Capitalism and Technology:
Bitcoin, The Blockchain, and the implications on Sustainable Development
Capitalism and technology have an inherent marriage where it innovates technologies only for its own reproduction, A positive feedback loop of environmental degradation and wealth generation. However, in this essay, I will pose the thought that Bitcoin and The Blockchain could be different than the traditional technological advances that promote capitalism. While the future is still undecided and this technology could very well end up being just like most others and only benefit the rich few and continuing the oppression of the poor, I personally believe this will be a net-good for society like the Internet and Gutenberg Press. Just as Gutenberg's Press decentralized ownership of books and reading from the select few royalty that had access into the hands of the poor and was open-sourced in the way he allowed any to print and not retain the technology for his own good but for the good of everyone and how the internet has decentralized information and granted anyone with access to learn from the collective knowledge of man without any limitations. There are key distinctions that I believe separate these technologies from the ones that blatantly align with capitalism and show the marriage that I mentioned before.
First I will give a brief background of what bitcoin and the blockchain is, then a look at the problem the capitalist, technology, and development nexus, as well as the solution and lastly; what the implications are for the future of sustainable development.
I. What is Bitcoin & The Blockchain
Bitcoin is a open-sourced, peer-to-peer digital currency that allows online
payments to be sent directly from one party to another without going through a
financial institution or intermediary. This at its premise is a solution to economic crisis, the federal reserve, and displays sound principles of money being, fungibility, store of value, and wealth transfer that is catered to a digital world. The only flaw with this system I see is it could ultimately be a way to further modernity and globalization of trade and further the disaster of capitalism. How this will truly play out is yet to be seen, but as with every new technology or idea real use cases start to appear and can give insight as to what lies ahead. We've heard of places around the world in history and even recently in cases of venezuela and the devaluation of the their home currency due to inflation, crippling hard working citizens savings, the little they had. This is why Bitcoin and the blockchain were created and the solution to the centralized banking system. What's interesting is we have seen that some of the largest buying volume has been coming from areas that are undergoing this problem today. Which brings me to my next point, the problems of the current system and potential solutions.
II. Problems and Solutions
Capitalism, depending on who you ask, can be seen as the cure for humanity and the life line we depend on, or a cancer feeding off the poor and consuming the earth with the sole purpose of generating more wealth for the few that find themselves on the winning end of the deal, namely; the Federal Reserve. I am on the side of the latter and believe capitalism does far more harm than it does good and what little good one could argue it does I rebuttal with it never finding its benefits in the hands of those that truly need it. Capitalism and the modern banking system is parasitic by vary nature.
The modern financial system has a lack of transparency and has led to losing most of the trust that the system operates on. The cat is out of the bag and more and more citizens are beginning to understand the current third party based trust system must go. “electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party (Nakamoto 2009).” Bitcoin and the blockchain look to solve the disconnect between global ambitions and local realities which is one of the limiting factors for the advancement of true sustainable development (Victor 2006). One currently limiting factor of the current capitalist globalization model is the intermitenancy and difficulty exchanging different forms of currency. For instance,
“Every country is empowered to print its own national currency, but a few are accepted for international payments, conferring special advantages on the countries that issue these currencies, along with certain obligations (Sheppard 2009).”
This places third world countries at a disadvantage in the global system to first world countries. In theory though, with bitcoin, or whichever coin is universally adopted, we would be able to, purchase some bananas directly from the farmer in Jamaica with no intermediary placing that farmer directly in control of his money and gaining the difference that the banks would have received. This will allow for banks and private partners to earn less from citizens and hopefully lead to less profit from the to invest in keeping the system going.
Another flaw in the current system, which makes life difficult for minorities is the remittance system. Most people from other countries like venezuela send money back from the U.S. to help out family still in other country. These people do not deserve to lose up to 10% of their hard earned wages just because they are doing a good thing, sending money back home. The banks and remittance systems do not have the authority or the ability to continue this scheme because once adopted, digital currency will most definitely end this. On top of this a major concern worldwide is the “errors and omissions that take place are substantial accounting to over $150 billion in U.S. dollars, this included capital flight and illegal economic transactions which can be estimated to totaling over $250 billion, which is the size of Turkey’s economy (Sheppard 2009). To combat this the blockchain completely gets rid of the middle man by introducing digital signatures and an immutable record of transactions.
“Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending.
We propose a solution to the double-spending problem using a peer-to-peer network.
“The network timestamps transactions by hashing them into an ongoing chain of
hash-based proof-of-work, forming a record that cannot be changed without redoing
the proof-of-work (Nakamoto 2009).”
II. Problems and Solutions Case Study: Venezuela
We are witnessing, in real time, the final dismissal of the Bretton Woods System. A paradigm shift from a centralized fiscal control that has been or possibly was from the beginning, corrupt, to a fully decentralized, digital floating reserve. The banking giants combat this with charges of not being backed by an entity, for me this is what Gandhi says playing out in full force, “First they ignore you, then they laugh at you, then they fight you, then you win”. As we have learned in Development Theory, the entire capitalist system we live in runs on exploitation, investment, and profit. A positive feedback loop of sorts where you rinse and repeat until all is consumed. The Banks and private institutions that are in charge do not like this technology, even if it would save and help them turn more profit, being how profit is the number one goal this is interesting. From this I’ve noticed their is perhaps one thing they are more interested in than purely profit, and this is power. The blockchain has the ability to give the power of wealth generation back to the people and out of the hands of select few, primarily the Federal Reserve and central banks. This power has and will always be abused, and even if stated to be a beneficial thing it often places greater burden on the people inhabiting the country.
