Bitcoin is banned in many fascist countries even though it is a radical idea based on a sound economic theory. Many economists from the Austrian School had imagined money that is independent of the State long before Bitcoin came into existence.
This year, countries across the post-pandemic world are grappling with rising inflation and global insecurity created by Russia’s invasion of Ukraine. Last month, inflation increased to an all-time high in many corrupt countries. Turkey’s annual inflation rate climbed to a 24-year high of 80.21 percent. Lebanon is facing its worst economic crisis in three decades with this year’s inflation rate rising to 178 percent. Sri Lanka recorded an inflation rate of 64.3 percent. Argentina’s inflation rate is expected to hit 95 percent by the end of this year. The South American country’s economy has become so bad that people recently took to the streets of the capital city, holding a mock funeral of the “death” of wages. The situation will likely get worse in the coming days because the countries with high inflation rates will likely face a threat of civil unrest as the new generation questions the effectiveness of representative democracy.
According to the latest Civil Unrest Index (CUI) released by the UK-based consulting firm Verisk Maplecroft, the risk of civil unrest is rising in over 100 out of 198 countries that were studied this year. Also, based on the data collected since 2017, more countries witnessed an increased risk of civil unrest in the last quarter of this year than at any other time. The report predicts that the world is yet to see the worst and that corrupt countries are at a greater risk of extreme political disruption like the one in Sri Lanka. The firm also warns that “over the coming months, governments across the world are about to get an answer to a burning question: will protests sparked by socioeconomic pressure transform into broader and more disruptive anti-government action?”
Nepal Rastra Bank’s recent data shows that Nepal’s inflation rate, as of July 2022, was recorded at 8.08 percent. Even when the inflation rate was low, the socio-economic conditions of a majority of the people were getting worse every year. If the country’s economic situation does not change for the better, civil unrest is inevitable. The real estate prices have been skyrocketing for more than a decade, increasing the rent and in turn, resulting in an unfavorable environment for industries and smaller-sized businesses to thrive. As a result, the unemployment rate has been increasing every year. The neo-feudal system has forced more than 10 million youths to head for Gulf countries for work due to the lack of employment opportunities in the Himalayan nation.
Nepal is becoming a failed state because the 18th Century style centralized and hierarchical institutions like bureaucracy, political parties, and parliament have not been functioning properly for decades. Such institutions are nearing a time of a terminal crisis due to the changes created by the digital revolution and globalization. The reason for this anarchy is, as Antonio Francesco Gramsci rightly puts it, “the crisis consists precisely in the fact that the old is dying and the new cannot be born. In this interregnum, a great variety of morbid symptoms appear.” In the Nepali context, the political class is still operating with a mindset fit for the bullock cart era and is not willing to change their corrupt ways while society as a whole is already in the era of self-driving vehicles. The extreme friction between the old and young values and the very fact that the old politicians are still holding on to political power are the reasons why the new digitally-powered direct democracy has not yet found its footing in Nepal. Direct democracy, also known as “pure democracy”, is a form of democracy in which all laws and policies imposed by governments are determined by the people themselves and not by the politicians who are elected by the people. Direct democracy was implemented at the central level in Switzerland in 1848.
Gramsci believed “a class cannot be dominated in a modern condition by merely advancing its own narrow economic interest; neither can it dominate purely through forces and coercion. Rather, it must exert intellectual and moral leadership.” Gramsci was referring to the emergence of fascism in Italy against the backdrop of the crisis of crony capitalism and the failure of anti-capitalist forces to disrupt the status quo to improve the socio-economic conditions of the Italian people. Gramsci was born in 1891 and died in 1937. Had he lived till the 1980s, he might have had a different viewpoint about capitalism as well as the anti-capitalist communist experiments in the mighty Union of Soviet Socialist Republics (USSR) and countries in Eastern Europe.
The USSR was a military superpower and also the second largest economy in the world. Radical leftist revolutionaries overthrew Russia’s Czar Nicolas II to establish the first socialist state in the territory that was once the Russian Empire. Socialism is a type of centrally-planned command economic system where the state controls most of the factors of production, including land and capital goods. Unfortunately, in reality, the socialist superpower suffered economic stagnation for decades, and consumer goods shortages became prevalent. It was estimated that the Soviet black-market economy was equivalent to more than 10 percent of the country’s official GDP. The fiscal policies were a disaster and wage hikes were supported by printing money, causing an inflationary spiral. By the time Michael Gorbachev became the Soviet president in 1985, the country was in such a bad state that the new foreign minister, Eduard Shevardnadze, told the new President, “Everything is rotten. It has to be changed.” Also, by that time the public had become so sickened with the widespread corruption that they were demanding the end of communism. The mighty USSR finally collapsed in 1991 after which the US opened the Internet to the world, catalyzing a worldwide digital revolution.
