The Satoshi Revolution: A Revolution of Rising Expectations
Section 3: Decentralization
Chapter 8, Part 3
The Centralization of Crypto and the Banality of Evil
First we must realize that all actions are performed by individuals… If we scrutinize the meaning of the various actions performed by individuals we must necessarily learn everything about the actions of the collective whole. For a social collective has no existence and reality outside of the individual members’ actions.
–Ludwig von Mises
In 1963, the political philosopher Hannah Arendt wrote a book Eichmann in Jerusalem, about “the banality of evil,” which redefined that concept forever. Evil is not usually committed by sadistic monsters, she argued, but by ordinary people who relinquish personal responsibility for their actions and obey the orders or rules of a corrupt system. (Here, evil is defined as deliberately and callously inflicting great harm on innocent people.)
Arendt reached this conclusion while reporting for The New Yorker on the trial of high-ranking Nazi Adolf Eichmann, which occurred in Israel. As a German Jew who fled the rise of Hitler, she should have been appalled to be in the same room with Eichmann. Instead, Arendt was fascinated by him. There was no guilt, no rage, no sense of responsibility, nothing exceptional. As her book explained, Eichmann kept repeating that, “He did his duty…; he not only obeyed orders, he also obeyed the law.” He was also assisted by a vast network of average people—clerks, railroad workers, low-ranking soldiers—who sent innocent others off to prison or worse fates, without a second thought. It was the law.
Cryptocurrency confronts the banality of an economic system for which the word “evil” is not too strong a word. Opening with Arendt may seem like hyperbole, but it captures something important. The central banking system and the other economic controls imposed by government seem benign because they are so familiar; people grew up with them. And bank clerks can be very pleasant as they demand Know Your Customer data; if the customer objects, they answer “I am doing my job, and it is the law.” Nothing benign occurs in the system. Hard-working people are robbed of their wealth through measures like inflation and the monopoly of fiat currency; food is taken from the mouths of children; innovators who could produce a better world are shackled; in some nations, people die for want of nourishment or medical care.
Venezuela is an extreme example of economic evil, as well as an example of the remedy. When the economy collapsed in 2014, many people’s lives were ruined while many others survived by using the only alternative they had to worthless fiat: cryptocurrency. President Nicolas Maduro was well aware of the dynamic. That’s why he issued the first-official state crypto—the Petro—which was announced last December (2017). The Petro is doomed, of course. When centralized in Maduro’s hands, it will become just another form of fiat. But the Petro indicates one of the main ways the economic system will try to defuse the threat of crypto—namely, centralize crypto by either issuing coins or regulating a few institutions approved to handle it, such as exchanges.
Two main factors in how long the Petro will last are the centralization of power, and how many average people will accept the official status quo because it is (or will become) the law. These are the people who will work in the financial system, or turn in a neighbor for mining, or vote to ask for regulation. They are the banality of economic evil, without which the system could not exist.
The harm done to freedom by those who act against decentralized-market crypto is more than just a denial of financial independence to others. Free-market crypto fortifies some of the most important concepts of liberty. One of them is “methodological individualism,” which is the exact opposite of what Arendt called “the banality of evil.” Instead of individuals relinquishing their responsibility for actions to an institution, like central banking or the military, individuals are entirely accountable for their own behavior.
The Austrian economist Ludwig von Mises rested much of his philosophy on methodological individualism. He declared that, ultimately, only individuals exist; only individuals act. Even within the dynamics of a collective, such as the state or society, it is individuals who comprise the structure and carry out all actions. Mises famously stated, “The Hangman, not the state, executes a criminal.” Individuals who look at the hangman [and] see the state in action do so only because they have created an abstraction known as ‘the state’ in order to provide a context. The hangman may be pressured to perform his job, but the performance is ultimately his choice. Equally, people never truly see or hear a group conversation. All they see or hear are individuals speaking, and then they label the sum of the exchange as ‘a group conversation’.”
Mises argued that collectives-such as family or society–were valuable abstractions that people used to describe their interactions with others within a specific context. He did not deny the worth of many collectives. Quite the contrary. He explained, “Methodological individualism, far from contesting the significance of such collective wholes, considers it as one of its main tasks to describe and to analyze their becoming and their disappearing, their changing structures, and their operation. And it chooses the only method fitted to solve this problem satisfactorily.” Individualism was the key to understanding collectives.
What does this have to do with cryptocurrency?
The most difficult area in which to implement methodological individualism is finance, which is one of the most powerful collectives in existence. Central banks, tax agencies, and reporting forms are ubiquitous types of evil. Governments do not produce any wealth. And, yet, they need vast amounts of it to finance bureaucracy, the military, and the other centralized trappings of power. This means governments need to steal vast amounts of wealth. But to do so directly would cause resistance. So they issue fiat and bonds, and force all finance to go through institutions they control. For a long time, for most people, there was no viable path around the centralization.
And, Then: Cryptocurrency
Free-market crypto is methodological individualism writ large in an essential area of life. Methodological individualism is an incredibly powerful challenge to the centralized control of economics. It was designed to be so.
The concept arose in response to the theory of social holism that became popular in the early twentieth century. Social holism claims that systems must be viewed as wholes rather than as collections of their parts. It maintains that a collective has a dynamic that differs from the sum of its parts. In short, the collective is greater than the individuals who comprise it.
Marxists often accuse those who espouse methodological individualism of being atomistic, or unable to bow to the greater social good. Some go so far as to assert that the individual, and not society, is the true abstraction. That is, individuals do not exist without society. As Mises observed, “The notion of an individual, say the critics, is an empty abstraction. Real man is necessarily always a member of a social whole.”
Karl Marx argued this point by using a Robinson Crusoe example. An individual who had been born and immediately abandoned on a desert island, he contended, would not be a human being at all. His point was that human beings are social organisms-social constructs, if you will-who cannot be lifted from their defining context and still remain human. Reversing Misesian logic, Marx claimed that society created its individual members. To create the “right” type of people, all social institutions had to be thoroughly regulated for the social good, however that was defined. The brutal conformity of communism is an example of centralization. So is the expression, “I was only following orders.”
Classical liberals argued that a person raised in utter isolation would still be a human being with human characteristics. For example, he would have a scale of preferences, and he would act to achieve the highest one first. Without social interaction, of course, huge parts of the person’s humanity would never develop. But this would not make the individual less human. Collectives do not define humanity. Human beings define collectives.
Coerced centralization is so inculcated into the culture that it is considered to be normal and healthy. Public schools, central banks, public works, tariffs, …many people cannot envision society through any other lens. But coerced centralization demands that people surrender their moral compass to a collective authority. It is the source of Arendt’s banality of evil.
Methodological individualism is the cure, especially through the dynamics of a free crypto, which is implemented through decentralization. But how does a decentralized society create the free-market institutions valued by Mises? The answer is another key concept of liberty: spontaneous order.