The surging price of the world’s best-known cryptocurrency has made some investors rich and prompted skeptics to point to the excesses of the current bull market. Central bank digital currencies (CBDCs) may offer a surer route to greater financial inclusion, but are policymakers and the public prepared for this potentially radical innovation?
In this Big Picture, Harvard University’s Kenneth Rogoff thinks that the COVID-19 pandemic could accelerate the emergence of CBDCs, and outlines two ways in which monetary policymakers could introduce them. The case for a digital dollar, however, is far from clear-cut, says Barry Eichengreen of the University of California, Berkeley, not least because fear that a digital renminbi will challenge the greenback’s global dominance is overblown. But New York University’s Nouriel Roubini makes the case that CBDCs could replace both an inherently crisis-prone banking system and worthless private cryptocurrencies such as Bitcoin.
Chatham House’s Jim O’Neill is similarly unimpressed by the Bitcoin hype, and explains why cryptocurrencies like it will never be anything more than speculative vehicles. For that reason, says Willem H. Buiter of Columbia University, only those with a robust appetite for risk and the wherewithal to absorb heavy losses should consider investing in them. By contrast, Brian Armstrong of cryptocurrency exchange Coinbase argues that cryptocurrencies with strong consumer-privacy protections should be a key feature of the post-pandemic recovery.
Either way, conclude Katharina Pistor of Columbia Law School and Co-Pierre Georg of the University of Cape Town, central banks may soon need to expand their remit and develop a new regulatory infrastructure to manage both public and private digital currencies.
The COVID-19 pandemic is accelerating the long-term shift away from cash, and monetary authorities risk falling behind. A recent report from the G30 argues that if central banks want to shape the outcome, they need to start thinking fast.
CAMBRIDGE – As the COVID-19 crisis accelerates the long-term shift away from cash (at least in tax-compliant, legal transactions), official discussions about digital currencies are heating up. Between the impending launch of Facebook’s Libra and China’s proposed central-bank digital currency, events today could reshape global finance for a generation. A recent report from the G30 argues that if central banks want to shape the outcome, they need to start moving fast.
Much is at stake, including global financial stability and control of information. Financial innovation, if not carefully managed, is often at the root of a crisis, and the dollar gives the United States significant monitoring and sanctions capabilities. Dollar dominance is not just about what currency is used, but also about the systems that clear transactions, and, from China to Europe, there is a growing desire to challenge this. This is where a lot of the innovation is taking place.
Central banks can take three distinct approaches. One is to make significant improvements to the existing system: reduce fees for credit and debit cards, ensure universal financial inclusion, and upgrade systems so that digital payments can clear in an instant, not a day.
The US lags badly in all these areas, mainly because the banking and financial lobby is so powerful. To be fair, policymakers also need to worry about keeping the payments system secure: the next virus to hit the global economy could well be digital. Rapid reform could create unexpected risks.
At the same time, any effort to maintain the status quo should provide room for new entrants, whether “stable coins” pegged to a major currency, like Facebook’s Libra, or redeemable platform tokens that large retail tech companies such as Amazon and Alibaba might issue, backed by the ability to spend on goods the platform sells.
The most radical approach would be a dominant retail central-bank currency which allows consumers to hold accounts directly at the central bank. This could have some great advantages, such as guaranteeing financial inclusion and snuffing out bank runs.
But radical change also carries many risks. One is that the central bank is poorly positioned to provide quality service on small retail accounts. Perhaps this could be addressed over time, by using artificial intelligence or by expanding financial services offered by post office branches.
In fact, when it comes to retail central-bank digital currencies, economists worry about an even bigger problem: Who will make loans to consumers and small businesses if banks lose most of their retail depositors, who comprise their best and cheapest source of borrowing?
In principle, the central bank could re-lend to the banking sector the funds it gets from digital currency deposits. This would, however, give the government an inordinate amount of power over the flow of credit, and ultimately the development of the economy. Some may see this as a benefit, but most central bankers probably have deep reservations about assuming this role.
Security is another issue. The current system, in which private banks play a central role in payments and lending, has been in place around the world for more than a century. Sure, there have been problems; but for all the challenges banking crises have created, systemic breakdowns in security have not been the major issue.
Technology experts warn that for all the promise of new cryptographic systems (on which many new ideas are based), a new system can take 5-10 years to “harden.” What country would want to be a financial guinea pig?
China’s new digital currency offers a third, intermediate vision. As the G30 report describes in greater detail than previously available, China’s approach involves eventually replacing most paper currency, but not replacing banks. In other words, consumers would still hold accounts at banks, which in turn would hold accounts with the central bank.
When consumers want cash, however, instead of getting paper currency (which is rapidly becoming passé in Chinese cities anyway), they would receive tokens in their digital wallet at the central bank. Like cash, the central-bank digital currency would pay zero interest, giving interest-bearing bank accounts a competitive edge.
Of course, the government can change its mind later and start offering interest; banks may also lose their edge if the general level of interest rates collapses. This framework does take away the anonymity of paper currency, but many monetary authorities, including the European Central Bank, have discussed ideas for introducing anonymous low-value payments.
Last, but not least, a shift to digital currencies would make it easier to implement deeply negative interest rates, which, as I have argued for many years, would go a long way toward restoring the potency of monetary policy in crises. One way or another, the post-pandemic world will move very fast in payments technologies. Central banks cannot afford to play catch-up.
Who Needs a Digital Dollar?
Recently, the idea of a digital greenback elicited support from US Treasury Secretary Janet Yellen and Federal Reserve Chair Jay Powell. Ultimately, the advantages of a digital dollar will need to be weighed against the potentially high costs and significant risks to the financial system that come with it.
BERKELEY – The idea of a digital dollar has been in the air for some time now. Recently, it descended from the ether to the lips of US Treasury Secretary Janet Yellen and Federal Reserve Chair Jay Powell. At an event in February, Yellen flagged the idea as “absolutely worth looking at,” adding that the Federal Reserve Bank of Boston, in conjunction with academics at MIT, was already doing so. In Congressional testimony the following day, Powell called a digital dollar “a high priority project for us.”
Some see this as another front in the technological cold war between the United States and China. The People’s Bank of China (PBOC) will almost certainly be the first major central bank to roll out a digital currency, in 2022 at the latest. If the US doesn’t move quickly, it will fall behind. America’s financial system will remain stuck in the twentieth century, damaging US competitiveness. The dollar’s position as the dominant international currency will be eroded by the ease of using China’s digital unit in cross-border transactions, and the US will squander a singular source of monetary and financial leverage.
In fact, such concerns are either overblown or flat-out wrong. The PBOC’s main motivation for issuing a digital renminbi is to create a government-controlled alternative to two very large and loosely regulated digital payment platforms, Alipay and WeChat Pay.
The ubiquity of Alipay and WeChat Pay raises the specter of the Chinese authorities losing control of payment flows through the economy. And because they use information on payments to inform their lending activities, their pervasiveness points to the possibility of the authorities losing control of financial flows and credit allocation more generally. Thus, the PBOC’s determination to issue a digital currency is part and parcel of the Chinese government’s decision last November to quash the initial public offering of Ant Group, Alipay’s corporate parent.
The American government has no analogous worries. In the US, scores of different platforms, such as PayPal, Stripe, and Square carry out digital payments, which are ultimately settled by banks, and hence through Fedwire, the Federal Reserve’s in-house system for clearing interbank transactions. Visa, Mastercard, Discover, and American Express process the lion’s share of card-based payments, but their actual cards are issued by banks, which are regulated, limiting risks to the payments and financial system. Here, too, settlement occurs through Fedwire.
Similarly, it is important to bear in mind how far the renminbi lags behind the greenback as an international currency. Currently, China’s currency accounts for a mere 2% of global cross-border payments, a negligible share compared to the dollar’s 38%.
