Editorial: Democracy? Insert cash . . . (2026)

Editorial from the October 2026 issue of the Socialist Standard

What many considered laughable in all the recent outrage at Reform UK getting twin donations of £36m from crypto-billionaires (one of them convicted for money laundering offences), was Farage’s claim that the money would ‘help to level the playing field’. As opposed to ‘buy it outright’, presumably.

Actually, Farage wasn’t far wrong on that score. Electioneering doesn’t come cheap. Labour’s pre-election fundraising in 2024 has been estimated at £64m, while Conservatives raised £54m (2026 Autonomy Institute report PDF). So Reform’s £72 mill doesn’t look wildly out of place. The problem, as pundits have pointed out, is that it all comes from just two dodgy geezers. Reform UK may not be buying the next election, but Messrs Harborne and Delo are pretty much buying Reform UK, and will doubtless expect a Reform government to be super-cuddly when it comes to crypto regulations.

Also slightly peculiar was the high moral tone struck by some newspapers, in congratulating themselves on how Britain has a robust and venerable democracy that can’t be bought. Well, maybe not bought exactly. But when you think about the expenses scams, the grifts, the grace and favour junkets, the lobby groups, the revolving doors and the side hustles, rented by the hour would be more like it.

Still, that’s nothing compared to US politics, where ‘mega-donors’ are pouring hundreds of millions into the Republican mid-term electoral war chest even as they trail the Democrats in the polls. ‘Other mega-donors have funnelled cash to candidates pushing deregulation of cryptocurrency and gambling or to promote AI’ (Financial Times, 16 September).

Why, if capitalism is genuinely democratic, do the rich feel the need to pile so much money into political campaigns? If you can’t already guess, a clue is offered by a well-known 2014 US study that looked at 1,779 policy issues between 1981 and 2002, and compared what people wanted versus what decisions were actually taken. It concluded that the preferences of the poor and middle-income majority had a ‘miniscule, near-zero, statistically non-significant impact on public policy’, while the views of the top 10 percent virtually dominated (Princeton PDF).

That this feels intuitively true is probably why so many people don’t bother to vote in elections. They may also consider that any system where your total say consists of writing one ‘X’ every five years is not really a democracy in the first place. But a flawed electoral system is better than no system at all – just ask people in China or North Korea. We continue to contest elections because they are a legitimate way for workers to express their opinions, and because no amount of mega-donor moolah is going to stop the landslide that will swallow capitalism once the world’s majority finally decide they’ve had enough of the 1 percent and their bullshit.

Pathfinders: Dark capitalism (2025)

The Pathfinders Column from the April 2025 issue of the Socialist Standard

Readers may have noticed that phishing emails have increased to almost epidemic rates lately. These are no longer badly spelled with wonky grammar. They are sophisticated efforts with corporate logos and plausible small print, purporting to be from banks or internet service providers, or even from your own club or organisation. Like Dracula, they can’t get into your system unless you invite them across the threshold, in this case by clicking the provided link. Once in, they aim to drain your bank account dry. A simple rule is to assume that anything asking you to click or open something is a scam unless you’re absolutely sure it isn’t. You can find some other good advice here.

There are phone scammers too, who are as annoying as they are persistent. In an effort to fight back, some computer scientists have set up honeytrap accounts, supposedly belonging to innocent and confused old ladies, but really controlled by an AI bot with the sole function of keeping scammers tied up in long phone calls answering silly questions.

But all that is a drop in the bucket compared to what’s really going on in that shadowy criminal dimension of the profit system, which we might call ‘dark capitalism’. Scamming is just one facet of this, but it’s not just a grubby little cottage industry anymore, it’s a multi-billion dollar global industry on the scale, by some estimates, of the illegal drug trade.

A deep and deeply disturbing analysis of this industry was provided recently in an 8-part podcast series called Scam Inc. by the Economist‘s South-East Asia correspondent Sue-Lin Wong. Since most of the series is paywalled it’s worth briefly recapping here. Just as AI can be used to fight scams, it is also being used to create them. There are two main types, love scams and crypto investment scams. Love scams target single, often older people, drawing them into a heady and convincing online or phone relationship until they are completely convinced it is real. AI is used to research and identify likely marks, and then deep-fake face and voice calls, as well as web and social media ‘histories’. The victim is cultivated over months, and then invited to make a small investment which sure enough sees a profitable return, reinforcing their sense of trust. When they are later invited to make a big investment, with huge returns, they have no reason to think it’s not genuine. And then, nothing. All the calls stop, the number is unobtainable, the scammer has vanished and so has the money. This, in the trade, is chillingly referred to as ‘pig butchering’.

Crypto scams target people, perhaps with retirement savings, who are persuaded that they can’t lose. Smart people are often at particular risk, largely because they overestimate their own sceptical faculties and underestimate how devious and tech-savvy the scammers are. One corporate finance manager paid over $21 million of company funds after his board of directors, all of whom he knew personally, told him to in a teleconferencing meeting. What he didn’t know was that the ‘board of directors’ were all deep-fake computer voices, and so convincing that he couldn’t tell the difference. How can anyone defend themselves against that? Sue-Lin Wong’s own solution has been to give all her family members a secret password, so that if ‘she’ ever phoned them asking for large amounts of money, they would have a way to verify it was really her.

You might think, at this point, that these scammers are the amoral jackals of capitalism, the worst of what Marx called the ‘lumpenproletariat’. But the truth is even more horrible than that. Having interviewed one love-scam victim in Canada who lost $75,000, Sue-Lin performed the almost miraculous feat of tracking down the very scammer who did it. And what she found would chill anyone’s blood.

