Charlie Munger: More Comfortable With The Chinese Communist Party Than Bitcoin?
Bitcoin naysayers usually have the same threads of critique: sometimes environmental, sometimes distributional. There is consideration of the morality of bitcoin as well as the soundness of investment. Seldom is there the ability to make a direct comparison between their support of what fills their wallets otherwise and their position, however — except for in the case of Charlie Munger and investors like him.
The 97-year old Berkshire Hathaway partner has long been a skeptic of cryptocurrencies. Claiming that China’s crackdown on bitcoin mining and transaction exchanges was good because it reined in the “excesses of capitalism”, he extolled his admiration for a exchanges ban and then a mining ban that was a half-hearted attempt to shut down a global, open-source network. He has been on record as saying that he hates “the Bitcoin success”, a “currency that’s useful for kidnappers and extortionists and so forth”.
This dovetails with his remarks on the Chinese system performing better for the Chinese in using “tougher methods than we could use under our Constitution” — assumably an euphemism for the state-sponsored massacre of working-class protesters around Tiananmen Square, the mass surveillance and detainment of ethnic minorities (including, but not limited, to Tibetans and Uyghurs), and the complete consolidation of Chinese Communist Party privilege and power in protecting against both sexual harassment claims and familial corruption from non-Party elite — not to mention the kidnapping of nationals from around the world for the extortion of Party goals.
These are not just words. This comes with significant levels of investment in Chinese companies and always pushing Berkshire to “do more in China” according to his long-time partner Warren Buffett.
Yet, Munger mistakes the current Chinese system as beneficial for all Chinese peoples rather than just investors like him, and speaks with two voices here.
On the one hand, he “prefers” democracy and the American system at least for the American people. Yet on the other, he extolls and prefers that the United States conducts itself in the same anti-democratic fashion as is typical of the Chinese Communist Party: congratulating the “muzzling” of Alibaba’s Jack Ma — at least “in the financial sector”.
One would not be amiss to wonder how true his words about supporting democracy ring and his strand of thought in ringfencing the way the Chinese state deals with financial matters while setting aside the consolidated source of that power.
Given that bitcoin is a system of participatory democracy (with an interplay between code contributors, miners, and other stakeholders) with a strong binding set of covenants based on principle (ex: the hard constraint of 21 million bitcoin), it may be clearer why Munger might think of it as “rat poison” now.
On this front, both the Chinese Communist Party and Munger are aligned. What could be more threatening to a system that wants complete control over the past, present and future than a truly internationalized hedge against financial surveillance standards, anti-censorship of funds, and the truth-sayers it can empower? A system like bitcoin that prides itself on first principles for eliminating arbitrary and powerful intermediaries that may not longer be needed?
What does “transparency for the powerful, privacy for the weak” mean for a ruling elite that uses anti-corruption campaigns to settle scores, where the slightest tendril of truth uncovers murders, elite children fraternizing with drunk prostitutes, and immense family stakes in state-owned companies? And what does that mean for those who have blinded themselves to these facts, and who hold their money and financial trust in the hands of that same consolidated elite, a ruling caste that maintains its power through family history rather than explicit, fair consent across a broad public — democracy, in other words?
Munger’s money talks louder than his words, in any case, on the conditions of the “excesses of capitalism” that he decries. It’s bubbling asset prices that make it hard for “value investors” like him that matter: left unsaid (but certainly invested) are the conditions of the “excesses of state-driven capitalism” that keep his investments in China safe and which are typical of the heavy-handed approach the Chinese state uses for economics: the detainment of labor and feminist activists including a wave of young women concerned about #MeToo in China (我也是), income inequality that has exceeded astronomically high levels in the United States thanks to the Party’s rigid enforcement of location-based economic castes, social anomie and the decay of the social fabric in China — and complete oversight from the Party, which means, among other things, imprisoning dissenting voices and ethnicities.
Leaving that aside however (and it is quite something to leave any of it aside), Munger uses the curious and utilitarian example of China’s one-child rule as an example of state control that has led to great success. Yet, right as China is now looking to enter another phase of economic development, it is also getting older than any country in modern history largely due to 36 years of the one-child policy. With the fertility rate below replacement rate and so far a lukewarm approach to the culture and policy required for global immigration (which has helped slow the United States from demographic decline), we may be seeing the consequences of this freedom-stifling policy in real time — not only as morally questionable, but as bad policy.
What Munger and investors like him seem to fail to understand is that bitcoin is not only about approaching freedom and financial access from a first principles standpoint, using human discretion over technology governed by consent across the system, it is also a practical refutation of the idea that mass-scale control with long-tail consequences over unpredictable data is “sound”.
China’s techno-nationalist rise is premised on a state-biased flavour of technology — using large and exhaustive data sets stored safely in domestic borders, some a result of extensive state and firm surveillance, and a careful count of computational resources under centralized control to leapfrog countries in the West it considers too comfortable to do anything much about this state of affairs.
Bitcoin, an open-source technology where anybody can participate, and an internationalized one at that, is a direct affront to the level of financial surveillance and individual-level controls the digital yuan (in the form of individual-level interest rates, for example) might offer — and is also a philosophical hedge against exactly this model, promoting with it encryption, individual consent, and a system that doesn’t favor any Party elite in economics or otherwise.
Bitcoin, in its blending of many voices and perspectives across a broad spectrum, is more akin to the bottoms-up of Bach, a set of solitudes brought together into harmonious concert by game theory, rather than the trumpting, blaring and triumphal tone typical of Beethoven. In its subtle nature, it allows for Wall Street to invest in decentralization as Wall Street has invested in Chinese Marxism.
By eroding the level of control states can have to execute this level of control over the financial health of their peoples, bitcoin is a technological and philosophical refutation of the model of governance and shaky, repression-biased, and anti-democratic methodology the Chinese Communist Party favors — and which Munger seems more comfortable with than the democratizing technology of bitcoin.
“Rat poison” indeed.Source