I wrote this article May 31, 2014 as part of a series that drew comparisons between the Crypto Rush and the Gold Rush. I have been working to try and understand how to avoid the same downfalls of the early 20th century as people scramble to plant stake in the new world in which we are treading:
In previous installments of this series, the Gold Rush was used as a historical parallel to show the potential growth that can happen in a society with a free market and a sudden injection of capital. This historical precedent was not only appropriate to show the potential of new capital, but it also shows the potential mistakes that can be made from too much or too little regulation.
It’s impossible to determine true causative relationships on a macro-economic scale. But there are still clear connections that can be made on this scale that have enough evidence to support retrospective assertion of a direct relationship.
In this chapter, we will step forward through time, starting at the end of the Great Depression, and end at the government imposed dissolution of the monopolized conglomerates that had formed in a new era of a loosely regulated economy.
The regulatory period post Great Depression is a perfect historical precedent to show how the regulation of crypto-currencies could either spell the end of the new technology, or prevent massive exploitation of individuals and organizations.
In modern society it seems impossible to have absolutely no regulation of Bitcoin, as many governments have shown they will not allow Bitcoin to exist without imposing their rules. In the face of this reality, the special interests of the US, Chinese, and Russian governments and their respective central banks seem to be threatened by the mere existence of Bitcoin.
With the world’s major superpowers threatening to legislate the banning or extreme taxation of cryptocurrencies and the recent joint effort of the Department of Justice and banks nationwide called Operation Choke Point, it could be reasoned based on historical precedent that the legislation in a nearly free market with new capital injection will have the new capital forcibly transferred to the state under threat of fine or jail time using ethical grounds as the driving force behind the laws.
In a previous article, we talked about the legislation in which the US government made owning more than $100 worth of gold illegal. This forcible removal of capital was said to have been for the greater good of the state, but history shows the overall benefit from this redistribution of wealth was short lived, as the government needed to immediately bolster a failing economy with the Works Progress Administration which established the government as the largest employer in the country.
While the government sanctioned theft of gold from the citizens was clearly a misuse of regulation, it cannot be ignored that at the turn of the century, major conglomerates were using unethical practices such as child labor, sweatshops, undervalued scrips as compensation, and complete disregard for worker safety to such an extreme that the nation demanded intervention. Although labor unions in America had formed in the mid-19th century, it was not until the early to late 20th century that they gained more traction and their influence over trade practices became strong enough to make a change.
During the period in which the New Deal was drafted, the National Labor Relations act came out as well. It was enacted to protect the rights of unions in America. While the WPA may be considered a misuse of funds by some, in the short term, it put government funds directly into the hands of individuals for labor, goods, or intellectual property, and did not rely on the Keynesian principle of trickle-down economics to distribute tax dollars into the economy.While the government was directly paying citizens for work, the anti-socialist movement attempted to establish a hard line between government and private sector, but would allow for subsidies to take place.
The back and forth swing between an unregulated free market and the socialist idea of forced redistribution of capital for the greater good allowed large conglomerates to monopolize industries using unethical practices.As a result the exploitation by these corporations created a political climate in which the citizens were behind a government legislated seizure of the monopolies’ capital.
As the American media and communication infrastructures grew into monopolies, regulatory bodies and legislations would be established as extreme countermeasures, to the extent of instituting government censorship on frequent occasions. While historical censorship may not seem to be immediately relevant to Operation Choke Point, understanding how information was filtered in the early to mid-1900s gives a clear example of how government media manipulation precedes forcible redistribution.
During World War I, the United States established heavy censorship around speech and film. On the tails of the war and the First Red Scare, the limits on speech were established in the name of keeping military secrets, and the limits on film were established as film was not recognized as art and therefore not protected by the first amendment.
The government went so far as to establish an Office of Censorship, which censored the journalists, the media, and all communications going in and out of the country. Two years after the closure of the OOC, the loosely monitored Central Intelligence Agency was established as the new agency to control the information flow in the United States.
In the decade following these unprecedented levels of censorship, McCarthyism emerged in the form of a heavy handed government willing to imprison citizens and seize their bank accounts asserting that any American under suspicion of being an enemy of the state was subject to the aforementioned punishments.
As the military industrial complex began to take hold of the government, the clash of domestic interests and international investments came to a head when Richard Nixon once again removed the United States from the Gold standard disrupting local and global economies. Conveniently, the US no longer had to honor its debts in gold, as fractional reserve banking had left the central bank with more debt than assets. To pay back debts, the US printed more money and drastically inflated the amount of currency in circulation, devaluing the dollar in the process.
In the next article, we will see the US government turn its focus back towards domestic corporations, and begin a new wave of regulation that would once again decentralize monopolies. We will also examine a major paradigm shift in infrastructure with the dawn of personal computers, cable television, mobile communication, and the creation of the internet.