Bitcoin: The Symptom is the Cure


When Nick Hanauer took to the pages of Politico to talk to his fellow 1%ers, judging by the response he got in some parts of the media, he may have taken the wrong tone. Rather than talk calmly and reasonably, using facts and evidence to bolster his points, to stress that inequality has become so bad that a French style revolutions is in the air, he should have whipped out the classic Yertle the Turtle.

For those of you without children, this Dr. Seuss classic tells the story of a turtle who is king of his pond. Not satisfied with his stone throne, he calls on his subjects and climbs on their backs to make himself higher. Never satisfied, he keeps calling for more and more turtles, ignoring and shouting down the complaints of the poor turtle at the bottom of the pile who is carrying all that weight. Finally, after calling for enough turtles to make him higher than the insolent moon, the turtle at the bottom of the pile burps and the whole column falls, burying the foolish king in the mud.

The allegory here is not accidental. Geisel, Seuss’ real surname, wrote what he saw as the truth into stories simple enough to be understood by children. And it’s essentially the same story that Hanauer was telling. The rich, he says, have allowed themselves to become so insular in their prosperity, and so focused on maximizing those profits, that they have lost sight of the misery their singular success is causing. Inequality in America is on par with the gilded age of the 1880s when robber barons ruled the land.

For the middle class, good jobs have gone away, pension funds have been ravaged, houses have gone underwater, and credit is over-extended. For the vast majority of America, even though they may own a cell phone (the poor owning a cell phone, Hanauer points out, is often used by his rich friends as evidence that the poor are not really poor), they are feeling pressed and pressured. All the while, they are hearing that the economy is recovering because stocks are at an all-time-high. They know that the companies that are doing so because the jobs they should have had have been moved overseas. They know that the pension funds they relied on were wiped clean in the Great Recession while the executives in the banks that cause that recession got bailed out at taxpayer expense – and not a single one of them went to jail.

James Miller wrote a critique of Hanauer’s piece that reads like the desperate defense of plutocracy that it is. He accuses Hanauer of “hammering on the favorite trope of all leftists: inequality.” The real problem, he states, is an over-intrusive government that cause rich people to collude to escape the oppressive reach of the government, and then, naturally, use their wealth and connections to manipulate government power to quash smaller businesses.

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What Miller misses in his argument is that the US has been through something like this before. In the late 1800s, wealth inequality stood roughly where it is today, and there were hints of revolution in the air then too. Everything changed when a number of progressive voices were able to muster enough power to change the tide. They weren’t able to do it alone, though, they needed the help of a number of plutocrats: Andrew Carnegie opened libraries across the nation, giving people who might not have otherwise had it, a chance to be educated. Theodore Roosevelt instituted high inheritance taxes (death taxes) to prevent a wealthy aristocracy being formed. He also enacted anti-trust laws that allowed him to break up large and abusive corporations, allowing smaller operations to thrive all around the country. Later, his relative, Franklin Roosevelt established Social Security, a program that has saved many people from living on the streets.

Over the last 40 years, the wealthy elite have chipped away at the protections that people like Carnegie and the Roosevelts’ set up. Monopoly laws, banking laws, inheritance taxes, all have fallen by the wayside. Social mobility in the US is at an all-time low, meaning that we are closer to having an entrenched nobility (based on wealth rather than title) than we ever have since the founding of the country. More than that, the security theater that’s been drummed up since 9/11 means that we have all become increasing accustomed to going through security checks, being spied on, and being watched over by an increasingly militarized police. We don’t like it, we’ve just gotten used to it.

Nick Hanauer is predicting a revolution, pitchforks, as he calls it, and I tend to agree with him. The thing is, the pitchforks are already out. Bitcoin made its first appearance right after the Great Recession began, and Satoshi Nakamoto talked explicitly about how the abuses of large banks was part of his motivation for creating this innovative currency. Bitcoin, because it cuts out the need for a middleman, is an existential threat to large financial corporations.

Despite that, Bitcoin is not going to be the thing that brings the house of cards down. No, that’s going to be the game the game of free-money and inflated trading that is going on right now. One significant piece of bad news will start a chain reaction that will plunge the market and cause the ‘smart’ money to go scrambling. At this point, Bitcoin will be waiting in the wings to take up the slack left when the too-big-to-fail banks fail. Bitcoin isn’t going to be the reason things fall apart, but it’s going to be part of how things get put back together.

By Mark Norton