This is a part of the Bitcoin Infinity Academy course on Knut Svanholm's book Bitcoin: Independence Reimagined. For more information, check out our Geyser page!
Poverty and Prosperity#
“The gaps are increasing!”
How many times have you heard this rhetoric? Whether it’s the wealth gap between countries or the pay gap between the genders, the gap itself is always marketed as a vile thing and a societal problem that needs to be solved. We’re led to believe that wealth cannot be acquired by any other means than by exploiting the poor in one way or another. The Uncle Scrooges of the “one percent” are somehow leeching off of the lifeblood of the less fortunate, using them for their evil capitalistic schemes. This rhetoric is completely backward, though, and merely serves as a tool for the real elite to keep all of us ducks in line.
First of all, economics is not a zero-sum game. John, the fisherman, can sell fish to Bob, the builder, and Bob can build John a fishing rod in order for him to increase his daily catch. By doing this, John can lower the price of fish, which is a net good (pun intended) for everyone in the economy (except the fish). In an economy with perfectly sound money, in other words, money with a fixed supply, the value of the medium of exchange used in the economy doesn’t go down but up, making everyone in that economy wealthier as the economy grows. We’re so used to operating under inflationary currencies that only a select few of us have experienced this, though. Of course, we’ve all seen the prices of goods that have had exponentially decreasing production costs, such as electronics and computing power, go down, but in a sound money economy, all prices go down as overall productivity rises. If the amount of money is stable while the amount of goods we can produce increases, it will necessarily take less money to buy more goods.
Historically, only two phenomena have been able to actually decrease the wealth gap between people: natural disasters and war. It is unclear which of the two categories socialist policies, interventionism, and central banking fall under. In a well-oiled economy, wealth gaps will increase naturally since more productive people will always accumulate wealth at a higher pace than less productive ones. This phenomenon is a good thing and of benefit to everyone because in order to monetize his productivity, man needs to serve other people’s needs. Every capitalist is a slave to his customers’ wants and needs. Unfortunately, no one on Earth has ever been able to enjoy the full potential of a truly free global market because we’ve never had a functioning, sound money economy up and running properly. Why not? Because the temptation of money printing is simply too powerful for the human mind. No nation’s central bank or government has ever resisted the urge to debase its national currency for its own benefit. Bitcoin is a different beast altogether, and its issuance rate is beyond the reach of mere humans. It can’t be tampered with, regardless of temptations.
In a sound money economy, and arguably in any economy, you can’t fight poverty by fighting prosperity. In a sound money economy, everyone profits from economic growth. The road out of poverty inevitably leads to more and more prosperity. To set a limit to this or to interfere with the process will hinder a person from becoming wealthy, but it will, at the same time, hinder his potential customers from acquiring the tools they need to lift themselves out of poverty. In a truly free market sound money economy, wealth taxes are a net loss to everyone. The costlier a monetary good is to produce, the cheaper everything else becomes compared to it, and vice versa. The cheaper the money, the costlier everything else. As time goes by, Bitcoin becomes costlier and costlier to mine. It looks like Bitcoin will hold this property forever since the last coin will be mined around the year 2140. After that, minting new Bitcoin will be close to infinitely expensive. This means that everyone who holds any Bitcoin will always profit whenever the Bitcoin economy grows, just as everyone loses from holding fiat money.
Some claim that Bitcoin was designed for black markets and that without state control, money laundering and other economic crimes will be harder to fight against in an economy without government oversight. From an Austrian economics perspective, this is absurd and just another proof of how effective the brainwashing machine of the interventionists has been. To a libertarian, there is no such thing as a black market since markets aren’t intrinsically good or bad, and there’s nothing morally wrong in trading one item for another. In well-oiled, functioning liberal democracies, the necessity for black markets is somewhat limited, but the black markets of Venezuela, Zimbabwe, or Cuba tell a different story. White markets might keep so-called dangerous goods off the streets, but they reinforce the status quo, let cartels have things their way, and form monopolies. We are yet to see the final result of the last century’s worldwide interventionist policies, but while we wait, there’s only one type of tamper-proof way to transact peer-to-peer besides barter. That ought to mean something.
Have you ever walked into a brick-and-mortar store and asked them where you could find something that they didn’t have? The answer you can expect is one that recommends another, often competing store. Despite the fact that the first store has nothing to gain from you going to another store instead, this level of courtesy can be expected almost anywhere. Why is that? Shouldn’t the evil mechanics of the free market system have thwarted such behavior in brick-and-mortar store employees by now? Quite the opposite! Markets evolve into friendly places because a seller’s top priority is always the satisfaction of the customer. It has to be. If a customer gets irritated or angry because of the attitude of an employee of a certain store, he will cease to shop there. An entrepreneur is always a slave to his customers’ wants and needs. The flip side of this coin is that the customer is always the master of the entrepreneur, but only if he’s in control of his wants and needs.
In order to be in control of one’s wants and needs, one needs to be self-sufficient. In order to become self-sufficient, one needs to be allowed to pursue one’s goals relatively unhindered. When markets aren’t truly free but crippled by interventionists, self-sufficiency becomes harder to achieve. This skews the prices of stuff that people want in comparison with the prices of what they actually need. People who aren’t even close to being self-sufficient but still have a steady income from social security programs buy frivolous things they don’t really need all the time. The fact that you can be poor and obese at the same time is a testament to this. That combination was unthinkable everywhere in the world a mere hundred years ago. The entrepreneurs won’t complain, though. Whether or not their customers are really acting in their own long-term best interest or not matters little to them. This is a feature, not a bug, in the free market system, and it does work, but only if the customer realizes that how they ought to allocate their resources is their problem and theirs alone. A semi-free market, distorted by interventionism, can never reach its full potential because of these effects.
About the Bitcoin Infinity Academy#
The Bitcoin Infinity Academy is an educational project built around Knut Svanholm’s books about Bitcoin and Austrian Economics. Each week, a whole chapter from one of the books is released for free on Nostr, accompanied by a video in which Knut and Luke de Wolf discuss that chapter’s ideas. You can join the discussions by signing up for one of the courses on our Geyser page. Signed books, monthly calls, and lots of other benefits are also available.
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