This is where dark capitalism turns darkest of all. The guilty scammer wasn’t some ruthless money-grabbing parasite, she was a helpless kidnap victim terrified for her life. She had applied for what seemed like a promising job in Thailand, on the advice of a supposed friend, then was bundled into a car at Bangkok airport, trussed and blindfolded and driven across the border to a ‘scam compound’ in Myanmar, a barbed-wire fringed mini-city patrolled by dogs and armed guards. Her passport was taken away, and she was ordered to use the phones to scam westerners, on pain of physical beating, or even execution. Only if she scammed enough money would she ever be set free, they told her. In her compound were hundreds of other kidnap victims, all forced to do the same thing. And hers was only one of many such compounds.

Who are the gang lords behind all this? Very likely Chinese former Triad (mafia) bosses, kicked out of China by Xi Jinping’s crackdowns but able to operate scams from anywhere. Under pressure from China, Myanmar’s rebel forces recently broke open some of these scam compounds, releasing hundreds of trafficking victims. But such compounds exist in other places across the world. One was even uncovered on the Isle of Man.

Even socialists, who think they know the depths of capitalism’s depravity, must quail at its darkest criminal side, where no laws inhibit its drive to make a profit no matter who suffers. Here is where you see what money does to people, how low it makes them sink. Here is where the need to abolish capitalism screams, as loud as in any warzone, any overcrowded hospital, any sink estate, any overdose or private numb despair.

And yet, decent humanity shines through even in such circumstances. When told the full story about the Myanmar scammer who took $75,000 from him, the Canadian offered to meet her to assure her that he didn’t blame her for anything, and that he wished her well in the future. She, sadly, was too traumatised to agree to the meeting.

Paddy Shannon

Capitalism’s structural waste (2023)

From the November 2023 issue of the Socialist Standard

One reason why we continue to work comparatively long hours, despite the labour-saving potential of modern technology, is the proliferation of many paid jobs that essentially contribute nothing whatsoever to our material well-being. They are, nevertheless, required simply to keep the money-based market economy ticking over on its own terms.

David Graeber in his 2018 book, Bullshit Jobs defines these loosely as jobs that, if you were to scrap them completely tomorrow, it would hardly make any discernible difference to the real world or to our standard of living. He noted in an interview that there is a certain delicious irony in the fact that while a Soviet-style system has often been held up by mainstream economists as grossly inefficient because of all those make-believe jobs it created to maintain the pretence of full employment, in a so-called free-market economy that is supposed to root out such inefficiencies, exactly the same thing has been happening.

In that book, Graeber invents a rather amusing and colourful lexicon of terms to describe the different categories of jobs he has in mind. These jobs are everywhere and multiplying like wayward bacterial spores in a Petri dish. There are ‘flunkies’, paid to hang around, like doormen or receptionists, simply to make their superiors feel important; ‘goons’ to harm or deceive others for some nefarious commercial interest like the ubiquitous lobbyists or telemarketers; ‘duct tapers’ to temporarily fix jobs that would be better, and more efficiently, fixed permanently; ‘box tickers’ that go through the motions of doing paperwork that appears important but is decidedly not; and, last but not least, ‘taskmasters’ who are either completely superfluous in the guise of superiors telling you what needs to be done when you already know what needs to be done or are otherwise known as ‘bullshit generators’ whose job it is to create yet more bullshit jobs and so keep themselves employed in their own bullshit jobs.

A great many of these bullshit jobs fall within the services or tertiary sector. This sector now comprises the great bulk of the workforce at least in the more economically developed countries and as stated, its growth has been linked to the concept of deindustrialisation. Some workers in the services sector – like nurses or teachers – of course, perform socially useful tasks but many others clearly do not.

The ‘tertiarisation’ of the economy strongly associated with the growth of such socially useless industries as commerce, finance and retailing is an expression of the evolving (and expanding) systemic needs of capitalism itself. However, tertiarisation in itself does not capture the full extent of capitalism´s structural waste since many apparently useful jobs in the secondary or manufacturing sector (and, by extension, the primary sector) have to do with providing products or physical infrastructure that are then used for socially useless purposes within the services sector itself.

These jobs don’t actually make us ‘better off’ in real terms. They don’t result in more socially useful wealth being produced and distributed around. However, the fact that more and more of us are doing them means that more and more of us are, in effect, dependent on economic transfers from the steadily shrinking part of the economy concerned with producing socially useful wealth to maintain what might be called our ‘real standard of living’.

Money is the mechanism by which these economic transfers are effected, but money is also the reason why they are needed in the first place. Bank employees shuffling around bits of paper called money (although these days this is largely digitalised) can’t live on the stuff. They have to exchange it for ‘real’ stuff – like pairs of shoes, takeaway pizzas, or a Toyota to drive to work.

This is equally true whether you possess a wad of cash or an electronic wallet of bitcoins. In both instances what we are talking about is just a symbolic claim to wealth, not wealth itself. Indeed, for all the current hullabaloo over the latter – the cryptocurrency of choice of money launderers and shady operators everywhere – society as a whole is not one jot better off. On the contrary, according to data supplied by the University of Cambridge and the International Energy Agency, bitcoin ‘mining’ consumes around the same amount of energy annually as the Netherlands did in 2019 (tinyurl.com/3yk9w3zw).

What an astounding waste of energy! And to achieve precisely what? Nothing except to boost some individuals’ symbolic claim to wealth at the expense of others. For that is all that it can ever logically amount to when you think about it. In themselves, bitcoins – or fiat money, for that matter – are completely worthless. How long would Robinson Crusoe survive on his island if that was all he had to live on?

