This is part 2 in my series, Bitcoin, the real Great Emancipator.

We discuss this article in the episode 1 of the Bitcoin and Economics Podcast.

Bitcoin and economics podcast episode on this article.

As a brief reminder, slavery is violent and recurring theft. Under Socialist Slavery (also called Communism) the victims are told that the very concept of ownership of goods has been eliminated. In this way the predators (slave owners) claim that they are not stealing everything produced by the victim, but merely allocating resources more effectively. They claim this will better serve the victims and ensure everyone is treated equally. In reality the predators allocate the stolen resources for their own benefit and claim possession of the very bodies of the victims.

Victim productivity — 2 out of 5

This strategy of deception has proven more effective than racial slavery, where the predators attempt to convince victims that they are an inferior race of men. One indication of it’s superiority is the fact that it has been effectively used to steal from men performing skilled and creative labor, where racial slavery has only been effective in stealing from men engaged in unskilled labor. Presumably this is because it’s easier to inflict violence when productivity drops in unskilled and uncreative tasks because productivity is easy to measure.

For example if a victim reduces the number of mud bricks produced from 100 to 90 it is obvious production has dropped, but if a carpenter takes 8 or 9 days instead of 7 to produce a chest of drawers, it could be because the materials proved challenging, the tools needed additional care, or that the carpenter attempted a new design.

As deception is increased rebellion is decreased, even when it is easier and less risky.

However, the fact that victim productivity under socialist slavery compares favorably to the productivity of victims under racial slavery does not mean that it is not pathetically low.

Reality breaks in

In socialist slavery the key rouse, that there is a difference between ownership of a resource and the power to allocate that resource, is soon unmasked by by daily experience.

In the past the victims decided what goods they would acquire for their labor and how they would enjoy those goods. Now they see that “officials” decide what goods they will produce and how those goods will be enjoyed. The distinction between ownership, and the power to decide, is seen as a lie to even the most gullible.

This greatly decreases incentives to produce, and it greatly increases the incentives to participate in predation (as this is the only way to obtain goods). This creates a vicious cycle where victims continually become more effective predators and less effective producers.

Dumb as a sack of hammers

This form of slavery also prevents good decision making. Good decision require market prices and market prices require free exchange between owners.

To understand this imagine you have a field that is suitable for wheat or corn. How do you decide what crop to produce? Under normal circumstances you can compare your costs for each crop to the expected sale price (based roughly on past prices) and you can grow the crop that will produce the greatest profit.

Let’s assume you determine that corn is going to be more profitable. This could be because a disease has affected corn production on another continent. It could be because the first ethanol based engine was invented last week and insiders are buying corn futures. It could also be the result of increased labor cost after a dam broke and damaged a nearby town. It could be a million things or more, but in order to make the best decision for consumers you only need to know prices.

Now imagine that you are a socialist slave owner. You own the men. You own the fields. You own the corn, the wheat and all of the equipment. How will you decide if that particular field should grow corn or wheat? What is the ratio of demand between wheat and corn? Your best option is to do a questionnaire and ask people how much corn and wheat they need this year. But since these people will not have to balance their desire for wheat with their desire for corn and milk their requests will not reflect the costs involved. If they knew that corn was 5 times more costly to produce would they have bothered to change their forms? How could they possibly know that it’s 5 times more costly? And if everyone asks for more than is available how much will you deny them? Will you reduce the bakery and the airports allocation of wheat by the same percentage? Who actually needs it more? What if they need a fixed ratio between milk and wheat because they are a bakery and without milk the wheat will be wasted? Will that appear as a footnote on the survey so that you know to reduce their request for milk automatically if you can’t fill their full request for wheat? Maybe you should improve the forms and start over. Even before you collected the first forms the data was outdated.

Prices are smarter than you

The reality is that all of this data is represented in the deceptively simple market price. Millions of people making tradeoff decisions, millions of times a day, in real time, is summarized in the constantly fluctuating market price of a product. That is the very purpose of a price — to communicate and coordinate the allocation of scarce resources to the people that need it most in order to meet the needs of consumers.

