Bitcoin – finally, fair money? Nope.

Systematic enmity of interests, exclusion from social wealth, subjection of everything to capitalist growth – that is what an economy looks like where exchange, money and private property determine production and consumption. This does not change if the substance of money is gold or Bitcoin. This society produces poverty not because there is credit money but because it is based on exchange, money and economic growth. The libertarians might not mind this poverty, but those who discovered Bitcoin as a new alternative to the status quo perhaps should.

By The Wine and Cheese Appreciation Society of Greater London and Scott Len, 21 February 2012

bitcoin-225[…]

In fact, it is consensus in the economic mainstream that co-operation requires money and the Bitcoin community does not deviate from this position: ‘A community is defined by the cooperation of its participants, and efficient cooperation requires a medium of exchange (money)…’’vii Hence, in their perspective on markets, the Bitcoin community agrees with the consensus among modern economists: free and equal exchange is co-operation and money is a means to facilitate mutual accommodation. They paint an idyllic picture of a ‘free market’ whose ills are attributed to misguided state intervention and sometimes the misguided interventions of banks and their monopolies.viii

[…]

This systemic production of circumstances where one party’s advantage is the other party’s disadvantage, also produces the need for the state’s monopoly on violence. Exchange as the dominant medium of economic interaction, and on a mass scale, is only possible if parties in general are limited to the realm of exchange and cannot simply take what they need and what they want. The libertarians behind Bitcoin might detest state intervention, but a market economy presupposes it. When Wei Dai describes the online community as:

a community where the threat of violence is impotent because violence is impossible, and violence is impossible because its participants cannot be linked to their true names or physical locations.xv

he not only acknowledges that people in the virtual economy have good reasons to harm each other but also that this economy only works because people do not actually engage with each other. Protected by state violence in the physical world, they can engage in the limited realm of the internet without the fear of violence.

The fact that ‘unbreakable’ digital signatures – or law enforced by the police – are needed to secure such simple transactions as goods being transferred from the producer to the consumer implies a fundamental enmity of interest of the parties involved. If the libertarian picture of the free market as harmonious co-operation for the mutual benefit of all was true, they would not need these signatures to secure it. The Bitcoin construction – their own construction – shows their theory to be wrong.

Against this, one could object that while by and large trade is a harmonious endeavour, there is always be some black sheep in the flock. In that case, however, one would still have to inquire into the relationship between effort (the police, digital signatures, etc.) and the outcome. The amount of work spent on putting those black sheep in their place demonstrates rather vividly the expectation is that there would be many more without these countermeasures. Some people go still further and object on the principal that it’s all down to human nature, that it’s just how humans are. However, by proposing such a view, one first of all agrees that this society cannot be characterised as harmonious. Secondly, the statement ‘that’s just how it is’ is no explanation, even though it claims to be one. At any rate, we have tried above to make some arguments as to why people have good reason to engage with each other the way they do.

[…]

But what is a forgery and why is it so bad that so much effort is spent, computational resources wasted, in order to prevent it? On an immediate, individual level a forged bank note behaves no differently from a real one: it can be used to buy stuff and pay bills. In fact, the problem with a forgery is precisely that it is indistinguishable from real money, that it does not make a difference to its users: otherwise people would not accept it. Since it is indistinguishable from real money it functions just as normal money and more money confronts the same amount of commodities and as a result the value of money might diminish.

So what is this value of money, then? What does it mean? Purchasing power. Recall, that Alice and Bob both insist on their right to their own stuff when they engage in exchange and refuse to give up their goods just because somebody needs them. They insist on their exclusive right to dispose of their stuff, their private property. Under these conditions, money is the only way to get access to each other people’s stuff, because it convinces the other party to consent to the transaction. On the basis of private property, the only way to get access to somebody else’s private property is to offer one’s own in exchange. Hence, money indicates how much wealth in society one can get access to. Money measures private property as such. Money expresses how much wealth as such one can make use of: not only coffee or shoes but coffee, shoes, buildings, services, labour power, anything. On the other hand, money counts how much wealth as such my coffee is worth: coffee is not only coffee but a means to get access to all the other commodities on the market: it is exchanged for money such that one can buy stuff with this money. The price of coffee signifies how much thereof. All in all, numbers on my bank statement tell me how much I can afford, the limit of my purchasing power and hence – reversing the perspective – from how much wealth I am excluded.

[…]

In summary, money is an expression of social conditions where private property separates means and needs. For money to have this quality it is imperative that I can only spend that which is mine. This quality and hence this separation of need and means, with all its ignorance and brutality towards need, must be violently enforced by the police and on the Bitcoin network – where what people can do to each other is limited – by an elaborate protocol of witnesses, randomness and hard mathematical problems.