Actually, the ‘Robinson Crusoe’ acid test is not a bad starting point for determining what we mean by a real ‘human need’ as opposed to a fake. We don’t ‘need’ money. What we need in this society is only (some of) the things money can buy – though a lot of other things our money can also buy we don’t really need at all either – what the counter-cultural philosopher Herbert Marcuse called ’false needs’ in his 1964 book, One Dimensional Man. These are systematically and subconsciously instilled in us as a way of better integrating us into a capitalist ‘consumer society’ that is then able to more efficiently repress and control us by manufacturing our consent, manipulating our inner desires, and generally soliciting our compliance with its core values.

Of course, banking or cryptocurrency transactions and the like are only a tiny visible tip of a veritable iceberg of structural waste that we are talking about. With fewer and fewer people involved in producing shoes, pizzas and cars and more and more people engaged in ‘socially useless’ (but capitalistically indispensable) work within the economy, it is not surprising that society’s overall workload has not diminished but increased. More and more people are employed today than ever before but, at the same time, more and more of these are engaged in work that contributes absolutely nothing to our material well-being. Consequently, from the standpoint of meeting our needs, we are in effect, as a society, having to run faster and faster just to stand still. That is, to maintain our real “standard of living”.

Indeed, this is the core argument that runs through Ken Smith’s thought-provoking book, Free is Cheaper (1988). According to him, capitalism or the ‘market economy’, from small beginnings at the end of the Middle Ages, has come to dominate life in every corner of the world. However, it has brought with it increasingly unacceptable costs:

‘The crime industry, war preparation, bureaucracy, the ”sales effort”, these and other non-productive activities absorb the efforts of nine-tenths of the working population and are growing faster than productivity itself’.

On the basis of evidence supplied by commentators such as Thorold Rogers (Six Centuries of Work and Wages, 1884) and Sir William Beveridge et al (Prices and Wages in England from the Twelfth to the Nineteenth Century, 1939), Smith came up with some quite startling conclusions. For instance: ‘it takes longer today for a carpenter or a bricklayer to earn the price of a pound of meat or a house brick than it did five centuries ago’. What accounts for this, he argued, is the ever-increasing on-costs – or transactional costs – imposed by the market system itself.

Smith arrived at a figure of 90 percent of the working population being engaged in one or other form of socially useless activity (from the standpoint of meeting human needs) by carrying out a fairly comprehensive sectoral analysis of the British economy as it was back then in the 1980s. A roughly similar figure has been reached by other commentators such as Buckminster Fuller.

That figure of 90 percent is probably on the high side. Most people who have looked into the matter would put the figure at, conservatively speaking, roughly half the working population or perhaps a bit more.

Much depends, of course, on how stringently you want to define ‘socially useless activity’. A luxury good, for instance, might be considered ‘socially useless’. Yet it is undeniable that ‘consuming’ it can afford us pleasure. The problem arises when the production of luxury goods reaches a scale that jeopardises the satisfaction of our more mundane and pressing basic needs by diverting resources and labour away from the latter to the former. So the question of opportunity costs – how much of a given resource should you devote to producing this particular product at the expense of producing more of some other product – needs to be factored into the equation. Additionally, there is the question of how you define a luxury good. Some goods that were once considered a luxury – like a car or a refrigerator – have over time come to be considered a necessity.

Nevertheless, the basic thrust of Smith’s argument is unquestionably on the right track. Even setting aside the example of the production of luxury goods, there is a very large number of occupations that can be unequivocally and categorically classed as ‘socially useless’ and, therefore, wasteful of society’s human and material resources. In fact, the full extent of capitalism’s ‘structural waste’ is truly massive, all-pervading, and steadily growing. However, it will remain completely invisible to the naked eye, so to speak, as long as the viewer adopts a standpoint that simply takes this money-based capitalist system for granted.

To really appreciate the enormity of this iceberg of structural waste, you have, as it were, to step outside of that standpoint, or way of looking at the world, and adopt instead, a standpoint external to the system itself. You have to imaginatively presuppose a hypothetical society in which money itself, as an institution, has completely ceased to exist.

Needless to say, in such a society a great many of the jobs bound up with the existence of money today – or what that existence entails –would likewise cease to exist. They would simply serve no purpose.

Robin Cox

Blogger's Note:

David Graeber's Bullshit Jobs was reviewed in the December 2019 issue of the Socialist Standard.

Ken Smith's Free is Cheaper was reviewed in the December 1988 issue of the Socialist Standard.

Pathfinders: More Tales from the Crypto (2023)

The Pathfinders Column from the January 2023 issue of the Socialist Standard

In autumn last year youthful fintech whizzkid Sam Bankman-Fried, proprietor of FTX, one the hottest crypto-exchange companies in the world, was boasting about pouring billions of dollars, yes billions, into the Democrat war chest to fight the 2024 US presidential election. Then his chips got fried in ‘one of the largest corporate collapses in history, including the implosion of Enron in 2001’ (nyti.ms/3FhREgH). FTX stock value went from billions to nothing in the blink of an eye. Hundreds of thousands of customers lost their money. The aftershock hit other crypto exchanges like Swyftx and Bybit who immediately laid off nearly half their staff (bit.ly/3haWNiR). And all this followed a gigantic crypto market crash in May after South Korean firm Terra-Luna went down, resulting in two thirds of global crypto value – about $2 trillion – being wiped out including for market ‘bluechips’ like Bitcoin and Ethereum. Though the currencies were virtual, the disaster was real enough. 20 people reportedly committed suicide and South Korean police were ordered to patrol known suicide bridges in Seoul to stop more people jumping.

