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Musings Report 2018-41 10-13-18 Social Control and China's "Social Credit" System
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For those who are new to the Musings reports: they are basically a glimpse into my notebook, the unfiltered swamp where I organize future themes, sort through the dozens of stories and links submitted by readers, refine my own research and start connecting dots which appear later in the blog or in my books. As always, I hope the Musings spark new appraisals and insights. Thank you for supporting the site and for inviting me into your circle of correspondents.
Social Control and China's "Social Credit" System
I've been pondering the excellent 1964 history of the Southern Song Dynasty's capital of Hangzhou, Daily Life in China on the Eve of the Mongol Invasion, 1250-1276 by Jacques Gernet, in light of the Chinese government's unprecedented "Social Credit Score" system, which I wrote about in Musings Report 17 (Kafka's Nightmare Emerges: China's "Social Credit Score").
The scope of this surveillance is so broad and pervasive that it borders on science fiction: Inside China’s Dystopian Dreams (NYT)
China has turned Xinjiang into a police state like no other (The Economist)
In the Song Dynasty, arguably China's high water mark in many ways (before the Mongol conquest changed China's trajectory), social control required very little force. The power of social control rested in the cultural hierarchy of Confucian values: one obeyed the family's patriarch, one's local civil authorities and ultimately, the Emperor.
Author Edward Luttwak made the distinction between force and power in his fascinating book The Grand Strategy of the Roman Empire: From the First Century CE to the Third: power is persuading people to cooperate, force is making them obey.
Power is people choosing of their own accord to comply, for reasons they find sound and that serve their self-interest; there is little need for the application of force.
Power is highly leveraged; a relatively small police/military and judiciary is all that's needed. Force, in contrast, doesn't scale: it's enormously costly in capital and labor to monitor an entire populace and impose control and obedience.
While the Song Dynasty had a police force, a judiciary and an army, the populace generally managed itself via an internalized secular religion that placed the father, civil authorities and the Imperial state at the top of a natural order that enabled the harmony of Heaven and Earth. To disobey would be to threaten the harmony that served everyone.
In the early days of the Communist revolution (1949 to 1965), the majority of China's populace embraced the values and authority of the Communist regime, despite the incredible hardships and setbacks of the Great Leap Forward (millions dying needlessly of starvation) and other disasters of centralized incompetence.
But the Cultural Revolution that was launched with Mao's blessing in 1966 was only embraced by the youthful Red Guards. The rest of the society had to be monitored and forced to comply with the mercurial injustices and arbitrary nature of the Cultural Revolution, which forced millions of China's most accomplished citizens into various forms of deprivation: house arrest (the most mild); relocation to rural labor, re-education (i.e. torture) and imprisonment. Many were killed without even the semblance of a judicial process.
In broad brush, the Cultural Revolution broke the power of the Communist Party and the government. Thereafter, the Party and the state only had force at their disposal.
The rise of broadly distributed prosperity (Deng's "to get rich is glorious") replaced the failed power of Communist ideology with a new social contract: obey the party and the state and you'll become prosperous.
If this new contract were considered rock-solid power, why would China's government need the vast surveillance system they're putting in place for fine-grained control of the populace?
This suggests that the leadership (Xi and his cabal) are aware that prosperity is not permanent, nor is it being distributed evenly enough to harmonize Heaven and Earth. Sensing their lack of social power, they are turning to technology to create a vast system of coercion (force).
Force is not a substitute for power. For this reason, the "Social Credit Score" system smacks of desperation. China's history is clear: the culture and the people prefer a system in which power is maintained through social norms, not force. With Communist ideology a dead secular religion, and prosperity about to wither, what's left? A system of forced obedience backed by Orwellian technology.
Highlights of the Blog This Past Week
Here's Why the Next Recession Will Spiral Into a Depression 10/12/18
The Distortions of Doom Part 2: The Fatal Flaws of Reserve Currencies 10/10/18
The Global Distortions of Doom Part 1: Hyper-Indebted Zombie Corporations 10/8/18
Best Thing That Happened To Me This Week
Home-made Portuguese sweetbread and a hearty vegetarian lasagna prepared by our lifelong friends on their homestead.
Musings on the Economy: Taxes, Wealth and Income
That the super-wealthy have access to tax shelters the rest of us don't have is not news. What's interesting about the New York Time's report Kushner Likely Paid No Federal Income Taxes for Years, Documents Show is that no offshore banking trickery was required; the tax breaks for depreciation on investment real estate are available to everyone in the U.S. who owns investment property.
In other words, it isn't the depreciation offset that's unique to the super-wealthy--it's being able to buy a multi-million dollar building with 1% down and financing the other 99%--and borrowing even the 1% down. The super-wealthy have no skin in the game, while the upper middle-class household buying an income property must pony up a 30% down payment in cash.
The other striking thing is the super-wealthy don't even need to make a net income from these tax-shelter properties; the commercial buildings can have multiple vacancies and lose money.
What sets the super-wealthy apart is they have income from other sources that needs to be offset with the tax-shelter depreciation.
The rest of us don't need money-losing tax shelters; we need the investment property to at least pay for itself, or better yet, yield a net income.
There are two other points of interest. One is that the public-sector tax shelters are only part of the super-wealthy's privilege: the other privilege that makes the tax shelter possible is the private-sector access to credit: anyone who can borrow $1 billion at say 2% can make 1.5% just by buying a Treasury bond.
What separates the super-wealthy, and enables them to effortlessly get wealthier, is access to low-cost credit. The tax shelters are politically purchased gravy.
The second point is wealth isn't just the net worth of assets: it's the income those assets generate that can be protected from taxes.
From Left Field
Americans Strongly Dislike PC Culture (via Atreya) "So the fact that we are so widely off the mark in our perception of how most people feel about political correctness should probably also make us rethink some of our other basic assumptions about the country."
NYT Reveals Kushner's Tax Records: Here Is How He Avoided Paying Taxes For Years (via Chad D.) -- can you borrow a few bucks, put 1% down on a multi-million dollar building and mortgage the other 99%, then get millions in offsets from the depreciation? Me, neither....
Movie madness: Why Chinese cinemas are empty but full (via Maoxian) According to Chinese government investigators, certain production and investment companies have developed ways of faking box office results.
52 heartwarming historical photos (9:26) (via LaserLefty) -- I confess I'm a sucker for old black and white pics of kids and pets...
Billionaires Are the Leading Cause of Climate Change: As the world faces environmental disaster on a biblical scale, it’s important to remember exactly who brought us here. -- when did GQ start running articles on billionaires spoiling the planet?
New Research Confirms We Got Cholesterol All Wrong (via Brad L.) The U.S. government has pushed a lot of bad nutrition advice over the years. Maybe it should stop advising us on what to eat. -- important to understand the evidence of a causal correlation between cholesterol and heart disease is not persuasive...
The Case of Jane Doe Ponytail: An epic tragedy on a small block in Queens. (via Maoxian) --the sordid side of immigration and "making it" in America...
Video: The Pentagon’s Insect Army (via LaserLefty)
International Climate Change Reports Are Dangerously Misleading, Says Eminent Scientist
Neoliberalism has conned us into fighting climate change as individuals -- I get the author's point, but the daily actions of billions of people remain extremely consequential for the planet...
A rare video of New York 107 years ago (3:05) -- very few cars, most people are on foot... horse-drawn carts and carriages... that vast city used what % of energy the current NYC consumes? 10% or less? 5% or less?
"Believe you can and you're halfway there." Theodore Roosevelt
Thanks for reading--
charles |
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