Andrew Browne reports in the Wall Street Journal:
Information technology, far from undermining China’s authoritarian mode, is reinforcing it. In a digital era authoritarian regimes less bound by concerns over data privacy and protection may have an edge on innovation. A linked “social-credit” system will collect data on all citizens, including social-media, and use it to rate their trustworthiness. Corporate data will give regulators the ability to spot credit and investment flows in real time. Algorithms will use granular information to optimize macroeconomic decision-making.
From Stalin to Mao, old-style central planners all faced the same problem: The system didn’t work.
The Soviets had their bread lines, and a quota for chandeliers set in tons that made them too heavy to hang from the ceilings. Mao’s delusionary target for steel production had peasants hurl their pots and pans into home furnaces. Famine ensued.
For all his talk about giving markets a “decisive” role, Xi Jinping ultimately believes the state should lead. On the cusp of his elevation to Mao-like status, he aspires to use big data and artificial intelligence to correct the planning errors of the past and micromanage the Chinese economy while keeping tabs on its citizens.
Information technology, far from undermining China’s authoritarian model as many thought it would, is reinforcing it.
The German political scientist Sebastian Heilmann coined the term “digital Leninism” to describe the program Mr. Xi has engineered to try to ensure the Communist Party’s survival.
The party calls the mission “top-level design,” and it is intended to guide the next stage of growth led by advanced technologies such as robotics, 3-D printing and driverless vehicles.
Technicians are working on a plan to monitor the performance of these machines using sensors and cameras and measure it against industrial goals. Corporate data feeds will give regulators the ability to spot credit and investment flows in real time, along with fraud. Algorithms will supposedly use this granular information to optimize macroeconomic decision-making, keep markets on an even keel and avoid speculative bubbles.
In public at least, the chief executives of China’s data oligopolies, including Alibaba and Tencent, are evangelists for the project that requires them to sluice gushers of consumer data to state superhubs. Alibaba founder Jack Ma in a seminar last year likened the role of big data in economic management to an X-ray or CT-scan in medical diagnosis. In the next 30 years, he declared “the planned economy will get bigger and bigger.”
Western free-market theory says digital or not, state planning can never replace what Adam Smith called the “invisible hand” of the market. In their book “Why Nations Fail,” the economists Daron Acemoglu and James Robinson assert that centralized economies like China’s are ultimately doomed because the elites who run them feel threatened by the political disruption of innovation.
Others argue the contrary, that in a digital era authoritarian regimes less bound by concerns over data privacy and protection may actually have an edge on innovation. A number of young Stanford and MIT-educated software engineers and M.B.A.s are joining Chinese startups in areas like health care and computer vision, where easy access to vast reservoirs of data can propel scientific breakthroughs and reduce time to market for their inventions.
With the government as the best customer, such ventures can have enormous impact on Chinese life. A Shanghai-based company is attempting to develop a facial-recognition database with the Ministry of Public Security that will identify any of China’s 1.4 billion people within three seconds. A linked “social-credit” system will collect data on all citizens, including their social-media postings, and use it to rate their trustworthiness.
The huge planning experiment “presents a fundamental challenge to democratic political systems,” Mr. Heilmann writes.
For years, Western politicians believed that China would keep moving steadily toward a free-market economy to rectify the weaknesses created by state planning. Greater economic openness, the thinking went, would induce political liberalization. If China delayed, it would be punished by low productivity.
Mr. Xi is upending these assumptions. It is becoming clear that economic “reform and opening,” in the jargon of the Deng era, has run its course.
Even as China’s state-owned industries like steel, aluminum and shipbuilding create monumental excess that burdens the economy with debt, the consumer shortages that are the bane of planned economies are history; the spending of China’s middle class increasingly drives growth and most prices are set by the market.
“Smart” planning could help China shift to a more modern economy; what could go wrong?
First, data overload; collecting it is one thing, analyzing it intelligently quite another. Second, and more ominously for ordinary Chinese and the tech companies, bureaucratic overreach. A telling sign is a move by regulators to force the biggest tech companies to hand over a 1% equity stake to the government along with decision-making powers. The enthusiasm of tech moguls for Mr. Xi’s planning ideas could rapidly wane if party apparatchiks start calling the shots on their boards.
Ultimately, Mr. Xi’s draconian approach takes the notion of “Big Brother” to a new level.
Economic planning “is not merely control of a sector of human life which can be separated from the rest,” wrote the Nobel Prize-winning economist F.A. Hayek in “The Road to Serfdom.” “It is the control of the means for all our ends.”
That was written in the 1940s. Neither Hayek nor Mao could have imagined the knowledge-fueled totalitarianism that Mr. Xi has in mind.
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