The Cantillonian Oligarchy: Why the Left Should Embrace Bitcoin
Our system is rigged
Wealth and income inequality are as bad as they’ve ever been. Over the last 30 years, the wealthiest one percent of Americans have seen their share of total net worth rise by eight percent to 31.4 percent, while the bottom 50 percent hold only two percent, about two percent less wealth than they had three decades ago. Wage changes from 1979 to 2019 paint an even more desperate picture. According to the Economic Policy Institute — an independent, nonprofit, unionized think tank — the top one percent and the top 0.1 percent of earners had their annual wages grow by 160.3 percent and 345.2 percent respectively over the last 40 years. The bottom 90 percent of all workers only experienced a 26 percent hike in the same period.
This has happened, and will only worsen with time, because the U.S. dollar and other sovereign currencies have been manipulated to benefit a select group at the expense of the rest of the world. As this “Cantillonian Oligarchy” gorge themselves on a mathematically-guaranteed supply of cheap money, the working and middle classes watch as the value of their time and labor is printed into oblivion.
Bitcoin fixes this.
Bitcoin is a revolutionary new tool for progressives, Democratic Socialists, and leftists of all stripes in the fight to:
- Combat climate change and end the reign of fossil fuels
- End corruption and forever wars
- Fix wealth and income inequality and build financial inclusion
- Increase transparency
But first: What is the “Cantillonian Oligarchy”?
The Cantillonian Oligarchy is a novel term that describes a worldwide power structure built on cheap money, corruption, and centralized control: central and investment banks, wealthy politicians, mega-cap corporations, major fossil fuel producers, predatory lenders, for example. The term comes from an economic phenomenon called a Cantillon Effect, first elucidated by 18th-century economist Richard Cantillon, which describes a “change in relative prices resulting from a change in money supply”. This means that those who have first access to newly-printed cash can acquire resources more cheaply than those who don’t before prices adjust to match the change in money supply. This allows entrenched politicians and institutions to further entrench themselves and consolidate their power as they have a perpetual first-mover advantage by virtue of standing closest to the printer and, in the case of politicians, being able to operate it.
One possible solution to the problems posed by such an organization is to topple the existing state, abolish private property, and nationalize all resources. Indeed, authoritarian communism emerged as the primary alternative to U.S. dollar primacy following World War II, offering a fairer and more equitable society by taking the power out of the hands of the few and returning it to the many. The result instead has — on every occasion — been the few taking the power out of the hands of the many by running their own Cantillonian oligarchy, albeit more consolidated than before.
Bitcoin delivers on the promise of restoring power to the rightful wielders: the people.
What is Bitcoin?
Bitcoin is an entirely new monetary system. Each coin, or fraction of a coin (yes, you can own a fraction of a bitcoin, called a satoshi) is a bearer asset that allows entities to exchange value and settle payment anywhere in the world without permission or gatekeeping from a third party. This decentralized, programmatic, fixed-supply, peer-to-peer monetary system is self-contained and only interacts with fiat currencies (USD, EUR, JPY) and other cryptocurrencies through exchanges. Instead of a central entity, it’s governed by an overwhelming consensus of the hash (computing) power that supports the Bitcoin network. Bitcoin exists on an immutable, distributed public ledger secured by cryptography called a blockchain. Anyone may explore the blockchain and examine any transaction; anyone may run a Bitcoin node, a small computer that downloads the up-to-date blockchain and verifies transactions as they travel through the network.
Blocks contain groups of transactions. Each bitcoin miner — a computer run by an operator — competes to solve a complex mathematical equation, known as a zero-knowledge proof, before the other miners can. The first miner to find the answer is authorized by the protocol to mine into existence a new block that is permanently stored on an ever-growing chain of blocks filled with transactions. The energy expended to solve the equation is their proof-of-work, meaning that someone who tries to fake a new block of transactions wouldn’t have solved the zero-knowledge proof or used the energy necessary to prove their work, and would therefore be rejected by the network. A new block is created approximately every ten minutes. A miner operator’s reward for mining a new block is, as of June 2021, 6.25 bitcoin (BTC). Every 210,000th block triggers a “halving” of the BTC reward for success, keeping issuance of new coins on a programmed schedule instead of being subject to the whims of a central authority that can print money whenever they decide. Roughly 687, 590 blocks have been mined thus far; the block reward will decrease from 6.25BTC to 3.125BTC when block 840,000 is mined. Because of the ~four-year halving cycle, the last bitcoin isn’t projected to be mined until about 2140.
Bitcoin has a maximum coin supply of 21,000,000BTC. This prevents an arbitrary change in the total money supply that would corrupt Bitcoin’s digital scarcity. The approximate circulating supply, as of June 2021, is 18,730,000BTC.
Isn’t Bitcoin an environmental catastrophe?