To be sure, the convenience of a digital renminbi would hasten its uptake in cross-border transactions. But that digital currency might also have a hidden backdoor, enabling Chinese authorities to track transactions and identify those undertaking them, discouraging use by third parties. Given this, it’s hard to see China’s digital currency as a game changer internationally.
So, the decision to create a digital dollar would have to be justified on other grounds. The soundest justification is financial inclusion. Americans without credit cards and bank accounts, who rely entirely on cash, are denied not just financial services but other services as well. Rideshare companies ask you to link your app to your credit or debit card; no card, no pick-up. And no bank account, no card.
In this context, recall the difficulty the US Treasury had in getting pandemic relief checks to the unbanked. If everyone had a Federal Reserve-issued electronic wallet into which digital dollars could be deposited, this problem would be solved.
Digital dollars could also address the exorbitant cost of cross-border money transfers. But foreign governments might be reluctant to permit their nationals to install the Fed’s digital wallet, because that would leave them and their central banks unable to enforce their capital controls, which they value as macroprudential tools.
Alternatively, the Fed’s digital wallet could be made interoperable with foreign digital wallets. But interoperability would require close cooperation between central banks on the details of technology and security. While there are efforts in this direction, making it work would be a daunting task, to say the least.
Ultimately, such advantages should be weighed against the costs and risks of digitizing the dollar. If people shift their savings from banks to digital wallets, banks’ ability to lend will be hamstrung. Some banks will close, and small businesses that rely on banks for credit will have to look elsewhere.
Moreover, a Fed-run network of retail payments would be a rich target for hackers and digital terrorists. Security and financial stability are of the essence, and it is not obvious that they can be guaranteed. All this is to say that while the case for a digital dollar may be worthy of examination by Yellen and Powell, it is hardly a slam-dunk.
Why Central Bank Digital Currencies Will Destroy Cryptocurrencies
Leading economic policymakers are now considering whether central banks should issue their own digital currencies, to be made available to everyone, rather than just to licensed commercial banks. The idea deserves serious consideration, as it would replace an inherently crisis-prone banking system and close the door on crypto-scammers.
NEW YORK – The world’s central bankers have begun to discuss the idea of central bank digital currencies (CBDCs), and now even the International Monetary Fund and its managing director, Christine Lagarde, are talking openly about the pros and cons of the idea.
This conversation is past due. Cash is being used less and less, and has nearly disappeared in countries such as Sweden and China. At the same time, digital payment systems – PayPal, Venmo, and others in the West; Alipay and WeChat in China; M-Pesa in Kenya; Paytm in India – offer attractive alternatives to services once provided by traditional commercial banks.
Most of these fintech innovations are still connected to traditional banks, and none of them rely on cryptocurrencies or blockchain. Likewise, if CBDCs are ever issued, they will have nothing to do with these over-hyped blockchain technologies.
Nonetheless, starry-eyed crypto-fanatics have seized on policymakers’ consideration of CBDCs as proof that even central banks need blockchain or crypto to enter the digital-currency game. This is nonsense. If anything, CBDCs would likely replace all private digital payment systems, regardless of whether they are connected to traditional bank accounts or cryptocurrencies.
As matters currently stand, only commercial banks have access to central banks’ balance sheets; and central banks’ reserves are already held as digital currencies. That is why central banks are so efficient and cost-effective at mediating interbank payments and lending transactions. Because individuals, corporations, and non-bank financial institutions do not enjoy the same access, they must rely on licensed commercial banks to process their transactions. Bank deposits, then, are a form of private money that is used for transactions among non-bank private agents. As a result, not even fully digital systems such as Alipay or Venmo can operate apart from the banking system.
By allowing any individual to make transactions through the central bank, CBDCs would upend this arrangement, alleviating the need for cash, traditional bank accounts, and even digital payment services. Better yet, CBDCs would not have to rely on public “permission-less,” “trustless” distributed ledgers like those underpinning cryptocurrencies. After all, central banks already have a centralized permissioned private non-distributed ledger that allows for payments and transactions to be facilitated safely and seamlessly. No central banker in his or her right mind would ever swap out that sound system for one based on blockchain.
If a CBDC were to be issued, it would immediately displace cryptocurrencies, which are not scalable, cheap, secure, or actually decentralized. Enthusiasts will argue that cryptocurrencies would remain attractive to those who wish to remain anonymous. But, like private bank deposits today, CBDC transactions could also be made anonymous, with access to account-holder information available, when necessary, only to law-enforcement authorities or regulators, as already happens with private banks. Besides, cryptocurrencies like Bitcoin are not actually anonymous, given that individuals and organizations using crypto-wallets still leave a digital footprint. And authorities that legitimately want to track criminals and terrorists will soon crack down on attempts to create crypto-currencies with complete privacy.
Insofar as CBDCs would crowd out worthless cryptocurrencies, they should be welcomed. Moreover, by transferring payments from private to central banks, a CBDC-based system would be a boon for financial inclusion. Millions of unbanked people would have access to a near-free, efficient payment system through their cell phones.
The main problem with CBDCs is that they would disrupt the current fractional-reserve system through which commercial banks create money by lending out more than they hold in liquid deposits. Banks need deposits in order to make loans and investment decisions. If all private bank deposits were to be moved into CBDCs, then traditional banks would need to become “loanable funds intermediaries,” borrowing long-term funds to finance long-term loans such as mortgages.
In other words, the fractional-reserve banking system would be replaced by a narrow-banking system administered mostly by the central bank. That would amount to a financial revolution – and one that would yield many benefits. Central banks would be in a much better position to control credit bubbles, stop bank runs, prevent maturity mismatches, and regulate risky credit/lending decisions by private banks.
So far, no country has decided to go this route, perhaps because it would entail a radical disintermediation of the private banking sector. One alternative would be for central banks to lend back to private banks the deposits that moved into CBDCs. But if the government was effectively banks’ only depositor and provider of funds, the risk of state interference in their lending decisions would be obvious.
Lagarde, for her part, has advocated a third solution: private-public partnerships between central banks and private banks. “Individuals could hold regular deposits with financial firms, but transactions would ultimately get settled in digital currency between firms,” she explained recently at the Singapore Fintech Festival. “Similar to what happens today, but in a split second.” The advantage of this arrangement is that payments “would be immediate, safe, cheap, and potentially semi-anonymous.” Moreover, “central banks would retain a sure footing in payments.”
This is a clever compromise, but some purists will argue that it would not solve the problems of the current fractional-reserve banking system. There would still be a risk of bank runs, maturity mismatches, and credit bubbles fueled by private-bank-created money. And there would still be a need for deposit insurance and lender-of-last-resort support, which itself creates a moral hazard. Such issues would need to be managed through regulation and bank supervision, and that wouldn’t necessarily be enough to prevent future banking crises.
In due time, CBDC-based narrow banking and loanable-funds intermediaries could ensure a better and more stable financial system. If the alternatives are a crisis-prone fractional-reserve system and a crypto-dystopia, then we should remain open to the idea.
The Bitcoin Lottery
The sudden rise of “special purpose acquisitions companies” and cryptocurrencies speaks less to the virtues of these vehicles than to the excesses of the current bull market. In the long term, these assets will mostly fall into the same category as speculative “growth stocks” today.
LONDON – I was recently approached about setting up my own “special purpose acquisition company” (SPAC), which would allow me to secure financial commitments from investors on the expectation that I will eventually acquire some promising business that would prefer to avoid an initial public offering. In picturing myself in this new role, I mused that I could be doubly fashionable by also jumping into the burgeoning field of cryptocurrencies. There have been plenty of headlines about striking it big, quickly, so why not get in on the action?
