GCAS Conversations with Miquel Bassart i Loré & Salman Sadeghi
This interview is part of a long discourse within GCAS that covers cryptocurrency, some economic theory, some political theory, and philosophy. For this interview we have GCAS alumni Salman Sadeghi, an economist currently studying at the University of Bari in Italy and Miquel Bassart i Loré a Ph.D. Candidate at the University of Bielefeld in Germany and the Sorbonne discussing an array of issues and ideas found in economic thought. Andrew P. Keltner is the moderator.
Andrew P. Keltner:
Hello both of you, and thank you for joining me in this interview. Let us cut to the chase with the first question of our discussion:
Europe, mainly Germany, is facing issues with gas and the upcoming winter. There is inflation in both the United States and Europe. The continuation of recessions seems to be an ever-present and ongoing of recession after recession. Knowing this, let us start by considering the role that crypto-currencies can play in this ‘new world’. What do you both think of the potentialities of crypto? How can such an economic situation as the one we are in now be alleviated by crypto? Or is it possible at all?
Miquel Bassart i Loré:
Hello and thank you for the invitation. Before dwelling into the answers I want to make clear that I am skeptical about cryptos. I do not think they can ever be money substitutes or financial assets, at most they are a rare collection of digital stamps with an absurd environmental cost.
That being said, I think we should make the distinction between Blockchain and Crypto. Crypto is that: digital stamps that use blockchain, an unjustifiable amount of energy, and marketing. Blockchain is a broader concept: a technology that allows to coordinate information in a decentralized and privacy-friendly way. The uses of blockchain go beyond crypto, and it can be helpful to coordinate the payments along the global supply chain. The only benefit I see is that it overcomes the bureaucratic impediments to make transactions between Global North and Global South, but this is something that could be overcome by extending SWIFT to those countries - something that should have happened long ago.
This however is an extremely minor issue compared to the two elephants in the room: non-resilient global supply chains and supply-side constraints on energy production. These have nothing to do with a payments system that has been functioning almost perfectly since 2015 - since big central banks put forward the SWAP lines. What these two have in common is the lack of industrial policy in the last 40 decades. By delocalizing industry, the global supply change becomes vulnerable to anything that may undermine shipping, may it be COVID or war. By underinvesting in renewables - or nuclear if you like - we are just not prepared to face the inevitable shortages of fossil fuels. The gas cuts from Russia are just an anticipation of something that could not be avoided and we were not prepared to deal with anyways, so from my side, if it helps finally putting an industrial plan forward, it is welcomed.
Can Crypto, or Blockchain, help the achievement of industrial plans? I do not think so. First, the finance that an industrial plan needs must meet two criteria: elasticity and price stability. Cryptos are usually designed in a way such that supply is limited, which contradicts the principle of elasticity and consequently requires getting the cryptos from somewhere else before investing them, which slows down investment and makes it costly. Cryptos have neither a stable value, that has been the experience so far. Second, what Blockchain resolves does not outweigh its energy cost, especially if it is going to take over the current payment system. Sure, the current payments system is dollar-based - or yuan-based in many developing countries - and this might raise concern for some. But the solution to that is not changing the financial instruments that denominate the value of the others, that is just a matter of language. The solution is rather to change the relationship of power between regions by reinforcing regional cooperation and developing resilient industries there.
In Conclusion, crypto will not alleviate inflation. It might just make it worse.
Salman Sadeghi:
Hi Andrew! Hi Miquel. Thank you for this interview. First I wish you could mention some general examples of the crises we live in these days! But from a Middle East's point of view, although gas shortage could not be a problem, it is always winter! And what I think could be a more critical problem for Germany, along with the whole world, is the rise of fascism, which is one of the side effects of long-lasting recessions. I think we have some examples in history. And the German School has thought a lot about that. And you should know why Putin attacks Ukraine. You have some examples in History, and history echoes! Miquel just mentioned that it is about the shortage of fossil fuels! But there are lots of fuels here and there!
And I think although the representation of the crises is different everywhere, the roots are the same. We have the problem of the distribution of resources in the capitalist mode of economy. They argue that this is the best way to allocate resources, but we see that it is not! So I heard that Germany is about to reopen its nuclear power plants, so what about all those costs to close and reopen these resources? Especially when we see that gas and other energy resources are wasted here in the Middle East. And the same is for food! And all other products. So I mean to say that the Capitalist mode of doing the economy has failed to introduce a perfect system of distribution of resources and goods! And the next problem with the economy is the production itself. I think we need to see how destructive the currency system of production is. And we have the climate crisis over there, as a result of that. A problem that, in my belief, would not be solved by the current logic of the capitalist economy. Each actor, like China or the US, is waiting for the other players to play first! And what is their solution?