To borrow a crypto phrase, the worldwide trade in crypto ‘went to the moon’ in 2021-2, with $275bn traded daily in over 16,000 currencies on more than 400 exchanges and platforms (tmsnrt.rs/3Br1oEi). Non-fungible tokens (NFTs), crypto art tradables considered a nerdy joke a year before, ballooned into a $40bn global market, not far off the $50bn value of the total fine-art market (Bloomberg, 6 January, 2022). How did all this happen? Essentially it’s Tulipmania or the South Sea Bubble, based on ‘next sucker’ logic, where people invest in ‘assets’ on the assumption that they will be able to sell on to the next sucker at a higher price. Forget the original rationale of crypto as digital money alternative, that was never very practical anyway and is now irrelevant. Forget the silly notion that speculator commodities ought to have some intrinsic value. That matters not one jot. One of them, Dogecoin, was created by software engineers as a joke solely to poke fun at Elon Musk, but was subsequently endorsed by Musk and wound up becoming the world’s fourth-largest crypto, valued at $80bn. The runaway momentum behind this global Ponzi scheme is not real wealth, but that it can make some people fortunes. Until, one day, it doesn’t.

The May 2022 crash should have been to crypto what the R101 was to hydrogen airships, but market disasters never dent the faith of the capitalist faithful. And crypto traders have a vested interest in not letting crypto die. Instead they’re desperate to keep promoting it in order to draw in the next consignment of gullible buyers, so they’re not left holding the bag in their own multi-level marketing trap. Meanwhile governments have been slow to regulate this crazy casino despite it being a gift to money laundering, smash-and-grab hackers, ransomware and organised crime. Indeed even the politicians have got pound signs in their eyeballs. In December the UK government introduced a set of gloves-off banking deregulation measures including a ‘nod to developing the UK as a centre for crypto assets’ (bbc.in/3FEJfph ).

But crypto advocates aren’t just about the money, they are ideologically motivated, hailing crypto as the future of money and even the future of the internet. While real revolutionaries ask the big question, what if we abolished capitalist trading and money entirely, crypto fans obsess over the pseudo-radical question, what if we have a money system that’s not mediated through any centralised state agency, and what if we roll that peer-to-peer architecture out to other centrally controlled systems like the web. They are essentially techno-libertarians, in love with the screw-you-Jack premise and get-rich-quick promise of capitalism, but with a deep-seated animus against the state regulatory apparatus that normally goes with it. They want football without the referee, the Wild West without the sheriff, trusting in invisible Adam Smith woo-woo to make it all work. Now they also want Web3, a decentralised blockchain version of the web which supposedly frees it from the power of the Big 4, Facebook, Apple, Google and Amazon, who reap the benefits from user-generated content while cutting the artists and creators out of the revenue stream. The fact that the Silicon Valley venture capitalists behind the Big 4 are the same ones now backing Web3 should be a big clue that the technology might be decentralised but the power certainly won’t be. If anything it will be the opposite, as Web3, just like the crypto casino, is based on using blockchain tokens. As web blogger Molly White points out, in a podcast series by Financial Times journalist Jemima Kelly, ‘When there’s a token involved, there is a speculative financial component’, to which Kelly adds ‘Web3 isn’t really about making the internet any fairer, or less easy to exploit by fatcat Silicon Valley investors, it’s… about introducing yet another layer of financialisation to the web’ (apple.co/3HyRhB8). None of this apparently matters to crypto ideologues with their warped notion of freedom. To them, the blockchain has become a fetishistic emancipatory totem.

To recap, the blockchain is simply a ledger system distributed across multiple computers that records digital transactions. All participants have a copy of this ledger, making it theoretically (though not actually) impossible to alter afterwards. The point of this is to prevent double accounting without relying on some central checking mechanism. What use is this in capitalism, a system entirely built around centralised hierarchical control? Many would say none at all, given that the technology is currently grotesquely inefficient in terms of energy use, requiring at least eight orders of magnitude more energy than a standard centralised alternative (bit.ly/2Kew9QE). Might it be useful in socialism, perhaps as a way to reduce the load on central administrative hubs involved in production and distribution? It’s possible, because the heavy power consumption involved is mainly caused by the current need for crushing layers of encryption, hash functions, public-private keys and all the rest of the paraphernalia of capitalist secrecy. Socialism, being a trust-based sharing cooperative, wouldn’t need any of that. Even then, blockchains might still be seen as overpowered, over-engineered and overcomplicated in a society that may set more store by keeping it simple, stupid.

Paddy Shannon

Pathfinders: Tales from the Crypto (2022)

The Pathfinders Column from the April 2022 issue of the Socialist Standard

One of the less apparent effects of the ongoing Ukraine situation has been a rejuvenated interest by western governments in regulating cryptocurrencies, into which Russian oligarchs, among others, have invested billions. The problem with crypto, from the capitalist state’s point of view, is that it is a decentralised, peer-to-peer money system over which the state has no control. Naturally the state will point out that crypto is a gift to organised crime because transactions are not trackable through any central bank system, but they will also pedal hard on the urgent necessity of regulating the market for the sake of protecting you, dear consumer.

The real motivation is that state power over your money means great power over you. For instance, in response to a recent truck driver protest disrupting Ottawa’s main road network, the supposedly liberal and progressive Canadian government used emergency powers to freeze protesters’ personal and business bank accounts (bit.ly/3CWJFV3). Obviously, if you have all your money in crypto, the state can’t grab you by the proverbial short and curlies.