Being a wizened participant in financial markets, I declined the invitation. The rising popularity of SPACs and cryptocurrencies seems to reflect not their own strengths but rather the excesses of the current moment, with its raging bull market in equities, ultra-low interest rates, and policy-driven rallies after a year of COVID-19 lockdowns.
To be sure, in some cases, pursuing the SPAC route to a healthy return probably makes a lot of sense. But the fact that so many of these entities are being created should raise concerns about looming risks in the surrounding markets.
As for the cryptocurrency phenomenon, I have tried to remain open-minded, but the economist in me struggles to make sense of it. I certainly understand the conventional complaints about the major fiat currencies. Throughout my career as a foreign-exchange analyst, I often found that it was much easier to dislike a given currency than it was to find one with obvious appeal.
I can still remember my thinking during the run-up to the introduction of the euro. Aggregating individual European economies under a shared currency would eliminate a key source of monetary-policy restraint – the much-feared German Bundesbank – and would introduce a new set of risks to the global currency market. This worry led me (briefly) to bet on gold. But by the time the euro was introduced in 1999, I had persuaded myself of its attractions and changed my view (which turned out to be a mistake for the first couple of years, but not in the long term).
Similarly, I have lost count of all the papers I have written and read on the supposed unsustainability of the US balance of payments and the impending decline of the dollar. True, these warnings (and similar portents about Japan’s long-running experiment in monetary-policy largesse) have yet to be borne out. But, given all this inductive evidence, I can see why there is so much excitement behind Bitcoin, the modern version of gold, and its many competitors. Particularly in developing and “emerging” economies, where one often cannot trust the central bank or invest in foreign currencies, the opportunity to stow one’s savings in a digital currency is obviously an inviting one.
By the same token, there has long been a case to be made for creating a new world currency – or upgrading the International Monetary Fund’s reserve asset, special drawing rights – to mitigate some of the excesses associated with the dollar, euro, yen, pound, or any other national currency. For its part, China has already introduced a central bank digital currency, in the hopes of laying the foundation for a new, more stable global monetary system.
But these innovations are fundamentally different from a cryptocurrency like Bitcoin. The standard economic textbook view is that for a currency to be credible, it must serve as a means of exchange, a store of value, and a unit of account. It is hard to see how a cryptocurrency could meet all three of these conditions all of the time. True, some cryptocurrencies have demonstrated an ability to perform some of these functions some of the time. But the price of Bitcoin, the canonical cryptocurrency, is so volatile that it is almost impossible to imagine it becoming a reliable store of value or means of exchange.
Moreover, underlying these three functions is the rather important role of monetary policy. Currency management is a key macroeconomic policymaking tool. Why should we surrender this function to some anonymous or amorphous force such as a decentralized ledger, especially one that caps the overall supply of currency, thus guaranteeing perpetual volatility?
At any rate, it will be interesting to see what happens to cryptocurrencies when central banks finally start raising interest rates after years of maintaining ultra-loose monetary policies. We have already seen that the price of Bitcoin tends to fall sharply during “risk-off” episodes, when markets suddenly move into safe assets. In this respect, it exhibits the same behavior as many “growth stocks” and other highly speculative bets.
In the interest of transparency, I did consider buying some Bitcoin a few years ago, when its price had collapsed from $18,000 to below $8,000 in the space of around two months. Friends of mine predicted that it would climb above $50,000 within two years – and so it has.
Ultimately, I decided against it, because I had already taken a lot of risk investing in early-stage companies that at least served some obvious purpose. But even if I had bet on Bitcoin, I would have understood that it was just a speculative punt, not a bet on the future of the monetary system.
Speculative bets do of course sometimes pay off, and I congratulate those who loaded up on Bitcoin early on. But I would offer them the same advice I would offer to a lottery winner: Don’t let your windfall go to your head.
Notwithstanding the recent spectacular surge in its price, Bitcoin will remain an asset without intrinsic value whose market value can be anything or nothing. Only those with healthy risk appetites and a robust capacity to absorb losses should consider investing in it.
NEW YORK – On February 8, Elon Musk’s electric-car firm Tesla announced that it had invested $1.5 billion of its cash reserves in Bitcoin back in January. The news helped to boost the cryptocurrency’s already skyrocketing price by a further 10%, to a record high of more than $44,000. But, especially in Bitcoin’s case, what goes up can just as easily come crashing down.
Bitcoin was invented in 2008 and began trading in 2009. In 2010, the value of a single Bitcoin rose from around eight-hundredths of a cent to eight cents. In April 2011, it traded at 67 cents, before subsequently climbing to $327 by November 2015. As recently as March 20 last year, Bitcoin traded at about $6,200, but its price has since increased more than sevenfold.
Today, Bitcoin is a perfect, 12-year-old bubble. I once described gold as “shiny Bitcoin,” and characterized the metal’s price as a 6,000-year-old bubble. That was a bit unfair to gold, which used to have intrinsic value as an industrial commodity (now largely redundant), and still does as a consumer durable widely used in jewelry.
Bitcoin, by contrast, has no intrinsic value; it never did and never will. It is a purely speculative asset – a private fiat currency – whose value is whatever the markets say it is.
But Bitcoin is also a socially wasteful speculative asset, because it is expensive to produce. The cost of “mining” an additional Bitcoin – solving computational puzzles using energy-intensive digital equipment – increases at such a rate that the total stock of the cryptocurrency is capped at 21 million units.
Of course, even if Bitcoin’s protocol is not changed to allow for a larger supply, the whole exercise can be repeated through the issuance of Bitcoin 2, Bitcoin 3, and so on. The real costs of mining will thus be replicated, too. Moreover, there are already well-established cryptocurrencies – for example, Ether – operating in parallel with Bitcoin.
But as the success of government-issued fiat currencies shows, the universe of speculative bubbles is by no means restricted to cryptocurrencies like Bitcoin. After all, in a world with flexible prices, there is always an equilibrium where everyone believes the official fiat currency has no value – in which case it consequently has no value. And there are infinitely many “non-fundamental” equilibria where the general price level – the reciprocal of the fiat currency’s price – either explodes and goes to infinity or implodes and falls to zero, even when the money stock remains fairly steady or does not change at all.
Finally, there is the unique “fundamental” equilibrium at which the price level (and the value of the currency) is positive and neither explodes nor implodes. Most government-issued fiat currencies appear to have stumbled into this fundamental equilibrium and stayed there. Keynesians ignore these multiple equilibria, viewing the price level (and thus the price of money) as uniquely determined by history and updated gradually through a mechanism like the Phillips curve, which posits a stable and inverse relationship between (unexpected) inflation and unemployment.
Regardless of which perspective one adopts, real-world hyperinflations – think of Weimar Germany or the recent cases of Venezuela and Zimbabwe – that effectively reduce the value of money to zero are examples not of non-fundamental equilibria, but rather of fundamental equilibria gone bad. In these cases, money stocks exploded, and the price level responded accordingly.
Private cryptocurrencies and public fiat currencies have the same infinite range of possible equilibria. The zero-price equilibrium is always a possibility, as is the unique, well-behaved fundamental equilibrium.
Bitcoin clearly is exhibiting neither of these equilibria at the moment. What we have instead appears to be a variant of a non-fundamental explosive price equilibrium. It is a variant because it must allow for Bitcoin to make a possible, if unexpected, jump from its current explosive price trajectory to either the nice fundamental equilibrium or the not-so-nice zero-price scenario. This multiple-equilibrium perspective doubtless makes it appear risky to invest in intrinsically valueless assets like Bitcoin and other private cryptocurrencies.
The real world is of course not constrained by the range of possible equilibria supported by the mainstream economic theory outlined here. But that makes Bitcoin even riskier as an investment.