“Printing money does not help, If the Indian state increases money supply by printing more rupees, the exchange rate of the rupee relative to other currencies, and thus the purchasing power of the national currency in international markets, will fall unless India can show a corresponding increase in productivity (Sheppard 2009)”.
While It is still left to be seen how it will directly impact the capitalist system, I do see solving the issue of Inflation like we see in Venezuela or even here in the U.S. contributing to solve the issues of wealth inequality.
For instance, there was over 2.7 trillion dollars in volume In venezuela the week of April 14th 2018 as shown in figure 1 below.*figure 1
This is showing a direct correlation with national currencies losing value and citizens doing anything they can to protect their hard earned assets. I can only think of the less fortunate in venezuela having the little bit they do have dwindling down daily because of the system that is in place, It’s not fair to begin with but this puts it over the limit. While I don’t agree with what the government is doing there, it's possibly a step in the right direction. The petro is venezuela's “national cryptocurrency” it is supposedly backed by venezuela's oil reserves. President Maduro has raised many alarms and concerns by doing this. Maduro has said they raised over $730 million on the first day of the with the U.S. Treasury department issuing a warning to american citizens to steer clear of investing or taking part in this. The U.S. has issued sanctions against president Maduro and Venezuela, but instead of heeding the U.S. Maduro went through with creating what is now known as the world's first government backed cryptocurrency, although most experts say this in fact isn't a cryptocurrency but more or less a new wrapping on a product, a tokenized version of oil relatable to an gold ETF. These type of plays are no different than the traditional capitalist innovation scheme that's only goal is to spurr more wealth. It's important to stay vigilant and understand that because few with power are utilizing this technology for bad it doesn't have to be and ultimately will not prevail. This is the equivalent of sustainable development being taken over by what David Victor insinuates when he says “cocktail party sustainable development (Victor 2006)”. The banking giants combat this with charges of not being backed by an entity, for me this is what Gandhi says playing out in full force, “First they ignore you, then they laugh at you, then they fight you, then you win”. As we have learned in Development Theory, the entire capitalist system we live in runs on exploitation, investment, and profit. A positive feedback loop of sorts where you rinse and repeat until all is consumed. The Banks and private institutions that are in charge do not like this technology, even if it would save and help them turn more profit, being how profit is the number one goal this is interesting. From this I’ve noticed their is perhaps one thing they are more interested in than purely profit, and this is power. The blockchain has the ability to give the power of wealth generation back to the people and out of the hands of select few, primarily the Federal Reserve and central banks. While It is still left to be seen how it will directly impact the capitalist system, I do see solving the issue of Inflation like we see in Venezuela or even here in the U.S. contributing to solve the issues of wealth inequality.
III. Implications are for the Third World
In the end, “The only way to fix the mess with sustainable development is to return to Brundtland's fundamentals. Sustainable development must be viewed afresh, as a framework for every aspect of governance rather than as a special interest. It can be revived by following four courses of action: making a priority of alleviating poverty, dropping the environmental bias that has hijacked the entire movement, favoring local decisions over global ambitions, and tapping into new technologies to spur sustainable growth (Victor 2006).” This is essentially calling for community enterprises, we can continue on a global scale but instill local community guidelines, for instance through bitcoin I can directly purchase a shirt from a woman in bangladesh versus from Nike. Either way the shirt is crafted in bangladesh but the difference is the benefits will be gained by the worker. This is eliminating the middleman who takes profit from that worker. This can directly empower women who are the primary workers neglected and exploited in this process. For instance, ~90% of agricultural property in Ghana is unregistered (Lagarde 2017). The blockchain can store digital land records for quick access, full transparency and more accountability. This can help with land disputes and hopefully allow farmers to truly own their land rights as they will be immutable, this can help as we know many corporations moved in and taken the farmers land. In Kumasi, Ghana a pilot program called bitland is looking to do just this. They are working on a streamlined automated land registration system that will be stored on the blockchain. This will will encourage land ownership in a less expensive way and then self sustiance can be achieved by having a plot to grow their own food. From a governmental perspective the IMF estimates that a governmental shift to digital payments could save the Nigeria between 5 to 9 billion U.S. dollars, or about 1.7 % of GDP (Lagarde 2017). Beyond payments, when the Minister of Education transitioned from cash to digital in 2011 they allowed for fewer misplaced payments, and less fraudulence.
This has and always will be my primary focus for sustainable development and according to the white paper this is focus of bitcoin as well. To succeed in our mission sustainable development will need to get back to the roots of why it was created, and so will the blockchain technology. I have often asked what good is wealth or a clean healthy planet without people to inhabit and share it with?
Works Cited
Dobbs, Richard, J. Manyika, and Jonathan R. Woetzel. No Ordinary Disruption: The Four Global Forces Breaking All the Trends. New York: PublicAffairs, 2016.
Fioramonti, Lorenzo. Wellbeing Economy: Success in a World without Growth. Johannesburg: Macmillan South Africa, 2017.
Lagarde, Christine, International Monetary Fund, and United Nations Economic Commission for Africa. "The Foundations of Technological Transformation in Africa." IMF. December 15, 2017. Accessed April 30, 2018.
Sheppard, Eric S. A World of Difference: Encountering and Contesting Development. New York, NY: Guilford Press, 2009.
“Sustainable Development Through Bitcoin.” 2017. CoinDesk. February 21. https://www.coindesk.com/sustainable-development-through-bitcoin/.
Nakamoto, Satoshi. "Bitcoin: A Peer-to-Peer Electronic Cash System." Bitcoin. January 01, 2009. Accessed April 22, 2018. https://bitcoin.org/bitcoin.pdf.
Victor, David G. "Recovering Sustainable Development." Foreign Affairs 85, no. 1 (2006): 91. doi:10.2307/20031845.
Jordan Palmer
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