Central Bank Digital Currencies (CBDC): A Potential Push Toward Socialism
The world of finance has been undergoing rapid transformation, with the rise of cryptocurrencies and decentralized financial systems challenging traditional monetary frameworks. Central banks worldwide are exploring the potential of Central Bank Digital Currencies (CBDCs) to maintain their influence and adapt to this evolving landscape. Understanding their implications on social and economic systems is crucial as CBDCs emerge as a potential response to these challenges.
The concept of CBDCs has gained significant traction in recent years, with the Bank for International Settlements (BIS) reporting that 86% of central banks are actively researching the possibility of issuing digital currencies (Boar, Holden, & Wadsworth, 2020). In addition, the ongoing COVID-19 pandemic has further highlighted a claimed need for digital and contactless payment methods, accelerating the exploration of CBDCs (Auer, Cornelli, & Frost, 2020). The development of CBDCs is not only about improving the efficiency of payment systems but also about reshaping the monetary and financial landscape. Mancini-Griffoli et al. (2018) argue that CBDCs could play a pivotal role in addressing the limitations of the current financial system, such as slow cross-border payments, limited financial inclusion, and the risks associated with bank runs. Conversely, the potential impact of CBDCs extends beyond these claimed economic benefits, raising questions about their potential role in promoting or impeding broader social and political changes.
In this article, I will briefly examine the potential implications of CBDCs on the advancement of socialism, totalitarianism, and the emergence of social credit scores. I will also discuss the challenges and opportunities posed by CBDCs in this context and the need for policymakers to carefully consider the broader implications of digital currencies as they chart a course for the future of finance.
CBDCs: A Catalyst for Socialism
As the development of CBDCs gains momentum, questions arise about their potential to influence political ideologies and systems, such as socialism. CBDCs could potentially redefine the role of central banks and state intervention in the economy, enabling governments to exert greater control over monetary policy and resource allocation, which is a key foundation of socialist thought.
One way CBDCs could facilitate socialism is by granting central banks the ability to implement unconventional monetary policy tools more realistically, such as negative interest rates (Bindseil, 2020). With CBDCs, central banks and governments could mandate citizen and business consumption and saving behaviors without the intermediation of the banking sector or regard for civil liberties. Moreover, CBDCs could enable large-scale mechanisms for wealth redistribution, such as direct transfers to citizens or funding social programs (Bordo & Levin, 2019). In this context, CBDCs could facilitate the implementation of significant penalizing progressive tax systems or even the establishment of a universal basic income. This increase in government control over monetary policy and resource allocation could lead to government overreach and stifle individual freedom (Raskin & Yermack, 2016). Furthermore, the implementation of CBDCs in a socialist context could exacerbate existing economic challenges, such as inefficiencies in resource allocation and the risks of hyperinflation (Svensson, 2018).
CBDCs and the Emergence of Social Credit Scores
As CBDCs continue to develop, their potential to impact not only the economic landscape but also the social sphere is increasingly coming to the forefront. One area of concern is the potential for CBDCs to facilitate the emergence of social credit scores, which would integrate financial and non-financial data, allowing the government to assess individuals’ behavior and trustworthiness to government propaganda.
Social credit scores, as demonstrated by China’s social credit system, are a controversial topic, raising questions about individual privacy, surveillance, and government control (Creemers, 2018). By leveraging the extensive data generated through CBDC transactions, governments could potentially integrate financial information with data on citizens’ social behaviors to create a comprehensive scoring system (Barrdear & Kumhof, 2016). This convergence of data could enable more targeted social policy interventions, but it also raises ethical concerns about the potential for political targeting of critics and the erosion of civil liberties (Zhang & Zheng, 2019).
Using CBDCs to facilitate social credit systems could also have significant implications for financial inclusion. While CBDCs have the potential to expand access to financial services, particularly for underserved populations (Mersch, 2017), their integration with social credit scores could lead to the exclusion of individuals with low social credit scores from essential services or products, further exacerbating political tribalism (Fan, 2018). Ultimately, the potential for CBDCs to enable social credit scores depends on the specific design and implementation choices made by central banks and governments. However, with the obvious cronyism taking place at all levels of government, which has led to significant government inefficiency and an erosion of public trust in political institutions, it is clear that CBDCs are just the first step to totalitarianism. Therefore, as policymakers explore the development of CBDCs, it is essential to engage in an open and critical debate about the broader social implications of digital currencies and to establish a clear regulatory framework that safeguards the US Constitution, individual privacy, and civil liberties while fostering financial innovation.
Conclusion
In conclusion, the development and implementation of CBDCs have the potential to significantly reshape the economic and social landscape. As central banks across the globe continue to explore the possibilities of CBDCs, it is crucial to engage in a comprehensive analysis of their broader implications, particularly with respect to their potential encouragement of socialism and social credit scores.
The potential for CBDCs to advance socialism, as discussed by Tobin (2021), warrants further research and debate among citizens, policymakers, and academics, as well as the need for a balanced and nuanced understanding of their broader political and social impact in light of the US Constitution. Moreover, the concerns surrounding the potential for CBDCs to facilitate the emergence of social credit scores, as noted by Zhang and Zheng (2019), highlight the need for a careful examination of the ethical, social, and regulatory challenges that may arise from the integration of financial and non-financial data. As policymakers and central banks move forward with the development of CBDCs, it is essential to establish clear regulatory frameworks and guidelines that protect individual privacy, civil liberties, and financial inclusion.
Reprint of article published in the Social & Political Philosophy eJournal, Vol 16, Issue 74: https://dx.doi.org/10.2139/ssrn.4451739
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