And for me, the economy is the “Production and Distribution of goods”! I mean if Crypto wants to play a revolutionary role here, it needs to deal with the mechanism of production and distribution! It would not be a change if Germany, for example, buys gas with fiat or Cryptos! When there is no change in the logic of exchange here.
APK:
So, it seems at this point let us do two things: First, Salman, if you can respond to Miguel's assertion that crypto and blockchain might only make inflation worse and share your thoughts on this statement; and as well, if there are “lots of fuels here and there” – how does this refute Miguel's proposed problem of the advance of the climate crisis and its connection with cryptos? Do you think it is possible to have a green revolution in crypto?
Now, Miquel, I am curious what your take is on how crypto and the blockchain, aside from the climate issues you have mentioned, might alleviate the issues of capitalism, if at all. So the question is more one of theory. What is the probability, and what are the consequences of crypto and blockchain changing the standard global market? As well, if you can please respond to Salman’s ideas on there being more alternatives to energy, and green energy, which seems to be in disagreement with your train of thought.
As well, a question of my own: You have both mentioned the differences between the Global North and South (Miquel) and the differences between Africa and Asia, and I assume Latin America, and the rest of the world, would be the Anglophone countries and Europe (Salman). Either in a fiat system or through a blockchain system – what general shifts in economic thought and policy should change, according to you both?
Miquel:
The first question is whether crypto and the blockchain can alleviate the issues of capitalism. We should first define what these issues are. Can crypto alleviate poverty? As a speculative investment, it is more accessible than shares or real estate, true. But poverty is about (the deprivation from) material wealth not finance per se. Finance is just the means to coordinate production decisions ex-ante and distribute ex-post. Would crypto investors, assumed to be a broader spectrum of society, gain a larger claim on material goods? I do not think so. Some reasons: first, in crypto investing, as in any other purely speculative asset as crypto is, the key is the first-mover advantage and power to influence the swings of financial markets. These powers do not lay on those who lie on the poverty spectrum; they do not manage the amounts necessary for doing so since they just do not have a pile of cash sitting around as mutual funds do. So, the first point is: I doubt crypto would lead to a better distribution of output. Second, crypto will not make the output larger. Let’s suppose first the crypto-ideal scenario where it takes over fiat. You would then have a limited amount of cryptos as opposed to the fiat system, which will restrict investment ability and reduce the ability to overcome economic downturns. This scenario is nonetheless unlikely as crypto does not have the power to overrule the U.S or China, or any other relevant fiat issuer. In such a case, crypto is just a means for speculation that would switch hands from poor to rich (as it is a pyramidal scheme), who instead of expanding the scale of production would rather re-invest the means in some other financial markets or engage in superfluous and highly damaging luxurious consumption. Conclusion: crypto is not there to solve any problem, but rather the opposite. My gut feeling: crypto will be limited to some exclusive circles with no implications for the real world and blockchain might be a technology adopted by fiat-based institutions.
About the alternatives to energy. There are of course alternative sources of energy to fossil fuels and we should scale them up since the goal is to not rely on fossil fuels any longer. However, it is not the case that we substitute the sources of energy and then we can still engage in superfluous energy usage. We live on a bounded planet, which means that we cannot scale solar panels and wind turbines ad infinitum since they also consume non-renewable resources (especially storage systems). They also have an energy cost of production that at the moment relies on carbon-emitting technologies. Sure we can and should replace our energy sources, but we should go beyond that and think about what environmental damage is socially justifiable and what is not (environmental damage being much broader than just carbon emissions). Clothes are socially justifiable, yet renewing the closet every week is not. Food is socially justifiable, yet eating meat every day is not. Transportation is socially justifiable, private jets are not. Having a functioning payments system is socially justifiable, crypto - in my opinion - is not.
About the changes in the Global North and Global South relationships. This requires much more thought than what I will write here, but I will give some hints about the direction where I think it would be beneficial (for both sides, but mostly Global South). 1) Move from a creditor to a debtor favorable system (Keynes’ Bancor idea): when a country runs into a trade surplus it is its responsibility to spend on countries that are in a trade deficit to balance the accounts, not the other way around, and countries that “save too much” should be (financially) punished; 2) transfer of technology and patents, not of cash; 3) “incubation” protectionism. Free trade has ambiguous effects and it is not clear who are the winners and losers, yet when the trade involves industrialized vis-a-vis non-industrialized countries it becomes harder to incubate an industry in de-industrialized countries; instead, temporary asymmetric protectionism could allow non-developed economies to develop their own specialized economy; 4) sovereignty and autonomy: whatever it comes about it should be the decision of the developing countries (ideally with the support of their population), whereas the role of developed nations is to support their plans; 5) break the currency hierarchy: a dollar-based system has many advantages, but I feel Global South nations are worse off. Instead, global north countries should accept global south currencies in their trades (trades based on point 1) and it would be then in their own interest to sustain the value of those currencies. By empowering Global South’s currencies - perhaps it could be 1 single regional currency that pools the value of those issued by its constituting sovereign nations -, the nations of the global south regain the tools to mobilize the resources of their economy via monetary sovereignty and become less exposed to financial crises.