No. It’s quite the opposite, actually. Yes, Bitcoin uses energy. But it’s important to remember that energy use is not equivalent to carbon emissions. The primary goal of climate crisis activists and proponents of the Green New Deal (GND) is to shift the entire globe from fossil fuel dependance to a fully renewable-powered grid. Importantly, it’s not about reducing energy usage, but changing the source of that energy. This is key to widespread adoption of technologies like electric vehicles and rooftop solar panels. In order for society to function, we must expend energy. Therefore, utilizing renewable energy sources to create value and wealth is within the mandate of the GND. Power production must be sustainable over time for the GND to be a success.
Bitcoin incentivizes the pursuit of cheap, renewable energy. Bitcoin miners use energy to run complex equations that cryptographically secure the Bitcoin network. Proof of that energy consumption (proof-of-work) is locked into the protocol upon creation of a new block. No matter what it costs a miner operator to power their equipment, they will receive the same amount of BTC. This creates an incentive for miner operators to find the cheapest possible energy source. A September 2020 study of proof-of-work miners published by the University of Cambridge found that 76 percent of miners used renewable sources in their energy mix, with about 39 percent of global bitcoin mining being powered by renewables, outpacing the U.S.-at-large, which only generates 20 percent of its power from renewables.
Energy is not fungible. Fungibility is the ability for one thing to be interchangeable with another of its identical type. The U.S. dollar is an example: each common dollar in circulation is worth exactly as much as, and is therefore exchangeable for, any other common dollar in circulation. It’s not easy — or not possible, in many cases — to transport energy over long distances. If it were, we would be incentivized to move energy generation away from population centers where renewables, especially hydroelectric, can be better taken advantage of.
Bitcoin is that incentive. The Bitcoin protocol converts energy into bitcoin, a store of value. That store of value can be sent anywhere in the world. The process only requires an internet connection, which in the age of satellite internet is possible anywhere, and a power source. In many cases, stranded or curtailed energy — energy that would otherwise never make it to the grid — is being utilized by bitcoin miners in places where energy is plentiful, but opportunities to use it are not. This also incentivizes investment in harnessing renewable sources, leading to innovation and reduced costs over time and speeding us down the path to self-sovereign energy production.
The International Brotherhood of Electrical Workers (IBEW) — the union that represented Senator Elizabeth Warren’s 2020 presidential campaign staff when they unionized — issued a memorandum of opposition against a bill in the New York State legislature seeking to impose a moratorium on granting new permits, or renewing current ones, for “electric generating facilities supplying cryptocurrency mining centers in New York that use the common method of ‘proof-of-work’ to validate financial transactions.”
The IBEW declared that: “While relatively new, cryptocurrency is becoming increasingly mainstream as a payment method and financial investment. These currencies are global and mining centers are a key element of digital currency security. The technology that drives energy consumption at the centers is likely to be adopted by traditional financial institutions and even national governments in the near future due to its inherent security. The bill fails to take into account the valid benefits of the technology behind the industry. New York should be embracing emerging technology, financial security and the job opportunities — for our members and new apprentices in construction and operations and the high-tech jobs this industry brings to communities throughout the state.”
Bitcoin realizes the mandate of the Green New Deal to create sustainable green jobs, incentivize a switch to renewable energy sources, and build wealth for the working and middle classes.
The petrodollar is the system by which the U.S. dollar cemented its status as the world’s reserve currency after we de facto abandoned the gold standard in 1973 and legally ended it in October 1976. It refers to the 1974 arrangement brokered between the U.S. and Saudi Arabia, led by President Nixon and Crown Prince Fahd, respectively, for Saudi Arabia to sell oil in U.S. dollar denominations and purchase U.S. debt in exchange for the U.S. protecting and arming the Saudi government. The other OPEC (Organization of the Petroleum Exporting Countries) nations, including Qatar and United Arab Emirates, got onboard with the petrodollar standard in 1975, denominating roughly 80% of the world’s oil reserves in U.S. dollars.
Breaking the world’s dependance on fossil fuels is a bigger task than building renewable energy infrastructure, shuttering fossil fuel corporations and prosecuting executives, or passing the Green New Deal and employing millions of Americans in green jobs. The U.S. dollar and oil have a mutually beneficial relationship.
Bitcoin does not have ties to Saudi oil or U.S. weapons. Bitcoin incentivizes miner operators to seek out untapped renewable energy sources that can create wealth without warming the planet because they want to get the most value possible from each bitcoin mined.
On Fixing Wealth and Income Inequality and Building Financial Inclusion
When your financial system is the only game in town and under your control, it’s easy to rig things in your favor and get away with it. The concept of “too big to fail” is essentially a mandate for investment banks to assume a great deal more risk than would be prudent or logical because the U.S. government and the Federal Reserve want growth and have proven their willingness to step in and stop a potential debt spiral from unraveling. It’s an unfair advantage for the wealthy and entrenched, and it occurs at the expense of everyone else.
Modern Monetary Theory (MMT) is the macroeconomic theory that sovereign states which control their own currency are only constrained in their spending or borrowing by the availability of hard resources. The state’s central bank can always print money — issue new debt — to fund itself, pay coupons, and settle maturing debts, theoretically making default impossible.