Small wonder then that China has banned crypto entirely. In somewhat less draconian style, the US Justice Department has set up a National Cryptocurrency Enforcement Team with the FBI providing backup services in ‘blockchain analysis and virtual asset seizure’. UK regulators are also calling for tighter controls, again flying the consumer protection flag, with the Treasury and Bank of England in urgent consultation on the matter (bit.ly/3CYkAc2). Conversely, after having first banned it last September, Ukraine has just performed a volte-face and legalised Bitcoin, as crypto donations to its war chest have surged north of $100m (bit.ly/3uhBG0C).

One reason why states haven’t cracked down harder and faster may be cultural inertia due to perceived notions of value, as people struggle to come to terms with the idea of currencies that are simply conjured into being, and virtual commodities like non-fungible tokens (NFTs) that have no physical or independent existence. How can you buy a thing that isn’t there using money that’s been made up?

For socialists though, all commodities are essentially imaginary, in the sense that their ‘value’ is a socially agreed perception and not an intrinsic physical property of the object. In socialism, where everything is free, things will be valued only in terms of their usefulness, not in terms of what they’re ‘worth’ in a non-existent market transaction. And currencies – at least government-issued fiat currencies – are all made up anyway. These days, as currency is no longer convertible on demand into gold, that piece of paper in your pocket may say £10 on it, but it’s only worth £10 because governments say it is and because we accept it is. Otherwise it’s just a firelighter. It’s the same with NFTs, which can be thought of as virtual limited shares. You can sell a share in anything, a meme, a song, a photo, if someone is willing to buy it, no matter how ‘worthless’ it might seem to anyone else. It might sound bonkers but that’s capitalist logic for you.

One vital consideration in all this is that it must not be possible, under any circumstances, to sell the same thing twice over, or the whole system is instantly discredited. Until recently, all money was managed through the central state banking apparatus, making double accounting impossible. Now blockchain technology prevents double accounting without central state involvement. Another essential requirement is ensuring that the supply of this virtual currency doesn’t increase exponentially, causing runaway inflation. The genius – if that’s really the word – of Bitcoin and other cryptos is to make the process of issuing or ‘mining’ new currency so extravagantly difficult through artificial problem-solving processes that they require enormous and ever-increasing amounts of computer number crunching. The solution of both these requirements has allowed crypto and NFTs to break free and take on a life of their own.

None of this is without cost however. Currently Bitcoin mining uses more electricity than 185 countries and 7 times Google’s global consumption (bit.ly/34XFWtC), with a growing carbon footprint that’s surpassing that of New Zealand (bit.ly/3tsNRbQ).

Now chip manufacturers are producing custom ‘blockchain accelerator’ chips especially for crypto-mining, which demonstrates, if you hadn’t already realised it, that what capitalists want and what governments want isn’t always the same thing (bit.ly/3L104dF). And crypto has largely contributed to the well-known chip famine of the past couple of years. These days, it’s chips with everything as the world surges ahead with 5G and the Internet of Things, VR, augmented reality, smart cities, lights-out factories, drone swarms, robotics, 3D printing, AI, electric vehicles, self-drive tractors, you name it. The problem is, the manufacturers of all these gadgets generally don’t make the microchips in-house, as the R&D and the ‘fabs’ are too expensive. Instead they outsource the work, mostly to one key place in the world, Taiwan, which has a GDP of around $670bn, close to that of Saudi Arabia, and a per capita workforce productivity 6 times higher than China’s.

Taipei is home to the Taiwan Semiconductor Manufacturing Co (TSMC), the world’s largest and most sophisticated semiconductor ‘foundry’. In 2020 TSMC accounted for 54 percent of global semiconductor revenues, and is a supplier to Apple, Qualcomm and Nvidia. No other foundry comes anywhere close, not even Samsung in South Korea or GlobalFoundries in the US, and China is not even in the picture.

Which, incidentally, adds a David and Goliath element to the tense situation between China and Taiwan over questions of political ‘sovereignty’ and strategic questions of control over the South China Sea.

So, while Ukraine spends its crypto windfall on guns before butter, China is currently keeping its cards close to its chest over the Ukraine question, and watching Nato very closely to see how muscular its response to Russia is. Today Ukraine, tomorrow Taiwan, is the big question exercising the geo-strategic wargamers. Just when you think capitalism can’t make things any worse, it displays its true inventive genius.

Paddy Shannon

Cooking the Books: Monopoly money (2019)

The Cooking the Books column from the August 2019 issue of the Socialist Standard

In June Mark Zuckerberg announced that in 2020 Facebook would launch its own ‘digital currency’. Since Facebook is the F in the GAFA group of US technology corporations that are widely criticised for harvesting private information for profit and/or not paying enough tax (the others are Google, Apple and Amazon), suspicions, not to say conspiracy theories, immediately arose that there must be some ulterior motive, one beyond making more money that is. Even Ed Conway, Sky News Economics Editor, had an article in the Times (21 June) headlined ‘Facebook currency will help it rule the world. Mark Zuckerberg’s new move is designed to make his company more powerful than any country’.

Is there anything in this? Or is it just sensationalism or the usual left-wing practice of selecting particular capitalist corporations or groups of capitalists to blame for things rather than the capitalist system as such or even the far-right delusion that the Jews are out to rule the world?

What is being proposed is an international payments system based on blockchain technology. This is a technology that allows any transaction to be both uniquely digitalised and unable to be tampered with. It was the basis of the Bitcoin scheme devised by the so-called crypto-anarchists. But the Libra, as the Facebook money is to be called (the same as the l in the old l.s.d.), will be different from Bitcoin in several key respects.

First, it will not be that decentralised but run by a central board on which other corporations, such as Paypal, Visa and Mastercard, participating in it will be represented alongside Facebook.