By taking ownership of all of these goods the predator has gained the ability to use them for his pleasure, but he has destroyed the distributed decision making, reflected in market prices, essential for producing the things he wants to enjoy.

The socialist slave owner is like a child that steals a candy factory only to find that he is left eating granulated sugar and raw cocoa. https://mises.org/library/economic-calculation-socialist-commonwealth

A sinking ship from day one

This is why populations under socialist slavery only survive as long as they are able to consume previously created resources. The deception is temporary and predators can’t make informed decisions. This greatly limits both the duration and amount the predators are able to steal from the victims and makes the overall productivity of victims low.

Security cost — 4 out of 5

Because resources are rapidly squandered predators are forced to create a steady stream of new victims. If they fail to deliver fresh meat the existing victims will kill the predators out of sheer desperation. To gain new victims predators must war with bystanders and this is expensive.

If the predators do manage to bring in enough additional victims they will still not be able to prevent a constantly decreasing standard of living. So even in the best case scenario victims are increasingly motivated to to kill the predator.

Portion acquired — 5 out of 5

As in racial slavery the very bodies of the victims are controlled by the predators. All goods produced are immediately owned by the predators.

Investment risk — 2 out of 5

Predators do assume some risk in attempting to gain power over a population, but they primarily use deception to obtain victims. This is far cheaper than kidnapping or purchasing victims from other predators.

Profitability — 3 out of 5

While the portion of goods stolen from victims is as high as theoretically possible the security costs, combined with the inability to make reasonable decisions, makes socialism slavery a temporary venture with constantly decreasing returns.

In this way socialist slavery is like a Ponzi scheme. Predators that get in and out early profit greatly, but eventually the institution collapses and the remaining predators suffer along with the victims.

How bitcoin disrupts socialist slavery

Bitcoin disables socialist slavery in three major ways. First, wealth stored in Bitcoin is very difficult to steal. Without the ability to steal the savings of victims socialist slavery may not be possible.

Black markets are just markets without violence

Second, Bitcoin makes it safer to make black market exchanges. This allows victims to create wealth without the predators knowledege. Imagine that Sally creates jackets. She needs to purchase cloth and tools — this can now be done in secret. She needs to work to turn that cloth into the more valuable jackets — easily done in secret. Finally, she needs to sell her finished jackets to customires — this can now be done on the black market. Of course the predator can still periodically rob Sally and it would be very hard for her to scale up production (factories are hard to hide). But, Bitcoin does make socailist slavery less profitable by making the black market more effecient and more safe.

Third, socialist slavery requires the deception of a large portion of the population (otherwise it would be even less profitable than racial slavery). In order to accomplish this deception a charismatic leader is required.

If a small number of potential victims realizes that this new leader is attempting to establish socialist slavery they could take advantage of of a surprising mechanism enabled by anonymous gambling.

Getting Hitler to throw the game

To illustrate this let’s imagine that we live in Germany in 1932. Hitler is about to rise to power and it is clear to many that he intends to establish socialist slavery. But unlike the real 1932, let’s assume Bitcoin is available and commonly used for anonymous gambling. Wealthy factory owners can be sure that Hitler will steal their stuff as soon as he can. In repsonse they buy an insurance policy. Many of them place a bet that Hitler will become Chancellor before the end of the year.

At first this would seem like a foolish bet. Everyone can tell that he will become Chancellor. But this bet creates an unexpected incentive. Anyone in a position to prevent Hitler becoming Chancellor could bet against these men and then take action to ensure the outcome — namely to ensure Hitler doesn’t become Chancellor. Anyone with secrets about Hitler that would prevent his appointment would be tempted to share them after claiming the bet. Hitler himself might decide to take the bet, resign and become a painter. If the pot became large enough it would be irresistible to many people with the access.

While this is probably one of the strangest application of private defense, it would be effective at preventing the establishment of socialist slavery. And it’s great advantage is that it’s only prerequisite is anonymous and public gambling.

If you can bet that evil will win, you can tempt it into throwing the game.

Any one of these effects created by Bitcoin could be enough to prevent the establishment of socialist slavery.

In part three we will examine how bitcoin disrupts Sexual Slavery.