[…]

Capitalist enterprises invest money to make more money, to make a profit. They buy stuff such as goods and labour power, put these ‘to work’ and sell the result for more money than they initially spent. For a capitalist enterprise, money is a means and more wealth – counted in money – is the end: growth.

If money is a means for growth, a lack of money is not a sufficient reason for the augmentation of money to fail to happen. With the availability of credit money, banks and fractional reserve banking, it is evident that this is the case. However, assume, for the sake of argument, that these things did not exist. Even then, at any given moment, some companies have money which they cannot spend yet while other companies need money to spend now (to buy new machines, say). Hence, both the need and means for credit appear. If growth is demanded, having money sitting idly in one’s vaults while someone else could invest and augment it is a poor business decision. This simple form of credit hence develops spontaneously under free market conditions.

Furthermore, under the dictates of the free market, success itself is a question of how much money one can mobilise. The more money a company can invest the better its chances of success and the higher the yield on the market. Better technologies, production methods, distribution deals and training of workers, all these things are available – at a price. Now, with the possibility of credit the necessity for credit arises as well. If money is all that is needed for success and if the right to dispose over money is available for interest then any company has to anticipate its competitors borrowing money for the next round of investments, rolling up the market. The right choice under these conditions is to apply for credit and to start the next round of investment oneself; which – again – pushes the competition towards doing the same. This way, the availability of money not only provides the possibility for credit but also the basis for a large scale credit business, since the demand for credit motivates further demand.

Even without fractional reserve banking or credit money, e.g., within the Bitcoin economy, two observations can be made about the relation of capital to money and the money supply.

If some company A lends some other company B money, the supply of means of payment increases. Money that would otherwise be petrified into a hoard, kept away from the market, used for nothing, is activated and used in circulation. More money confronts the same amount of commodities, without printing a single new banknote or mining a single BTC. That means: the amount of money active in a given society is not fixed, even if Bitcoin was the standard form of money.

Instead, capital itself regulates the money supply in accordance with its business needs. Businesses ‘activate’ more purchasing power if they expect a particular investment to be advantageous. For them, the right amount of money is that amount of money which is worth investing. This is capital’s demand for money.

[…]

Systematic enmity of interests, exclusion from social wealth, subjection of everything to capitalist growth – that is what an economy looks like where exchange, money and private property determine production and consumption. This does not change if the substance of money is gold or Bitcoin. This society produces poverty not because there is credit money but because it is based on exchange, money and economic growth. The libertarians might not mind this poverty, but those who discovered Bitcoin as a new alternative to the status quo perhaps should.

More on Mute: We gladly feast on those who would subdue us


  2 comments for “Bitcoin – finally, fair money? Nope.

  1. April 3, 2013 at 8:46 pm

    This was a highly interesting post. A few thoughts follow below which have already been percolating in my mind – some of what you see below, which I wrote, has recently made its way to print in a local free newspaper… parts of the article I wrote are in quotes below.

    “…there are moments throughout history, where what you develop, require you tear down or abandon something first. That’s not an easy process – no matter what you are doing – when it implies a change in your status quo or a systemic change in “the way business is done.” Realizing the benefit of networking, when bridge building with familiar and unfamiliar allies and resources, involves some tearing down and closure, to ensure the benefit is fully realized for “where” you are going in this process.”

    “…I thought I would cover how people are misled by money as value, and how alternative currencies can serve as a bridge while people function within existing systems. But rather than me yammer on about the values part of this post, I ask that as you read this, you consider (or reconsider) your own ideas about the inherent value of the person, have a conversation with your family and friends about how we can shift our perspectives: not just how we can talk about alternative currencies or the latest trendy techno bridge to the next system, but talk with your family and friends about how can we shift our perspectives about value itself, and on a fundamental level I ask you to re-evaluate or think personally about the inherent value of human life rather than remain with the common assumptions, as people often equate or “value” human beings based on jobs, social status, money and so on. I won’t assume that you have these common assumptions, but they are very easy to get stuck in our heads since so many people do rely on the use of money and it’s easy to make nearly unconscious analyses and judgments of people based on… money. These are important conversations for you to have, to consider and re-evaluate these possible assumptions. Instead of equality or inequality being examined in terms of income (which is to say, money), I want (you) to examine, how can we look at equality more generally — what principles can we look at to treat each other better, which is to say, more equally on fundamental levels, and what are the underlying principles we can use to do so.”