Tesla’s recent Bitcoin buy-in shows that a large additional buyer entering the market can boost the cryptocurrency’s price significantly, both directly (when markets are illiquid) and indirectly through demonstration and emulation effects. But an exit by a single important player would likely have a similar impact in the opposite direction. Positive or negative opinions voiced by market makers will have significant effects on Bitcoin’s price.
The cryptocurrency’s spectacular price volatility is not surprising. Deeply irrational market gyrations like the one that drove GameStop’s share price to unprecedented highs in January (followed by a significant correction) should serve as a reminder that, lacking any obvious fundamental value anchor, Bitcoin is likely to remain a textbook example of excess volatility.
This will not change with time. Bitcoin will continue to be an asset without intrinsic value whose market value can be anything or nothing. Only those with healthy risk appetites and a robust capacity to absorb losses should consider investing in it.
Cryptocurrencies’ Time to Shine?
Now that the COVID-19 pandemic has accelerated the trend toward e-commerce, policymakers and the general public should apprise themselves of the latest developments in cryptocurrencies. And just as e-commerce requires encryption to protect personal privacy, so do digital coins.
SAN FRANCISCO – Even as all of humanity mobilizes against COVID-19, thoughts are turning to how the world will be different after the crisis. As businesses rush to adapt to the new world of social distancing, the pandemic has accelerated an already inexorable trend toward digital commerce. This broader shift should also include the widespread adoption of digital currencies, which provide stronger consumer financial and privacy protections.
For most of the twentieth century, encryption was reserved for national-security needs. Cryptography helped the Allies win World War II, and then protected secret communications during the Cold War. Until as recently as 1992, the United States, as a matter of national security, did not allow cryptographic technology to be exported. Encrypted communication was not widely available, and anyone using it was assumed to have something to hide.
But starting in the 1990s, early Internet entrepreneurs began calling for encryption to be used in e-commerce, arguing that it was needed in order to protect customer credit card numbers, passwords, and other information entered online. It turned out that the same encryption technology that had been created in academic labs – where trust and collaboration reigned – could be useful to everyone.
US policymakers and law enforcement initially balked at this push toward widespread encryption. In their view, privacy for everyone meant privacy for terrorists, drug dealers, and money launderers. As FBI Director Louis J. Freeh told Congress in 1994, preserving the US government’s ability to intercept Internet communications was “the No. 1 law enforcement, public safety, and national security issue facing us today.”
The debate about end-to-end encryption is still raging. But, crucially, consumer expectations have changed since the 1990s. The overwhelming majority of Internet traffic is now encrypted, and most of us have been trained to look for the closed-lock icon in our browser before entering sensitive information. Popular apps like WhatsApp, Telegram, iMessage, and Signal have led the way in normalizing private messaging that can’t be tracked by third parties.
But there is one area of our lives where privacy is not yet the norm: our personal financial information. By law, financial firms are required to collect reams of personal information about their customers. This information ultimately ends up on online databases, where it presents a tempting target for hackers. In 2017, the credit-rating firm Equifax revealed that a data breach had exposed sensitive information about more than 147 million consumers, or just under half the US population. That followed a similar breach in 2013, when hackers famously obtained the names, credit card numbers, and other information about tens of millions of Target customers.
Fortunately, a solution is on the horizon. Cryptocurrencies hold the promise of creating a more open financial system, with worldwide access, instantaneous fund transfers, lower costs, and vastly improved consumer-privacy protections. When Bitcoin first gained popularity, many people incorrectly assumed that it was anonymous money. In fact, as a blockchain technology, it uses a public ledger that records a digital trail of every transaction. Blockchain analytics firms are thus now helping law enforcement track down criminals who thought their trail was covered. And cryptocurrency exchanges like Coinbase have instituted robust anti-money-laundering and know-your-customer programs that rival those of any financial institution.
Several more recent developments in cryptocurrency technologies promise to take consumer privacy to even higher levels, and they are sure to be controversial. First, “privacy coins” such as Zcash and Monero offer new cryptocurrency protocols that make every transaction untraceable. Other cryptocurrencies aspire to replicate these features, and even JP Morgan has explored private transactions through its Quorum cryptocurrency. This shift is a bit like when websites moved from HTTP to HTTPS as the global standard: it lets consumers know that their information is protected by default.
Second, so-called non-custodial cryptocurrency wallets now enable customers to store their own private keys (which allow one to move funds) instead of relying on a third party. By not actually storing customer funds, the providers of non-custodial wallets are aiming to position themselves as software companies rather than financial institutions subject to regulation. In the past, non-custodial wallets required a certain degree of technical sophistication to operate, limiting their use. But, like encrypted messaging apps, they are becoming increasingly accessible to a mass market.
Unsurprisingly, these innovations have alarmed banks, regulators, and law-enforcement agencies. But just as the early Internet needed encryption to enable digital commerce, cryptocurrencies need privacy protections to unlock their full power and potential. Whether one needs to guard against authoritarian regimes, data harvesters, or criminals, the best way to ensure that sensitive financial data isn’t hacked is to avoid having to collect it in the first place.
Enhancing consumer financial protections does not mean giving free rein to criminals. Law-enforcement agencies still have a wide range of tools at their disposal, from subpoenaing cryptocurrency exchanges to examining conversions into and out of fiat currencies (which are likely to remain the choke points for law enforcement). And these exchanges will continue to be regulated as financial services, regardless of whether consumers are using privacy coins or non-custodial wallets.
Having watched the US benefit enormously from the creation of the world’s leading Internet companies, many countries are now working to attract the next generation of cryptocurrency firms. For countries thinking about cryptocurrency policy, the best approach, as always, will be to strike a balance between law enforcement, cybersecurity, privacy, innovation, and economic competitiveness.
Consumers in a free society will always demand and expect reasonable levels of privacy. Our financial lives are no exception. Fortunately, cryptocurrencies can fix some of the most vexing issues in financial services. As we plan to rebuild economically after the COVID-19 crisis, we must allow these technologies to grow.
The Right Response to the Libra Threat
Facebook’s plans for a digital currency and payments system have understandably been met with skepticism, bordering on outrage. Clearly, if a serial violator of the public trust can unilaterally insinuate itself into the global monetary system, something must be done to manage the rise of digital private monies.
NEW YORK – Facebook’s plan to launch a new digital currency, Libra, within a year has won few friends. Regulators, policymakers, and academics reacted to the news swiftly, and for the most part skeptically. US congressional committees quickly arranged hearings, and the issue featured prominently at the G7 meeting in France last month.
Facebook’s disrepute as a guardian of user privacy helps to explain some of the blowback. The real bombshell, however, was the sudden realization of the threat posed by digital currencies to the existing monetary system – not at some later date, but right now. Cryptocurrencies have been around for over a decade, but none has been adopted widely enough to challenge the existing order. With the potential to mobilize more than two billion monthly active users, Facebook could change that.
Now that the company has thrown down the gauntlet, governments should use the opportunity to advance a form of digital currency that serves the public good. Even the staunchest defenders of the current monetary system will admit that it does not work equally well for everyone. Moreover, the system is being rapidly outpaced by technological change, much of which is insufficiently regulated and could expose consumers to unforeseen risks.
It doesn’t have to be this way. Technology could enable the development of a far better system. One of the original motivations behind Bitcoin and other cryptocurrencies was to establish an alternative, censorship-resistant payment system. Sweden and Singapore are on track to create central-bank-backed digital currencies (CBDCs) of their own. In China, a handful of companies, including Alibaba and Tencent, have launched closely regulated and supervised digital currencies for transactions that are settled in renminbi. In Kenya, Mali, and elsewhere, phone companies offer digital-payment services to everyone, even those without a bank account.
These experiments offer plenty of models to choose from. But first, we must consider a fundamental question: Should the state allow the creation of private money, or should it tightly limit efforts like Bitcoin and Libra, even at the risk of curtailing innovation?
