Commerce Versus State
I wrote this piece for Digital Gold Currency Magazine. A comment to one of our blog entries inspires me to repost it here. This article was adapted from material I am assembling into a new book, entitled The 21st Century: What Will Happen And Why Hopefully I’ll have it ready some time in 2009.
****
Government never furthered any enterprise but by the alacrity with which it got out of its way.
– Henry David Thoreau
The battle between government and commerce has been raging since the beginning of the agricultural revolution. It is a marathon struggle of Politics versus Market. Some happy day the market will win, but that day, alas, may be a long way off.
It in is the crossfire of this battle that the digital gold business finds itself. If we succeed, the market gains important territory from the state.
No, most of us didn’t particularly choose to be in this battle, we were merely trying to improve our lives. But, by reason of being at the forefront of commerce, we find ourselves at the forefront of this battle. God help us.
UNDERSTANDING THE
The most basic reason for commerce-state animosity, of course, is that Politics and Market have completely different operating principles. Markets operate on the principle of choice: People are convinced to trade. States operate by coercion: People are forced to pay and to obey.
Of course, there are traders who bring coercion into the marketplace, and there are politicians who wish to minimize it. It is quite possible to have an individual market player who loves coercion or a politician who hates it. Nonetheless, there is no real argument to be made regarding the basic operating principles – they are what they are. And they are most definitely at odds.
The more interesting question is this: What goes on in the minds of individuals, to make them sanctify either market or state?
Politicians are programmed by both psychology and experience to believe in the need for control. Even when they privatize and deregulate, politicians want to be sure that the ability to “reign it back in” remains.
Small business people are just the opposite. They have learned to believe in spontaneous order. It works. It has always worked… and it always scares the hell out of control-biased people.
But try, for a moment, to see it the politician’s way: Statist types see commerce as an essentially amoral activity, and they see politics as a Heaven-ordained forge of morality. To them, markets are purely a trading center for quasi-thieves; necessary, perhaps, but morally inferior. Politics is, to them, the temple of higher morality; where Chosen Ones make decisions based upon the principles of righteousness: Equality, Sacrifice, and Unity.
Realize that we in the digital gold arena are the few who believe in the morality of the marketplace. For reasons too long to explain in this article, the virtuous image of commerce died in the popular mind a hundred years ago, and was replaced by statist images.
Never forget that the popular mind – currently committed to finding “the good” in politics – is a powerful enforcer. You’ve doubtless noticed this when discussing the digital gold business. The price of agreement – leaving the majority – is too high for people who seek comfort in normalcy. This precludes them from considering your arguments. They may nod their head and ask questions, but they’ve already decided that they will not agree with you.
COMMERCE VERSUS WAR
War is the health of the State.
–
The quote above is widely known, but is commonly taken to mean that evil government bosses purposefully stir up wars in order to have more power. This is true far less often than people suppose.
Most political leaders are no less confused than other people. They struggle to attain a place at the forefront of the masses, but once there, they soon realize that the office does not come with any magic wisdom. They look out upon a supremely complicated world and know that it is beyond their understanding. Why do you think so many of them act aloof? It’s a defense mechanism. And why else would so many of them run to fortune-tellers of various sorts? They know they are out of their depth. Politicians are overrun by great events far more often than willing them into existence.
So, what should Bourne’s statement mean? It means this: War is the health of the state because it makes the state necessary.
(I know that the above statement is not absolutely true: mankind could defend itself effectively without states. But, until men develop the courage to take responsibility for their own safety, the statement more or less stands.)
In times of peace, the state is commonly resented; after all, they do forcibly remove money from the people in their control, and that does engender bad feelings. In time of war, however, people are willing to forget about such matters: It is better to be a serf than to be a corpse.
In times of war, or of serious threat, the state will gain on commerce, often dramatically. But, even here, things have improved somewhat. Modern states have learned not to intrude too deeply upon commerce, since war materiel must be produced in abundance, and the state alone fails miserably in such attempts.
War economies are strange, mixed-up things, with twisted moralities. Commerce is challenged and abused at such times, but it is never extinguished.
RECENT MARKET SUCCESSES
As I’ve noted previously, the past few decades have been a wonderful time for economic education. Even ex-commies are buying in to the free-market philosophy! Keynes is dead and Hayek rules the roost… at least for now. Here are a few good signs (and this will be US-centric):
It used to be that offshore drugs were strictly forbidden by US law. I’m not sure if jail time was ever imposed, but it could easily have been. With the Internet as a catalyst, however, Americans began to see that the same drugs were available in
A critical feature in this was that
People without an understanding of markets can certainly understand cheaper prices, but they are also easy to intimidate. This time, contrary to what would have happened twenty or thirty years earlier, those who understood economics gave a boost of confidence to the others, and the market trumped the FDA.
A second good sign has been the lack of regulation for new utilities. The older utilities, such as electricity and gas, are all government-protected and government-regulated monopolies. Regulatory bodies are the size of small armies and require similar budgets.
The next utility to come along was cable TV, which is partly regulated. Cable TV monopolies are small, and are being broken by satellite television and Internet delivery anyway.
The newest utility, Internet access, is definitely not monopolistic and is lightly regulated, and as an after-thought at that.
WHERE TO NOW?
War and threats are now on the march and the gains of commerce are under threat. GW Bush and other Western leaders are endeavoring to build a Protector-State in response. “We’ll see everything and protect you from everything.” This may not long endure, but how much damage will be done along the way is anyone’s guess.
The next major battle between commerce and state could be currency. It’s still a bit early to tell, but with many fiat currencies headed toward what may be a terminus, it is a distinct possibility.
