AI Facial-Recognition Software in China: Ethical Implications beyond Political Economy

By the 2020s, the Chinese government had made significant advances in applying computer technology to garden-variety surveillance. To do so, that government relied to a significant extent on Chinese companies, and this in turn encouraged innovation at those companies even for non-governmental applications. I contend that treating this as a case study in business and government, without bringing in the ethical and political implications is a mistake. The ostensive “objectivity” of empirical social science may seem like an objective for scholars, but I submit that bringing in political and ethical theory renders the analysis superior to that which political economy alone can provide.

David Yang, who teaches economics at Harvard, spoke on a panel on China on October 11, 2024 on why some Chinese companies were developing AI technology even though generally technological development tends to go on in democracies rather than dictatorships. The reason for the exception, he said, is that the Chinese government had been buying facial-recognition software from companies in order to improve surveillance of the Chinese. Ignoring the unsavory ethical implications of a more totalitarian surveillance, Yang characterized the relationship between the businesses and the government as a win-win. The purchases by the government gives the companies the financial incentive and wherewithal to innovate AI for other, purely commercial purposes, and the government can more easily “restore order locally from social unrest.” Characterizing political protests as unrest can be said to be taken from an autocrat’s handbook, which unfairly casts a negative glow on what in a democracy is seen as healthy. Omitting the ethical implications from relations between business and government generally is thus partial both with respect to wholeness or completeness and in the sense of being biased. Even though Yang tried to present the relationship between the Chinese companies working on facial-recognition and the Chinese government buying the finished products objectively, his omission of the ethical dimension resulted in an incomplete explanation and a pro-autocratic bias. Even though such a bias could be said to be in sync with Harvard’s police-state, the hegemony of social order as the top value in political theory is problematic.

To be sure, social value could come with a government’s use of facial-recognition AI technology. Dave Davies, an American journalist who ventured inside China’s “surveillance state,” has argued that the Chinese Communist Party was “trying to internalize control. . . . Once you believe its true, it’s like you don’t even need the policeman at the corner anymore, because you’re becoming your own policeman.”[1] Once we shift from political protests to criminal activity, it is easier for even a democrat to see the value in prompting people to police themselves so a visible police-state apparatus in public would not be as likely. This is the antithesis of the “invisible man” question: What would you do that is illegal were you invisible so no one would see you and you wouldn’t get caught?  Instead, we can ask: What wouldn’t you do that you otherwise would do if you thought odds were high that you would get caught by police using facial-recognition AI technology?

But even with this internalization of control within an individual, which admittedly does not reach the individual not wanting to steal or injure someone in some way, the loss of privacy in public can be reckoned as an ethical (i.e., undeserved) harm that outweighs the ethical benefit of internalized control. Ben Franklin, one of the founding fathers of the United States, famously said that people who would trade privacy for more security deserve neither liberty nor safety. Of course, liberty is severely repressed in a dictatorship, and such a government can freely reduce people’s privacy with impunity in getting carried away with adding security measures. Ironically, such action by a pseudo-government can be observed at major universities in the States, including at Yale and Harvard, whose police departments do not have democratic legitimacy because the U.S. Constitution gives the police power to the state and federal governments rather than to even very wealthy private (“non-profit”) organizations.  

Whether in the United States or China, a republic (of republics) or an autocracy (or dictatorship), the human instinctual urge for still more control can manifest so easily in a sliding slope towards an excessively visible (and invisible), and thus impinging, police-state. The mind’s judgment concerning whether it has gone too far in this regard is susceptible to distorting itself or even suspending itself due to the allure of the pleasure of increasing control in a geographical area (or organization). In short, control is not easily internalized in people in whose discretion security measures lie. It is ironic that the internalization of control is easier when applied to individuals being controlled. An external check on the minds of the controllers is thus strongly advisable, lest we do not all wake up one day in a world in which we are surrounded by manifestations of passive-aggression and even unaccountable police brutality by people drunk with power from having the legal right to use lethal weapons. Cameras in public places are certainly superior to an overwhelming visible police presence in public places (and universities whose atmospheres are at least in principle academic in nature), but even with the ethical and practical value of internalized control, the unethical costs in terms of invasion of privacy should not be minimized or ignored outright. Achieving a policy that is balanced may not be easy, but I suspect it is best.

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1. Dave Davies, “Facial Recognition and Beyond: Journalist Ventures Inside China’s ‘Surveillance State’,” NPR.org, January 5, 2021.