Money is conventionally defined by the functions it performs: it is a means of exchange, a store of value, and a unit of account. The dollar, pound, yen, and euro each perform all three functions, but not without some help from the private sector. Banks play a critical role in payment systems (the exchange function of money), by issuing private monies in the form of book money and the like. They also offer deposits, which can be viewed as stores of value (assuming they are insured). Only the unit-of-account function – which guarantees a currency’s nominal value as legal tender for paying taxes – is in the hands of the state alone.
Given that some of the defining functions of money can be farmed out to private actors, the question is whether, and to what extent, they should be. Shouldn’t we favor CBDCs over all the different forms of privately issued digital monies? After all, there are powerful normative arguments to be made for CBDCs. As public goods, payment systems should be available on equal terms to everyone. And with modern technologies, we can finally cut out the middlemen (banks) who have been skimming the cream off the top for centuries.
On the other hand, there is also a case to be made against the monopolization of the payment system. Under ideal circumstances, CBDCs could usher in a fully integrated, highly efficient system that works for everyone. But in the real world, even a slight technical glitch or other governance failure could have systemic effects. Generally speaking, monolithic systems lack the resilience of diversified systems, not to mention the incentives for further innovation.
Still, a multiplicity of payment systems comes with problems of its own. The transaction costs of converting diverse currencies, either into one another or into fiat currency, could be enormous. And the history of free banking tells us that unregulated monetary systems are prone to collapse.
This conundrum could be solved by creating a single framework for all digital currencies, which would keep the door open for innovation. Alternatively, it could be addressed through common protocols to govern interoperability among separate systems, similar to how the Internet has evolved.
Either way, we need a new infrastructure for managing both public and private monies. They should be treated as a public good, and thus accessible on a non-profit basis. They should be open to anyone looking to develop specific new products or services, subject to a simple registration requirement. Depending on the service, all offerings should be regulated to ensure the safety and stability of the monetary system. To reduce compliance costs for smaller start-ups, supervisory authorities could provide free consultation about the appropriate regulatory channels for new products. And, where necessary, regulation should be streamlined to avoid unnecessary overlap and other sources of inefficiency.
Digital monies present us with a massive challenge. Traditionally, the guardians of the money system, central banks, have focused narrowly on monetary policy and financial stability. Guiding financial innovation is far outside their existing mandates. But given the pace of change, they may have no choice but to expand their remit sooner rather than later.
There are limits to what ordinary people are willing to endure to secure their employers’ bottom line.
Chris Christie, a Trump supporter and a former New Jersey governor, pleaded with Americans on May 5 to risk disease and death by returning to work. “Everybody wants to save every life they can,” he said, but “we’ve got to let some of these folks get back to work.” Otherwise “we’re going to destroy the American way of life in these families.”
The “American way of life” is shaping up to be a battleground.
On one side is the working class. From Amazon warehouse workers to striking sanitation workers in New Orleans, there are limits to what ordinary people are willing to endure to secure their employers’ bottom line. Resistance to oppression and exploitation is a familiar experience for millions of workers in this country. And when workers have not found justice or relief in mainstream politics, they have turned to more combative ways of mobilizing to secure it.
On the other side is the Republican Party, led by the Trump administration, which has accelerated its call for states to “reopen” the economy by sending people back to work. While President Trump admits that some people will “be affected badly,” nonetheless “we have to get our country open.”
Public health experts disagree. Instead, they argue that testing rates must “double or triple” and that we need a more intense regime of “contact tracing” and isolation. This has been the established pattern in countries that managed the coronavirus with success. But without these measures, forecast models predict a sharp rise in fatalities. A conservative model that in mid-April predicted a ghastly death toll of 60,000 by August now estimates 147,000 fatalities by August. Just as the rate of infection drops in cities like New York and Detroit, new outbreaks threaten to emerge elsewhere where restrictions are being relaxed.
But if we expect tens of millions of people to stay at home for even longer, that is possible only if people have access to income, food, stable housing and reliable health care. If people cannot work, then these things will have to be provided by the federal government. It is that simple.
For Republicans, the “American way of life” as one with big government social welfare programs would be worse than the pandemic. At the core of their vision of the United States is a celebration of supposed rugged individualism and self-sufficiency where hard work is valorized and creates success. Of course, the contrapositive is also believed to be true, that when people have not been successful it is because they did not work hard enough.
Buried within this is the false notion that the U.S. is free from the hierarchies of class. Instead, Republicans and most mainstream Democrats would argue, America has fluid social mobility where a person’s fortitude determines the heights of his or her success. This powerful narrative has motivated millions to migrate to this country. But for tens of millions, this view of ‘the American way of life’ has no bearing on their lives.
Typically, the contradictions of our society are buried beneath the American flag, suffocating hubris and triumphalist claims of exceptionalism. But the pandemic has pushed all of the country’s problems to the center of American life. It has also highlighted how our political class, disproportionately wealthy and white, dithers for weeks, only to produce underwhelming “rescue” bills that, at best, do no more than barely maintain the status quo.
The median wealth of a U.S. senator was $3.2 million as of 2018, and $900,000 for a member of the House of Representatives. These elected officials voted for one-time stimulus checks of $1,200 as if that was enough to sustain workers, whose median income is $61,973 and who are now nearly two months into various mandates to shelter-in-place and not work outside their homes. As a result, a tale of two pandemics has emerged.
The crisis spotlights the vicious class divide cleaving through our society and the ways it is also permeated with racism and xenophobia. African-Americans endure disproportionate exposure to the disease, and an alarming number of videos show black people being brutalized by the police for not wearing masks or social distancing, while middle-class white people doing the same things are left in peace. In New York City, 92 percent of those arrested for violating rules regarding social distancing and 82 percent of those receiving summons for the same offense have been black or Latino.
Our society imagines itself to be impervious to the rigidities of class, but it is overwhelmed with suffering, deprivation and hunger. Food banks across the country report extraordinary demand, producing an almost shocking rebuke of the image of a country of universal abundance. According to one report, a food bank along the affluent New Jersey shore has set up a text service allowing people to discreetly pick up their food.
Elsewhere, the signs of a crisis that looks like the Great Depression are impossible to hide. In Anaheim, Calif., home to Disneyland, cars formed half-mile-long lines in two different directions, waiting to pick up free food. In San Antonio, 10,000 cars waited for hours to receive food from a food bank. Even still, Republicans balk at expanding access to food stamps while hunger is on the rise. Nearly one in five children 12 and younger don’t have enough to eat.
That “way of life” may also begin to look like mass homelessness. Through the first five days of April, 31 percent of tenants nationwide had failed to pay their rent. And while more people paid in May, continued payments seem unsustainable as millions fall into unemployment. Forty-three million households rent in the U.S., but there is no public rental assistance for residents who lose the ability to afford their rent. With only a few weeks left on many eviction moratoriums, there is a thin line between a place to shelter in and homelessness for tens of millions of Americans.
Many elected officials in the Republican Party have access to Covid-19 testing, quality health care and the ultimate cushion of wealth to protect them. Yet they suggest others take the “risk” of returning to work as an act of patriotism necessary to regenerate the economy. This is duplicitous and obscures the manipulation of U.S. workers.
While the recent stimulus bills doled out trillions of dollars to corporate America and the “financial sector,” the smallest allocations have provided cash, food, rent or health care for citizens. The gaps in the thin membrane of a safety net for ordinary Americans have made it impossible to do anything other than return to work.
This isn’t just malfeasance or incompetence. Part of the “American way of life” for at least some of these elected officials is keeping workers just poor enough to ensure that the “essential” work force stays shows up each day. In place of decent wages, hazard pay, robust distribution of personal protective equipment and the simplest guarantees of health and safety, these lawmakers use the threat of starvation and homelessness to keep the work force intact.
