“Money is no exception to the rule that self-interest would be a better motive than benevolence in producing good results.” – Hayek at the Denationalization of Money.
It’s hardly been a generation since China embarked on its great economic reforms that opened free market activity to entrepreneurs, raising the country’s living standards from a peasant backwaters to the world’s second biggest economy.
That great success, which marks the ultimate triumph of capitalism and individualism over collectivism and authoritarianism, has propelled China to be even more advanced in some areas, especially digital payments.
Before the communist party intervened, bitcoin was starting to gain widespread usage in the country. Alibaba and Baidu accepted it for payments. Chinese manufacturers started mining it, exchanges sprung up.
Since then, digital payments in China have gone mainstream, but bitcoin was denied the opportunity after the authoritarian government declared its acceptance for payments to be illegal.
A law they could enforce where big companies are concerned, while seemingly ignored where local cafes or bars enjoy the practice. With no known legal action taken to punish anyone who does so accept payments.
They are now seemingly going further, apparently planning to ban crypto-exchanges completely. Potentially turning the practice of mass selling digital currencies into an illegal activity.
At the scale of China, and considering its recent advancements where in some aspects the country is ahead of the west, this would make it the biggest experiment on earth, if they do indeed go ahead with it.
It would also make it a direct attack on Hayek and his insight which bitcoin implements in a decentralized manner. Something that perhaps should have been expected in light of suggestions Yuan might once more be devalued as much as 70%.
That’s a considerable loss of wealth for the country’s citizens who might have jumped to the crypto-saving boats. Whether they will, nonetheless, be able to do so remains to be seen, just as it will be interesting to see whether China can in fact actually do anything about bitcoin at all.
Its criminalization would make it far more interesting to the young, especially the more educated. Who may question why their rulers are so strongly coming out against a self evident insight that appears obvious once expressed:
“The past instability of the market economy is the consequence of the exclusion of the most important regulator of the market mechanism, money, from itself being regulated by the market process… only competition in a free market can take account of all the circumstances which ought to be taken account of.” – Hayek.
Among them might be the sons and daughters of China’s elite themselves, who after studying in the west and encountering Hayek’s insight, might wonder whether their country might not be far richer if it implemented them.
A question they may raise after seeing the central bank mismanage its currency through constant devaluation because “government has failed, must fail, and will continue to fail to supply good money,” according to Hayek.
Questions they may raise because they see a solution which was provided half a century ago by Hayek. Enough for this new generation to become familiar with it and see that it is needed following the banking collapse that bankrupted countries.
Perhaps they will see it too after PBoC necessarily mismanages their currency, as it must, because they can not possibly take into account all matters which ought to be taken account of.
China must know the truth of that statement more than any other. Within a generation they have seen just how much better the free market takes account of things than central planning, which miserably failed.
They may, eventually, also see that bitcoin is not just code, although it is that too. It’s not just a decentralized network. Bitcoin is an idea from some of the finest men and women to have ever lived, including Nobel laureates.
It’s an idea that is self-evident once expressed and an idea that should be tried. It may well fail, but in the absence of alternatives to the constant mismanagement of our money, we have to try and see whether it does actually work.
The old generation may say no, but the new generation is loudly saying yes. And if the old generation wants to turn its hammer, then we’ll turn any unjustly criminalized entrepreneur into heroes. And we’ll sing their names loud and wide.