It seems that the digital gold market has absorbed the most serious blows of the Bush Protector-State. There has been pain aplenty and serious damage, but the market yet stands. Now that the G7’s currency and debt schemes are unraveling, it is likely that control types will have better things to do than harass us. That may give our industry some space to mature and grow in something that resembles a natural, healthy manner.
And, frighteningly enough, it is at times like these that the proud predators of the world see opportunities to grab territory here and there. The other nations being busy with internal troubles much reduces the chance of violent response to a quick, contained aggression.
The next few years look scary, but the more legitimate threats appear, the less attention is likely to be directed at us. (At our small size, however, we do remain vulnerable.)
So, the worst may be over for the digital gold marketplace. However, it will never really be over until we win the memetic war: We must make the case that honest money is both morally and practically superior to fiat, and we must make it widely and benevolently.
© Copyright 2008 by Paul A. Rosenberg
| Recommend this article to: | Digg | Slashdot |
Explore posts in the same categories: Economic Morality
July 14th, 2008 at 6:35 pm
You know, the problem with gold is that, while the economy has potential to grow, there isn’t that much more new gold around to be found. (And what is yet to be found might be mined in an environmentally destructive fashion, with lots of mercury winding up in pristine rivers, but be that as it may…)
The problem I see is, a currency based on gold wouldn’t inflate—not even a little bit, like 1% or 2% a year, meaning it would halve in value every generation or two. Quite on the contrary—it might actually *deflate.* That would mean, however, that, while nearly everything you own depreciates in value over time—your car, your house, your clothes, your furniture—your cash would not. And that would mean that, unless there are *really* lucrative investment opportunities out there, promising even greater returns than your money itself, it would be the most prudent thing not only to sit on as much cash as you can but also to hoard as much more of it as you can.
And that could very well cause a deflationary depression, with more and more money going out of circulation, staying in people’s pockets, who would beggar each other out. That would increase the deflation even more, meaning it would make even more sense (on an individual level) to hold on to your money than to spend it.
There is a reason why fiat currency was originally introduced, and I’m afraid that, even though government mismanagement and high national and international debt can send it into a hyperinflationary spiral, a substitute currency that doesn’t inflate at all couldn’t possibly replace it without bringing the economy to a grinding halt.
Of course it needn’t even be an official currency. The rise in commodity prices all over the place, including gold, is based on the same dynamics, essentially…
July 15th, 2008 at 1:32 pm
Yes, I am familiar with this problem.
Let’s start with this: I do not seek perfection, and a single flaw in something is no reason to toss it out the window. The “gotcha” emotion is highly misleading and destructive. Now…
I am not an economist myself, but I have discussed this with some very good ones. They tell me that it is not a major problem.
But, let’s say that they are wrong. There were certainly a number of crashes when the world was mostly on a gold standard, in the 19th Century.
The question is this: Which is worse, an occasional crash, or the evils of fiat currency?
I’ll take an occasional crash over fiat. The value of a dollar is less than 1% of what it was when my grandparents were young. A 99% tax over 80 years or so.
And, we’ve had crashes anyway!!!
You simply cannot give politicians the ability to create money out of thin air and have it turn out well.
I’ll take the problems of a gold standard any time. Again, I’m not looking for perfection, and…. fiat currency most certainly doesn’t provide it!
PR
July 17th, 2008 at 3:04 am
There is no reason why a system that allows multiple electronic currencies, issued by multiple private “mints” and backed by many different real world commodities could not be easily implemented. Such a system would provide all the good of an online gold market (which would be just one small part of it) without the potential problems of a single commodity system. And such a system is the likely future of money.
The real issue is adoption of online money, not what commodity or commodities the initial online currencies happen to use as a connection to the real world. All of the technical problems to make this work have been solved - adoption is a marketing problem - and Gold has a lot of marketing appeal.
August 9th, 2008 at 6:58 am
> The value of a dollar is less than 1% of what it was when my grandparents were young. A 99% tax over 80 years or so.
You could view it as a tax. Or you could simply view it as erosion. How much would your car be worth after 80 years, whether you ever drove it or not? Maybe it would be a priceless antique, but only if not everyone still has their 80-year old cars in their garages.
Before there was currency and gold there were barter systems. Did people expect the goods that they exchanged for other goods to retain their value if they weren’t traded?
It’s the same with fiat currency. Should you still expect to buy the same amount of goods for, say, a plumbing job you did 30 years ago as opposed to one you did yesterday? Maybe there ought to be a statute of limitations on what society owes you. (With the exception of retirement benefits, of course…)
August 11th, 2008 at 9:31 am
Comments to your most recent, Ool:
> The value of a dollar is less than 1% of what it was when my grandparents were young. A 99% tax over 80 years or so.
You could view it as a tax. Or you could simply view it as erosion. How much would your car be worth after 80 years….
– You could, but… it turns out that time is not the only factor involved. The “taxers,” per my first comment, are taking action to make this happen, AND getting benefit from it. (Creating dollars and spending them on projects that gain them some benefit.) Hence my insistence that “tax” is more appropriate.
> Before there was currency and gold there were barter systems. Did people expect the goods that they exchanged for other goods to retain their value if they weren’t traded?
– Which is why, of course, that they used silver, gold and copper - things that did not easily corrode.
> It’s the same with fiat currency. Should you still expect to buy the same amount of goods for, say, a plumbing job you did 30 years ago as opposed to one you did yesterday?
– See above.
Maybe there ought to be a statute of limitations on what society owes you. (With the exception of retirement benefits, of course…)
– I don’t think “society” (whatever that is) owes me anything at all. I just want it to leave me alone.
PR