Bit by Bit: How P2P Is Freeing the World
by Jeffrey Tucker (Liberty.me 2015), Kindle, 130 pages (estimated).
Jeffrey Tucker opens with the story of Fereshteh Forough, who set up a chain of clinics in Afghanistan to empower women by teaching them coding, design, and other computer skills that they could market directly on the web. The problem they met with was an inability to get paid, either because there was no nearby institution where they could open a checking account or they required a man’s permission to open one.
Bitcoin allows all the women in her clinic to open a bank account without permission from anyone. If they owned a smartphone, they only needed a free wallet app. Then they could receive and spend money without permission from any authority….
What had to come together to make something like bit coin possible? You need distributed networks, open-source programming, entrepreneurial drive, cryptography, and a world networked through the Internet.
The economy of distributed technology, Tucker writes, is what used to be called the “free market” — the free market that has been systematically destroyed or undermined by governments. The difference is, this time it’s being built in the information realm; and unlike the old markets in naturally scarce material goods, the new one is organized around abundance. He quotes F.A. Hayek from The Constitution of Liberty:
The uses of new knowledge (where we do not make them artificially scarce by patents of monopoly) are unrestricted. Knowledge, once achieved, becomes gratuitously available for the benefit of all. It is through this free gift of the knowledge acquired by the experiments of some members of society that general progress is made possible, that the achievements of those who have gone before facilitate the advance of those who follow.
The basic outlines of such a networked/distributed economy of abundance, Tucker writes, had emerged by the end of the 20th century; its capabilities have grown exponentially in the 15 years since, and can be expected to continue to do so.
It is an emergent system. As its component parts become more differentiated and developed, and achieve a higher synthesis through their mutual interrelation, it undergoes a phase transition and takes on a qualitative character that could not have been anticipated by looking at the component parts. And it is, for the most part, a complex, self-organized system.
It is coming about not because of political reform. It is not any one person’s creation. It is not happening because a group of elite intellectuals advocated it. The new world is emerging organically, and messily, from the ground up, as an extension of unrelenting creativity and experimentation. In the end, it is emerging out of a stateless order that no one in particular controls and no one in particular can fully understand.
The legacy economy
Tucker begins his second chapter with a reference to Mises’s absolutist position on Woodrow Wilson’s self-determination doctrine after World War I. It was not enough, Mises said, to grant the right of self-determination to nationalities; it should be extended to any grouping of people, no matter how small, capable of constituting themselves as a territorial administrative unit. And if not for the “technical considerations” standing in the way, he added, it would be morally requisite to extend the same self-determination to every individual.
Network communications technology, Tucker says, is overcoming those technical considerations. Even without a common territorial administrative apparatus, it’s now possible for individuals to
seek out associations regardless of geography, to be governed under geographically non-contiguous ruling regimes, to pursue associations based purely on individual volition….
These new P2P [peer-to-peer] systems have connected the world like never before: erasing borders, circumventing restrictions, obsoleting old ways of doing things.
P2P architectures facilitate direct, one-off interactions between endpoints without the need for third-party coordination.
One thing Tucker singles out for special favorable attention is Bitcoin, the encrypted digital currency. Bitcoin’s blockchain system makes it possible for individuals to deal directly and securely with one another on a peer-to-peer basis without any centralized third-party trust mechanism. Tucker’s explanation of how the blockchain architecture works is one of the clearest available.
But the P2P revolution also extends into the material realm in a number of ways. 3D printing coupled with digital design/machining files makes it possible to carry out manufacturing in small shops or even homes. P2P coordination mechanisms such as Uber are making it possible to access services such as transportation outside the local cab cartels and, Tucker writes, the same phenomenon is likely to extend to things such as P2P home health-care apps in the near future. There are even steps toward P2P policing, such as the Peacekeeper app.
Reputational systems such as those embedded in the two iterations of Silk Road so far provide a self-organized regulatory framework arguably superior to the state’s when it comes to safety and quality. And Tucker argues that Bitcoin’s blockchain ledger system has almost infinite potential for being expanded beyond purely currency functions to provide P2P trust mechanisms for contracts and other market regulatory functions.
All these things taken together, given the superior service they offer and the difficulty or impossibility of enforcing state regulatory oversight and taxing authority over them, mean that the public will gradually withdraw an increasing share of its activity from the legacy economy and starve it of revenue.
The result is political instability. A paradigm shift. Obsolescence of the public sector. The growing irrelevance of power. Ever less dependence on, and hence loyalty to, the coercive power structure and ever more cultural, economic, and social reliance on the structures that society creates for itself. The tolerance for taxation, slavery, spying, regulation, and war begins to decline. Eventually it dies because it is unsustainable without public support. That’s the story of how human liberty prevails over tyranny. It could be the story of our near-term future.
The fourth chapter of Bit by Bit is an eloquent discussion of this emergent P2P economy in light of Hayek’s thought on the knowledge problem. As with his discussion of the Bitcoin blockchain’s functioning, it’s worthwhile reading the book just for this.