Second, it will be linked to a bundle of state currencies (dollar, euro, yen, sterling, etc) so that, unlike Bitcoin, its value can be stabilised so it can be used as a means of payment.

Third, it won’t be secret. Secrecy is not built-in to blockchain technology but was something added by the crypto-anarchists for Bitcoin to avoid states knowing who the payers and payees were.

Fourth, it will be profit-making. The corporations participating in it are aiming to make a profit out of the fees charged to users.

Those using the service – in theory all of the 2.3 billion Facebook users – will be able to open an account in Libra by converting their state currency into it and using this to pay for goods and services in any part of the world (except China where Facebook is banned). It is rather surprising that the banks themselves have not come forward with such a system. They may well be forced to now. Even the state central banks might have to,

That this is a bid by Zuckerberg to become the ruler of the world is complete nonsense of course. For that, he would have to control armed force, which he doesn’t. And his scheme will be subject to the control of states. They are bound to introduce regulations to stop Facebook money being used for currency speculation, money laundering and other dodgy dealings, just as they have done with Paypal and the others and would love to do with Bitcoin.

Ellen Brown, the US anti-banker theorist, has suggested (‘Facebook May Pose A Greater Danger Than Wall Street,’ Truthdig, 25 June) that what should happen is that the international payments system be run as a public service by ‘democratised’ central banks. That’s to miss the problem. It, too, would be a colossal waste of information technology that could be more usefully employed, in a needs-oriented world, in organising the logistics of ensuring that everyone on Earth had access to what they needed when they needed it – without payment.

Cooking the Books: Bitcon (2018)

The Cooking the Books column from the August 2018 issue of the Socialist Standard

‘Bitcoin “will never replace money”’ ran the headline of a news item in the Times (18 June) about a report by the Bank for International Settlements:

  ‘Bitcoin and other cryptocurrencies can never replace conventional money because they lack centralised backing and are riddled with problems, not least that they can simply stop working and have their value totally wiped out . . . In contrast to traditional money, cryptocurrencies become more cumbersome and unstable the more they are used.’

As the BIS is the international of state central banks, which issue conventional money, it is tempting to think ‘they would say that, wouldn’t they?’ They would, but that doesn’t necessarily mean that they haven’t got a point.

 Bitcoin was a free marketeer project, a scheme to create a currency that had nothing to do with the state, in accordance with the view that the state was a hindrance to the proper functioning of a genuine market economy. From a technological point of view, its creators succeeded – they did devise a way of making an electronic payment without using state fiat money.

 However, although dubbed a ‘cryptocurrency,’ bitcoin has never really functioned on any large scale as a means of payment. It has served two other purposes – speculation and a means of making transactions without states knowing.

People have bought bitcoins, speculating on its price rising; which is why some have suggested that bitcoin is more a ‘crypto-asset’, something to hold to keep or enhance what you paid for it like paintings or gold. Since bitcoins are intrinsically worthless the price is just a bubble that would burst if there was no other reason for holding them.

 It so happens that there is another such reason. Very few of those who use bitcoins are anti-state idealists. The vast majority are shady capitalists such as drugs barons, arms dealers, tax dodgers, sanctions busters, money launderers and others who don’t want the state to know about their financial dealings. It is their demand that determines the bitcoin price, so enabling it to be a subject of speculation. As one critic has put it, the bitcoin price is an index of money laundering. This is shown by the fact that, following state authorities taking measures to try to stop bitcoins being used for these purposes, the price of one bitcoin slumped from nearly $20,000 just before last Christmas to nearer $5000 today.

 Although a technologically elegant solution to what the free market computer geeks wanted, it is a waste of time and energy. New bitcoins are created by using computers to solve a complicated mathematical problem. This requires a huge amount of computer time and so of electricity, all pure waste from a rational point of view. Further, each time a bitcoin is used this is recorded, so the string of computer code representing it gets longer and longer. It’s as if every transaction using a particular paper note or metal coin had to be recorded. The BIS calls this ‘cumbersome’. Crazy is more like it.

 Having said this, the computer technology which is used to do this – blockchains – does have other uses. Since it is almost impossible to tamper with it could be used, for instance, to confirm the origin of meat so that horse meat can no longer be passed off as beef.

 So the BIS is right. Bitcoins will never replace state fiat money. State fiat money isn’t that stable itself of course but nowhere near as unstable as bitcoins. No doubt it will last till the time when capitalism is replaced by socialism and all forms of money become redundant.

Bitcoin-mania (2018)

From the February 2018 issue of the Socialist Standard

Bitcoin was set up in 2009 in accordance with a design drawn up by a person, or more probably a group of persons, calling themselves ‘Satoshi Nakamoto’. In a paper ‘Bitcoin: A Peer-to-Peer Electronic Cash System’ (bitcoin.org/en/bitcoin-paper), he/they stated that:

‘A purely peer-to-peer version of electronic cash would allow payments to be sent directly from one party to another without going through a financial institution.’

Libertarian money

What, you might wonder, is the advantage of such a system over the electronic payments systems such as Paypal and Visa that already exist? None as far as most people are concerned. However, those who set it up had been influenced by ‘libertarianism’ in its American sense,  such as anarcho-capitalists, ‘minarchists’ and other advocates of an unregulated market economy. They wanted a ‘cash system’ that was independent of the state and, also, didn’t want to involve a ‘financial institution’, in particular not banks, which, like the state, were accused of issuing unsound money by creating too much.