Salman:
First, I think when we say that cryptos have high environmental costs, we should say in comparison to what? Who knows what are the true environmental costs of the current financial system? And I think we should be worried about a big system that runs globally but skips 2 billion people worldwide! The Unbanked! This is the worst environmental cost, I think!
More than that, I need to clarify that not all cryptos are like bitcoin. The bitcoin blockchain deploys the Proof of Work consensus algorithm which requires an enormous amount of electricity to maintain transactions. But you do not need any bank branches, clerks, or papers. And bitcoin was the first! Now there is a number of different consensus algorithms that are more energy-efficient. Ethereum for example has recently upgraded its protocol and moved to a Proof of Stake algorithm. Cardano or Solana use even more efficient consensus mechanisms than Ethereum. And developers still working on that. More than that, we should look at energy sources. Bitcoin Miners now are using the extra electricity of power plants. I am not a bitcoin believer, but I think Bitcoin’s energy problem is overblown.
And about inflation, I do agree with Miquel that Cryptos are not stable. Orthodox economics believes that inflation is the result of government intervention in the works of the monetary system! So, they advocate cutting the hands of the government from the process of money fabrication. I need to quote Friedrich Hayek, which cryptocurrency believers call the Prophet! Miquel should know Fredrich Hayek's proposal for the monetary system. In his book “The Denationalization of Money'', Hayek expressed a theoretical foundation for a regime of currency competition in which the state is no longer in power to produce money. In the economy which Hayek favors, entities and individuals are free to establish money; and the market would lead individuals to choose better currencies. The libertarian rhetoric surrounding cryptocurrency argues that cryptos can visualize the Hayekian regime of currency competition. I do not very agree that cryptos are Hayekian money. And I do not also believe that Hayekian money is possible or even desirable. But I do not agree with Miquel when he says that Crypto's supply mechanism contradicts principles of elasticity. There are many cryptos in the market with cutting-edge supply mechanisms. Remember Hayek, his sound money would only be possible when the supply takes care of day-to-day transactions, which is now available in the second, third, and fourth generations of cryptocurrencies, like Ethereum, Cardano, and so on. So, I believe that there is nothing wrong with the supply side because it can be managed by technology. You can read this link to find out more about the new supply mechanisms of cryptocurrencies. and I put a good article concerned with cryptocurrencies and the Hayekian sound money. I think Miquel understands cryptocurrencies only by bitcoin.
And about the stability issue, I need to say that everything of value in the capitalist economy is unstable in terms of price. Look at Gold! or the Stock Market! Even money! What happened to the price of one hundred euros compared to bread? or Fuel! So the roots of the boom and busts of the economy should be found somewhere else! Referring to Hayek, the price instability of commodities is not the problem of goods! It is the problem of the monetary system!
Above all, I want to say something about how cryptos can be revolutionary. And I think this is the task of philosophy! To talk about new possibilities! To show how new possibilities can emerge. I want to distinguish between the current cryptocurrency market and the potentialities of the decentralized way of governance! Which is I think the best use case for cryptocurrencies. When I say I am a fan of cryptos, I do not mean that I am a fan of bitcoin! Or I think its price would eventually hit the moon. But, I mean that there is something there for us! to think about it, to do poetry with it. Cryptos can revolutionize the hierarchical way of governing communities, and cryptos can be understood as the representation of the work of participants. So I see that with cryptos we can dream of truly democratizing working places.
APK:
Salman, what do you say about Miquel's last statement?: “My gut feeling: crypto will be limited to some exclusive circles with no implications for the real world and blockchain might be a technology adopted by fiat-based institutions.” How much truth value does it have? And in your opinion is having closed circles better or worse?
As well, Salman, can you expand on what you mean by the environmental costs of not banking 2 billion people? What are the environmental costs and how does this process happen?
Finally Salman, in Miquel’s final paragraph points to many things that can happen between the Global North and the Global South – what are your thoughts on his plans? And, how do you see that crypto can be a benefit to his ideas, and in a way that he might not see?
Adding to that, Miquel, what do you think of Salman’s first paragraph: “I think when we say that cryptos have high environmental costs, we should say in comparison to what? Who knows what are the true environmental costs of the current financial system? And I think we should be worried about a big system that runs globally but skips 2 billion people worldwide! The Unbanked! This is the worst environmental cost, I think!” What do you make of this statement?