Of course the legacy capitalist economy of large corporations interlocked with the regulatory state has long pursued a business model of extracting rents through just the kinds of artificial scarcity, rooted in patent, that Hayek wrote of. And it hopes to rejuvenate that dying system by imposing the same regime of artificial scarcity and rent extraction on the realm of information.
But early attempts to do so are meeting with failure. For example: Hollywood, Tucker says, has already lost the war against “piracy.” Although money is still made on proprietary information, the competition from online file-sharing has driven down the price of digital music and movies in many cases to little more than a convenience fee.
The problem is that many of the specific firms — like Uber and Airbnb — that Tucker hails as examples of the new P2P economy are actually attempts to put new wine in old wineskins. The market is indeed more competitive with them than without them, and their existence has made a positive difference in the alternatives available. But they are still halfway measures — attempts to enclose the new P2P technologies within corporate walls, with the help of proprietary apps.
So Tucker’s framing, in which left-wing critics of Uber and other pseudo-P2P services are simply statist enemies of the free market, and Uber and others are champions of the unleashed network future, is over simplistic.
P2P architecture
There is a great deal of evidence accumulating that — to take one example — Uber, far from being a genuine P2P service, assumes what amounts to an employer-employee relationship with its drivers. It really isn’t a driver-owned service at all. And it takes a cavalier attitude towards its passengers, and bullies its critics in the press as well.
But what’s needed is not state regulation in the “public interest” (as if such a thing ever existed), but to push the revolution further and replace Uber, Airbnb, Bitcoin, and other halfway measures with the real P2P thing. James Tuttle, director of the free-market think tank Center for a Stateless Society, argued that the proper response to Uber is to develop pirated or open-source versions of the app, and to infiltrate its workforce with labor organizers; or in his own words: “hack the app, salt the service, fight the competition with better competition” (“One Cheer for Uber and Lyft,” C4SS, May 16, 2014). If Uber and Airbnb are playing Encarta to the legacy cab and hotel industries’ Britannica, we need a genuine open-source equivalent of Wikipedia to destroy them in turn.
We need genuine P2P architectures for delivering services and facilitating cooperation completely outside the old corporate framework.
And Bitcoin, for all of Tucker’s enthusiastic Misesian defense of it against traditional hard-money critics, shares many negative features with the old specie currencies. Like older and more-conventional commodity currencies, whose primary function is to provide a store of value, Bitcoin is given to deflation, speculative hoarding, and hence withdrawal from the market and loss of liquidity.
I think David Graeber, in his book Debt, demonstrated pretty clearly that the conventional account of the origin of specie currencies from the free market, in response to problems such as the “mutual coincidence of wants,” is utterly ahistorical. Many societies throughout human history, on the other hand, flourished with currencies whose sole function was the denomination of value in exchange rather than as a store of value, such as the village mutual-credit clearing systems that Tom Greco, a theorist and designer of currency systems, based his currency model on.
Bitcoin, at best, will be a useful currency for carrying on exchange in one-off transactions outside trust networks — especially when evading state scrutiny is a consideration — as part of a larger currency ecosystem in which something like Greco’s credit-clearing system does most of the heavy lifting.
On the other hand a great deal of left-wing criticism of P2P alternatives — like that that Tucker cites from Jacobin magazine — misses the point. It is not the case that P2P services shift risk from corporations to workers. Minimizing risk, with the help of the state, is central to the existing business model of legacy corporations right now. That is because the corporate economy of the past 150 years has pursued a very capital-intensive, high-overhead model of manufacturing goods and delivering services. The giant corporate dinosaurs must minimize risk and guarantee sales of their output precisely because they have high overhead to service. And the fact that high capital outlays serve as entry barriers and reduce the number of competitors in an industry makes it easier to engage in monopoly pricing and rationing of service. So legacy corporate industries have an incentive to promote regulations that mandate inefficient production methods and artificially inflate the capital outlays required for production.
But the less overhead, the less the regular income stream required to service it, and hence the less need for certainty. Because P2P taxi and bed-and-breakfast services involve zero overhead — they rely entirely on the spare capacity of capital assets that participants already own anyway — all income is increased. Someone can earn extra income in addition to wage labor, and gradually shift to part-time wage work supplemented by self-employment, without taking on debt and with zero risk.
So I think the final outcome of the P2P economy will be a lot less corporate, and a lot more geared toward either genuine self-employment or cooperative commons governance — more like what Peter Kropotkin described — than Tucker envisions. There are alternatives beyond the bureaucratic leviathan state and the cash nexus, and any genuine free-market order of the future is likely to incorporate a lot more of such institutions than most people imagine.
One area where I agree heartily with Tucker is in his enthusiasm —stated in the last chapter — for libertarian strategies centered on secession and counter-institution building, circumvention and “life hacks,” rather than political agitation to change the law. It’s what many of us on the Left call “prefigurative politics”: building the future society here and now, in the interstices of the dying old one.
This article was originally published in the May 2015 edition of Future of Freedom.