Western Banks Lending to Asia's Expanding Middle Class: Profit vs. Planet

In April 2013, debt levels in Asia were reaching record levels as international lenders were extending short-term loans to a growing middle class. Non-mortgage consumer credit in Asia outside of Japan had increased 67% from 2007 to reach $1.66 trillion by the end of 2012. This credit included credit cards and loans for cars, electronic products, and appliances. Outside of Japan, Asian car and motorcycle loans nearly doubled from 2007 to 2012, to reach a record $219.7 billion. Appliance and electronics loans also more than doubled, reaching a high of $10.9 billion. Meanwhile, credit-card loans grew by 90% to reach a record $234.1 billion, according to Euromonitor. The incentive for the banks is not difficult to fathom. At the time, more than half of the world’s middle class was expected to be in Asia by the end of the decade. That translates yearly into more than 100 million additional people per year. For the banks, this was an opportunity since at least the beginning of the decade because growth was not possible in the European Union and the United States on account of the financial crisis of 2008 and the ensuing European debt-crisis that extended well into 2013. The European Commission of the E.U. was also working on regulatory proposals that would limit the incentives of mortgage servicers to produce too many “bubble-creating” mortgages. 
So Western banks had an incentive to look east for fruitful markets. Interesting, government regulators in China, Malaysia, and Indonesia had began reining in mortgage, credit-card and auto/motorcycle lending, perhaps in fear of an Asian financial crisis. Had Western bankers learned their lesson, or were they unwittingly bringing their reckless mentality to Asia? Two levels of concerns can be extracted from this case. I contend that the more immediate concerns were crowding out attention that ought to have been paid to the larger, but longer-term, problems.
One sort of concern suggests that the international banks may have been providing too much credit to people entering the middle class. Such borrowers, similar to the sub-prime mortgage borrowers in California, Arizona and Florida, may not be able to handle their new debt-loads. At the beginning of 2013, debt levels relative to individual income in many Asian economies, including Malaysia, China, South Korea, Thailand, Indonesia and India, were already up to 30% higher than in the United States. This would suggest that the Western bankers were again poised to be reckless. Citigroup’s claim that it was expanding its lending to the middle class in Asia in a “disciplined manner” can thus be challenged. More particularly, the financial-growth incentives facing the bank, given the continued weak economies in Europe and North America, can be critically analyzed. Did Citigroup's bankers accurately anticipate whether another debt melt-down might have resulted from the trend in debt-loads, or was this low-probability, high-risk scenario too long-term oriented to be factored in sufficiently? I don't know the answer to this, but I submit that baleful consequences that are larger and presumably further off tend to get pushed aside by the human mind, given the preoccupation with today, hard-wired by natural selection.
Even if we take Citigroup at its word that it was lending in Asia in a “disciplined manner” in spite of the rather unique opportunity for bank profit there, we can ask whether international banks have a responsibility to society, and even the species itself by resisting the temptation to immediately extend the rising middle class higher in spite of "growth pains" that could be anticipated. To a banker, this might have seemed like muzzling the golden goose, particularly given the soft economies in North America and Europe at the time.  What if his or her competitors would have stepped in anyway? Responsibility involves some voluntary restriction on a company’s financial self-interest that may require industry-wide commitment.  What are the chances that no one would cheat? Very low, I submit. Nevertheless, duty, a word mostly lost to today's short-sighted narcissism, is not meant to be convenient; otherwise, it would not operate as a tug on a banker’s conscience.
The upsurge in auto loans in Asia is a case in point. That is, is is responsible to facilitate an expansive auto market especially in China's major cities, which had already been known to be notable polluters. After 2000, the number of cars in use in China was doubling every year. Meanwhile, the Chinese were building an “interstate" highway-system that would dwarf the network of highways in the contiguous United States. Loans enabling an exploding middle class to buy cars increased the global demand for oil, resulting, other things equal, in a higher price at the gas pump. Would the magnitude of the surge in projected fossil-fuel use in China drain the Earth’s oil reserves before alternative sources of energy could pick up the slack, or should the Chinese too be able to enjoy a car economy like those in the West? It would be too easy for the Western bankers to resound with the latter at the expense of the former due to the allure of greater profits over duty to the species.