In the case of the meatpacking industry, there is not even a veil of choice, as those jobs are inexplicably labeled essential, as if life cannot go on without meat consumption. The largely immigrant and black meatpacking work force has been treated barely better than the carcasses they process. They are completely expendable. Thousands have tested positive, but the plants chug along, while employers offer the bare minimum by way of safety protections, according to workers. If there were any question about the conditions endured in meatpacking plants, consider that 145 meat inspectors have been diagnosed with Covid-19 and three have died.
The statements of the two senators from South Carolina, Lindsey Graham and Tim Scott, vociferously opposing the extension of $600 supplemental payments to unemployment insurance, offer another stark example of how workers are being compelled to return to unsafe work environments. Mr. Scott referred to the supplement as a “perverse incentive” to not work. He and Mr. Graham argued that the payments were more than some workers’ salaries, which is an indictment of the jobs and the companies, not the employees.
This is not the first time Southern politicians have complained that government aid to poor or working-class people would undermine their perverse reliance on low-wage labor. During the Great Depression, Southern leaders opposed new systems of social welfare over fear it would undermine “the civilization to which we are accustomed,” as a newspaper in Charleston, S.C., described it. The crude version came from an official in Alabama who insisted that welfare payments to African-Americans should be lower because, “Negroes just don’t want to work.” The logic was that if you could pay black men a nickel then white men would celebrate being paid a dime. Meanwhile, the prevailing wages elsewhere were significantly higher than both. This is why wages are still lower across the South than elsewhere in the country.
American progress means that Mr. Scott, an African-American senator from South Carolina, now voices these ideas. But then as now, complaints about social welfare are central to disciplining the labor force. Discipline in the U.S. has always included low and inconsistent unemployment and welfare combined with stark deprivation. Each has resulted in a hyper-productive work force with few benefits in comparison to America’s peer countries.
This is at the heart of the conflict over reopening the country or allowing people to continue to shelter-in-place to suppress the virus. But if the social distancing and closures were ever going to be successful, it would have meant providing all workers with the means to live in comfort at home while they waited out the disease. Instead, they have been offered the choice of hunger and homelessness or death and disease at work.
The governor of Iowa, Kim Reynolds, made this painfully clear when she announced that not only was Iowa reopening, but that furloughed workers in private or public employment who refused to work out of fear of being infected would lose current unemployment benefits. She described these workers’ choices as a “voluntary quit.”
The Ohio Department of Jobs and Family Services is also instructing employers to report workers who refuse to go to work because of the pandemic. Part of what’s going on is the crush of people filing for benefits means state funds are shrinking. This is exacerbated by the reluctance of the Trump administration to bail out state governments. That the U.S. government would funnel trillions to corporate America but balk at sending money to state governments also appears to be part of “the American way of life” that resembles the financial sector bailout in 2008.
This cannot all be laid at the feet of the Trump administration, though it has undeniably made life worse for millions. These are also the bitter fruits of decades of public policies that have denigrated the need for a social safety net while gambling on growth to keep the heads of U.S. workers above water just enough to ward off any real complaints or protests.
The attacks on welfare, food stamps, public housing and all of the attendant programs that could mitigate the worst aspects of this disaster continue to be bipartisan. The loud praise of Gov. Andrew Cuomo of New York, in contrast to the poor performance of President Trump, has overshadowed protests against his $400 million cuts to hospitals in New York as the virus was raging through the city.
There will be many more examples of Democrats wielding the ax in response to unprecedented budget shortages in the coming months. With the increasing scale of the crisis — as unemployment grows to an otherworldly 36.5 million people while states run out of money and contemplate cutting Medicaid and other already meager kinds of social welfare — the vast need for government assistance will test the political class’s aversion to such intervention.
During the long and uneven recovery from the Great Recession, the warped distribution of wealth led to protests and labor organizing. The crisis unfolding today is already deeper and much more catastrophic to a wider swath of workers than anything since the 1930s. The status quo is untenable.
Sandberg argues in her 2013 mega-selling book, “Lean In,” should take a seat at the table. That’s all well and good. But what should they do once they’re sitting there? Sandberg herself, consummate table-sitter, has offered an answer over her company’s year of horrors: Keep everything exactly the same.
Let your Republican strategist tell you that being honest will make GOP members of Congress mad — and stay silent. Yell at your security officer for doing his job because it might put yours at risk. Allow your subordinates to play on the same political polarization your platform is under fire for facilitating by using public-relations firms to fan partisan flames. These tactics, all reported by the Times, whose portrayal Facebook has rebutted and the company’s board of directors has called “grossly unfair,” are how people in power have always held on to it. Sandberg intended to hold on to it, too.
In fact, this approach is perfectly consistent with the message of Sandberg’s opus. “Lean In” is not fundamentally a feminist manifesto. It is a road map for operating within the existing system, perhaps changing it at the margins to make it easier for other women to, well, operate within the system. Sandberg does not spend much time asking whether the system is so screwed up that pushing against it might be the better route toward meaningful change.
.. But the answer isn’t to lower the standard for women to match the too-low expectations set for men. Better to raise the bar for everyone so that aggressiveness and selfishness and untrustworthiness no longer shortened the track to success.
.. Sandberg didn’t do these things because she was a woman. She did them because she was not so different from all those men.
Sandberg posits in her book that installing women in positions of power is a worthy end in itself. And it is. But it means a lot less if, once women are in power, they do nothing to alter the society-wide structures that separate the haves from the have-nots along lots of lines besides gender.
.. she suggests that women in particular may be able to clear an atmosphere of pent-up male emotion. Real leadership, she argues, “stems from individuality that is honestly and sometimes imperfectly expressed.”
When men get angry, their power grows. When women do, it shrinks.
.. While parents talk to girls about emotions more than they do to boys, anger is excluded. Reflect with me for a moment: How did you first learn to think about emotions, and anger in particular?
.. My mother may have been livid, but she gave every appearance of being cheerful and happy. By staying silent and choosing this particular outlet for her feelings, she communicated a trove of information: for example, that anger was experienced in isolation and was not worth sharing verbally with others. That furious feelings are best kept to oneself. That when they do inevitably come out, the results can be scary, shocking, and destructive.
.. My mother was acting in a way that remains typical for many women: She was getting her anger “out,” but in a way that explicitly separated it from her relationships. Most women report feeling the angriest in private and interpersonal settings.
.. While we experience anger internally, it is mediated culturally and externally by other people’s expectations and social prohibitions.
.. in some cultures anger is a way to vent frustration, but in others it is more for exerting authority.
.. In the United States, anger in white men is often portrayed as justifiable and patriotic, but in black men as criminality, and in black women as threat. In the Western world, anger in women has been widely associated with “madness.”
.. At home, children still learn quickly that for boys and men, anger reinforces traditional gender expectations, but that for girls and women, anger confounds them.
.. It’s as children that most of us learn to regard anger as unfeminine, unattractive, and selfish.
.. Many of us are taught that our anger will be an imposition on others, making us irksome and unlikeable. That it will alienate our loved ones or put off people we want to attract. That it will twist our faces, make us ugly. This is true even for those of us who have to use anger to defend ourselves in charged and dangerous situations. As girls, we are not taught to acknowledge or manage our anger so much as fear, ignore, hide, and transform it.
.. There is not a woman alive who does not understand that women’s anger is openly reviled.
.. They want to know how to stand up for themselves “without sounding angry or bitter,”
.. told we are “crazy,” “irrational,” even “demonic.”
.. Our society is infinitely creative in finding ways to dismiss and pathologize women’s rage.
.. When a woman shows anger in institutional, political, and professional settings, she automatically violates gender norms. She is met with aversion, perceived as more hostile, irritable, less competent, and unlikable
.. The same people who might opt to work for an angry-sounding, aggressive man are likely to be less tolerant of the same behavior if the boss were a woman.