Then, after Salman’s explanation, what are your thoughts on the potentialities of algorithms being able to have less environmental harm? Can you explain to us why you might disagree?
And finally, aside from the purely economical. What is your take on the revolutionary and political aspects of blockchain technologies and crypto? Is there a future-changing tide for those left astray by the current ‘powers that be’?
Miquel:
First of all, there are two statements there: The comparison with the energy usage of the traditional financial system and the issue of many people who don’t have access to the global payments system. About the first, it is not really a “fair” comparison – actually, there was no real comparison because he did not provide any data. But let’s suppose it is the case that the standard financial system consumes more energy. What we are talking about here is energy intensity. If crypto is to expand and take over the leading role in global finance the energy cost would massively exceed the current expenditure. What matters here is energy intensity, not absolute use. Second, of course, it is relevant to include the Global South into the payment systems, but labeling that as an environmental cost is just a lie. It is a social injustice, but not an environmental cost. And here I have 2 points: 1) you don’t need blockchain for that, you need multilateral agreements to include national banks worldwide into the core banking system (a different debate is if that is desirable; alternatively there could also be South-South payments systems); 2) the by design stickiness of crypto would just make matters worse, is some gold standard fetish that would lead to the problems that ended up in its collapse – or the collapse of Bretton Woods for that matter.
Sure there can be fewer energy-intensive algorithms and that would be an improvement. On my scale, it would upgrade from harmful to useless. I think I made that clear, I do not see the virtues of cryptos beyond a means of speculation. Linking to the last question, I am really skeptical about any revolutionary content it may have. Sure, this technology might have the potential of enabling some new actors in the scene, but to call it a “revolutionary process” is too presumptuous. There have been constant financial innovations since the 1950s and that has reduced the power of the State and increased the power of some wealthy institutions – institutional investors mainly. Is that revolutionary? Not in my dictionary.
Salman:
First, I need to say that I do agree with Miquel when he says that he is skeptical about the real applications of cryptocurrencies. As I see, most of them are just scam projects. There is no real-use application for them, and they are just speculative assets. But the point is when you apply the core idea behind cryptocurrencies, I mean the decentralization of governance into working groups, this is when you can see what are the true potentialities of them. I think I mentioned this before. There are new cryptos that use new consensus algorithms and do not use too much energy to maintain their network. So let's not talk about the energy intensity of cryptos in general and conclude that yes, they are not efficient! The problem is now solved with new consensus mechanisms.
But about the unbanked, I don't mean the “Global South” exactly by the unbanked. According to statistics, around 5 percent of US households were unbanked in 2021! It is more than 6 million people. For China, another country with one of the biggest economies, 225 million adults did not have a bank account in 2017. And, in India, it is around 200 million adults. These people are not using bank services, this is including credit cards, loans, and mortgages. I think the problem is with their legal identity: Sub-Saharan Africans, migrants, Muslims, etc. in China, and so on. So, they live the dark side of society, they rely on cash. and this is not good.
As we know, there are some countries with authoritarian political regimes, and they can easily control the mass movement by controlling the banks. So, if we want to find something revolutionary with cryptos, we need to see these problems first. I think beyond the simple acceptance or refusal of cryptocurrencies, there is something more important with them. The state and big companies can also use cryptos, and the masses, as well as pure communities, can also use them. So, I wish we can talk more about the philosophy of money, not the economics of that because as you see, economics is about realities, which Miquel well explains, but philosophy is more about possibilities, which I like more. Anyway, for me money is technology as such, and why don't we think about using new technologies?
APK:
Miquel: What is your definition of revolution and what would an economic revolution look like to you? As well, what do you think about Salman’s suggestion to discuss the philosophy of money? Can you give us a basic interpretation our some fundamentals that should be known about the philosophy of money that the readers can learn about?
Salman: The same question applies to you: what can you tell us about the philosophy of money? And, what are your interpretations and the fundamentals you understand of it?
Finally, for both of you. Let us take this shift in dialogue as a segue for a final 2-3 questions in which you share your philosophies on money and take the time to think of one central critique of the other's position and one central facet of the other’s thought you find illuminating.
Miquel:
For me, a transformation is revolutionary if it leads to 1) a change in the structure of power in favor of collectives that did not have it in any other time in history, and 2) a change in the logic of the underlying system - this could be suppressing rentierism, taking nature as a stakeholder, overcoming anthropocentrism, it can go in many directions.
