Internet to amplify a dissident public ‘voice’, rather than to facilitate a private ‘exit’, that determines the security priorities of the Great Firewall. From this perspective, the Bitcoin menace is relatively minor, even trivial, in comparison to Twitter, Facebook, YouTube, and similar channels of vocal dissent.
The administrative challenges Bitcoin does pose to the Chinese authorities are of a technical, rather than existential-ideological, nature, and only tangentially related to the country’s monumental apparatus of Internet control. The most politically-charged concern is capital flight or money laundering, but this is a topic of mind-boggling complexity, involving everything from high-level corruption on a titanic scale, through organized crime, to informally tolerated business activities and the attempts of small private actors to secure savings or diversify regime risk. Corruption is clearly perceived by the Chinese Communist Party as an indirect source of political insecurity, and few doubt that the potential of Bitcoin to facilitate the concealment and expatriation of illicit funds was a leading motive for the restrictions imposed so far. 6BTC China was founded in June 2011 with Bobby Lee as CEO. It had risen to become the world’s largest bitcoin exchange (by volume) by 18 December 2013, when it temporarily suspended acceptance of RMB deposits, following a People’s Bank of China statement on the crypto-currency, released on the 5th of that month. Chinese Internet giant Baidu, which had been accepting BTC payments since October 2013, ceased accepting the currency following the PBOC statement. Although RMB depository services were partially resumed at BTC China in January 2014, Baidu has not returned to the currency, stalling the development of bitcoin within China as a means of payment. Price movements of bitcoin on international exchanges have reflected the enormous significance of Chinese events to its perceived value.
In “How the World Works,” James Fallows excavates the neo-mercantilist political-economic theory of Friedrich List from its oblivion within the Anglophone world. He argues that the laissez-faire commercial ideal, considered by English-speaking nations as an undisputed norm of rational economic order, has a remarkably limited application beyond these nations. Elsewhere it is treated as a set of impractical, culturally and situationally specific principles, to which only the most nominal deference can safely be paid. The passage of two decades has done nothing to erode the pertinence of this observation.
List’s “German System,” which was also Alexander Hamilton’s “American System”—and indeed the ‘system’ of every challenger power seeking accelerated industrialization under conditions of strategic disadvantage—was characterized by a series of anomalous features relative to the free-market hegemonic norm that has been identified with Anglophone cultures for over two centuries, and maritime Protestant Atlantic powers for longer still. 7Fallows usefully lists the distinctive emphases of the “German System”: planning over spontaneity; producers over consumers; outcome over process; national over individual interest; zero-sum over positive-sum economic relations; and Realpolitik over moralism. Yet even these core economic powers, prior to their ascent to industrial dominion, subordinated commercial liberties to nationalistic development imperatives. Both geographically and historically, the ‘normality’ of the open market is exposed as rare and precarious. As Fallows remarks in “How the World Works”:
Every country that has caught up with others has had to do so by rigging its rules: extracting extra money from its people and steering the money into industrialists’ hands. […] Today’s Americans and Britons may not like this new system, which makes their economic life more challenging and confusing than it would otherwise be. They are not obliged to try to imitate its structure, which in many ways fits the social circumstances of East Asia better than those of the modern United States or Britain. But the English-speaking world should stop ignoring the existence of this system—and stop pretending that it doesn’t work.
Where Chinese Internet policy is concerned, “ignoring the existence of this system” amounts to an interpretative orientation fixated upon domestic security politics and human rights issues, while overlooking its neo-mercantilist features. When this bias is corrected, the “Chinese System” of digital mercantilism can be seen as a classic example of strategically accelerated industrialization, based upon selective protections directed at those business sectors perceived as most essential to the nation’s economic future. Quite evidently, the Internet occupies center stage in this strategy, which identifies it as the basic techno-economic platform of the twenty-first-century world. Arguably, the peculiarities of the Chinese Internet make far more sense in the context of geo-strategic industrial competition, than in that of domestic regime insecurity.
The most pronounced features of the “Chinese System” are not restrictions on free political expression—although these can of course be found—but rather the emergence of domestic Chinese business analogs for the major players of the international (i.e., American) Internet economy. The most obvious digital Sino-clones include Baidu (Google), Taobao (eBay, Amazon), Youku (YouTube), Weibo (Twitter), WeChat (Facebook), and Alipay (Paypal). From this perspective, it begins to seem that much less is being prevented than replicated.
As previously noted in this series, Bitcoin designates both a specific digital cryptocurrency (BTC), and a technical innovation in electronic communications of extreme generality (the blockchain), potentially enveloping all Internet-based activity. Besides its intrinsic significance, the currency can be understood as a test implementation of the blockchain system. Increasingly, as the anticipated techno-economic consequences of the blockchain breakthrough have loomed ever larger, it is the second, expansive sense of Bitcoin that has begun to prevail—even as the currency has entrenched itself among the world’s resilient monetary realities.
As the extraordinary implications of blockchain technology have come into focus, 8Although the ultimate scope of Bitcoin escapes ready apprehension, it is already clear that it is roughly coextensive with the form of the contract in general, within which monetary systems are comprehended. Any actually or potentially formal human agreement is blockchain compatible, and it is through the blockchain that many previously tacit social arrangements can be expected to attain formalization. The horizon of the blockchain, therefore, is that of deal-making in general. Once this is understood, the predictions of those such as Marc Andreessen—who sees the potential blockchain economy scaling into the multi-trillion-dollar range within a matter of decades—seem entirely reasonable. Global commerce, as a whole, is in principle a subset of blockchain-supported relationships. As this becomes ever more obvious, the prospect of an economically ambitious society attempting to opt out of this future will become increasingly implausible. It is already unimaginable that China could want to do so. historical analogies have escalated. While it may once have made sense to compare Bitcoin to a particular Internet application of great generality, such as the web browser, or perhaps to the World Wide Web, a general-purpose platform built upon the Internet, it is increasingly common to find blockchain technology compared to the Internet as such. On this ever more plausible account the blockchain is of equivalent socioeconomic import to the basic Internet-enabling innovation of packet switching communications—a once-in-a-Kondratieff-wave-level infrastructural revolution. If this is the case, it is a candidate to be the commanding technology of the first half of the twenty-first century.
How might the “Chinese System” be expected to respond to this emerging reality? Everything we have seen so far points in one direction: Clone war. For China to reject the blockchain revolution would be an abdication from all industrial leadership ambitions in the coming digital economy. The only Chinese strategic option compatible with the digital industrialization path so far taken is a Sinification of the technology—a blockchain with Chinese characteristics, in which distributed ledger systems are accommodated to the country’s social and cultural realities. There is no reason to think this will be an easy thing to achieve, but nothing else could possibly work.