.. When a man becomes angry in an argument or debate, people are more likely to abandon their own positions and defer to his. But when a woman acts the same way, she’s likely to elicit the opposite response.
.. Black girls and women, for example, routinely silenced by “angry black woman” stereotypes, have to contend with abiding dangers of institutionalized violence that might result from their expressing justifiable rage.
.. men, as studies find, consider anger to be power enhancing in a way that women don’t. For men, anger is far more likely to be power enhancing.
.. Anger has a bad rap, but it is actually one of the most hopeful and forward thinking of all our emotions. It begets transformation, manifesting our passion and keeping us invested in the world. It is a rational and emotional response to trespass, violation, and moral disorder..
.. It bridges the divide between what is and what ought to be
.. By effectively severing anger from “good womanhood,” we choose to sever girls and women from the emotion that best protects us against danger and injustice.
.. I am still constantly being reminded that it’s “better” if women didn’t “seem so angry.” What does “better” mean, exactly? And why does it fall so disproportionately on the shoulders of women to be “better” by putting aside anger in order to “understand” and to forgive and forget? Does it make us “good” people? Is it healthy? Does it enable us to protect our interests, bring change to struggling communities, or upend failing systems?
.. Mainly, it props up a profoundly corrupt status quo.
.. It took me too long to realize that the people most inclined to say “You sound angry” are the same people who uniformly don’t care to ask “Why?”
.. They’re interested in silence, not dialogue.
.. A society that does not respect women’s anger is one that does not respect women, not as human beings, thinkers, knowers, active participants, or citizens. Women around the world are clearly angry and acting on that emotion. That means, inevitably, that a backlash is in full swing, most typically among “moderates” who are fond of disparaging angry women as dangerous and unhinged.
.. It is easier to criticize the angry women than to ask the questions “What is making you so angry?” and “What can we do about it?” — the answers to which have disruptive and revolutionary implications.
From his Birmingham jail cell, King wrote: “I have almost reached the regrettable conclusion that the Negro’s great stumbling block in his stride toward freedom is not the White Citizen’s Counciler or the Ku Klux Klanner, but the white moderate, who is more devoted to ‘order’ than to justice.” King knew that whites’ insistence on civility usually stymied civil rights.
.. Kennedy, like today’s advocates of civility, was skeptical of “passionate movements.” He criticized “demonstrations, parades and protests which create tensions and threaten violence and threaten lives.” But he also had to put out those fires. He tasked his staff with drafting what could eventually become the landmark Civil Rights Act of 1964. Dialogue was necessary but far from sufficient for passage of civil rights laws. Disruption catalyzed change.
.. That history is a reminder that civility is in the eye of the beholder. And when the beholder wants to maintain an unequal status quo, it’s easy to accuse picketers, protesters and preachers alike of incivility, as much because of their message as their methods. For those upset by disruptive protests, the history of civil rights offers an unsettling reminder that the path to change is seldom polite.
Having safely established that Jordan Peterson is an intellectual fraud who uses a lot of words to say almost nothing, we can now turn back to the original question: how can a man incapable of relaying the content of a children’s book become the most influential thinker of his moment? My first instinct is simply to sigh that the world is tragic and absurd, and there is apparently no height to which confident fools cannot ascend. But there are better explanations available. Peterson is popular partly because he criticizes social justice activists in a way many people find satisfying, and some of those criticisms have merit. He is popular partly because he offers adrift young men a sense of heroic purpose, and offers angry young men rationalizations for their hatreds. And he is popular partly because academia and the left have failed spectacularly at helping make the world intelligible to ordinary people, and giving them a clear and compelling political vision.
.. Peterson first came to international prominence when he publicly opposed Canada’s Bill C-16, which added gender expression and identity to the list of prohibited grounds of discrimination in the Canadian Human Rights Act. Peterson claimed that under the bill, he could be compelled to use a student’s preferred gender pronoun or face criminal prosecution, and suggested that social justice activists were promoting a totalitarian ideology. In fact, there was nothing in the bill that criminalized the failure to use people’s preferred gender pronouns (full text), and I share the belief that government legislation requiring people to use particular pronouns would be an infringement on civil liberties. But since that’s a position shared by Noam Chomsky and the ACLU, it’s not a particularly devastating criticism of the left. And when Peterson goes beyond the very narrow issue of compelled speech, his take on social justice isn’t much much more sensible than his lecture on Jungian archetypes in the story of the pancake-dragon.
.. The reason he’s stuck here is that there’s no evidence the Canadian Human Rights Act is about to bring us a gulag archipelago, but that’s what his grandiose statements about left-wing totalitarianism imply will happen. So he must either allege Alberta is about to get its own Great Leap Forward or draw a distinction between Mao’s Red Guards and the University of Toronto LGBTQ center, neither of which he wants to commit to. So we get another heaping dish of Peterson waffle.
.. [Liberalism] got flipped so that the world was turned into one group against another. Power struggle from one group against another, and then the social justice warrior types and the lefties, even the Democratic party, started categorizing everybody according to their ethnic, or sexual, or racial identity, and made that the canonical element of their being. And that’s an absolutely terrible thing to do! It leads to, in the Soviet Union when that happened, for example, when they introduced that idea along with the notion of class guilt… So for example, when the Soviets collectivized the farms, they pretty much wiped out, or raped and froze to death all of their, all their competent farmers—they called them kulaks—and they attributed class guilt to them, because they were successful peasants, and they defined their success as oppression and theft. They killed all of them pretty much, shipped them off to Siberia and froze them to death, and they were the productive agricultural to the Soviet Union, and then in the 1930s in the Ukraine because of that, about six million Ukrainians starve to death.
.. I think it’s worth remembering here what anti-discrimination activists are actually asking for:
- they want transgender people not to be fired from their jobs for being transgender,
- not to suffer gratuitously in prisons,
- to be able to access appropriate healthcare,
- not to be victimized in hate crimes, and
- not to be ostracized, evicted, or disdained.
Likewise, the social justice claims on race are about:
- trying to fix the black-white wealth gap,
- trying to reduce racial discrimination in job applications,
- trying to reduce race-based health disparities
.. Read the Democratic Party platform or the Black Lives Matter policy agenda. Disagree with them! But Peterson spares himself from having to actually engage in substantive debates on policy questions, by writing off the left as a bunch of brainwashed totalitarian postmodernist neo-Marxists.
.. When a questioner asked himwhat he thought people should do to effect change, given his opposition to student activism, his answer was telling:
…This happened in the 60s, as far as I can tell, that we got this misbegotten idea that the way to conduct yourself as a responsible human being was to hold placards up to protest to change the viewpoints of other people and thereby usher in the utopia. I think that’s all appalling, I think it’s appalling. And I think it’s absolutely absurd that students are taught that that’s the way to conduct themselves in the world. First of all, if you’re nineteen or twenty or twenty one, you don’t bloody well know anything. You haven’t done anything. You don’t know anything about history, you haven’t read anything, you haven’t supported yourself for any length of time. You’ve been entirely dependent on your state and on your family for the brief few years of your existence. And the idea that you have any wisdom to determine how society should be reconstructed when you’re sitting in the absolute lap of luxury protected by processes you don’t understand… let’s call that a bad idea… The idea that what you should do to change the world is to find people you disagree with and shake paper on sticks at them, it’s just…
.. Activism, then, is arrogant brats holding “paper on sticks,” a peculiar and appalling phenomenon he believes started in the 60s. Nevermind that what he is talking about is more commonly known as the Civil Rights Movement, and the “paper on sticks” said “We shall overcome” and “End segregated schools” on them.
.. And nevermind that it worked, and was one of the most morally important events of the 20th century.