Yes, the philosophy of money is a very interesting debate and I have a strong opinion about it. I am a Chartalist, which means that I understand money as a creature of the State, as an instrument to organize labor power via promises to pay. I strongly suggest David Graeber’s book “Debt: The first 5000 years”, it gives the entire anthropological basis to chartalism. Of course, the tradition is long, it goes from George Friederich Knapp with his Theory of Money in 1905 to the current - and quite successful in reaching the big public - Modern Monetary Theory (Stephany Kelton’s Deficit Myth is a bestseller indeed). John Maynard Keynes also fully endorsed the Chartalist proposition in the first 3 chapters of “A Treatise on Money” (1930). And later, in his own way, Hyman Minsky did the same with the great quote “Everyone can create money, the problem is to get it accepted”.
The Chartalist proposition argues that it is the coercive power of the State that makes money valuable, as it is the only instrument that cancels payments with the State or that are legal tender within a jurisdiction. In a capitalist economy, the State accepts private monies - such as bank deposits - to be issued as if it was public money. As a matter of fact, the relationship is always at par precisely because the Central Bank is holding accounts of private banks (see Perry Mehrling’s “New Lombard Street” 2010). But private monies are valuable to the extent that the State accepts them as such.
That is the theory, practice is a bit more nuanced, of course. First, we have inter-State relations, and not all of them hold the same power. And there is an International Monetary System that reflects the power relationship between states. First, it was gold, then it was the US dollar under fixed exchange rates, before the Global Financial Crisis it was the US dollar with flexible exchange rates and US mortgage securities, and now we are in a transition. On the one hand, we have SWAP agreements that began within the core - Federal Reserve, European Central Bank, Bank of England, Bank of Japan, Bank of Canada, and Bank of Switzerland - and has progressively expanded to the periphery via bilateral agreements with Brazil, China, India etc. The last works of Perry Mehrling explain that in detail.
Why do I believe Bitcoin or any other crypto with the same design does not have any future? Because it has no ties with the State, simple as that. As a matter of fact, crypto-enthusiasts value their assets in terms of US dollars, never in terms of the crypto itself.
Can the blockchain penetrate the sphere of “public money”? It already has, and the experiments for Central Bank Digital Currency are ongoing. Essentially that means that the deposit and payment system functions of private banks can now be done also by the State. That indeed reduces a bit of power to commercial banks who, if this experiment is successful, will no longer be “too big to fail”. However, with all the regulations post-GFC it is not clear to me that was an issue to start from. Again, no revolutionary if this does not translate into an actual change of power and logic of the organization of productive forces.
What if, after the CBDC experiment, a more democratic Central Bank engages in using finance for social purposes? Sure, that would be somehow revolutionary, at least a renewed political economy framework very much in line with what Pollin defended. But this is not a technological revolution but an institutional revolution that could have happened otherwise (at most I could grant that the technological revolution can give momentum for other things to happen).
To conclude with the philosophy of money I’d like to give a parallelism with language. Language is an extremely top-down institutional feature, just like money. Any language that does not have explicit institutional support gets relegated to the category of dialect. Languages compete in the international sphere and the cultural, economic, and military power of nations defines which is “the international language”. Bitcoin is as doomed to fail as Esperanto.
Salman:
Actually, I agree with Miguel's definition of what could be a revolution. And here is what I want to highlight about the potentialities of these so-called decentralized currencies. From my point of view, cryptos can provide a radical change in the structure of power, which could be managed in favor of collectives. They can change the old hierarchical power relations which have existed with different shapes for thousands of years. What I love about cryptos is the way that they distribute governance through their communities. They are not complete yet, but there is a lot to consider here. The decentralization of governance, if it could be truly achieved, is a revolutionary change. and of course that the logic of the underlying system needs to be changed. It was my first argument in this interview.
Let me continue with the philosophy of money and then get back to my favorite topic, revolution. Miquel mentioned David Graeber and his masterpiece “Debt: The first 5000 years”. I think it is a misinterpretation of Graeber if we say that he is a Chartalist. As Miquel mentions, Chartalists believe that money is the creature of the state. This is in fact against the whole idea of the right-wing libertarian economists that argue that the state itself is the creature of money. But I think the whole idea of Graeber in this book, along with his other economic contributions, is that money is not the creature of the state, nor the state is the creature of money. I mean I am not sure that Graeber would be a good reference for Cahratlists. Graeber's argument in this book is that money and the state came simultaneously. And it's a fundamentally different story from Chartalism. To say, Graeber is not a Chartalist, he is more an anarchist, as he himself mentioned many times. So what is the difference?
I think here we can see what can we do with cryptos to make them revolutionary. If we take the true identity of money, nor the rightist definition, nor the Chartalist, or let's say, leftist or socialist definition. The rightist interpretation of money presupposes that first it was a pure market and then money came to facilitate or reduce the transition costs. In this hypothetical story, Homo economicus, which used to do barter, or direct exchange, gradually understood the benefits of indirect exchange, and money sprang gradually as the most economic way to manage exchange relations. While, in the Chartalist or socialist story, it was the state that invented money to enforce its power or make nations or whatever. But in the Graeberian story, the state and money or market came at the same time. As I said, it is completely different story because it leads to a different ontology of money, the market, and the economy as a whole. According to Graeber, money came to quantify the mere obligation, which existed before the existence of the market and the state.
