Bitcoin’s Model of Capitalism

Date: 2020-09-14

Source: https://craigwright.net/blog/economics/bitcoin-model-of-capitalism

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Some people think that Bitcoin is a system designed to act outside of state and society. Others believe that it is a system designed to control business and to reign power into their particular social agendas. Neither case captures the reasoning behind Bitcoin. Society matters. Whether we are talking about small groups or the individual, the truth of the matter does not change, nor does it shift at the level of nations. All businesses need to remember that they have a responsibility to the communities they are a part of. Such responsibility does not mean that they have to become the whipping boys of a particular agenda, but that we need to be conscious of the world and the environment we are living in and to be an active part in ensuring that good is achieved.

Adam Smith Statue (Edinburgh): Image by [scotlandstudycentre from Pixabay]

Bitcoin is a financial

system, and it is designed to return capitalism to the system that individuals

such as Adam Smith promoted. Capitalism is a system that allows the free action

of the baker or the candle maker or the software developer seeking to trade

fairly, without exploitation. It is such a system that allows for long-term

growth—without the exploitation by interest groups, government, greedy

individuals, or ‘rent-seekers’.

In the last 30 to 40

years, we have seen a seismic shift in the nature of how corporations are

managed. Individuals who seek to exploit by making short-term gains at the

expense of the business have become the norm, with companies both in Silicon

Valley and at Wall Street fostering unfair business practices. Businesses and

companies are virtual people under the law. And as virtualised persons,

companies have obligations within society. Citizenship gives us rights and

privileges, which apply to corporations, too. Yet, rights and privileges do not

come without responsibilities. Corporate citizens need to act as citizens, for

they are part of society.

Corporate actors need

to build an environment that is conducive to long-term growth. The situation

requires investor approval. Here, the choice of investors is essential. Where

an organisation seeks merely to benefit from short-term gains and promoting the

price of an asset and not to grow across years, the lifespan of the

organisation will be short-lived.

Social responsibility

is not the same thing as not making a profit. But few seem to understand that a

long-term path to profitability and sustainable business practice present

something different from an increase in the short-term share price.

Equally, business is

not a tool for social activism, and it is not a tool of government. As virtual

citizens, companies also have rights. Corporate citizenship means that the government

does not have the right to dictate how money and profit are spent. Responsible

corporations cannot be seen as the lapdog of whatever social justice platform

seeking to redistribute wealth at any particular time. Corporations are not

tools for delivering social change, but, at the same time, they come under all

of the other responsibilities of citizenship. Corporations own property. Property

owners have duties and responsibilities. Corporations have rights, yet, they

live in a community, in society, which means that they have both rights and obligations.

Milton Friedman was in error when he said that corporations only had a

responsibility to their shareholders. Corporations are made up of many

entities. If a corporation does not treat their personnel and their suppliers

well, they will find a higher turnover, which leads to higher costs. In the

long term, short-term gains reduce profitability.

Whether we are talking

about mercantilism or fascism or state capitalism, as has become fashionable in

many Communist countries, where business becomes the lapdog of state and social

activist groups, it falls into the same problems as it does as the lapdog of

the ‘rent-seekers’ and financial vampires that inhabit much of Wall Street and

Silicon Valley. Such groups offer promises of short-term benefits as they bleed

their corporate victim dry.

Investors are

different from traders; a trader only cares about short-term gains.They

will happily make money by manipulating the price of an asset, shorting the

same asset as its price goes down and pumping it to go up, making money at each

change in price. A trader carries a use: speculators are necessary for markets.

But they need to be informed speculators and not merely gamblers. The financial

market cannot function without speculation; it is such individuals who act as

market makers and provide liquidity. As with any ecosystem, be it merely a

virtualised analogy of human activities, as with financial markets or with

global ecosystems and the environment, the introduction of what can be adverse

at scale can be essential when limited in scope.

A business is

responsible not only to its investors and shareholders, but for many other

aspects of society. To succeed long-term and not merely gain in some

pathological prisoner’s dilemma, leading to the benefit of one costing another

in a zero-sum game, a business needs to grow both itself and its environment.

It needs to ensure that suppliers are sound and that they don’t engage in unfair

business practices. It needs to safeguard against fraud and ensure that the

employees within the organisation are looked after. Such provisions do not mean

that employees dictate the company policy or strategy or control the

organisation. It means that employees are taken into account. That they have a

career path and that they are not exploited.

A good organisation is

one that has not only loyal employees, but personnel who value the mission they

are a part of, who can see their role as more than just a job. In creating a

workplace where people can work as a team, we create an environment that

delivers more than a mere job; it can become a calling. It can become something

that people will do because they believe in it—and not because they earn a pay

cheque.

Managers and

executives in an organisation are not merely there to derive a pump in the

share price. They exist to steward the organisation into the future. The title

of the steward presents an important distinction: stewards are not kings, and I

used the word steward very carefully. A steward traditionally acted to

maintain a realm when the lord or king was not around. They did not have the

ultimate power, and they could not do anything they wished. Stewardship is the

form of leadership that is needed if we are to take global corporations

successfully into a secure future that people want to be a part of.

Bitcoin is not a

system that is designed to deliver ‘permissionless’ development. Nothing in the

world is ‘permissionless’, nor can anything be. A world that has no obligations

or responsibilities is not a world that can have growth. The concept of ‘permissionless’

development is purely designed to bypass the responsibilities of corporate

citizenship, or any responsibility whatsoever. It is a system without the

commitment to long-term growth. It is a means to provide access to the wealth

created by other people, to favour a select group that seeks to vampirically benefit

based on the efforts of those who work on the long-term good.

Bitcoin is a system designed to be honest, and it is a system designed to enable sound business practice. Building a world that we want to live in, that we would like our children to inherit, a world that is fair to all requires openness and honesty. Bitcoin is not a system that is designed to promote anarchy, and it is not a system that is favourable to those who break the law. Bitcoin presents a structure of rules that encourage openness. The candidness that comes with the system does not require a business to act philanthropically. Still, it allows members of the community to verify such ones that do and to actively make a choice to support the organisations that they see as best serving the community.

Such is why I created Bitcoin.

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