    “…Though the above is important, on the other hand, I also present recent developments in alternative currencies and provide you with some links to evaluate on your own…”

    (followed some links to bitcoin, VPN, bitcoin, etc)…

    “…Are there other alternatives besides virtual currencies? Yes, example: If you exchange your hour (or goods) for someone else’s hour, this is hOURbanking; you can give a service to earn “time credits…””
    https://hourworld.org/ in US | See also http://www.timebanking.org/ (UK) and hourbank.org (? under development).
    [[ NOTE: as you will see from hourworld.org, there are at least ‘6,841 hOurworld members in 89 hour banks (that) have provided and received 589,873 hours of service,’ it is not known when these stats were last ‘current’ and is assumed they are constantly increasing. The hOURbank group where I live is a member of hOurworld and is growing, for example. ]]

    This brings us to TATA and centralized vs. decentralized economies, first, TATA is a saying that David Cobb of Move to Amend chooses to use, who says, responding against the (Margaret Thatcher) TINA (There Is No Alternative) concept, “TATA!” which means, There are Thousands of Alternatives! and it’s true, there are always (at least) thousands of alternatives, and infinite possibilities.

    Unfortunately, under any system, there’s always greed and some sort of rampant human (self) interest. As anyone knows who has even marginally studied the history of the corporation state, the corporations as we now know them, at least in the United States, couldn’t even be brought into existence without an act of Congress… well, that was a long time ago, now anyone can bring a corporation into being quite quickly for really anything, and whether we are talking about the past or present, the corporation or the person, serving the public interest seems to have gone out the window. Somewhere along the line, people started equating people to profit. And before long, people reasoned, “Well, let’s print money, and concentrate wealth in central banks, that’ll solve our problems. Problem solved!” That didn’t work out so well. Fast forward. Now we are hearing, “Well maybe if we redistribute income, we’ll solve the problems that go along with the problems that have been created.” So if your person-dollar or person-euro is “equalized,” problem solved! Don’t think so, the problems go deeper. The problem is, that we equate each other, and our time, and energies, to money. And that people want to rely on a ‘government’ (which is to say, a type of corporation, or a corporation state) to do this. These are some real problems with societal attitudes today. Bitcoin, litecoin, and similar instruments are a bridge to a future (I hope) where people will have a much greater increase in awareness that we don’t need to be constantly exchanging and speculating and currency hedging and playing with derivatives (even in a decentralized way), because we don’t need to directly or indirectly equate, correlate, correspond, or in any way associate the value of the human being with money ~ which almost every single one of us is now currently using all the time! Human life has an intrinsic value. Our relationships are the ultimate technology, as I’ve said before. As someone who has a strong libertarian streak, but who has been around the world helping others who suffer needlessly, I don’t see the logic in a statement that says “The libertarians might not mind… poverty, but those who discovered Bitcoin as a new alternative to the status quo perhaps should.” We do need to help others, but to make assumptions about others in society is one of the problems we face. And I don’t see anything wrong with economic growth, but I do see a problem with a society that sees the sharing of information as criminal — and sees education as a debt to be paid. What if I told you the next virtual “bridge” currency to the new system that awaits us will be every single act of sharing itself? That it could not be measured or attributed to a person, but only had the benefit realized once it has manifested itself in a larger society – much as how it is impossible to discern which sardines are “more” or “less” contributing to the school’s turning in the water? Imagine sharing as a currency that is not a currency, because people want it to be so. Think of information available freely everywhere. Information is hard currency. We should all have equal access to that. And we can.

    And now I’m really rambling, so I’ll stop.

    Cheers (and solidarity)

    @AnonyOdinn

    • silvergrim
      April 14, 2013 at 8:07 am

      Thanks, great rambling! Also, Bitcoin Anyone? (more rambling)

      As for why “economic growth is bad”? Not always. It depends.

      Economic Growth Theories – Costs of Growth – Who pays? (I am lazy, just nicked and adapted these cos they sum it up rather well):

      ‘Growth is good, recession is bad’. This is the standard view of economic growth, and it tends to be treated as the Holy Grail of economic policy. However, it may not always be good. Possible costs of growth include:

      Inequality of income – growth rarely delivers its benefits evenly. It often rewards the strong, but gives little to the economically weak, where “economically weak” means “weak according to perceived value of production”. This will widen the income distribution in the economy.

      Pollution (and other negative externalities Look up Negative Externalities in glossary) – the drive for increased output tends to put more and more pressure on the environment and the result will often be increased pollution. This may be water or air pollution, but growth also creates significantly increased noise pollution. Traffic growth and increased congestion are prime examples of this.

      Loss of not-easily-renewable resources – the more we want to produce, the more resources we need to do that. The faster we use these resources, the less time they will last. Earth can not replenish these resources as fast as the current growth economy uses these resources.

      Loss of land and water – increased output puts further pressure on the available land and available fresh water. This erodes the available countryside and what is left of indigenous lands and nature all over the planet, even when in local lifestyles the land lived on and from, can not be owned. Then on top of that, do-gooding (inflicting help) is applied, pretending these people are “poor” because they are not “adapted to the system” enough to “make a living”.

      Lifestyle changes – the push for growth has in many areas put a great deal of pressure on individuals. This may have costs in terms of family and community life.

Leave a Reply

Your email address will not be published. Required fields are marked *