I love the comparison that Miquel did with money and language! What is the language? It is the only real, I think! language is what makes our perceptions of the world. And if we change truly the language, we can make a new world. And this is the same for money, if we truly change money, we can change the economy and as the result, society. Let's suppose that Miquel is right and cryptos are just a dialect, and for a dialect to become a language, there is a becoming process! And it requires effort and participation! If we can change the structure of the power for the benefit of society, with a different logic, according to what Miquel truly states, we can enjoy a revolution.
APK:
Alright, so as we see there is an intangible amount of discussion to have in this conversation. And this will be heading toward the end of our interview/discussion.
On the subject of money and language comparisons: it is true that what might be considered a poor language for some time might become accepted as the new standard. For example, when I work as an editor I change some ways the words are spelled, usually these changes are from British English to ‘American’ English, e.g. from ‘colour’ to ‘color’, ‘metre’ to ‘meter’, etc. I do not do this because I disclude British English. I do this because of two things: American English is probably what our readers more generally are used to and it helps me stay consistent with my own writing. Now, of course, I could not change anything, but this might make a written piece look sloppy. So, the reason for the editing, or the reason for the oversight in this way is due to two things: 1) proximity to the consumers and 2) consistency. A third factor that exists, but that I do not factor into my editing is that American English is now considered the more desired language to write/speak in among non-native speakers. Now, this can be considered a factor related to ‘proximity’ (that being of culture, money, etc. that American English is connected to), or to following a trend. I am more interested in the trend than that of language, and to continue with the comparison – the trend of money and crypto.
For example, we just saw Crypto take a massive hit in late 2022. But, speculation is out there about its new transformations. We can talk about how people spoke about how gold in California before 1849 was bullshit, that Rock ‘n’ Roll would never become popular, or that gay marriage would never be supported by the state. However, if we want to cut this cake, it seems crypto is deep enough in the world that those who want to benefit from it can. And will do what they can to do so. What do you both think about the ideas of consumption, consistency, and trend I explained to describe the philosophy of money? (This is the part where I interject to share some of my own armchair philosophizings). But, I digress.
For the idea of state sponsorship and crypto, to Miquel, while there might not be a global sponsorship or regulation I think two facts point to the idea that it is already in the state: 1) El Salvador accepted it as a formal currency, which was a failure (but from failure comes success), and 2) that in the GameStop case in the US, where there is still a big court trial happening about how the market was shorted due to a Reddit forum. Certainly, we cannot expect these actions to ever again be mimicked. And further, some speculate that crypto is not accepted in gov't yet because they do not know how to control it for themselves. So, Miquel, what do you think the government will need to happen to accept crypto as legitimate? And then, do those conditions seem ethical when considering possibilities for the welfare, development, and self-determination of people who might find themselves needing to rely on crypto/blockchain technologies?
Now Salman, on the other hand, if crypto/blockchain fails to be supportive to communities otherwise, that being from internet control, state control, etc. What alternatives are there to incentivize people to be part of such a movement? Because it does seem that crypto is something that people only get into either from three things: 1) they have the opportunity where there is not much consequence; 2) they are desperate; or 3) they are ignorant – which may be related to both numbers 1 and 2. Your question to answer is this: What steps can be made in crypto to have more people be part of the crypto world that do not fall under the descriptions of numbers 1 and 2? Meaning more specifically, how do we get people invested in crypto that is not desperate to make money nor are free of consequence? That being, people who really treat it with a marketplace dynamic.
Salman:
So, Andrew, about the language of consumption, trend, and consistency that you used to describe the philosophy of money I would love to say that we ought to consume the trends consistently! But far from being funny, I do agree that the desire for a new monetary regime within the capitalist economies is itself a capitalistic desire. If you go through the history of money you will see that the monetary system periodically moves between credit money and commodity money. Mentioning Graeber, it would be interesting to say that virtual money is not something new at all, as the primary form of money was virtual, without having any symbolic physical representative. And this virtual monetary system was backed by an ethical agreement within primitive communities, which Graeber calls mere obligation. And then with the expansion of primitive communities some physical objects came as symbolic representations of that mere obligation. Empires need coins. I don't want to describe the genealogy of money here but all I want to say is that we used to have a virtual monetary system and according to Graeber, it was a more peaceful monetary system in many ways. Following Graeber's argument, in the time of peace and stability we used to have credit-based monetary systems and in the time of instability and war, we turned to using commodity-based monetary systems. So this is the trend, Andrew! Now, in my view, the time has come to witness the collapse of the existing monetary system, which is a credit-based monetary system. And it is not only an idea of mine, many economists have warned about the fate of the existing international monetary system. So, now it seems that history repeats itself. There can be seen as a general tendency, especially among right-wing libertarian economists, for turning back to the gold-backed monetary system. Commodity money again! Maybe this time with digital gold, something like bitcoin. But the thing is that there were some problems with the commodity-backed money as well! What should we do then? To consume the trend of money or to affect the trend? This is why I think we need to problematize the idea of cryptos.
