The overthrow of crony capitalism

The overthrow of crony capitalism

Many critics of the current economic system blame crony capitalism for hampering much-needed reform. The popularity and success of cryptocurrencies, however, has often been met with a mix of enthusiasm by those who believe it will “fix everything,” and pessimism from skeptics who say that such an overhaul is unlikely.

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“Crony capitalism” is a term used to describe the government and business interests that work together to benefit each other. “Examples of crony capitalism” includes the bailouts of banks, subsidies for oil companies, and tax breaks for the wealthy.

The overthrow of crony capitalism

If Karl Marx and Friedrich Engels were transported to the current day and handed a newspaper, the absence of class strife would almost certainly lead the revolutionaries to believe they had won. They would see a society divided on a wide range of issues, from identity politics to the proper COVID-19 approach, but almost completely mute on the unending conflict between labor and capital, oppressors and oppressed.

What a difference it would have made if they’d returned 10 years ago, when the Occupy movement was at its peak, with tent towns popping up in protest of crony capitalism, corporate greed, and an out-of-control banking sector. The same issues continue a decade later, but they’ve faded into the background hum of the boiling, raging cultural wars.

The 1% may be sleeping better these days, but whatever sense of complacency they have is wrong. The wrath never went away, and as inequality has increased, capitalism’s discontents are no longer isolated to the Left. Most importantly, these proto-revolutionaries now have access to the most potent economic weapon ever available to regular folks.

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Rich people’s welfare

Why is revolution brewing? Because people aren’t stupid. They see governments spending trillions of dollars on propping up the too-big-to-fail while the poor continue to struggle from paycheck to paycheck. What most don’t realize, however, is that governments know that Rich people’s welfare hits the poor hardest. Indeed, they’ve known it for the better part of 300 years.

The Cantillon Effect, first observed in the early 1800s, outlines how money production makes the affluent wealthier and the poor poorer. When a large quantity of fresh money is injected into an economy, the initial receivers get to spend it before prices rise. If they are sensible, as the wealthy are, they will invest in real estate, precious metals, art, and excellent wine.

The overthrow of crony capitalism

By the time this money “trickles down” to the poor (if it ever does), the inflationary consequences of printing it have depreciated it significantly. As prices rise, the wealthy double their gains as the value of their assets rises, while the poor lose twice as much as the cost of living rises.

You don’t have to be a socialist to be outraged by an economic system that makes life more difficult for the poor while rewarding corporate greed. What’s less often known is that this isn’t a flaw in our ostensibly capitalist economic system; rather, it’s a feature.

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Related: How might Bitcoin help third-world nations combat inflation?

Soft socialism and crony capitalism

It’s customary to blame “capitalism” for the world’s current economic and sociological problems. In fact, if Marx were still living today, he’d like many aspects of our financial system, including ideas from The Communist Manifesto. For example, Marx’s fifth tenet of communism argues for the “centralisation of credit in the hands of the state, by means of a national bank with State capital and an exclusive monopoly.” Sounds familiar, right?

The fact is that we live in a “soft socialist” paradise in many respects, with rules, subsidies, and other government interventions targeted at safeguarding corporate behemoths and individuals with assets rather than savings accounts. It’s difficult to see how a further leftward shift can address the inherent flaws of an economic system that currently views printing money as a panacea for all problems. However, short of a blood-and-thunder revolution, it’s difficult to see what we can do to counter such huge entrenched interests and their political supporters. What is to be done, to use Vladimir Lenin’s favorite phrase?

Related: How the Roman Empire may have been rescued by a crypto revolution

The solution, whether on the Left or the Right, is to avoid battling the wealthy on their own terms. There is only one way for the weakest members of society to wrest power from the 1%: by taking away their capacity to manipulate fiat money.

A revolution without bloodshed

Can Bitcoin (BTC) really disrupt the asset-owning class’s millennia-long rule (without spilling any blood)? You may call me a dreamer, but I’m not alone. Simply ask the Salvadorans.

Before Bitcoin, Salvadorans who received remittances from overseas had to pay a hefty charge to money transfer companies like Western Union or MoneyGram – money that might have been spent on food or medication instead. These firms are expected to lose $400 million per year now that Bitcoin is legal money. That money is flowing right into the hands of the world’s poorest people.

This is how the revolution will take place: by choice rather than violence. People will vote with their feet if you show them how the fiat system makes them poorer and offer them the option to develop their wealth in uninflatable Bitcoin. Rather than being overturned in a flash, fiat money will fade in significance as more people turn to Bitcoin to protect themselves from inflation. This will pick up steam as the “squeezed middle” is struck harder, with history demonstrating that revolutions only happen when the middle classes and political moderates accept the revolution’s radical views.

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Today, there’s a fragrance of insurrection in the air. People have lost trust in politicians for a long time, but they are now starting to challenge long-held economic and monetary narratives. What makes Bitcoin so appealing is that it doesn’t need to preach its own gospel or attack the opposition: the more people learn about Bitcoin, the more they realize how they’re being duped by the present system.

Bitcoin’s detractors often contend that it is too complicated for widespread adoption. But which is more difficult to comprehend: a digital currency with a hard ceiling of 21 million coins or the perplexing gimmicks used by central banks and finance ministers to hide inflationary policies that benefit the wealthy while harming the poor?

We don’t need to employ terror to combat the tyranny of unsound money, as revolutionary France did with the guillotine and Soviet Russia with the gulag. Ours is a true Velvet Revolution, with an alternative currency that cannot be inflated, banned, or otherwise manipulated as our single weapon, and the only “victims” being those who profit from a system that harms everyone else.

This post makes no investment recommendations or advice. Every investing and trading choice has risk, therefore readers should do their own research before making a decision.

The author’s views, ideas, and opinions are entirely his or her own and do not necessarily reflect or represent those of Cointelegraph.

Nik Oraevskiy is a Bitcoin Reserve co-founder. Nik has been working with Bitcoin wallet and exchange firms in North America since 2012, assisting them in developing and leading their strategic goals. Before founding Bitcoin Reserve, he worked in international finance and fund management in Liechtenstein, with the intention of extending smart Bitcoin-buying to the rest of Europe.

The “crony capitalism vs free market capitalism” is an argument that has been made in the past. The argument goes that crony capitalism is better than free market capitalism because it provides more jobs and stability. However, this argument is usually used by those who have not fully understood the benefits of a free market economy.

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