More people=More cars=More pollution    source: Businessweek

The viability of the species enters the equation of course because of the scientifically-proven link between carbon emissions by humans and climate change in which both the atmosphere and oceans of the planet have been warming since well before 2013. To be sure, it could indeed have been argued that the Asian middle-class deserved the same freedom and ease provided by owning a car in the twenty-first century that the American and European middle-classes enjoyed in the twentieth century. Fair is fair, right? However, the global climatic threat to the species had not been pressing during the industrial revolution and through the ensuing shizogenic (i.e., a maximizing variable) consumerism of the twentieth century. By  analogy, even though a person starting to smoke at 50 can point to a person starting at 20 and say, “I should be able to have my years of smoking too,” the person who smokes at an older age faces more health risks than the person who smokes when young. Is it worth a heart attack to a 50 year-old to insist on having years of smoking too?  Similarly, the question of the additional oil for more cars, as well as more coal-sourced electricity powering electronics and appliances—all being facilitated by the upsurge in loans—can legitimately be answered differently when it is accurately (and thus justly) feared that unless the carbon-use trends reversed themselves everywhere, the species would likely face dramatic negative effects all too soon, with the very survival of the species itself perhaps hanging in the balance further out.

As these diverging patterns demonstrate, the threat of over-population is not uniform across the globe.   source: fashionzombie.net

In terms of public policy, if corporate social responsibility is not strong enough given the addictive allure of profit-seeking to ward off even current use that could result in a very different climate, perhaps resulting in a new equilibrium beyond the bounds of human habitation, then government regulation may be humanity's only option to pick up the slack. Because the problem is global in nature, this option is also problematic. 
Because the interests of the government of China and other countries do not take kindly to economic costs inflicted on their respective peoples for fear of political unrest and economic recession,  the absolutist interpretation of national sovereignty might finally have to be compromised in order, ultimately, for the species to survive or at least not be inundated even in the twenty-first century with climatic havoc. To the extent that the explosion of the human population is the root cause of the increase in carbon (and methane) in the atmosphere and oceans, even government regulation enforced at the global level would be difficult, even ethically, especially as countries fear an older demographic in a declining base. It would be a lot to ask bankers to take this on. Nevertheless, societies and governments can legitimately ask banks not to exacerbate global warming by acting so as to dramatically increase human consumption too much given the business environment. As the managerial role is profit-seeking by design and incentive, however, it is not likely that bankers would agree. Hence I have viewed corporate social responsibility as a creature more of marketing than duty, especially in societies in which the honor of duty is not valued. 

Source:

Kathy Chu, “Consumer Loans Surge Across Asia,” The Wall Street Journal, April 22, 2013. 

Hollywood Bribes China

The Foreign Corrupt Practices Act, known as F.C.P.A., “forbids American companies from making illegal payments to government officials or others to ease the way for operations in foreign countries.”[1] The practical difficulty facing American companies doing business around the world is that in some cultures bribes are so ubiquitous they are simply a part of doing business.  For American companies to refuse to participate in what is generally expected can be a competitive disadvantage, particularly if substitutes exist and the practice is widespread.

The full essay is in Cases of Unethical Business: A Malignant Mentality of Mendacity, available in print and as an ebook at Amazon.

1. Edward Wyatt, Michael Cieply, and Brooks Barnes, “S.E.C. Asks if Hollywood Paid Bribes in China,” The New York Times, April 25, 2012.

Labor-Management Relations: Starving Workers as a Childish Tactic

Before the industrialization in the nineteenth century, nothing "intrinsic or permanent separated those who hired from those who hired out" because "many laborers could hope to ear and saven enough to become their own employers." (1) That is to say, the employee/employer distinction was not overlaid with connotations of disparate distinctions, such as child/parent and subject/ruler. Relatedly, the two parties to the economic agreements bearing on labor in exchange for money had roughly equal bargaining power. As the United States industrialized, however, a distinct working class developed as industrial workers found their upward mobility cut off by rising start-up costs and other barriers to entry. Additionally, the advent of the monopolies (and oligopolies) swung the balance of power in contract negotiations strongly in favor of the corporations. With the added leverage came pretensions going far beyond what could be justified by the relation of labor and capital in a commercial contract. The case of the first transcontinental railroad, which was completed in 1869, demonstrates just how distended, or bloated, the pretensions on the corporate side had become.

The full essay is in Cases of Unethical Business: A Malignant Mentality of Mendacity, available in print and as an ebook at Amazon.