The basis of the system is a network of computers without a central server, all the computers being in direct contact with all the others. Hence peer-to-peer. The problem with such a decentralised, or, rather, non-centralised, system is how to verify that the person making the payment has not already spent the ‘electronic cash’ attributed to them. The innovation here was to apply ‘blockchain’ technology, as explained in the Pathfinders column of the December Socialist Standard:

‘When you make a Bitcoin transaction, the details are distributed across the entire network. To be sure the transaction is unique (i.e. not a 'double spend') it must be validated. To do this, the system triggers a competition in which freelance 'miners', acting somewhat like accountants, race to validate the transaction in return for a diminishing new-issue Bitcoin payment, which also helps to grow the currency at a controlled rate. Once validated, the transaction is then written into an encrypted public ledger as a permanent record or 'block'. This block is linked to previous blocks and in turn becomes the anchor or link to the next created block, forming an unbroken chain.’

The decision to call the validators ‘miners’ was another reflection of the ‘libertarian’ ideology behind the project. It was explicitly chosen to be like gold mining. As Nakamoto wrote:

‘The steady addition of a constant amount of new coins is analogous to gold miners expending resources to add gold to circulation. In our case it is CPU [computer] time and electricity that is expended.’

In this respect Bitcoin’s aim was to create the digital equivalent of a gold currency, to realise on the internet Ron Paul’s dream of a return to the gold standard.

It is not clear whether Bitcoin’s originators really intended their electronic cash to replace state fiat money or even just to compete with it. They seemed more concerned just to show that their ‘electronic cash’ could be created and that their system could work. If so, they proved their point; they did manage to transfer Bitcoins from one member of the network to another. A few cafés and other establishments agreed to accept payment in Bitcoins but more to appear trendy than for business reasons. At first Bitcoin was little more than a toy for computer whizz-kids.

Bitcoins didn’t have a price until 2010 when it was made convertible into fiat money at the rate of 1 Bitcoin = 0.003 US cents. The first recorded purchase using Bitcoins is said to have taken place in May that year when a computer whizz-kid paid 100,000 of them for two pizzas. By the following year, however, it had achieved parity with the US dollar.

The money changers come back

Bitcoins have never been independent of state fiat money or prices expressed in it. The businesses that accept payments in Bitcoins price their goods or services by converting their fiat money prices into Bitcoin ones; when someone pays for an item in Bitcoins the business doesn’t keep them. In fact, normally they don’t even receive them (what use would they be to them?) as the Bitcoins go to a Bitcoin dealer who converts them into fiat money and pays that to the business. Not that, with the price of Bitcoins as it is, many will be using it to buy anything.

From 2010 people who were not part of the peer-to-peer network began to buy Bitcoins. But why? There was a feature of the system – disguising payers and payees – that was attractive to those who prefer to be paid in cash rather than by cheques. Not plumbers and other handymen but bigger fry such as drugs barons, arms dealers, money launderers and others wanting to avoid financial regulations. This is why Blackrock CEO Larry Fink recently described the Bitcoin price as ‘an index of money laundering’. At the moment North Korea is being accused of hoarding Bitcoins to use them to get round the latest sanctions. Secrecy didn’t have to be part of the system but was incorporated into it by the designers, either because they were ideologically opposed to the authorities knowing or because they wanted to replicate on the internet the equivalent of payments in cash.

Despite the original intention of Bitcoin being a system of payment ‘without going through a financial system’, that is precisely what you have to do to buy or sell Bitcoins. Bitcoin exchanges have grown up where you can buy Bitcoins with state fiat money and where you can convert Bitcoins that someone has paid you into fiat money. For a fee of course.

And the speculators too

Technically a Bitcoin is a token enabling you to access Bitcoin’s money transfer service. Bitcoins only exist as strings of computer code, and are intrinsically worthless. But so are fiat money’s notes and coins, only behind them is the state guaranteeing their face-value. There is nothing behind Bitcoins. Yet last year the price of a single Bitcoin overtook the price of an ounce of gold and reached $19,000 in December from less than $1,000 at the beginning of the year. No wonder people are comparing the current Bitcoin bubble to the Tulip-mania that swept through Holland in 1636-7. At the moment Bitcoins are being bought purely for speculative purposes to make a gain out of their rising price. Sooner or later the bubble is going to burst and some suckers are going to lose their money and could end up holding something worth less than a tulip bulb.

It is this aspect – as an object of speculation – that has led some commentators to describe Bitcoins as a ‘crypto-asset’ rather than a ‘crypto-currency’, something people can invest in that will hold or increase its monetary value over time. In any event a fluctuating price conflicts with Bitcoin’s original aim of being a payments system. There is an irony in this. Its creators wanted to create an electronic version of gold. They seem to have succeeded in that gold, having been demonetised, is now an asset subject to price fluctuation due to speculation. Real gold would of course be a safer investment as it will always be worth more than a tulip bulb because of the considerable labour time spent finding and fashioning it.

Ironically too, governments and banks have become interested in the blockchain technology behind Bitcoins as it offers a cheaper way of registering transactions (and not just financial ones) and transferring money. To get in on the act could be a more rational capitalist reason for buying and holding Bitcoins as, at some point, the system or a part of it might be sold as has happened to other inventions by computer whizz-kids.

Bitcoins are not the only tokens to access electronic services provided by a network of computers using blockchain technology. There are over a thousand other so-called ‘crypto-currencies’. Many are offshoots of Bitcoin and the exchanges that deal in Bitcoins deal in other such tokens as Litecoin, Dash, Ripple and the appropriately named Ether.

What a waste

From the point of view of satisfying human needs, all the human ingenuity that went into developing the Bitcoin system and all the computer time and resources involved in operating it have been so much waste. In a socialist society, based on the common ownership of the means of production and access to the products according to need, there would be no need for an electronic payments system, in fact no need for any sort of payments system since buying and selling will have been replaced by giving and taking, and so need for money at all. There would, however, still be a need for computing skills and computer technology. In socialism the skills and enthusiasm of the type of people who first developed Bitcoin could be put to much better – and more satisfying – use.