After the US opened the Internet to the public, many developed countries successfully embraced digital technologies and were fully transformed into a digital society. Nepal, however, is still at a juncture where digital technologies with the potential to catalyze radical political transformation have not been deployed to their full potential. It seems as though the status quo is not interested in going full throttle on digital transformation, fearing radical techno-political innovations that create alternative social worlds to interact within. For example, blockchain technology has powered an alternative financial system like cryptocurrency (cryptos) that enables a ‘political exit’ from the existing political regime.
There are mainly two types of blockchain projects: incorporative and radical. Incorporative projects are those that innovate within the current institutional paradigm e.g. Central Bank Digital Currency (CBDC). Radical projects are about creating alternative systems that enable users to wholly circumvent the dominant institutional paradigm and take part in a parallel socio-economic system e.g. Bitcoin. The radical projects are based on the concept of individual centricity and decentralization of digital services through peer-to-peer interactions to disrupt and reconceptualize the traditional top-down structure of financial, legal, social, and even political powers.
Bitcoin emerged out of nowhere in 2009 as a unified monetary and payment system. Bitcoin has been misunderstood by many people because it is a difficult concept requiring one to question and re-think many things that have been mistaken for absolute truths. Money debasement is a big problem that causes goods debasement, but the main rotten fruit that collapses societies is hyperinflation. Unfortunately, we live in a world where saving money is punished through inflation as a result of the government expanding the money supply too quickly. In such a world, people lose faith in the national currency, giving rise to ideas like Bitcoin. Bitcoin is banned in many fascist countries even though it is a radical idea based on a sound economic theory. Many economists from the Austrian School had imagined money that is independent of the State long before Bitcoin came into existence. There were many such people but Carl Menger and Friedrich A Hayek were prominent visionaries who provided the theoretical foundation for the creation of radical money like Bitcoin.
Carl Menger was born in 1840 and died in 1921. Menger was also the founder of the Austrian School of Economics or casual realist economics that describes the economy “as a vast and complex network of cause-and-effect relationships driven by purposeful human action and interaction, which occur in real-time and place involving specific, real economic goods in discrete quantities as the objects of action.” Another interesting thing about the Austrian school of economics is that the school does not approach the economy as a mathematically solvable problem.
Menger’s “subjective theory of value” is one of the most influential insights in economics that argues people will exchange something they value less for something they value more. He was also against the idea of centrally-planned economies. He believed chaos would ensue and eventually result in the consumption of society’s wealth and capital in centrally-planned economies. Simply put, he was against the establishment of institutions like the National Planning Commission. We could say the same about overtly hierarchical and centrally-controlled political parties or anything centrally controlled for that matter.
Menger also believed money not to be an invention of the State or a legislative act and that the sanction of political authority is not necessary for money to exist because certain commodities become money quite naturally, as a result of the economic relationships that are independent of the power of the State. His idea of money directly contradicts the contemporary idea of money created by the State. He alleged governments like to control money because they can depreciate money to have another revenue source besides tax.
Menger understood that “once people free themselves from the myth of government-created money, new possibilities emerge.” For most of history, money creation and adoption has always been a process of trial and error that fostered innovation. Therefore, he argued that a new form of money emerged gradually and went through many iterations.
Nobel laureate economist Friedrich A Hayek was born in 1899 and died in 1992. Hayek, together with another Austrian school economist Ludwig von Mises, pushed for fundamental monetary reform and warned the people about the danger of central banks. The duo demonstrated how expansionary credit policy leads to price inflation and business cycles fueling the growth of big government. He was an advocate of free-market capitalism and argued against government intervention in economic matters and was also known for identifying the economic calculation problem inherent in socialism. The impossibility of determining prices without a free market leads to the inevitable failure of the centralized planning of an economy. Mises died in 1973 after which Hayek gave up on the idea of government involvement in money creation at any level and pushed for the complete separation of money from the State.
Initially, Hayek was a supporter of the gold standard but switched his stance later in his life stating that the world could create something better than gold because digital technology was advancing rapidly. Hayek then went on to endorse a system of privately created money based on a variety of technologies that would compete for market dominance just like cryptocurrencies are competing for market dominance these days. Like Menger, Hayek was also against the Soviet-style centrally-governed economies because he believed “No amount of ingenuity at the center (central government) can calculate the value for the people through society- not even with all computing power in the world devoted to the task.”
The central bank is a double-edged sword in the sense that it can be beneficial to the economy in well-functioning countries like the USA, Canada, Germany, and other G20 countries, but can be a curse in corrupt and dysfunctional countries with inept leadership where money printing is employed as the principle method of government finance even when there is no economic growth whatsoever. Looking at the extremely low quality of roads, services, and cities developed by the Nepali government, allowing the private sector to create money becomes an attractive option. However, for this radical idea to work, the government has to act as an ethical regulator which is not possible until our corrupt representative democracy is replaced with digital direct democracy.
If Nepal is to prosper and maximize its potential, implementing direct democracy is the only way forward.