Proponents of MMT point to the U.S. and Japan as evidence that massive debts and economic stability aren’t mutually exclusive, that increasing the money supply can be done with minimal debasement of the currency because everyone participating in the system wants the currency that the central bank is printing.
But what if they didn’t want it?
Bitcoin is the first monetary system designed to separate money and state. Its open source, proof-of-work architecture and distributed ledger prevent a small group of people — elected and/or unelected — from co-opting the system to serve their agenda and inflate away the value of your time and effort. There is no central money printer constrained only by the fiscal and monetary policies of the moment; a fixed amount of new bitcoin per block is issued to any miner that meets the computing demands of the protocol and provides security for the network.
Medicare for All, the Green New Deal, and other cash-intensive government programs that have become imperatives because of the Cantillonian Oligarchy’s mission to redistribute wealth to the top may have had a chance at long-term success before the invention of Bitcoin, but the fact that an alternative to limitless printing, compounded inflation, and a growing mountain of debt is beginning to see global adoption is a true game changer.
But how could curtailing a government’s ability to finance assistance help more than hurt?
A system of infinite printing can only sustain itself if demand is also infinite. Any challenge to the U.S. dollar’s primacy over the last 50 years has been met by a response from the world’s most powerful and well-funded military (spoiler alert: it’s the U.S.) or harsh economic sanctions. There’s no need to reign in spending when the U.S. government can mandate U.S. dollar hegemony. Yes, currencies such as the Euro and the Japanese yen are widely used and enjoy a relative strength, but as of the end of 2020, U.S. dollars made up 55 percent of total foreign exchange reserves in central banks across the world.
Adoption of a worldwide Bitcoin standard would mean that sovereign states couldn’t print their own currency without debasing its value against Bitcoin, de-incentivizing boundless printing as a viable monetary policy. And while the inability to cheaply print money at will would make executing large government programs much more difficult, it would also protect us from financing forever wars, from stuffing the pockets of big banks and their wealthiest clients, and from cheap money flowing to industries and businesses that accelerate climate change and refuse to treat their employees with dignity.
Our current financial and political systems have made the rich richer, the working class poorer, and endeavored to convince the middle class to blame the most vulnerable or the most radical for society’s problems instead of the system itself.
Bitcoin is a fairer, more equitable system that prevents the Cantillonian Oligarchy from stealing the value of money from everybody else.
Bitcoin works because of blockchain technology. Can Bitcoin be used for anything else?
Yes! One of the benefits of blockchain-based record keeping is transparency. Each transaction has a unique identifier, allowing users to verify not only their transactions, but any transaction on the entire blockchain, with transactor information cryptographically secured by 136.466 EH/s (exahashes per second), meaning the Bitcoin network’s combined computing power completes about 136.466 quintillion computations per second. This revolutionary combination of transparency and security has the potential to breathe new life into democracy. I’m talking about voting validated by the Bitcoin blockchain, and an organization called TrueVote is working to make it a reality.
Voters would log into an app, submit their ballot selections, have their identity and choices secured by cryptography, and receive a copy of their voting transaction and a link to a blockchain explorer program that would allow voters to verify that their choices match with the identity hash they received. Votes can be tallied instantly and released at a designated time. No long lines where providing food and water is now illegal. No signature matching manipulation by partisan actors. And most importantly, claims about voting irregularities and election rigging can be verified against public blockchain data. Transparency.
Conclusion: Bitcoin is just beginning.
Bitcoin is a better system. It’s liberty, equality, and solidarity come to life, with permissionless access and exchange between parties on a public ledger visible to all, no one person or group having sole access to a limitless money printer, and every entity around the world transacting in the same currency, empowering people who have access to plentiful talent and energy resources in places like Africa and Latin America, but have had their currency and wealth debased or stolen by autocrats and corrupt officials.
I hope I’ve been able to dispel most of the fear, uncertainty, and doubt (FUD) surrounding Bitcoin, at least enough to prove that it’s not a tool of Wall Street, but one to fight it. I’m not asking you to buy Bitcoin. I’m just asking you to do your own research.
The Bitcoin community is an intelligent, eclectic group with a trove of articles and analysis that will further inform those curious about Bitcoin. Here are a few recommended pieces:
From Alex Gladstein, Chief Strategy Officer at the Human Rights Foundation:
- “Bitcoin is a Trojan Horse For Freedom” https://bitcoinmagazine.com/culture/bitcoin-is-a-trojan-horse-for-freedom
- “Check Your Financial Privilege” https://bitcoinmagazine.com/culture/check-your-financial-privilege
- “The Humanitarian and Environmental Case For Bitcoin” https://bitcoinmagazine.com/culture/bitcoin-is-humanitarian-and-environmental
From Nic Carter, general partner at Castle Island Ventures:
- “How Much Energy Does Bitcoin Actually Consume?” https://hbr.org/2021/05/how-much-energy-does-bitcoin-actually-consume
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