.. Peterson, who is apparently an alien to whom political action is an unfathomable mystery, thinks it’s been nothing but fifty years of childish virtue-signaling. The activists against the Vietnam War spent years trying to stop a horrific atrocity that killed a million people, and had a very significant effect in drawing attention to that atrocity and finally bringing it to a close. But the students are the ones who “don’t know anything about history.”
.. Peterson seemingly discourages all serious political involvement. He says cultivating the self and reading great books is “more important than any possible political action.” Don’t focus on changing the world, focus on tidying up your life.
.. 12 Rules For Life makes it explicit: stop questioning the social order, stop assigning blame for problems to political actors, stop trying to reorganize things.
.. Have you taken full advantage of the opportunities offered to you? Are you working hard on your career, or even your job, or are you letting bitterness and resentment hold you back and drag you down? Have you made peace with your brother? … Are there things that you could do, that you know you could do, that would make things around you better? Have you cleaned up your life? If the answer is no, here’s something to try:start to stop doing what you know to be wrong. Start stopping today… Don’t blame capitalism, the radical left, or the iniquity of your enemies. Don’t reorganize the state until you have ordered your own experience. Have some humility. If you cannot bring peace to your household, how dare you try to rule a city? … Set your house in perfect order before you criticize the world.
.. And since one’s house can never be in perfect order, one can never criticize the world.
.. This is, most obviously, an invitation to total depoliticization and solipsism.
.. Peterson speaks to disaffected millennial men, validating their prejudices about feminists and serving as a surrogate father figure. Yet he’s offering them terrible advice, because the “individual responsibility” ethic makes one feel like a failure for failing. Oh, sure, his rules about “standing up straight” and “petting a cat when you see one” are innocuous enough. But you shouldn’t tell people that their problems are their fault if you don’t actually know whether their problems are their fault.
.. Millennials struggle in part because of a viciously competitive economy that is crushing them with debt and a lack of opportunity.
.. But if you can’t pay your student loans, or your rent, and you can’t get a better job, what use is it to tell you that you should adopt a confident lobster-posture?
.. Why is Jordan Peterson’s combination of drivel and cliché attracting millions of followers? Some of it is probably because alt-right guys like that he gives a seemingly scientific justification for their dislike of “social justice warriors.” Some of it is just that self-help always sells. Another part of it, though, is that academics have been cloistered and unhelpful, and the left has failed to offer people a coherent political alternative. Some of it is probably because alt-right guys like that he gives a seemingly scientific justification for their dislike of “social justice warriors.” Some of it is just that self-help always sells. Another part of it, though, is that academics have been cloistered and unhelpful, and the left has failed to offer people a coherent political alternative.
.. Tabatha Southey was cruel to call Jordan Peterson “the stupid man’s smart person.” He is the desperate man’s smart person, he feeds on angst and confusion.
.. Who else has a serious alternative? Where are the other professors with accessible and compelling YouTube channels, with books of helpful advice and long Q&A sessions with the public?
.. it’s futile because ultimately, you can’t escape politics.
.. Our lives are conditioned by economic and political systems, like it or not, and by telling lost people to abandon projects for social change, one permanently guarantees they will be the helpless victims of forces beyond their control or understanding. The genuinely “heroic” path in life is to band with others to pursue the social good, to find meaning in the collective human striving to better our condition. No, not by abandoning the idea of the “individual” and seeing the world purely in terms of group identity. But by pooling our individual talents and efforts to produce a better, fairer, and more beautiful world.
There is a certain image that Canada projects to the world, one that is particularly compelling to Americans. It’s the image of Canada as a tolerant, progressive, kind and humanitarian nation, populated by mild-mannered and polite people.
.. The idea of Canada the Good — a Scandinavian-style socialist democracy, with the added bonus of multicultural harmony — is an attractive one, helpful in providing Canadians with some kind of national identity, and left-leaning Americans with a handy rhetorical device for political arguments: Look at what’s possible, right next door!
.. But it’s worth remembering that this image of Canada, currently personified by Prime Minister Justin Trudeau, is a relatively recent construction, largely put forth by Mr. Trudeau’s father, former Prime Minister Pierre Trudeau. Before that — and for most of the intervening years, between Trudeaus — the public face of Canada has looked a lot like, well, Jordan Peterson.
.. Canada is home to many more Jordan Petersons than Justin Trudeaus.
.. Mr. Peterson is — to use one of his favorite terms — something of a national archetype, the default setting of the Canadian male: a dull but stern dad, who, under a facade of apparent normalcy and common sense, conceals a reserve of barely contained hostility toward anyone who might rock the boat.
.. those who make a fuss are bothersome and ignorant at best, and probably dangerous and destructive too.
.. This is how “peace, order and good government” came to be the Canadian answer to “life, liberty, and the pursuit of happiness.”
.. Charisma is suspect here, and when Mr. Peterson uses that word to describe Mr. Trudeau, it’s not a compliment.
.. Suspect, too, is any whiff of revolutionary spirit. Pierre Trudeau might have technically been a liberal, but he was the kind of liberal who declared martial law in 1970 when a bumbling handful of Quebec separatists were deemed enough of a threat to justify suspending civil liberties en masse.
.. Our politics reflect our sense of unease with anything radical.
.. Liberals who think of Canada as a lefty haven should look to our most recent federal election: the New Democratic Party, ostensibly the major party farthest to the left, ran its last campaign on a platform of balanced budgets and fiscal responsibility. Not even the Green Party dares to suggest divesting from Alberta’s oil sands.
.. On every issue, from peacekeeping to pipelines, carbon targets to Indigenous relations, Mr. Trudeau has largely continued the policies set by his predecessor.
.. Canadian conservatism is not brash. It not belligerent, it is not loud. It is not Fox News. But our most popular columnists all deliver the same message: Things are the way they are for a reason. Those who agitate for change are stepping out of line.
.. He reserves particular ire for young activists. “I tell 18-year-olds: Six years ago you were 12 — what the hell do you know? You haven’t done anything,” he says. “You don’t have a degree, you haven’t finished your courses, you don’t know how to read, you can’t think, you can’t speak.”
“It’s just not right,” he says, “to tell people in that situation that they should go out and change the socioeconomic structure of the culture!”
.. Delivered as a fiery sermon, this impassioned plea for humility and self-improvement gets laughs from Peterson fans. But in practice, it’s actually an argument for submission to the status quo that would have prevented any number of people, from the Rev. Dr. Martin Luther King Jr. to Emma Gonzales, from ever speaking up.
.. Americans are raised to believe that individuals, even flawed ones, can indeed change the world, and sometimes should. Canadians, for all that we’ve managed to construct a society that Americans sometimes envy, lack this ethic.
.. The resulting mind-set, disdainful of idealism and suspicious of ego, is one we are now, evidently, exporting.
.. Jordan Peterson is considered a heroic figure of historical importance, the man who finally said “Enough!” to political correctness run amok, to mobs of rabid Social Justice Warriors, to an ideologically driven “leftist-Marxist” movement hellbent on destroying Western civilization itself.
.. Mr. Peterson can be more accurately described as a previously obscure Canadian academic who believed, erroneously, that he would soon be forced by law to use gender-neutral pronouns and who refused to bow to that hypothetical demand. The proposed human rights policy that made Mr. Peterson famous is now Canadian law, and no instance of “compelled speech” has occurred as a result of it or resulted in criminal charges, as Mr. Peterson feared. On the issue of legal requirements for pronoun use, things remain the way Mr. Peterson wanted them — the same.
.. Mr. Peterson was taking a stand not against power in that instance but on behalf of it. His acolytes, some of whom might consider themselves to be walking in the tradition of rugged American individualism, should note that they are in fact taking marching orders — “Rules for Life,” no less — from a line-toeing Canadian, preaching a philosophy not of American defiance but of Canadian deference.