And about your second question, we can not expect too much from people. They are desperate already as we are suffering from a harsh economic situation, inflation, and stagnation at the same time, which economists referring as stagflation. I want to put the responsibility on the state side as they are the blame for this situation. A typical Austrian argument may put the blame on the government’s intervention and argue that if government stops its intervention, stagflation would correct itself. In my belief, the situation today seems more like the economy is suffering from a negative supply shock, and the government's demand-side policies would not be helpful. So, I mean, manipulating interest rates and pumping money into productive sectors would not work anymore. Following F. A Hayek, I do believe that government should stop its fiscal and monetary interventions at the first step, but it doesn’t mean that they have no responsibility at all. It’s true that crises like stagflation may cure itself through time, but they have devastating consequences, mostly on the most vulnerable part of the economy. So, Government revenues and taxes should be directed to those who are affected the most. it could happen through developing supportive social programs. In this sense, instead of supporting failed economic sectors, the government should lubricate the process of transition. A positive shock on the supply side may come with an institutional change in the economic sectors or as a fundamental paradigm shift in the relation of production. Crises are always like that. They bring fundamental paradigm shifts in the way that the economic and social institutions operate. In this way, the government should support innovations and deregulate the economy in order to shorten the time-consuming process of self-correction of the crises.
Miquel:
About what it takes for a (powerful) government to legitimize cryptos as means of payment to the extent that citizens could pay taxes and fines in cryptos, or the Central Bank holds cryptos in their assets, I would say there are 2 answers, depending on what the question specifically is. If the question is about what it takes for governments to actually do it, it just takes some historical coincidence of having convinced people holding powerful positions to put it in place, as it is the case of El Salvador. Now, in the case of the US or the EU, much more people would need to be convinced since more interests are intertwined, yet this is basically what it takes. What their convincement depends on is something that only the chaotic dwellings of history know. There is more of a cultural war (sort to speak) there than any real reason to push crypto forward.
However, if the question is what needs to happen for governments to have as a best - or at least satisfactory - solution to take crypto on board I think it should be to re-define cryptocurrency as just another State apparatus that is managed and maintained by a public authority, which of course is against the definition of crypto. Moving to a non-reliant (by a central bank) currency means losing monetary sovereignty, which is something I would not recommend to any country, with perhaps the unlikely case (unlikely for a big economy such as the US, Canada, Switzerland, Japan etc.) that the currency has reached a “failed state” status and nobody is really willing to use it anymore.
Concerning the ethical issues of adopting crypto as it is today, I think that moving towards crypto is indeed irresponsible for monetary sovereignty - what ensures the ability of the State to meet payments - is given away to the relevant actors of this seemingly ethereal institution named “the markets”. These are mutual funds and banks, of course. My feeling is that something that would de-power even more developing nations is being sold as their salvation. This, of course, I deem unethical.
APK:
Alright, so before we end. Thank you both very much for agreeing to do this interview/discussion. We have some final questions, that might seem simple, a tad simplistic, but, nonetheless, a good way to wrap up. The following questions are for both of you:
The World Economic Forum was held this past couple of weeks. What should people understand about this power from your perspective? Should we be worried in any capacity about this organization? If so, why? And, what should be done?
Like many people in the world, if one does not have capital, assets, resources, an income where they can save, commodities, etc. That is, no way to accelerate themselves economically within either fiat or crypto methods, what is the best way to earn? If there is none, does that mean that the poor are destined to, or, is there a way out?
What are your takeaways from each other's responses and perspectives? I.e. what do you think are the pros and cons of each other’s style of thought?
Again, thank you both very much.
Salman:
As all may know, The World Economic Forum is a lobbying and non-governmental institution founded by the german economist Klaus Schwab. Seemingly, the aim of the WEF is to "improve the state of the world by engaging business, political, academic, and other leaders of society to shape global, regional, and industry agendas". The WEF is a place for business elites to discuss world economic challenges. The WEF receives much criticism for its lack of financial transparency, non-democratic institutional construction, and decision-making. some may argue that The WEF is the new private alternative for the United Nations to move the world towards a privatized global governance. There exist lots of, let's say, conspiracy theories about the WEF and I don't mean to discuss them here but I want to use the opportunity of talking about The WEF to express my belief on how is the existing idea of global governance, I mean the neoliberal way of governance. Maybe then, I can wrap up with how I think cryptos can problematize the very basic foundations of the Neoliberal idea of governance.
