More State, Less Market
Bloomberg Economics
As we close out 2021, many of us under COVID-19 prohibitions, having long spent our stimulus checks, we are witness to the global crypto marketcap above $2 trillion, the S&P closing at an all-time high for the 70th time this year, and against a rising annual inflation rate in the U.S. of 6.8% in November, the highest since June of 1982.
Bloomberg Economics has dropped some serious data on us forecasting that only 26 percent of GDP will come from free market economies by 2050, a number that was closer to 60 percent in the 1990s.
Milton Friedman must be turning in his grave.
The Free Market And The Internet
It is difficult to speculate what Friedman, who passed in 2006 at the age of 94 and straddled four industrial revolutions, would have thought about bitcoin, crypto assets and the emerging Web3.0 digital transformation of the economy.
I expect at minimum we might have witness a wry smile across his face at the notion that a $2 trillion economy had been created by the people with elegant computing (a sprinkle of genius thanks to Satoshi) and no state or legacy financial market support, and little positive intervention in the early days, all in the course of a decade.
Friedman did comment in his day that, “I think that the Internet is going to be one of the major forces for reducing the role of government.”
The digital economy will continue to transform the lives of billions of people before we even consider the profound implications of bitcoin and the further breathtaking developments of decentralized finance (DeFi), the digital economy being created in Web30 the metaverse.
The Digital Space Race
The time has come for policymakers must to fully grasp and engage in the digital space race. The role that blockchain and digital technologies can play in enabling society in creating a greater and more open and free markets and a prosperous economy for all citizens, and let the power of the crowd and the free economy prevail.
In mixed capitalist systems most expect government policy and regulation to protect consumers and businesses from bad actors and criminal behavior. Though most people and companies don’t break the law, launder money, or cheat on their taxes, most people pay for a system that attempts to protect us from the few that do. Getting meaningful regulation and compliance in place is what policymakers should be striving for, not protecting laws and systems that at times show little evidence of success.
Policy and regulation for crypto and digital assets has been slow in coming as many in governments discounted the sector as largely irrelevant for the first half of a decade, only to chide it in the second. That most policymakers do not understand the technology, given its import to governance and society, is scandalous.
The crypto and digital assets sector has done itself no favors in promoting an acceptable narrative. It’s libertarian message of anti-government and institution revolution is often at odds with its great social utility and democratic governance models and sends the wrong message to policymakers. It is a highly fragmented sector and this is nowhere better evidenced than its response to the proposed U.S. infrastructure bill.
The proposals caught the sector off-guard and unprepared to any significant effort on the Hill. If anything, it demonstrated how unorganized and underfund the sector is, relative to the well-funded and well-oiled traditional financial services sector and in particularly the banking industry, which has many big players now commercially engaged in some form in the crypto and digital assets sector.
To Serve And Protect
The rise of calls for consumer protection in the largely unregulated crypto and digital assets sector from regulators and central banks has also significantly increased in the past. In a largely consumer generated market now more than $2 trillion, you have to ask who policymakers are trying to protect consumers against?
Policymakers concern about financial financial crime on the blockchain looks off-target narrative where crime looks low relative to other digital or analog segments and government security professionals laud the public blockchain for its transparency in rapidly tracking down and isolating assets that are part of criminal activity.
More importantly it is the largely networked and diverse digital governance models that better engage larger constituents of stakeholders than many traditional models of governance in capital participation – in many instances, its like an old-fashioned mutual structure.
Given the problems down the road with inflation or possibly stagflation, COVID-19 vaccine arbitrage, product shortages, supply chain disruptions, and economic recoveries, you would think governments have enough to focus on instead of picking on bitcoin.
Don’t Throw The Baby Out With The Bathwater
Instead, taking a proactive approach, as was taken with COVID-19 vaccinations, where governments and private industry collaborated to solve a ticking time bomb, might be considered. Why don’t we take the accelerated approach to trialling COVID-19 vaccinations and apply it to blockchain and the crypto and digital asset sector’s products.
Calls for a safe harbor and industry sandboxes for the crypto and digital assets sector, as a means of allowing products and services to be tested off market, in a risk reduced environment, similar to the accelerated drug trialing of COVID-19 vaccinations are a means for governments to better collaborate with industry private money and capital to solve big society problems.
Governments are advised not to throw the baby out with the bathwater when it comes to crypto and digital assets policy and regulation.
Bloomberg Economic’s analysis is a good shot over the bow of free market policymakers everywhere in the world. For champions of free markets, seeing democracy in further decline another year on isn’t good news. That often it appears that U.S. allies are leading the anti-democratic charge is worth paying attention to.
The last word on this topic belongs to Friedman, “There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”
My best wishes to you and yours and may 2022 be your best year ever.