Adam Buick

Bitcoin: What Would Marx Think? (2018)

From the February 2018 issue of the Socialist Standard

We have heard all kind of things about Bitcoin. There is even someone who has dared to say that Bitcoin was an alternative to the current economic-political structure and that for this reason Marx would have liked it (‘Bitcoin and Marx’s Theory of History’, Kenny Spotz, Bitcoin Magazine 26, July 2014). Oh dear!

Let us see whether Marx would have liked Bitcoin or not. Bitcoin is a ‘cryptocurrency’, ie a digital encrypted means of payment, safe, until hacked of course. According to Marx, the only alternative to capitalism is a society based upon common ownership of the means of production and products, a society with no profit and no money, not even crypto or funny ones.

Marx analysed extensively the nature and function of money in the capitalist system. This can be found in the first section of the first volume of Capital. Let us brush up on a few concepts from it.

Anything that is able to satisfy a need has a use-value, which is a utility, a particular quality. But when we look at the exchange of two things and their qualities, for example two chairs and 0.3 ounces of gold, their various use-values are not the driver for the exchange; what matters is some measurable common quantity. In the exchange, these two things become commodities and their values become exchange-value. As for the example, the 2 and 0.3 are the exchange-values. Yet, if we were to look at it from the utility point of view, the two chairs should be more useful than the 0.3 ounces of gold (let’s say a golden ring).         

But who or what decides that two chairs are worth only 0.3 ounces of gold, rather than 20 ounces, or 0.1 ounce? It is because the average amount of human labour in a society needed to produce two chairs and to extract 0.3 ounces of gold is the same. Thus, two chairs as well as 0.3 ounces of gold can be exchanged with each other, as with 8,000 apples, or 4 pairs of shoes. Every commodity therefore has equivalents, reflecting the average labour time spent on producing them from start to finish. By convention, historically, the universal equivalent form was attributed to a precious metal, gold or silver, as money-commodity, as the currency, which in itself embodied a standard of labour time in the same way and allowed all other commodities to be measured against it. 

Marx sums this up in a clear example:

  ‘Could commodities themselves speak, they would say: Our use value may be a thing that interests men. It is no part of us as objects. What, however, does belong to us as objects is our [exchange] value.’
   ‘Gold [meaning here as money] … serves as a universal measure of [exchange] value.’

In origin, money was a commodity, the precious metals gold or silver, for their property of lasting through time and their divisibility; their exchange-value was determined by their weight. At some point in order to allow smaller scale exchanges, other metals such as copper were used as tokens, substitutes for gold or silver coins. Even gold and silver coins were subject to wear and tear, thus their value became more and more conventional and less and less connected to their weight. This paved the way for a purely conventional currency as paper notes. Paper by itself is of little exchange-value, but conventionally notes are worth £20, £50, £100, etc. In Marx’s time Bank of England notes were redeemable in gold. The Bank, to which the state had given a concession to print paper notes, had to have in its safe the same amount of value in gold.

As Marx said, ‘Coining, like the establishment of a standard of prices, is the business of the State.’ Furthermore,

‘Only in so far as paper money represents gold, which like all other commodities has value, is it a symbol of value.’        

One by one, governments around the world decided to stop their currency’s convertibility to gold, making them fiat currencies. Fiat stands for let it be. That is to say, money with no gold convertibility obligations.

So today, a central bank, that can print banknotes under the state’s concession, can create money out of thin air, increasing the chances of inflation. 

Let us go back to the cryptocurrency, though, and how Marx would see it.

It is quite possible to create a ‘cryptocurrency’ out of thin air; it is all a question of convention. To become a real currency, the state would have to recognize it. In most of the world’s countries, but not all, bitcoins are legally recognized but only as a private currency. Importantly, the inventors of Bitcoin set a limit on the number of bitcoins (21 million) and this scarcity, combined with other advantages, gave it some attraction. The major other advantage is that Bitcoin guarantees anonymity, ideal for those interested in tax evasion, gambling and money laundering. Moreover, purchases are not taxed. Bitcoin does not require so many intermediaries and therefore should have lower transaction fees. Businesses can even raise money, by means of Bitcoin, with no formal stock exchange listing. Yet, these advantages do not explain the steep increase in its price.

Chicago Mercantile Exchange, the world’s largest derivatives exchange operator, is planning to start offering Bitcoins trading. This has helped make the speculative Bitcoin bubble bigger than the dot-com one of the late 90s. At the time of writing, in December, bitcoins were worth about $15,500, already on a descending phase, from a peak of about $18,000. What was it going to be worth the next day, $10,000, $500, $1? Investors were buying bitcoins because they expected somebody else to buy them, and so on. They hope for a ‘greater fool’ to buy from them, as the Economist (1 November) put it. Clearly, despite what the Bitcoin community say, this is not a currency adequate for buying everyday goods, but it has proved ideal for a huge speculative bubble, surely not a step towards the future of human evolution.

Marx would not think that Bitcoin was a good currency, because it is not a stable form of universal equivalent. Marx would equally think that neither the dollar nor any other fiat money was a good form of universal equivalent, since fiat money is fictitiously sustained by the state and when issued in excess leads to inflation. Marx would not think that a currency, invisible because digital and encrypted, was intrinsically a step forward or could change the social order. Capitalism can be surpassed only by a system where the means of production and products have become the common property of the whole society, and access to them completely free. A society where gold would not be the universal form of equivalent, nor any other type of money.

Cesco.