WHEN austerity became the model of choice for Conservative Britain in 2010, the idea of ‘tax and spend’ was erroneously entrenched in economic dogma.
Half a decade later – during the Social Democrat pseudo-revolution of Jeremy Corbyn and Bernie Sanders – the idea was challenged by Modern Monetary Theory.
Simply put, the economy does not work like a household budget – you do not need to tax, to spend. Government spending isn’t constrained by supply, but demand.
Also gaining popularity around that time was cryptocurrency. Bitcoin and Ethereum, in particular, were steadily gaining in value. At the time of writing, Bitcoin is worth over $50,000 – and crypto-experts are predicting a financial revolution.
Modern Monetary Theory is often thought of as the antithesis to the Austrian school of thought that Bitcoin’s fixed supply philosophy stems from.
According to leftist cryptocurrency advocates, however, the two can work together for the public good.
[READ MORE: Would Karl Marx have endorsed Bitcoin?]
Ben Arc, a writer for Bitcoin magazine, told Redaction Politics: “MMT is understanding that household spending logic does not apply to a sovereign soft-currency producer, as it can always produce more money and maintain a much higher deficit indefinitely.
“Government deficit actually creates surplus for private capital, so is good for both the private and public sector.
“Equating large commons with a large State is a phenomenon – but not a rule. This explains the concept of the “Withering State” purported by Marx and Engels, that when socialism becomes reality, the State will cease to be necessary and will wither and die.
“Bitcoin is a planetary commons we all have access to, and being decentralised means it does not need a State to defend it. In fact its existence withers the reach of State.
“Regardless of the hard-currency absolutists, soft-currency is a powerful tool humans should utilise, the issue is it being centralised.
“As with software production, Governments can still maintain a soft-currency fiat, although control will lean towards decentralisation and transparency.
“A federated “honest”, MMT ready fiat is perfectly possible on a bitcoin sidechain, and likely to happen within the next 5 years, I have no idea whether this will be introduced by left or right leaning government.”
Even if not adopted by a socialist government, decentralising the monetary system could place curbs on central banks who have, in the past, worked directly in the interests of capital.
Dr Matthew McKeever, an executive associate editor at Inquiry who wrote ‘The Socialist Case for Cryptocurrency’, told Redaction Politics: “Arguably, the best that Bitcoin could offer to a leftist government would be a certain predictability.
“From the Greenspan era to the too big to fail banks, to QE, to the recent Fed operations to fight corona, and the consequent stock market rally, one could easily construct a story according to which the Fed’s interventions (or even merely its capacity to intervene) induce moral hazard or – going further – lead to concrete outcomes that in fact serve to amplify inequalities.
“If one took away the discretion to affect monetary policy from central banks, then, if one assumes that central banks will be in thrall to capital (not implausible, but certainly controversial), then one will have removed one way of further entrenching inequalities.
“By placing hard algorithmic constraints on economic policy, Bitcoin could prevent human discretion from messing things up.”
Ben Arc is a writer for Bitcoin Magazine and an advocate of cryptocurrency as a socialist tool.
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