Friday, December 20, 2013
by David Atkins
Bitcoin lost half its value today in a glorious self-immolation certain to have impoverished a lot of cyberlibertarians out there. Charlie Stross has one of the best takes out there on the Bitcoin nonsense:
Like all currency systems, Bitcoin comes with an implicit political agenda attached. Decisions we take about how to manage money, taxation, and the economy have consequences: by its consequences you may judge a finance system. Our current global system is pretty crap, but I submit that Bitcoin is worst.
For starters, BtC is inherently deflationary. There is an upper limit on the number of bitcoins that can ever be created ('mined', in the jargon: new bitcoins are created by carrying out mathematical operations which become progressively harder as the bitcoin space is explored—like calculating ever-larger prime numbers, they get further apart). This means the the cost of generating new Bitcoins rises over time, so that the value of Bitcoins rise relative to the available goods and services in the market...
Mining BtC has a carbon footprint from hell (as they get more computationally expensive to generate, electricity consumption soars). This essay has some questionable numbers, but the underlying principle is sound.
Bitcoin mining software is now being distributed as malware because using someone else's computer to mine BitCoins is easier than buying a farm of your own mining hardware.
Bitcoin violates Gresham's law: Stolen electricity will drive out honest mining. (So the greatest benefits accrue to the most ruthless criminals.)
Bitcoin's utter lack of regulation permits really hideous markets to emerge, in commodities like assassination (and drugs and child pornography).
It's also inherently damaging to the fabric of civil society. You think our wonderful investment bankers aren't paying their fair share of taxes? Bitcoin is pretty much designed for tax evasion. Moreover, The Gini coefficient of the Bitcoin economy is ghastly, and getting worse, to an extent that makes a sub-Saharan African kleptocracy look like a socialist utopia, and the "if this goes on" linear extrapolations imply that BtC will badly damage stable governance, not to mention redistributive taxation systems and social security/pension nets if its value continues to soar (as it seems designed to do due to its deflationary properties).
To editorialize briefly, BitCoin looks like it was designed as a weapon intended to damage central banking and money issuing banks, with a Libertarian political agenda in mind—to damage states ability to collect tax and monitor their citizens financial transactions. Which is fine if you're a Libertarian, but I tend to take the stance that Libertarianism is like Leninism: a fascinating, internally consistent political theory with some good underlying points that, regrettably, makes prescriptions about how to run human society that can only work if we replace real messy human beings with frictionless spherical humanoids of uniform density (because it relies on simplifying assumptions about human behaviour which are unfortunately wrong).
That bit about libertarianism and Leninism is a point I've been making for quite some time now (and earning me some angry feedback from Marx aficionados.) Both libertarianism and Leninism assume a sort of human perfection that simply doesn't exist in the real world. Leninists believe that with just enough training, everyone can be brought to a total selfless regard for species being, or at least for motherland and local community in such a way that everyone will be content to hard work with each receiving according to his "need" (however we define that) and toiling away according to his "ability" (however we define that.) We already know that doesn't work. Increasingly totalitarian structures of management are required to try to force it to work and then, human nature being what it is, those managers inevitably become their own corrupt elite.
Libertarianism has a similar problem. Libertarianism assumes a rational marketplace where everyone spends their time figuring out exactly how to maximize their benefit, and where labor and capital meet their perfect equilibrium at their perfect price. In this magical land there is presumed to be some sort of police force protecting everyone's basic property rights and persons against harm and theft. But, of course, the world doesn't work that way. In the real world, there are valuable and essential commodities that only large organizations can purchase (healthcare, sewage, street lights, roads, food inspections, etc.). Without a government to purchase them, large numbers of people simply must do without those commodities. But since people need those commodities, they are immediately and ruthlessly exploited by nongovernmental entities. Moreover, most people lack the time or inclination to thoroughly research all their supposed choices in the marketplace, leading to an enormous power gap between corporations with armies of researchers and deceivers, and consumers without the capacity to make sense of it all. Also, in the real world people aren't automatons able to simply travel and conform themselves to whatever and wherever the jobs are. In the real world people have interests, skills, communities and families that tie them to more than simply wherever the labor market can use them most efficiently. A perfectly efficient labor market would be a hell of human misery.
And finally, of course, human life and dignity are incredibly cheap on the open market. Left all to itself, the free market becomes like a game of Monopoly: a few people have all the money, and the rest beg for their crumbs. That is, in fact, exactly what happens when comparatively more equal civil societies with broad middle classes (such as the Roman Empire) collapse into feudal societies. The middle class disappears, and all that is left is barons and serfs. And once all the power and money are in a very few hands, that tiny government small enough to drown in a bathtub immediately becomes subject to corruption and either disappears or becomes a wholly owned arm of the barons, leading to totalitarian kleptocracy simply by another route.
A monetary system designed by and for libertarians in order to weaken central governments predictably begins to display all the prominent characteristics of libertarian social failure. It can't fail fast enough.
thereisnospoon 12/20/2013 03:00:00 PM