Bitcoin, Magick and Eco-Socialism: Part 1 – Bitcoin

I haven’t been blogging for ages, which means that I never get ideas out of my head, so they all swirl around in the great soup of my brain and make random connections.  This three part series of posts is a classic example of that.  I am well aware some people think that bitcoin is a ponzi scheme; that magick is just woo-woo nonsense and no amount of quoting nineteenth century Ukrainian scientists is going to convince them otherwise.  If that puts you off then this is perhaps not the best read for you.  If you are intrigued, come dive into my brain soup.  

There is an impending financial crisis.  High levels of institutional debt in 2008 nearly brought the financial system crashing down.  Its saviour was debt nationalisation through quantative easing; that debt taken from banks to the state is now being reprivatized onto households.  Rising rent arrears, rocketing student debt and accelerating car loans are creating record levels of personal debt in the UK.  It  is a similar tale across most of the developed world.  For the working class, debt is effectively the pre-sale of future labour.  This is most clearly seen in student debt, where the (increasingly threadbare) promise of a secure well paid job is now seen as the purpose of education, but labour is limited and you cant just mortgage the future forever. Inflation is the classic means of debt erasure, but when wages are stagnent and people are already struggling to attain basics like shelter and food, inflation simply means more pain.

Enter Bitcoin.

Bitcoin is all over the news at the moment.  Its been around for nearly a decade, but suddenly thanks to its stratospheric rise against the dollar and other fiat (government issued) currencies, interest has piqued: what was once fringe has been catapulted into the limelight.  Bitcoin is a crypto-currency, not issued and vouched for by a government, but by a network of computers who verify transactions and are rewarded with new bitcoins for doing so.

Bitcoin was “invented” in 2008, the same year as the financial crisis, and first “minted” in 2009 with a genesis block that explicitly referenced quantative easing.  It gained a strong hold in the imagination of the libertarian right and “gold bugs”, but had little to no attention paid to it from the left.  At first sight, its attraction for the economic right is obvious – pseudo-anonymous, deflationary and stateless – but a deeper analysis demonstrates it worth.    It is pseudo anonymous, but also completely transparent with every single transaction lodged on a public ledger: following the money just got a whole lot easier.  It is deflationary, but inflation is a problem that socialist countries have battled, not an inherent good. Bitcoin will undermine the nation state as we conceive of it, that is a certainty, but how that nation-state will be reshaped is for the taking.

Adopted as it was by the economic far-right, its advocates applied the quantity theory of money to much of the early analysis of bitcoin, suggesting that its fixed limit of 21 million coins (approx 0.003btc per person currently alive) gave it superiority to fiat money with its variable supply, in achieving stable prices.  But the quantity theory of money has its flaws.  For Marx, money was a commodity, just a very special one.   Marx’s Labour Related Theory of Value suggests that value can be conceived of in two ways, from a consumption angle (use-value) and a production angle (exchange value). While use value can deviate, exchange value as the sum of the accumulated labour power which had gone into its production was relatively stable and the basis of pricing. This exchange of accumulated labour power for money stored it for later deployment, turning it into capital.  That capital could then be used to attract greater and greater amounts of surplus value.

Capital is dead labour, that, vampire-like, only lives by sucking living labour, and lives the more, the more labour it sucks. The time during which the labourer works, is the time during which the capitalist consumes the labour-power he has purchased of him.

Criticisms have been made of Marx’s conception of labour – particularly his focus on productive labour: labour which is exchanged directly for money. Feminists economists have frequently highlighted the non-payment and underpayment of traditional women’s tasks that are expected to be done for love not money – such as care, cooking and cleaning.   In Marxist terms this labour is written off as “reproductive”, which is an apt term given that the very gestation and production of new labour units is in itself labour (and as any new mother will tell you, it isnt called labour for nothing).

Podolinsky, a Ukrainian socialist writing in 1880, took Marx’s theory Labour Related Theory of Value (LRTV) and extended it even beyond the realms of reproductive labour. As well as pointing out the reproductive labour that goes into the creation of labour units, he also explored the non-human labour in animal form which was not formally accounted for, and beyond that to how animal labour is itself produced – from calorific intake – and traced it all back to its common denominator. For Podolinsky, the LRTV was just a special case of an energy related theory of value, where human labour is just a particular form of energy.

Cast your mind back to high school science and the definition of work you were taught in physics. “work is done on an object when you transfer energy to that object. If one transfers energy to a second object, then the first object does work on the second” From Podolinsky, this function also applies to economic activity: that a worker is transferring their energy to the product of their labour. Returning to Marx, a worker then is transferring his energy to the capitalist through the medium of the saleable object, and in return is is obtaining stored energy in the form of money at a lesser rate – the difference in the two being the surplus value.  Using an energy related theory of value rather than a labour related theory; using energy as the ultimate source of surplus value, rather than labour, and acknowledging non-human forms of energy transfer, we can start to explore that relationship between money and energy and how it operates. In particular we can explore the contrasts between the relationship that fiat currency and bitcoin have with energy.

When talking of fiat currency, we are really talking about the dollar: the de-facto world currency.  The 1944 Bretton Woods system pegged world currencies to the dollar, which was in turn pegged to gold. In the 1970s, as a means of aliviating the debt of the Vietnam War, the dollar was removed from the “Gold Standard”, first temporarily, then permanently, while new agreements with OPEC nations for weapons and protection ensured that oil became the new gold.  Oil sales are denominated in dollars which means that anyone who wishes to purchase oil must have dollars. Dollar dominence is only possible through energy scarcity, consequently it is more profitable to launch expensive and destructive conflicts to secure it, rather than to invest in research to harness it more effectively. Under dollar dominence, present energy is deployed destructively to ensure ongoing control over the sources energy, paid for through debt.

With bitcoin, this relationship between money and energy is inversed. Every 10 minutes a new block is created giving the “miner” a bitcoin reward in the form of a mix of new bitcoins and transaction fees. The more miners, the more energy (in the form of computing power, via electical energy) is required to gain that reward. The more efficiently energy can be deployed to mine, the greater the rewards, leading miners Miners will only mine if the rewards are greater than the cost of production – so where the bitcoin purchasing power is high, more miners will join in; where the purchasing power is low, more miners will drop out, but blocks are formed every 10 minutes regardless. In this manner past energy  is monitized, as the blocks which are mined at the present time have the purchasing power of the current energy deployment, but also every past bitcoin, which collects or disapates other forms of past energy in its exchange.

The dollar is on the decline and with it, the fiat monetary system.  Bitcoin is revolutionary, those who write it off as a ponzi scheme and wait on the sidelines for its collapse are on a hiding to nothing. It is the purest form of commodity as an explicit store of energy and it turns current economic thinking on its head.  It offers us an escape from capitalist realism, and a potential means of climate change.  But to fully explore those aspects, we need to think magickally….stay tuned for part 2.

Note:  I am aware that Bitcoin is not the only cryptocurrency.  I have used bitcoin in this post as it is the best known and for simplification purposes.  

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Updated: December 28, 2017 — 11:31 pm
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