Since the discovery of the Uncertainty Principle in quantum physics by Werner Heisenberg in 1927, which asserts that, at the quantum level, it is not possible to measure the position, mass, and momentum of particles at the same time, the predictive promise of science went under question. The uncertainty principle showed the limits of knowledge to predict the outcomes of an event. According to David Chandler, the effect of the uncertainty principle in social and political sciences was the fall of the classical modernist approach to governmentality and the emergence of a new method of governmentality which we call today neoliberalism. Neoliberalism, as the existing global way of governance, accepts the complexity of life, the unpredictability of the outcomes, and the unknown, as the object of governance and rejects the liberal modernist premise of governmental reason, which asserts that scientific knowledge provided by the government, central authorities, with the full ability to control and direct policy outcomes. In my view, Neoliberalism can be understood as the breakdown of modernist linear cause-and-effect assumptions of governance. So the world is complex, it is unknown, and it is not possible to direct it by top-down policymaking. I want to call Hayek here again as he is supposed to be the father of neoliberalism by many. From Hayek’s point of view, it is not possible for the government, Central Authorities, to access the knowledge of complex reality, the object of governance, and the unknowns. For him, it is only through prices that the plural reality of complex life would be revealed and one can understand how to adapt to this reality and learn through it. So considering that, philosophically, cryptos at first look promote Hayek's notions of Neoliberalism: Let's cut the hands of the government, a top-bottom system of policy making in the process of money fabrication, and appreciate the complexity of life and the unknown.
But, according to many including David Chandler, this methodological shift in understanding life, as the object of governance, from a liberal modernistic approach to governance to Neoliberalism happens at the epistemological level and not at the ontological level! In Neoliberalism, life is complex, but it is still governable, not by the top-bottom approaches, like the modernistic liberal approach, but by the bottom-up approach which is market and price indicators. To say that in neoliberalism, life is complex, but it is simple, I mean it is a simple complexity.
But for many, including me, accepting life as a complex object of governance requires a different understanding of the meaning of complexity. Here Life is complex and it is not simple! Chandler calls it the ontology of The Emergent Complex Life! Life is unknown and it is not possible to know it! so please keep in mind that for neoliberalism, life is unknown, and we know it! and for liberalism, we can know how is simple life!
But, the question would remain as to how one can encounter life, as the emergent complex phenomenon, the unknown object of governance, at the ontological level and not at the epistemological level like Neoliberalism. Then we can see how we can introduce a radical interpretation of cryptos, rather than the neoliberal narrative. I know that many things remain unclear here but I hope that readers would notice how cryptos can promote at first look the fundamental notions of the neoliberal way of governmentality! but how we can go further and develop them toward a postliberal way of governmentality. For those who are interested to read more, they can follow Brian Massumi, Erin Manning, Creston Davis, Erik Bordeleau and many who are trying to introduce a new narrative of cryptos which is Post-Liberal and not Neoliberal! I think we are practising that at the GCAS community. I think it is a post-liberal way of governance!
And at the end, I really enjoyed discussing my thoughts with you and Miquel. I think Miquel sees the problem from an economical point of view and me from a philosophical point of view. I think economists deal with the realities and philosophers with possibilities. I think readers would find so many interesting ideas about cryptos here.
Miquel:
I regret to say that I am not well-informed about the World Economic Forum, and therefore, I do not feel equipped to provide a comprehensive answer to this question. However, it is worth noting that the WEF does not possess any direct political authority, and any impact it has is derived from soft power or indirect influence. The effectiveness of this indirect influence remains unknown to me.
Regarding the second question, there are numerous factors that contribute to individual economic prosperity, and I am hesitant to offer specific advice on any one investment over another. Wealth can be accumulated through stock investments, real estate holdings, entrepreneurship, or investing in one's own skills to secure a well-paid job. It is crucial to manage expenses at all stages, and I would recommend people be risk-averse and only invest in areas that they fully understand.
I also enjoyed the discussion with Salman. We held divergent opinions regarding what cryptocurrencies can offer the world, with me being skeptical and Salman seeing the potential for changing power structures to provide greater financial access to previously excluded groups. Perhaps this disagreement is due to our different approaches to the problem. I would also note that my tendency to support state intervention and oversight of the economy as a means of empowering society contrasts with Salman's leanings towards anarchist principles. Overall, I believe readers will find a diverse array of views on how cryptocurrencies may shape power dynamics in the future, which can enrich their own opinions.
Cover photo credit to Chris Curry and Kobby Mendez