How Barefaced Lies Fuel the Success of China’s Pyramid Schemes
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2017-08-23 23:00:43

University student Li Wenxing thought he’d found a job opportunity in Tianjin through an online hiring site. Instead, he may have fallen for a pyramid scheme. After Li arrived in Tianjin, a coastal megacity east of Beijing, his behavior abruptly changed. He became withdrawn and hard to contact, and he was always asking for money. Then, on July 14, his body was discovered in Tianjin’s Jinghai District.

Stories like this have become all too common. Earlier this month, police took action against two major online pyramid schemes, one based in the central Chinese city of Changde, and the other run out of a town near Beijing. The latter manipulated its targets’ emotions and used sob stories to draw them in.

Soon after these reports surfaced, I took a closer look at media reports about China’s pyramid schemes. I soon realized that on one early August day alone, media outlets in Beijing and the provinces of Guangdong, Shanxi, Shaanxi, Fujian, Hubei, Jiangsu, Shandong, Jiangxi, and Anhui had all published at least one story on local pyramid schemes. The content of these reports ranged from how police had cracked a case to stories from the victims themselves. It’s important to note that, at the time, there was no national media campaign targeting pyramid schemes — these stories had all surfaced naturally.

Direct selling schemes flourished in China during the mid-1990s but soon devolved into a kind of high-level scam. For years, members of the direct selling industry have expressed frustration at the situation, with some claiming that, in comparison with the United States and Taiwan, the Chinese mainland’s illegal pyramid schemes have caused much more damage to society. What is it about China that has led these schemes to multiply so quickly? What’s so special about this country that makes it uniquely well-suited to their growth?

A uniquely crucial factor in the prominence of these schemes in China is an enhanced ability to lie to and cheat family and friends.

In China, pyramid schemes have blossomed for two familiar reasons. First, there are the supposed success stories of poor people getting rich quickly thanks to a scheme — except, of course, the number of people who actually made money in this fashion is much lower than the such scam operators claim. This is a rational, albeit dishonest, tactic when we consider that the organization needs to attract new members and explain who is benefitting from the vast sums of money invested in each scheme.

Second, there is the notion that everyone has a chance, no matter how slim, to ascend to the tip of the wealth pyramid. The prospect of easy money, however remote, is always sufficient to excite people’s interest. The supposed fast track to wealth that pyramid scheme operators advertise can appear both subversive and alluring to those stuck on the lower rungs of society — people who lack future prospects but crave upward mobility and an escape from their current circumstances. Add to that the constant lectures on “the science of success” that participants are subjected to, and pretty soon their dreams of overnight wealth spiral out of control.

The first organizations to illegally run pyramid schemes in China appeared in the south more than 20 years ago, but they’ve since spread insidiously across the country. Almost none of the victims of these schemes know where their money really went. The person cheating them, backed by the organization with which they’ve signed up, takes an individualized approach to each deception, carefully calculating which methods are most likely to win over a given target. The targets themselves are usually approached for their assumed naivety, in the hope that they will willingly give money to an acquaintance on the basis of shared social ties.

The success of such scams says much about how vulnerable our traditional social ethics become when people value money over good faith and honor.

However, a uniquely crucial factor in the prominence of these schemes in China — especially among economically disadvantaged groups in less developed areas — is an enhanced ability to lie to and cheat family and friends. In underdeveloped regions, people tend to move around much less, leading to higher levels of interdependence among friends and relatives. It is common for money to change hands freely in such communities, making casual borrowing much easier. The same goes for convincing others to join an organization.

Brainwashing is another vital part of how pyramid schemes operate. When examining them from the outside, the question arises: Why are the individuals involved in these schemes so willing to completely forsake both their own morals and social norms? Such schemes are constantly being honed as the number of victims continues to swell. There have even been cases of husbands cheating their own wives.

Pyramid schemes are detestable. Aside from the very few victims who succeed in overcoming their brainwashing — many of whom are beaten or killed for their trouble — how many more Chinese have been drawn into their web? Given that those who join pyramid schemes are both victims and victimizers, the success of such scams says much about how vulnerable our traditional social ethics become when people value money over good faith and honor. Until we address this profound lack of civic sense, pyramid schemes will remain an easy sell.

Translator: Kilian O’Donnell; editors: Lu Hongyong and Matthew Walsh.

(Header image: Suspected participants in a pyramid scheme are arrested in Kunming, Yunnan province, July 12,2016. VCG)