Rhapsody On A Theme Of Nakamoto
Part IX of the Bitgenstein Serialization
Quentin Skinner’s monumental overview of the development of early modern political philosophy, The Foundations of Modern Political Thought, begins with the following lines,
“As early as the middle of the twelfth century the German historian Otto of Freising recognised that a new and remarkable form of social and political organisation had arisen in Northern Italy. One peculiarity he noted was that Italian society had apparently ceased to be feudal in character.”
While Skinner’s concern is political philosophy and not economic history, it is easy enough to identify that these social changes were made possible by a nascent form of capitalism. As the great medievalist Henri Pirenne commented on the period and region in his Medieval Cities,
“Lombardy, where from Venice on the east and Pisa and Genoa on the west all the commercial movements of the Mediterranean flowed and were blended into one, flourished with an extraordinary exuberance. On the wonderful plain cities bloomed with the same vigor as the harvests. The fertility of the soil made possible for them an unlimited expansion, and at the same time the ease of obtaining markets favored both the importation of raw materials and the exportation of manufactured products. There, commerce gave rise to industry, and as it developed, Bergamo, Cremona, Lodi, Verona, and all the old towns, all the old Roman municipia, took on new life, far more vigorous than that which had animated them in antiquity.”
Pirenne added that the rise of these cities, which was predicated on commercial and industrial expansion,
“strongly stimulated social progress. It made no less a contribution in spreading throughout the world a new conception of labor. Before this it had been serf; now it became free, and the consequences of this fact, to which we shall return, were incalculable. Let it be added, finally, that the economic revival of which the twelfth century saw the flowering revealed the power of capital, and enough will have been said to show that possibly no period in all history had a more profound effect upon humanity.”
And wouldn’t you know it, but feudalism seems to be making a comeback. Joel Kotkin introduces his pithy tract, The Coming of Neo-Feudalism, anticipating this re-emergence:
“Of course it will look different this time around: we won’t see knights in shining armor, or vassals doing homage to their lords, or a powerful Catholic Church enforcing the reigning orthodoxy. What we are seeing is a new form of aristocracy developing in the United States and beyond, as wealth in our postindustrial economy tends to be ever more concentrated in fewer hands. Societies are becoming more stratified, with decreasing chances of upward mobility for most of the population. A class of thought leaders and opinion makers, which I call the “clerisy,” provide intellectual support for the emerging hierarchy. As avenues for upward mobility are diminishing, the model of liberal capitalism is losing appeal around the globe, and new doctrines are arising in its place, including ones that lend support to a kind of neo-feudalism.”
Not all, but certainly some, of these afflictions can readily be attributed to the normalized strip mining of capital in the pursuit of ever more leveraged “growth” I outlined in Parts V through VIII of this serialization. Those who do not own hard assets are increasingly tending to drown in debt from which they will realistically never escape, unable to save except by speculation, and unable to afford the inflation in the essential costs of living that does not officially exist. What amounts to an “official” message is the likes of Christine Lagarde (then president of the IMF and now of the ECB) musing that, “we should be happier to have a job than to have our savings protected,” and the World Economic Forum projecting that, by 2030, “you will own nothing, but you will be happy.” You will use things that somebody owns, mind you. But that somebody will not be you.
If we were to believe that these people actually mean what they say, and that the strip mining of capital is not going to stop — indeed, that it cannot stop — we might be as similarly inclined as Otto of Freising to look for any sprouts of civilization that manage to advance beyond our rebooted feudalism. There may end up being a variety of reasons that different groups avoid this state. I think that, for some, the reason will be Bitcoin.
What does that mean? I am sure it seems hyperbolic to most, if not outright ludicrous, but it’s actually quite prosaic. It means that those social units that voluntarily choose to liquidate their positions in self-referentially mispriced toxic loans in favor of a global, digital, sound, open-source, programmable money will be in a position to accumulate long-term oriented capital at a disproportionate rate to those who do not. They will have a superior economic foundation from which to build healthy social and political institutions, which will contrast to those left behind as medieval Venice did to the remnants of the Western Empire. This could be true at any and every scale. It could be an individual, a family, a friend group, a neighborhood, a company, a city, an industry, a country, or the entire world. We will have to wait and see.
Of course, it could be nobody. It could fail altogether. I say this primarily to guard against accusations of blind faith, speculative mania, and fundamental unseriousness. But I don’t say it to feign intellectual sophistication with post-hoc unfalsifiable fence-sitting. As if this wasn’t entirely clear already, I am very happy indeed to be on the record as saying it is overwhelmingly likely Bitcoin will succeed. And so, while there are good reasons it might fail, “it’s dumb,” and, “I don’t like it” are not among them. In order to sensibly articulate the reasons why it might fail you have to understand it in the first place. Most do not. As I explained in Parts I through IV of this serialization, most do not even know what it is they are looking at. Nor are they likely to any time soon because they don’t want to see it. As philosopher of science Norwood Russell Hanson might say, their perception is theory-laden. Also, their theories are wrong. Oops.
And so, in the spirit of such colorful outrage as “it’s a Ponzi scheme!”, “it’s a waste of energy!”, and, “it’s backed by nothing!”, I will round off this trilogy with my own set of colorfully outrageous metaphors to try to help people understand what is actually happening right now, and why things seem exactly like they should.
So outrageous they might just be accurate …
continue to Part X:
or go back to Part VIII:
n.b. This is a serialization of my previous trilogy on Bitcoin, economics, and capital markets: Wittgenstein’s Money, The Capital Strip Mine, and, Bitcoin is Venice.
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